HCA Holdings and the Justice Department said Wednesday have reached a $16.5 million settlement over violations of federal laws that restrict financial relationships between hospitals and physicians. The AP reports that Justice officials say two HCA doctors’ subsidiaries gave financial benefits to Diagnostic Associates of Chattanooga, a physicians group, in an effort to get more patient referrals to HCA facilities.

The case arose from a whistleblower lawsuit filed in East Tennessee. The whistleblower will receive an 18.5 percent share of the settlement money. The settlement requires Parkridge to hire an independent organization to review its business arrangements and transactions and work with the Office of Inspector General of the U.S. Department of Health and Human Services to ensure compliance with federal laws.

The Securities and Exchange Commission has issued final rules governing the implementation of the Dodd-Frank Wall Street Reform and Consumer Protection Act.

On May 25, commisoners voted by a 3-2 vote to make individuals who volunteer “original information” to the SEC about actual or potential violations of securities laws eligible for rewards from 10 percent to 20 percent of the rewarded amount. These percentage payouts are restricted to cases where the prosecution is successful and the amount awarded  exceeds $1 million.

Prior to issuance, one controversial issue arose as to whether the SEC should require a whistleblower to first exhaust internal reporting programs to be eligible for the whistleblower reward. The final rules do not require whistleblowers to report internally to qualify for an award, but the rules are designed to encourage whistleblowers to do so. The final rules provide the following incentives to whistleblowers who report internally:

• A whistleblower whose company provides information to the SEC following his or her use of the company’s internal reporting process will receive credit for the information, even if  the information is more than what the whistleblower originally reported.

• A whistleblower who uses the internal reporting process and reports the alleged violation to the SEC within 120 days (as opposed to the 90 days originally proposed) will be deemed to have reported to the SEC as of the date of the internal report. This allows the whistleblower to maintain his or her “place in line.”

• The whistleblower’s participation in a company’s internal reporting process will be a factor in determining the amount of the award.

So, the bottom line is company whistleblowers are not required to take complaints internally before reporting concerns to the SEC.

In a separate but related matter, the SEC did not address the attorney fee issue — the concern there being that attorneys should not be eligible for contingency fees in whistleblower cases.

The SEC's release regarding the final rules is here.

The Company views this issue as a funding dispute between government agencies. The government has never alleged that the hospitals filed false claims or that they received reimbursement under the Sole Community Provider program for services the hospitals did not provide.