Indianapolis-based Community Health Network has agreed to a $345 million settlement with the Department of Justice to settle allegations of illegal physician referrals and related False Claims Act violations.
Announced Tuesday, the deal stems from a whistleblower complaint filed in 2014 by the nonprofit’s former chief financial officer and chief operating officer, Thomas Fischer, which was investigated by the Department of Health and Human Services’ Office of Inspector General (HHS OIG) and Federal Bureau of Investigations (FBI).
The government alleged that Community Health Network had knowingly submitted false claims to Medicare from 2008 to 2017 as part of senior management’s “illegal scheme to recruit physicians for employment for the purpose of capturing their lucrative ‘downstream referrals,’” the Justice Department said.
“The Stark Law was enacted to ensure that the clinical judgment of physicians is not corrupted by improper financial incentives,” Principal Deputy Assistant Attorney General Brian M. Boynton, head of the Justice Department’s Civil Division, said in the announcement. “Today’s recovery demonstrates the department’s resolve to protect the integrity of federal healthcare programs and to safeguard the taxpayer dollars used to support these important programs.”
The $345 million settlement includes $167 million of restitution and is accompanied by a five-year Corporate Integrity Agreement with HHS OIG, the government said.
According to the Justice Department’s complaint and settlement agreement documents, law enforcement alleged Community Health Network had employed “hundreds” of physicians across several specialties by offering and paying salaries “well above market value” that “in many cases … were magnitudes higher” than what they received in private practice.
For example, [the system] essentially doubled the salaries of all of the cardiovascular specialists (cardiologists, cardiothoracic surgeons and vascular surgeons),” law enforcement wrote in its complaint, which went on to allege that Community Health Network had also awarded financial performance bonuses related to target referral numbers.
Community Health Network allegedly ignored warnings from, and provided false information to, a valuation firm it hired (Sullivan Cotter) to review its payment proposals, the government said. As a result of these actions, the system allegedly submitted “thousands” of Medicare claims for specific services that were unlawfully referred, according to the complaint.
“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,” Zachary A. Myers, U.S. attorney for the Southern District of Indiana, said in a release. “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.”
Community Health Network is a nonprofit system with 10 acute and rehabilitation hospitals as well as over 200 care sites and affiliates across Central Indiana. It reported total revenues and gains of over $3.1 billion in the 2022 fiscal year but a $182 million decrease in net assets.
Fierce Healthcare has reached out to Community Health Network for comment.