The United States Department of Justice (DOJ) recently reached a $345 million settlement with Community Health Network, Inc., a health care network headquartered in Indianapolis, Indiana, over allegations that the company violated the False Claims Act by knowingly submitting claims to Medicare for services that were Stark Law referral violations.
The claim was initially brought in 2014 by a qui tam whistleblower, Community Health Network’s former Chief Financial and Chief Operating Officer. The United States opted to intervene in the case in 2020, with allegations as set forth below. While the settlement resolves claims alleged by the United States in its Complaint in Intervention, it does not resolve the claims set forth in the Relator’s Second Amended Complaint, filed roughly 11 months after the United States’ Complaint in Intervention.
The United States alleged that since at least 2008 and through 2020, senior management at Community Health Network have engaged in an illegal scheme to recruit physicians for employment for the purpose of capturing their lucrative “downstream referrals.” Through this scheme, Community Health Network successfully recruited hundreds of local physicians, including specialists like cardiologists, neurosurgeons, and breast surgeons, by paying significantly higher salaries than what they were receiving in their own private practices. The United States contended that Community Health Network engaged in this scheme, despite knowing that the Stark Law requires compensation of physicians to be fair market value and not account for the volume of referrals.
The United States further alleged that Community Health Network hired a consulting firm to analyze and value the proposed compensation for recruited specialists, knowingly providing the firm with falsified compensation figures so the firm would render a favorable opinion. The complaint also alleged that Community Health Network ignored repeated warnings from the firm regarding legal perils of overcompensating physicians.
In addition to paying the recruited specialists excessive compensation, the United States alleged that Community Health Network awarded incentive compensation to the physicians, via financial performance bonuses based on the physician reaching a target number of referrals to the Network. This is also a Stark Law violation.
In addition to the $345 million settlement reached with the DOJ, Community Health Network will also enter into a five-year Corporate Integrity Agreement with the Department of Health and Human Services Office of Inspector General (HHS OIG).
As we often see with similar settlements, the allegations in the case have not been proven and there has been no determination of liability.
“Hoosier Medicare patients deserve to know that their care is based on their medical needs, not their doctor’s financial gain,” said U.S. Attorney Zachary A. Myers for the Southern District of Indiana. “When doctors refer patients for CT scans, mammograms or any other medical service, those patients should know the doctor is putting their medical interests first and not their profit margins. Community Health Network overpaid its doctors. It also paid doctors bonuses based on the amount of extra money the hospital was able to bill Medicare through doctor referrals. Such compensation arrangements erode patient trust and incentivize unnecessary medical services that waste taxpayer dollars. The U.S. Attorney’s Office’s Civil Division, working alongside the U.S. Department of Health and Human Services Office of Inspector General (HHS-OIG) and the DOJ’s Fraud Section are committed to holding companies accountable when they knowingly seek to profit off of Medicare patients through greedy compensation schemes.”