The Cooper Health System in Camden has agreed to pay $12.6 million to settle a whistle-blower lawsuit alleging that it made improper payments to doctors in an effort to build its cardiology business, the U.S. attorney for the District of New Jersey said Thursday.
From October 2004 through 2010, local doctors were paid $18,000 to attend four meetings of the Cooper Heart Institute Advisory Board in any given year under "consulting" and "compensation" agreements, in possible violation of antikickback laws, state and federal law enforcement officials contended.
The whistle-blower was South Jersey cardiologist Nicholas L. DePace. He attended an advisory board meeting in 2007 and was convinced that the board's purpose was not to provide advice to Cooper, but to be a source of patient referrals to the Heart Institute, according to a lawsuit he filed in 2008.
"He was invited to be a member of the advisory board. He attended a meeting and it quickly became apparent to him what the advisory board really was. It was sitting and listening to lectures and not providing advisory services," said Michael A. Morse, a partner in Pietragallo, Gordon, Alfano, Bosick & Raspanti L.L.P. in Philadelphia, one of DePace's lawyers.
Topics for 50-minute lectures at a June 2007 meeting included: "Our National Healthcare Policy: What to Expect in the Future" and "The Efficient Utilization of Resources in the Delivery of Healthcare," according to DePace's 60-page complaint.
Morse said DePace, whose office administrator referred a call to the attorneys, was satisfied with the civil settlement. "He is encouraged that he was able to expose this," Morse said.
DePace's portion of the settlement is $2.39 million. Cooper also agreed to pay attorney fees and expenses of $430,000, the settlement said.
U.S. Attorney Paul J. Fishman said, "Payments to outside physicians by hospitals require heightened scrutiny because those payments may be improper if they are based on patient referrals. Such kickback arrangements interfere with the physician-patient relationship and can lead to problems of overutilization and increased costs."
Cooper admitted no liability.
"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," Cooper president and chief executive officer John P. Sheridan Jr. said. "This allows us to focus our full energies on serving our community."
In a note to Cooper employees, Sheridan said the board was established to "improve the quality and responsiveness of our cardiac programs" and "was reviewed by outside legal counsel before it began operations."
George E. Norcross III, chairman of the board of Cooper Health System, is a comanaging partner and director of Interstate General Media L.L.C., which owns The Inquirer.
The $12.6 million penalty is financially significant for Cooper, which had operating income of $13 million in the 11 months ended Nov. 30, according to financial disclosures for bond investors.
The cardiologist who oversaw the advisory board, Joseph E. Parillo, is no longer at Cooper. In October, he became chairman of the Heart and Vascular Hospital at Hackensack University Medical Center. Parillo, whose 2010 compensation at Cooper was $1.13 million, could not be reached for comment.
Cooper did not respond to a question about whether the organization had signed a corporate integrity agreement with the U.S. Department of Health and Human Services. Such agreements outline an entity's obligations as part of a civil settlement. As of Thursday, the department's online database of integrity agreements did not include one for Cooper.