Covenant Healthcare Paid $69M to Settle FCA Allegations

Two physicians allegedly involved in the scheme to defraud Medicare, Medicare, TRICARE and other government payers will also pay a combined $750,000.

Covenant Healthcare System paid $69 million in 2021 to resolve whistleblower allegations of a decade-long scheme that provided illegal kickbacks to physicians in exchange for referrals, a violation of the False Claims Act, federal prosecutors revealed this week.

The kickbacks, a violation of the Stark Law against physician self-referrals, went to eight physicians and the physician-owned Covenant Physician Investment Group between 2006 and 2016, and led to false claims submissions to Medicare, Medicaid, TRICARE, FECA, and other government programs, Dawn N. Ison, U.S. Attorney for Eastern Michigan, says in a media release.

Two of these physicians, neurosurgeon Mark Adams, MD, and electrophysiologist Asim Yunus, MD, will pay $406,551 and $345,987, respectively, to resolve allegations related to their role in the scheme, Ison says.

The settlement with Saginaw, Michigan-based Covenant was finalized in 2021 but held under seal until the settlement with Yunus and Adams was finalized, Ison says.

Covenant did not respond Thursday afternoon to a request for comment from HealthLeaders.

The federal government collected $67.1 million, the state of Michigan collected $1.8 million, and whistleblower Stacy Goldsholl, MD, received $12.3 million, DOJ says.

"Improper financial relationships and kickbacks undermine the integrity of federally funded healthcare programs by influencing physician decision making," Ison says. "This outcome emphasizes our commitment to pursuing justice against parties on both sides of those relationships—the hospital seeking to influence the physician via certain compensation schemes and the physician accepting the compensation."    

According to DOJ:

• Between 2006 and 2016 Covenant had contracts with Yunus, Kimiko Sugimoto, MD, Sujal Patel, MD, Sussan Bays, MD, Guy Boike, MD, and Thomas Damuth, MD, to serve as "medical directors," whose referrals did not meet the exemption requirements of the anti-kickback statute.
   
• From June 1, 2006, to December 14, 2009, Covenant employed Adams in an improper financial relationship that did not meet Stark Law exemptions.
   
• From January 21, 2009, through July 31, 2013, Covenant rented office space to Ernie Balcueva, MD. But didn’t charge him rent, which DOJ called an illegal kickback paid in exchange for referrals.
   
• Covenant let Covenant Physician Investment Group buy medical equipment that the group would lease to Covenant "through non-arm’s-length negotiations" to induce referrals.