Community Health Network agrees to pay record settlement against violating False Claims Act
INDIANAPOLIS (WISH) — Community Health Network Inc., headquartered in Indianapolis, has agreed to pay the United States $345 million to resolve allegations of violating the False Claims Act.
Community Health was accused of knowingly submitting claims to Medicare for services that were referred in violation of the Stark Law.
According to a news release, 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 the lawsuit, the U.S. claims 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 U.S. also complains in the lawsuit that at the beginning of 2008 and 2009, senior management embarked on an illegal scheme to recruit physicians for employment to capture their lucrative “downstream referrals.” Community Health recruited hundreds of local physicians by paying them significantly higher salaries — more than what they were receiving in their private practices.
Further information on the complaint from the release is below.
“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.”
The settlement stemmed from a whistleblower complaint filed in 2014 by CHN’s former Chief Financial and Chief Financial and Chief Operating Officer Thomas Fischer, according to the False Claims Act.
Statements
This is completely unrelated to the quality and appropriateness of the care Community provided to patients,” said Community spokesperson Kris Kirschner. “This settlement, like those involving other health systems and hospitals, relates to the complex, highly regulated area of physician compensation. Community has consistently prioritized the highest regulatory and ethical standards in all our business processes. Community’s caregivers and our services will not be impacted by the settlement, and Community’s leadership has ensured the ongoing health and growth of the organization. Community has a bright future. Our commitment to providing exceptional care is unwavering.
Community Health Network spokesperson Kris Kirschner
The Stark Law was enacted to ensure that the clinical judgment of physicians is not corrupted by improper financial incentives. 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.
Principal Deputy Assistant Attorney General Brian M. Boynton, head of the Justice Department’s Civil Division
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. 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. The U.S. Attorney’s Office’s Civil Division, working alongside the U.S. Department of Health and Human Services Office of Inspector General (HHS-OIG) and the DOJ’s Fraud Section are committed to holding companies accountable when they knowingly seek to profit off of Medicare patients through greedy compensation schemes.
U.S. Attorney Zachary A. Myers for the Southern District of Indiana
The Stark Law is an important law in the health care regulatory arena, and when adopted, the law had a laudable purpose – to prevent physicians from receiving financial incentives that 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. 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.
IHA Stark Law Expert Steven Pratt, Shareholder with Hall, Render, Killian, Heath, & Lyman, P.C.