A federal district court in Mississippi has denied a motion to dismiss a lawsuit against Corinth, Miss.-based Magnolia Regional Health Center and its joint venture cancer center, Magnolia Cancer Center, alleging Stark law and antikickback violations, JDSupra reported Nov. 22.
The lawsuit, filed by cancer center's former executive director, alleges an illegal kickback scheme where physician investors were financially incentivized to refer patients to the center, despite no formal referral requirement.
The lawsuit claims that physician investors' increased referrals directly boosted their investment income, and defendants also falsely certified compliance with these laws when submitting claims to Medicare.
The court found that the offering memorandum explicitly noted potential noncompliance with the Anti-Kickback Statute, but investors knowingly chose not to structure the venture to meet the statute's safe harbor protections.
The cancer center, which was established in 2007 as a joint venture between Magnolia Regional Health Center and physician investors, was voluntarily dissolved in 2020 after a consultant raised concerns about the potential violations. The report alleges that while efforts to address the compliance issues had been raised, no action was taken until the dissolution.