Alleged Doctor Kickbacks Cost Cooper $12.6M

HADDONFIELD-HADDON TOWNSHIP, NJ -- Cooper Health System will pay $12.6 million to settle allegations the Camden hospital engaged in kickbacks to doctors as it built its cardiology program, state and federal officials said Thursday.

Cooper agreed to pay the federal government $10.2 million and the state $2.3 million in the joint settlement, plus attorney’s fees of $430,000 to a whistleblower, Haddonfield cardiologist Dr. Nicholas DePace. The hospital also already implemented, and agreed to maintain, corporate reforms for accountability, training and other aspects of compliance.

The settlement stems from a joint federal-state investigation into the financial ties between the Cooper Heart Institute in Camden, the Cooper Heart Institute Advisory Board and physicians who served on the advisory board. Investigators allege that doctors who served on the advisory board were seemingly paid for their advice, but actually were paid to refer patients to the Cooper Heart Institute.

The physicians were paid $18,000 annually to attend four meetings in a given year, investigators found. Federal and state officials say the payments were meant to encourage the doctors to refer patients to Cooper.

Cooper then sought and received reimbursements from Medicare and Medicaid to treat the inappropriately referred patients, in violation of state and federal laws, investigators charged.

“Payments to outside physicians by hospitals require heightened scrutiny because those payments may be improper if they are based on patient referrals,” said U.S. Attorney Paul Fishman. “Such kickback arrangements interfere with the physician-patient relationship, and can lead to problems of overutilization and increased costs. Federal health care participants, such as Cooper, who run afoul of the prohibitions against kickbacks must be held responsible.”

Cardiologist Dr. Nicholas DePace, of Haddonfield, was recruited to take part in the arrangement, but instead filed a whistleblower suit. Cooper agreed to pay $430,000 for DePace’s legal fees in the case. DePace will receive $2.3 million from the settlement as well—$1.95 million from the federal government and $442,890 from the state.

The allegedly improper payments occurred from October 2004 through December 2010, according to the settlement papers (click on the PDF, above, to view.)

Agreeing to the settlement isn’t an admission of liability from Cooper, the settlement states.

"After more than three years of extended discussions with government lawyers, we decided, in the best interests of Cooper, to settle our dispute without the admission of wrongdoing to avoid the burdens and uncertainties of a protracted litigation," John P. Sheridan Jr., president and CEO of Cooper University Hospital, said in a statement. "This allows us to focus our full energies on serving our community."

Cooper sent an email to its employees Thursday about settlement, echoing Sheridan's statement. The email, from Sheridan, also stated: "It is important to note that there is no contention that this program led to any unnecessary or inappropriate services at any time. Our quality of care has never been in question."

(Click the PDF, above, to read the email to the Cooper staff.)

"Cooper has taken responsibility for its past misconduct," John Hoffman, executive assistant New Jersey attorney general, said in a statement. "We commend Cooper for implementing substantial internal reforms and accountability measures designed to address the government's concerns and avoid any future transgressions."

Cooper has undergone aggressive expansion in recent years. In June 2004, hospital leadership announced plans for a $220 million expansion to its campus, which added a 10-floor “patient care pavilion” to the existing hospital. Cooper sought to become a regional health center, and now includes the hospital, the Cooper Medical School of Rowan University, a clinical research building and a cancer institute.

, chairs the board of trustees for Cooper Health System and Cooper University Hospital.

This story was updated at 10:10 p.m., Jan. 24 to include the statements from Cooper Hospital.