Covenant Healthcare System, along with two of its physicians, recently reached agreements with the Department of Justice (DOJ) to pay more than $69 million to resolve allegations that they participated in improper financial relationships, resulting in the submission of false claims to Medicare, Medicaid, TRICARE, and FECA programs.
According to the government, Covenant engaged in various schemes and had “improper financial relationships” with eight referring physicians and a physician-owned investment group. At various points from 2006 to 2016, Covenant had contracts with six physicians to serve as medical directors (Asim Yunus, M.D.; Kimiko Sugimoto, M.D.; Sujal Patel, M.D.; Sussan Bays, M.D.; Guy Boike, M.D.; and Thomas Damuth, M.D.). However, those arrangements did not satisfy any exceptions to the Stark Law or the Anti-Kickback Statute, which meant that referrals from the physicians to Covenant were in violation of the False Claims Act.
Additionally, from June 2006 to December 14, 2009, Covenant employed Mark Adams, M.D. During that time, the relationship did not satisfy any Stark Law exception and referrals for healthcare services by Adams to Covenant were in violation of the False Claims Act.
Covenant also rented office space to Ernie Balcueva, M.D., from January 21, 2009 through July 31, 2013. However, Balcueva did not pay rent to Covenant, instead providing referrals to Covenant in exchange for free office rent. This was in violation of the Anti-Kickback Statute, Stark Law, and the False Claims Act.
Finally, the Covenant Physician Investment Group was a group owned by Covenant-employed physicians for the purpose of purchasing large medical equipment that the Group would then lease to Covenant. This would allow Covenant to secure an equipment lease through a non-arm’s-length negotiation and induce referrals from the physicians, violations of the Anti-Kickback Statute and False Claims Act.
Covenant agreed to pay the United States $67 million and the State of Michigan $1.8 million in 2021. However, the settlement remained under seal while the DOJ investigated the physicians involved. Recently, Drs. Adams and Yunnus reached agreements with the DOJ totaling $406,551.15 and $345,987.54, respectively.
The claims were initially filed by a former vice president and CEO of one of the Covenant divisions in 2012. When filing the initial complaint, the whistleblower noted that they had raised the concern to Covenant while still employed, but instead of Covenant looking into the matter, they terminated the whistleblower’s employment. For their involvement, the whistleblower will receive roughly $12 million.
“Improper financial relationships and kickbacks undermine the integrity of federally-funded healthcare programs by influencing physician decision making,” said U.S. Attorney Dawn N. Ison. “This outcome emphasizes our Office’s commitment to pursuing justice against parties on both sides of those relationships—the hospital seeking to influence the physician via certain compensation schemes and the physician accepting the compensation.” Ison added, “I would like to commend the new leadership at Covenant for making things right once its past wrongdoing was brought to its attention by federal investigators.”