Westerly Hospital Settles with DOJ Over Doctor-Hospital Deal

Jun 24, 2013

Westerly Hospital has reached a settlement with the U.S. Department of Justice over agreements it made with doctors not to compete for business. Westerly officials haven’t admitted wrongdoing, but the hospital’s arrangement with doctors may have contributed to higher patient costs.

Federal officials investigated Westerly Hospital for possibly violating the Stark law. It aims to prevent doctors and hospitals from having ownership or payment agreements with each other that might influence patient referrals. At issue was Westerly’s agreement to let local physicians run a department in the hospital as long as they agreed not to open their own clinic offsite offering the same services. Providence-based health law attorney Don Wineberg says many hospitals make these kinds of deals.

Credit Kristin Gourlay / RIPR

“That is not a per se illegal contractual arrangement. I think those are actually quite common, but, maybe in the facts and circumstances of this particular arrangement, it was in appropriate or worthy of settling.”

Wineberg says this particular arrangement may not have affected patient’s choices or the quality of the care they received. But it could have made those services more expensive. Westerly agreed to pay the federal government $500,000 to settle the case.