Former compliance officer files whistleblower lawsuit against Iasis

Lawsuit from former CCO Jerre Frazier claims Iasis illegally compensated docs for referral to the company's hospitals for often-unnecessary procedures, in order to boost profits

Email | Print By Walker Duncan

08-13-2007 4:20 PM — According to recently unsealed documents from the Federal District Court in Phoenix, Ariz., Franklin’s Iasis Healthcare might be staring down the barrel of an unpleasant legal battle that could wind-up costing the company millions.

The whistleblower lawsuit, brought under the False Claims Act by the company’s former chief compliance officer, Jerre Frazier, alleges that Iasis illegally compensated doctors to refer patients to the company’s hospitals for what were often unnecessary procedures, in the hopes of boosting profits.

Plaintiff's documents filed in federal court allege the behavior has been underway since at least 1999.

The lawsuit claims among the benefits the doctors received were below-market rent for office and lab space, lease payments at above fair-market rates for catheter labs or other diagnostic equipment owned or controlled by physicians, as well as medical “directorships,” which the lawsuit says required little or no work from the physician to earn the pay.

So, how big is this potential blow to Iasis’ balance sheet?

According to a release put out this afternoon, companies found liable under the False Claims Act can be required to pay as much as three times the government's losses plus $5,500 to $11,000 for each false claim. All told, Medicare and Medicaid reimbursement claims by Iasis hospitals covered by this case number in the thousands.

The release, put out this afternoon by Phillips & Cohen, the law firm representing Frazier, notes the HCA pedigree of many top Iasis officials including CEO David White and COO Sandra McRee, among others.

When HCA paid the government $1.7 billion to settle multiple Medicare fraud cases, roughly $600 million of that was the result of three cases brought by Phillips & Cohen.

Not mentioned in the release, however, is the fact that Frazier, himself, shares the HCA pedigree, as well.

The release from Frazier's camp notes that a federal investigation into the matter remains underway.

Attorneys from Phillips & Cohen could not be reached for further comment this afternoon, nor could officials from Iasis. NashvillePost.com will update this story, as further details become available.