DOJ Reaches $6.5 Million Settlement with Cardiologist Over Kickback Referral Payments

Recently, the Department of Justice (DOJ) announced a $6.5 million settlement with Klaus Peter Rentrop and his medical practice, Gramercy Cardiac Diagnostic Services P.C. The settlement resolves allegations that Rentrop and Gramercy Cardiac paid millions in kickbacks to physicians and medical practices for patient referrals, often in the form of inflated office “rental payments” and other fees paid to contracted cardiologists. Gramercy Cardiac provides cardiac diagnostic imaging services and was founded and owned by Rentrop, who also served as the company’s president.

The complaint specifically alleged that from 2010 to 2021, Rentrop and Gramercy Cardiac entered into office space agreements (at rates often higher than fair market value) with more than 130 primary care and other physicians (or their practices) to induce those physicians to refer patients to Gramercy Cardiac-contracted cardiologists who would see patients at the rented office space. The rental agreements often allowed for the use of an exam room once or twice per month, in addition to use of basic equipment (such as a computer and a telephone) and front desk staff to help with scheduling. Gramercy Cardiac paid more than $11 million to the practices under the rental agreements.

The contracted cardiologists would turn around and order diagnostic tests and procedures to be performed at Gramercy Cardiac locations and were paid a flat fee for each of those referrals. Larger fees were often paid for tests and procedures in instances where Gramercy Cardiac received a greater reimbursement. The flat fees were sometimes the only payment paid to Gramercy Cardiac-contracted cardiologists.

Certain versions of the Independent Contractor Agreements between Gramercy Cardiac and the contracted cardiologists said the cardiologist was to be paid not for the referrals, but for “[a]dministration and supervision” of the PET and SPECT scans performed at Gramercy Cardiac. However, the contracted cardiologists often did not administer and supervise the PET/SPECT scans but were instead paid based on the number of tests and procedures referred.

These arrangements referred tens of thousands of patients to the Gramercy Cardiac-contracted cardiologists, who referred more than 23,000 patients for PET and SPECT scans at Gramercy Cardiac, with a “significant proportion” of those patients Medicare or Medicaid beneficiaries. As one would expect, Gramercy Cardiac billed Medicare or Medicaid for those tests or procedures and as a result, the claims submitted for those tests and procedures were false and violated the federal False Claims Act.

To verify the “investment” in rental practices was worth it, Rentrop would ask staff members to calculate the return on investment from the rental payments paid to each rental practice, requiring a minimum ROI of 300% from the kickbacks. When a certain rental agreement ROI fell below the 300% minimum threshold, Gramercy Cardiac – at Rentrop’s directing – would refuse to pay the rental practice the amounts due under the rental agreement. Not only that, but physician liaisons employed by Gramercy Cardiac would advise the rental practice physicians that if the volume of referrals to the contracted cardiologists did not increase, rent would be decreased or the rental agreement would be terminated. Gramercy Cardiac and Rentrop did follow through and terminate several rental agreements because of the low ROI generated.

Of the $6.5 million settlement, $4,510,678 will be paid to the United States and another $1,989,362 will be paid to the State of New York to resolve the State’s claims. Rentrop and Gramercy Cardiac accepted responsibility for conduct alleged in the Complaint filed by the United States.

In addition to the monetary settlement, Rentrop agreed to relinquish ownership and control over Gramercy Cardiac by the end of 2023 and is barred from working for any entity that bills a federal health care program.

U.S. Attorney Damian Williams said, “Over more than a decade, Klaus Peter Rentrop and Gramercy Cardiac paid millions of dollars to doctors and their medical practices in exchange for patient referrals for cardiac testing and procedures.  The Anti-Kickback Statute is meant to ensure that when making medical decisions, a doctor considers only the patient’s best interests — not the doctor’s or others’ financial interests.  The defendants violated those doctor-patient relationships through their kickback arrangements, and now they are being held to account.”