Kickbacks and Illegal Compensation: West Virginia Hospital Settles Lawsuit for $50 Million

Wheeling Hospital in West Virginia just settled a major lawsuit with the U.S. Department of Justice for $50 million dollars after a whistleblower accused the facility of issuing illegal payments and kickbacks to doctors and physicians. A former executive called out the facility for giving money to providers based on the volume or value of patient referrals, which can put patients at risk. 

Wheeling Hospital has been strapped for cash for years, and is in danger of closing; it’s one of the last of its kind in the Upper Ohio Valley where access to care can be scarce. Now, the facility is looking to get back to business as fast as possible, so it can protect residents from the spread of the coronavirus. 

Find out what went wrong and how this scandal came to light.

Blowing the Whistle on Wheeling Hospital

It all started in 2017 when Louis Longo, a former hospital executive vice president, issued a complaint against the facility. In the lawsuit, Longo claimed that the hospital’s physician compensation program violated federal law. The facility paid physicians and doctors millions in kickbacks based on the number of patients they saw and referred to specialists.

According to the official complaint, some physicians were making more than $1 million a year off the system.

This kind of arrangement can lead to a conflict of interest. When physicians receive kickbacks for referring patients to specialists or relying on expensive treatments, some providers may recommend medically unnecessary care simply because it leads to a bigger paycheck.

The Department of Justice began investigating Longo’s complaint in December 2018. Authorities analyzed the facility’s compensation system and found evidence of wrongdoing.

Jeffrey Bossert Clark, acting assistant attorney general of the Justice Department’s Civil Division, commented on the case, “Improper financial arrangements between hospitals and physicians can influence the type and amount of health care that is provided. The department is committed to taking action to eliminate improper inducements that can corrupt the integrity of physician decision-making.”

West Virginia shares a border with western Pennsylvania and rural Ohio. Wheeling Hospital is one of the only medical facilities in the Upper Ohio Valley, and these kinds of illegal tactics can put the entire tri-state area at risk.

U.S. Attorney Scott W. Brady of Pennsylvania’s western district was outraged over what he sees as reckless endangerment: “Medicare and Medicaid beneficiaries trust that their healthcare providers will make decisions based on sound medical judgment. Our office will take decisive action against any medical providers which betray that trust and make medical decisions based on their own financial interests. Our seniors deserve nothing less.”

Longo is set to earn $10 million from the lawsuit for his role as a whistle blower.

A History of Financial Mismanagement

Records suggest the facility was issuing illegal kickbacks and excessive payments to doctors from 2007 to 2020, even though the hospital continued to lose money year after year.

Over the last ten years, the 233-bed facility has been struggling to stay afloat. It’s owned by the Roman Catholic Diocese of Wheeling-Charleston. In 2019, it entered into a management services agreement with the West Virginia University Health System as a way of reducing its operational expenses.

The coronavirus pandemic only made things worse. In July, Wheeling announced that it would lay off an unspecified portion of its staff. It gave providers the option of participating in a severance plan. Before these layoffs, the facility had just 300 staff members.

CEO Douglass Harrison says that the facility lost more than $11 million during the 2019 fiscal year and is in danger of losing more than $18 million this year.

Harrison says the hospital had no choice but to settle the lawsuit, even though administrators didn’t admit to any wrongdoing.

In an official statement, he writes, “Prolonging the lawsuit would have paralyzed the ability of the hospital to attract the best physicians and to make the necessary capital improvements to ensure that the highest quality health care continues to be provided in the Upper Ohio Valley.”

It’s unclear how many patients in the area have received medically unnecessary care over the last 13 years, but hopefully Wheeling Hospital has learned its lesson.

Patient advocates say the hospital should have assumed more responsibility, but hitting Wheeling Hospital with a major fine could’ve done more harm than good. Many people in the Ohio, Pennsylvania, and West Virginia area depend on Wheeling for essential medical care. Both Ohio Valley Medical Center and East Ohio Regional Hospital in nearby Martins Ferry, Ohio closed last year, leaving residents with few alternatives.

If the Department of Justice had taken Wheeling Hospital to court, it might have bankrupted the facility, forcing another hospital in the Upper Ohio Valley to close.

Hitting Wheeling with a $50 million fine will hopefully dissuade other facilities from engaging in unlawful, dangerous behavior. Providers should always make decisions based on what’s best for their patients, not on how much money they stand to earn.