DOJ sues Indiana's Community Health Network over Stark Law violations

The Department of Justice is suing Community Health Network for allegedly improper financial relationships with physicians. (Getty/designer491)

The Department of Justice (DOJ) has filed a lawsuit alleging that Indiana-based Community Health Network violated the Stark Law that bans physician self-referrals.

The lawsuit, announced Tuesday, comes as the industry is bracing for major changes in how the Stark Law will be enforced. The Centers for Medicare & Medicaid Services (CMS) is mulling a series of new exceptions and safe harbors to allow for value-based enterprises.

DOJ alleges in its lawsuit that Community Health, which is a network of hospitals and physician offices in central Indiana, conditioned paying bonuses to physicians based on them achieving a minimum target of referrals to the hospital. The False Claims Act lawsuit also said that Community submitted claims to Medicare “knowing that the claims for those referred services were not eligible for payment.”

“Improper financial relationships between hospitals and physicians corrupt clinical decision-making, threaten patient care, and ultimately drive up Medicare costs,” said Jody Hunt, assistant attorney general of DOJ’s Civil Division, in a statement.

RELATED: Docs concerned about financial risk in Stark reform while hospitals push for clarity

Stark does have statutory exceptions for financial relationships.

The lawsuit alleges that the relationships Community had with several physicians don’t meet any exceptions because “the compensation Community paid to the physicians was well above fair market value and because Community conditioned paying bonuses on physicians achieving a minimum target of referral revenues to the hospital.”

Community Health did not return a request for comment as of press time.

The lawsuit comes a few months after California health system Sutter Health reached a $46 million settlement with the DOJ to settle allegations that it ran afoul of Stark.

CMS is considering a slew of changes to Stark to address provider criticism that the 1989 law is hindering value-based care arrangements. A proposed rule released last fall would install new exemptions and safe harbors to Stark and the anti-kickback statute. Some examples include creating new exceptions for value-based arrangements and more flexibility for sharing information between doctors and hospitals.

The comment period on the rule ended Dec. 31, and the rule could be finalized later this year.