HOUSTON – Dr. Jack L. Baker, a prominent Houston radiologist, has agreed to pay the United States $650,000 to settle claims that he violated the False Claims Act, the Anti-Kickback Statute, the Stark Statute and the Texas Medicaid Fraud Prevention Act between 2002 and 2010, United States Attorney Kenneth Magidson announced today. The allegations included paying illegal compensation to doctors to induce them to refer patients to Fairmont Diagnostic Center and Open MRI Inc., an imaging center he owned and operated.

“Improper financial relationships between health care providers and their referral sources can corrupt a physician's judgment about the patient's true healthcare needs,” said Magidson.”In addition to yielding a substantial recovery for taxpayers, this settlement will prohibit Baker from participating in the Medicare and Medicaid programs for six years, which should deter similar conduct in the future.”

The settlement announced today involved allegations that Baker had entered into improper financial relationships with up to 17 physicians to induce them to refer patients to Fairmont for a wide variety of imaging studies. These prohibited financial relationships included (1) sham personal services contracts (medical directorships) which took into account the value of referrals from the medical directors and (2) contracts to pay the salaries of employees in physicians’ offices, which also took into account the value of referrals from those physicians. Under the Stark Statute and the Anti Kickback Statute, Medicare providers are prohibited from billing Medicare for referrals from doctors with whom the providers have a financial relationship, unless that relationship falls within certain exceptions.

These types of financial arrangements are prohibited for a variety of reasons, including that they increase the cost of health care by incentivizing physicians to make referrals for unnecessary tests.

The settlement resolves allegations made against Baker and Fairmont in a qui tam or whistleblower lawsuit filed in 2010 in federal court by Drs. Philip Blum and David Spinks, practicing physicians who refer patients to imaging centers such as Fairmont. Under the False Claims Act, private citizens can bring suit on behalf of the government and share in any amounts that are obtained through that legal action. In this case, Drs. Blum and Spinks will receive 20% of the proceeds of the settlement.

As part of the agreement, Baker has also agreed to a voluntary suspension from the Medicare and Medicaid programs for a period of six years. Under this provision of the settlement agreement, Baker will not be allowed to bill these programs for treating Medicare and Medicaid beneficiaries.

The investigation was conducted by the Department of Health and Human Services - Office of Inspector General. Assistant United States Attorney Andrew A. Bobb handled the case.