Indiana Health Network Agrees to Pay $345 Million to Settle Alleged False Claims Act Violations
Crime
The Stark Law seeks to safeguard the integrity of the Medicare program by prohibiting a hospital from billing for certain services referred by physicians with whom the hospital has a financial relationship, unless that relationship satisfies one of the law’s statutory or regulatory exceptions.
Under the Stark Law, when a hospital employs a physician, the hospital may not submit claims for certain services referred by that physician unless the physician’s compensation is consistent with fair market value and not based on the value or volume of their referrals to the hospital.
In this lawsuit, the United States alleged that the compensation Community paid to its cardiologists, cardiothoracic surgeons, vascular surgeons, neurosurgeons and breast surgeons was well above fair market value, that Community awarded bonuses to physicians that were tied to the number of their referrals, and that Community submitted claims to Medicare for services that resulted from these unlawful referrals.
The United States’ complaint alleged that beginning in 2008 and 2009, senior management at Community embarked on an illegal scheme to recruit physicians for employment for the purpose of capturing their lucrative “downstream referrals.” Community successfully recruited hundreds of local physicians, including cardiovascular specialists, neurosurgeons and breast surgeons, by paying them salaries that were significantly higher — sometimes as much as double — what they were receiving in their own private practices.
Community was well aware of the Stark Law requirements that the compensation of employed physicians had to be fair market value and could not take into account the volume of referrals. Community hired a valuation firm to analyze the compensation it proposed paying to its recruited specialists. The complaint alleged that Community knowingly provided the firm with false compensation figures so that the firm would render a favorable opinion.
The complaint further alleged that Community ignored repeated warnings from the valuation firm regarding the legal perils of overcompensating its physicians. In addition to paying specialists excessive compensation, the complaint alleged that Community awarded incentive compensation to physicians, in the form of certain financial performance bonuses that were based on the physicians reaching a target of referrals to Community’s network, again in violation of the Stark Law.
Under the settlement, in addition to paying the United States $345 million, Community will enter into a five-year Corporate Integrity Agreement with HHS-OIG.
The settlement stems from a whistleblower complaint filed in 2014 by CHN’s former Chief Financial and Chief Operating Officer Thomas Fischer pursuant to the False Claims Act’s qui tam provisions, which permit private persons to bring a lawsuit on behalf of the government and to share in any recovery. The Act also permits the government to intervene and take over the lawsuit, as it did in this case as to certain of Fischer’s allegations. Fischer’s share has not yet been determined in this matter.
The United States’ intervention and settlement in this matter illustrates the government’s emphasis on combating healthcare fraud. One of the most powerful tools in this effort is the False Claims Act. Tips and complaints from all sources about potential fraud, waste, abuse and mismanagement can be reported to HHS at 800‑HHS‑TIPS (800-447-8477).
The FBI and HHS-OIG investigated the case.
The matter was handled by Trial Attorneys Arthur Di Dio, Kelly McAuliffe, Claire Horrell and David Finkelstein of the Civil Division’s Fraud Section and Assistant U.S. Attorneys Justin Olson and Shelese Woods for the Southern District of Indiana.