Bozeman Health Deaconess Hospital

An aerial view of Bozeman Health Deaconess Hospital is seen from a Summit Air Ambulance helicopter on Thursday, Nov. 19, 2015, in Bozeman.

Bozeman Health has settled a federal lawsuit that alleged the hospital made millions of dollars worth of fraudulent claims to government health care programs as part of an illegal kickback scheme to keep a monopoly on radiology services in Gallatin County.

Despite the settlement, however, a Bozeman Health spokesperson said the hospital denies all the allegations and any wrongdoing.

The lawsuit, which was filed nearly three years ago in U.S. District Court in Butte, was dismissed Oct. 31 after the parties let the judge know that they had reached a settlement.

The suit, filed against Bozeman Deaconess Health Services, Bozeman Health Deaconess Hospital and Advanced Medical Imaging, was brought under the False Claims Act, which allows private individuals to file against federal contractors for fraud against the government.

The two private individuals in this case were former Bozeman radiologists Frank Rembert and Michael Paradise. The U.S. and Montana declined to intervene in the case, however.

According to court documents, Paradise and Rembert will receive an undisclosed portion of settlement funds, while the U.S. and state will also receive some of the settlement money.

According to the Montana Attorney General’s Office, the Department of Public Health and Human Services is receiving $238,820, of which $66,869 will go to the plaintiffs.

How much the U.S. is getting, however, is unknown. A spokesperson with the U.S. Attorney’s Office and attorneys for both the plaintiffs and Bozeman Health declined to comment.

The suit, filed by the Bozeman firm Goetz, Baldwin & Geddes, alleged that Bozeman Health entered into a “sham” joint venture with a radiology group that they alleged had been seeking to open its own outpatient imaging center that would have competed with Bozeman Health.

The hospital was represented by Ian McIntosh and Mac Morris of the Crowley Fleck law firm of Bozeman and David Robbins and David Taylor of Perkins Coie LLP of Seattle. They argued that the radiology group was not considering opening its own independent outpatient imaging center and that the allegations that the hospital bribed the group to not open the center were “demonstrably false.”

According to the suit:

Bozeman Health had an exclusive contract to provide radiology services with Intercity Radiology, a local radiology group that co-owns Advanced Medical Imaging with Bozeman Health.

In 2002, Intercity Radiology considered opening an outpatient imaging center in Bozeman, which would have provided MRI, CT and ultrasound services.

The center would have offered lower prices, better office hours and faster service in a more convenient location, the suit claimed.

As a way to protect its monopoly, the suit claimed that Bozeman Health convinced Intercity Radiology to abandon those plans and instead persuaded it to open a joint venture at the hospital.

That joint venture became Advanced Medical Imaging, with Bozeman Health having a majority ownership at 77.5 percent and Intercity Radiology owning the rest.

The partnership with Intercity Radiology also included a non-competition clause, preventing employees from participating in any other outpatient imaging center.

Bozeman Health then intended to refer all outpatients to Advanced Medical Imaging for MRI, CT, mammography, women’s diagnostic and exa scans. And for those referrals, Bozeman Health wanted to be paid.

The suit alleged that during negotiations, Intercity Radiology’s attorneys voiced concerns that the hospital’s proposed patient referrals violated the federal Anti-Kickback Statute.

The hospital then offered to have Intercity Radiology pay less for patient referrals, the suit claimed, pushing forward with the arrangement despite being warned that it was illegal.

Despite the revenue, sending referrals to Advanced Medical Imaging still took revenue away from Bozeman Health, which offered the same services, as Intercity Radiology received 22.5 percent of revenue from Advanced Medical Imaging.

So Bozeman Health took steps to track and control the volume of referrals it sent to Advanced Medical Imaging so it could keep the majority of outpatient imaging business for itself, the suit alleged.

Bozeman Health sent a predetermined number of patients to Advanced Medical Imaging and had them hire a “patient care navigator” who, among other duties, was tasked with referring breast cancer patients back to Bozeman Health.

Hospital attorneys argued that the foundation of the claims in the suit — that Intercity Radiology intended to open its own center and gave Bozeman Health a non-compete agreement as compensation in return for patient referrals — were false.

In 2002, Intercity Radiology hired consultants to develop a business plan for a potential outpatient imaging center. However, two reports from the consultants that year showed that Intercity Radiology was interested in opening a joint venture with Bozeman Health.

They also argue that Intercity Radiology already had agreed to a non-compete agreement with Bozeman Health almost two years before forming Advanced Medical Imaging, and before any alleged bribe by Bozeman Health.

The federal suit was the third lawsuit Rembert and Paradise, who were fired from Intercity Radiology in 2011, had filed against the hospital.

The first suit, filed in 2012 for wrongful termination, ended with both Rembert and Paradise receiving more than $850,000 and $817,000 respectively from Intercity Radiology. And a second suit, filed in 2013, is still pending.

In court documents, hospital attorneys also noted that since the federal suit was filed in 2015, Bozeman Health Deaconess Hospital and Advanced Medical Imaging have submitted hundreds of Medicare and Medicaid claims to the U.S. Department of Health and Human Services and to the state, both of which have paid the claims.

The government agencies have also not filed any sort of administrative sanctions against BDH or AMI, they said.

Whitney Bermes can be reached at or 406-582-2648. Follow her on Twitter @wabermes. {span} {/span}

Whitney Bermes is the city editor and covers cops and courts for the Chronicle.

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