INDIANAPOLIS — An Indianapolis-based healthcare network has agreed to pay the United States $345 million concerning allegations that the network violated the False Claims Act.
According to an announcement from the US Attorney’s Office for the Southern District of Indiana, Community Health Network agreed to pay the sum to “resolve allegations” that the network violated the act by “knowingly submitting claims to Medicare for services that were referred to in violation of the Stark Law.”
Officials say that when a hospital employs a physician, the hospital may not submit Medicare claims for certain services referred to by that physician unless their compensation “is consistent with fair market value and not based on the value or volume of their referrals to the hospital.”
“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 release. “Today’s recovery demonstrates the department’s resolve to protect the integrity of federal health care programs and to safeguard the taxpayer dollars used to support these important programs.”
In the suit, first filed in July 2014 in the Indianapolis division of the United States District Court for the Southern District of Indiana, the complaint claimed that Community Health Network “engaged in a scheme” to pay improper compensation to persuade physicians to “illegally refer patients, including Medicare and Medicaid patients, to its hospitals and associated medical facilities” for services paid for by government-funded healthcare programs.
Specifically, the release said that the network reportedly paid its cardiologists, cardiothoracic surgeons, vascular surgeons, neurosurgeons and breast surgeons compensation well above fair market value, as well as awarding bonuses that were tied to the number of their referrals. The physicians’ salaries paid for by the network were sometimes as much as double what they were receiving through private practice.
The network submitted claims to Medicare for services that resulted from the referrals, according to the complaint.
“Community’s systematic overcompensation of its employed and affiliated physicians is so extreme that Community’s physician group has, for the past five or more years, lost tens of millions of dollars per year,” the complaint said at the time. “…Defendants have submitted and caused to be submitted tens, if not hundreds, of thousands of fraudulent claims to federal and state-funded healthcare programs for services provided capable of kickback-tainted referrals and/or based on referrals from physicians with whom defendants had financial relationships not falling within a Stark safe harbor.”
Officials stressed at the time that each submission made by the network was a “false or fraudulent claim in violation of” the federal and Indiana False Claims Act. The release said that the network “ignored repeated warnings” of the potential for legal action for overcompensating its physicians in this way.
“The Community was well aware of the Stark Law requirements that the compensation of employed physicians must be fair market value and could not take into account the volume of referrals,” the release said.
Under the settlement, the network will enter into a five-year Corporate Integrity Agreement with the Office of Inspector General for the Department of Health and Human Services, the release said.
“Hoosier Medicare patients deserve to know that their care is based on their medical needs, not their doctor’s financial gain. 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, the US Attorney for the Southern District of Indiana, said in the release.
“The United States alleged that Community Health Network overpaid its doctors, and that it 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 US Attorney’s Office’s Civil Division, working alongside the US Department of Health and Human Services Office of Inspector General (HHS-OIG) and the Justice Department’s Fraud Section are committed to holding companies accountable when they know they seek to profit off of Medicare patients through greedy compensation schemes.”
This settlement comes after Thomas Fischer, the network’s former chief financial and chief operating officer, filed a whistleblower complaint in 2014, the release said.
“I am grateful for this recovery,” Fischer said. “These claims are not mere technicalities; they directly affect patients, hospital employees and the high cost of healthcare. This puts money back into the healthcare system and is a victory for the Indiana taxpayer.”
In a statement from the Community Health Network, officials said the settlement is “completely unrelated to the quality and appropriateness of the care” the network provides to patients.
“This settlement, like those involving other health systems and hospitals, relates to the complex, highly regulated area of physician compensation,” Kris Kirschner, the spokesperson for the network, said in the release. “Community has consistently prioritized the highest regulatory and ethical standards in all our business processes.”
The network stressed that the settlement resolved the claims from the United States “with no finding of wrongdoing.”
“The community’s caregivers and our services will not be impacted by the settlement,” Kirschner said. “Community’s leadership has ensured the ongoing health and growth of the organization.”
In a statement from the Steven Pratt, a shareholder with Hall, Render, Killian, Heath, & Lyman, PC and the Stark Law expert for the Indiana Hospital Association, he said that when the law is implemented, it prevents physicians from receiving financial incentives that could result in a patient receiving unnecessary care.
“Unfortunately, the law is not being enforced to achieve this purpose. Instead, without showing any unnecessary care or any harm to patients or Medicare, hospitals are frequently required to pay extraordinary damages to settle claims,” Pratt said. “The Community Health Network settlement is a good example of this. In fact, congressional leaders are currently reviewing potential updates to the Stark Law so that any damages are based upon patients having received unnecessary care, and any settlement amounts do not unnecessarily contribute to health care costs.”