Methodist Le Bonheur Healthcare building
Methodist Le Bonheur Healthcare and the federal government have settled a 340B-related False Claims Act suit against the system.

Feds in Mediation with Tenn. Health System that Allegedly Paid for Referrals to Boost 340B Profits

The federal government and a Tennessee health system are meeting with a mediator in connection with a whistleblower lawsuit that alleges that the system paid Memphis-area cancer physicians for referrals that generated $50 million in profits in one year alone for the health system from billings on 340B purchased drugs.

Methodist Le Bonheur Healthcare has said that the allegations are without merit and that it would vigorously defend against them.

U.S. District Judge William L. Campbell, Jr., stayed the case on Oct. 14 “to allow the parties to focus on mediation.” According to case records, the two sides met with a mediator on Sept. 30. Although they did not reach a settlement, the parties agreed to continue the mediation.

Federal False Claims Act and Anti-Kickback Statute lawsuits filed on the government’s behalf by whistleblowers often are resolved with a financial settlement with no determination of liability about the alleged misconduct. Whistleblowers get a share of the financial recovery.

Campbell in March granted the government’s motion to intervene in the case and take over its prosecution from the whistleblowers.

The government says that, by purchasing a private oncology practice’s outpatient locations, “Methodist was able to bill Medicare not only for the facility and professional components of outpatient treatment but also for the chemotherapy and other drugs provided, for which Methodist could recoup a staggering discount in costs through the 340B Discount Drug Program, resulting in $50 million in profits to Methodist in one year alone.” The whistleblowers alleged in an amended complaint filed in 2021 that that Methodist illegally channeled more than $125 million to the oncology practice’s physicians over seven years for their patient referrals, and that 340B profits funded these payments.

Methodist said in a May 2022 court filing that it did not pay the oncology practice, West Clinic, for patient referrals, that “West performed extensive [inpatient and outpatient] management services” under affiliation agreements with Methodist, that it and West “sought to improve cancer care through their affiliation,” and “the multi-agreement structure complied” with federal law.

The government does not allege that Methodist violated the 340B statute or 340B program requirements. Neither the statute nor its regulations address how hospital covered entities may use revenue from their participation in 340B.