- Associated Press - Wednesday, March 19, 2014

PITTSBURGH (AP) - West Penn Allegheny Health System has agreed to pay more than $1.5 million to settle claims it violated the law by offering doctors below-market rents so the physicians would refer patients to the network’s hospitals, federal prosecutors said Wednesday.

Allegheny Health Network, a Highmark-owned hospital network that includes the five West Penn Allegheny Health System hospitals, said the settlement resulted from a “self-audit and voluntary reporting” to federal officials.

U.S. Attorney David Hickton confirmed that in announcing the settlement. The allegedly illegal activity began in the mid-2000s, with most of it occurring between 2008 and 2012, according to federal prosecutors.

That was before Pittsburgh-based health insurer Highmark Inc. bought the five-hospital West Penn network and created the Allegheny Health Network with two other hospitals it also acquired: Jefferson Regional Medical Center in the city’s South Hills suburbs and Saint Vincent Health System in Erie.

West Penn had experienced financial problems before the Highmark takeover and has since continued to lay off hundreds of workers to cut costs.

Allegheny Health Network has a robust compliance program to ensure that the organization is acting in accordance with all regulations, to promptly identify potential problems and to implement corrective measures when necessary,” Allegheny Health spokesman Dan Laurent said in a statement. “Our actions leading to the settlement reflect how seriously we take our compliance responsibilities and the diligence with which we monitor and fulfill those obligations.”

The settlement itself was negotiated without a civil or criminal complaint being lodged, and therefore was not filed in public court records. It can only be obtained by a Freedom of Information Act request with the U.S. Department of Justice, according to a spokeswoman for Hickton’s office.

The Justice Department did not immediately respond the FOIA request filed by The Associated Press, a process that typically takes weeks.

As a result, it was not immediately clear how the sides agreed on the $1.529 million settlement, how it relates to the rents collected or how many doctors were involved.

Hickton declined to comment beyond a brief news release that said the settlement involved violations of the federal Anti-Kickback Statute and the Stark Law.

Federal prosecutors contend the illegal rent arrangements also “resulted in improper claims being submitted to federal health care programs,” Hickton said in the release.

The anti-kickback law prohibits providing payments or other items of value “to induce referrals of items or services covered by Medicare, Medicaid, and other federally funded programs,” the release said. The Stark law prevents doctors who have a financial relationship with a hospital from billing federally funded programs for services, subject to a few exceptions.

Allegheny Health Network remains locked in a financial battle with the much-larger University of Pittsburgh Medical Center, which has 20 hospitals. Highmark subscribers are allowed to use UPMC doctors and hospitals as in-network providers. When that deal expires next year, Highmark customers will have to pay more to continue using UPMC doctors and most of its hospitals.

That also has ramped up competition from other insurers, such as Aetna, which are trying to woo Highmark customers who want continued access to UPMC providers.

Allegheny Health Network has countered by affiliating with John Hopkins Sidney Kimmel Cancer Center in Baltimore and others to bolster its provider network.

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