DOJ Intervenes in False Claims Act Lawsuit Against Hospital Group

Allegations of Anti-Kickback Statute and Stark Law violations related to medical director arrangements

Jan. 29, 2026 at 7:23pm

Got story updates? Submit your updates here. ›

The U.S. Department of Justice (DOJ) has intervened in a False Claims Act lawsuit against Priority Hospital Group, three of its long-term care hospitals, and a physician, alleging violations of the Anti-Kickback Statute (AKS) and Stark Law related to medical director arrangements. The DOJ claims the hospital group paid a physician, Dr. Benjamin Newsom, over $450,000 between 2017-2022 to induce patient referrals, resulting in millions in Medicare payments.

Why it matters

This enforcement action highlights the federal government's continued focus on physician compensation arrangements that may disguise improper referral incentives. Healthcare organizations utilizing independent contractor medical directors face increased risk under federal healthcare fraud laws like the AKS and Stark Law, which can result in treble damages, civil penalties, exclusion from federal programs, and criminal prosecution.

The details

The DOJ alleges that Riverside Hospital, one of Priority Hospital Group's facilities, entered into three 'medical director' agreements with Dr. Newsom that paid him over $450,000, but the payments were intended to induce referrals and admissions that resulted in over $2 million in Medicare payments. The government claims the arrangements failed to satisfy AKS safe harbors and Stark Law exceptions due to a lack of fair market value analysis, commercial unreasonableness, false timesheets, and compensation exceeding actual services provided.

  • The DOJ intervened in the False Claims Act lawsuit on January 16, 2026.
  • The alleged medical director arrangements were in place between 2017 and 2022.

The players

Priority Hospital Group

A hospital group that operates three long-term care hospitals, including Riverside Hospital, that are named in the DOJ's lawsuit.

Dr. Benjamin Newsom

A physician who entered into three medical director agreements with Riverside Hospital that the DOJ alleges were used to induce patient referrals.

Riverside Hospital

One of the long-term care hospitals operated by Priority Hospital Group that is named in the DOJ's lawsuit.

U.S. Department of Justice (DOJ)

The federal agency that has intervened in the False Claims Act lawsuit against Priority Hospital Group and others.

Got photos? Submit your photos here. ›

What’s next

The DOJ's lawsuit against Priority Hospital Group, its hospitals, and Dr. Newsom is ongoing, and the court will determine the outcome of the case.

The takeaway

This case highlights the significant legal and regulatory risks healthcare organizations face when utilizing medical director arrangements that may violate the Anti-Kickback Statute or Stark Law. Proactive compliance measures, including fair market value analyses, needs assessments, and robust timekeeping practices, are crucial to mitigate these risks.