Whistleblower Case Started with Appraiser!

October 4th, 2012 | Uncategorized

HCA’s Parkridge Hospital in Chatanooga, TN announced a $16.5 million qui tam settlement with the federal government and state of Tennessee on September 19.  The case originated when a real estate appraiser doing work on behalf of the hospital filed a qui tam complaint alleging that Parkridge paid excessive rent to a real estate entity owned by physicians whose practice Parkridge had previously purchased.  According to the complaint, the appraiser had been retained in 2008 by Parkridge to determine the fair market rent and concluded a range of $8.10 to $10.10 per usable square foot.  The lease ultimately entered into had a rate of $12.59 per foot, based upon “an erroneous fair market value study … from an unlicensed and uncertified appraiser”[1] in order to provide sufficient rental income for the physicians to satisfy bank loan payments on the property.

The total rent based upon the 29,204 square feet leased would have been approximately $367,000 per year; for 4 years it would have been $1,468,000.  The excess rent based upon the high end of the whistleblowing appraiser’s range would have been $2.49 per foot or $73,000 per year; for 4 years it would have been $300,000.  Comparing this to the fine of $16.5 million gives a sense of the relative risk of violating the Stark law and Anti-Kickback Statute.

The whisteblower received $3.1 million out of the settlement payment.

[1] Quoting the original complaint filed under seal in the District Court for Eastern Tennessee.

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