By Barbara Liston
ORLANDO, Florida (Reuters) - A Florida hospital on Monday settled for $80 million to $90 million part of a federal whistleblower lawsuit that accused it of Medicare fraud and kickbacks to its cancer doctors and neurosurgeons, according to a lawyer for the whistleblower.
Halifax Health, a 678-bed hospital in Daytona Beach serving Florida's East Coast, reached the tentative settlement with the U.S. Department of Justice on the morning that jury selection was set to begin in the U.S. District Court in Orlando, said Atlanta lawyer Marlan Wilbanks, who filed the lawsuit on behalf of former hospital employee Elin Baklid-Kunz.
The settlement will be finalized before a judge next week. It leaves intact a second part of Baklid-Kunz's complaint accusing the hospital of pumping up its revenue by unnecessarily admitting for overnight stays patients who could have gone home, he added.
Wilbanks said those issues are set for trial in July and carry potential liability for the hospital of up to $400 million, including $70 million in Medicare losses and penalties.
Lawyers for the hospital and the U.S. Department of Justice, who prosecuted the case, did not return calls for comment.
"We understand where the information is coming from," said hospital spokeswoman Tangela Boyd. "But nothing has been signed. So we're not going forward (with a comment) until everything is a done deal."
The case attracted national attention after Wilbanks said the court allowed the whistleblower to pierce the hospital's attorney-client privilege under the crime-fraud exception to the law.
Baklid-Kunz worked for more than 15 years in financial and regulatory compliance roles at Halifax Health. She filed the lawsuit in 2009 under the federal False Claims Act, which rewards those who report government fraud with up to 30 percent of the proceeds.
After reviewing her claims, the U.S. Department of Justice agreed to prosecute the hospital itself for what the government called illegal "profit-sharing" plans with its cancer doctors and neurosurgeons.
U.S. District Judge Gregory Presnell ruled in November that the Halifax Health profit-sharing plan with the oncologists violated the federal Stark Law, which prohibits hospitals from billing Medicare for services in which the referring doctors have an improper financial interest.
The judge had not yet ruled on the neurosurgeons' compensation plan, or the extent of the damages, both of which would have been at issue at trial.
Baklid-Kunz will continue to pursue her other allegations at trial in July, including charges that the government was overbilled for excessive spinal fusions performed by one neurosurgeon, and for patient services performed by nurses or physician's assistants but billed at doctor rates, Wilbanks said.
The lawsuit claimed that the hospital's own internal analyses found patients being admitted unnecessarily at rates of up to 82 percent, depending on the diagnosis.
The case is United States of America and Elin Baklid-Kunz vs. Halifax Hospital Medical Center and Halifax Staffing, Inc. Case No. 6:09-cv-1002-Orl-31TBS
(Editing by David Adams and Jan Paschal)