The Indianapolis-based nonprofit system has admitted no wrongdoing.
Community Health Network will pay $345 million to resolve allegations that "senior management" knowingly billed Medicare in an "illegal scheme" that relied on illicit physician referrals, the U.S. Department of Justice announced this week.
The alleged violations of the False Claims Act and the Stark Law date back to 2008, and stem from a 2014 whistleblower lawsuit filed by CHN’s former CFO/COO Thomas Fischer.
The DOJ complaint alleges that beginning in 2008 and 2009, senior management at CHN launched an illegal scheme to recruit and hire hundreds of local physicians — including cardiovascular specialists, neurosurgeons and breast surgeons — to capture their downstream referrals.
In exchange, the physicians were paid exorbitant salaries that were sometimes double what they earned in private practices. "Community was well aware of the Stark Law requirements that the compensation of employed physicians had to be fair market value and could not take into account the volume of referrals," DOJ says in its complaint.
To cover their tracks, CHN hired a valuation firm to analyze the compensation it proposed paying to its recruited specialists, but knowingly gave the firm bogus compensation figures to gain a favorable review, DOJ says.
The complaint says CHN ignored repeated warnings from the valuation firm about illegally overpaying physicians, who also were awarded bonuses based reaching a target for referrals, also a violation of the Stark Law.
"Hoosier Medicare patients deserve to know that their care is based on their medical needs, not their doctor’s financial gain," U.S. Attorney Zachary A. Myers for the Southern District of Indiana says in a media release.
"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."
In addition to the $345 million settlement, CHN will be under a five-year Corporate Integrity Agreement with the Department of Health and Human Services' Office of the Inspector General.
CHN Responds
Community Health Network says in a media statement that the more than one-third-of-one-billion-dollars settlement comes "with no finding of wrongdoing" on its part, and that the settlement will be paid from reserves. CHN had operating revenue of $3.1 billion in 2022.
"This is completely unrelated to the quality and appropriateness of the care Community provided to patients," CHN spokesperson Kris Kirschner says. "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," said Kirschner. "Community's leadership has ensured the ongoing health and growth of the organization," Kirschner says.
“Hoosier Medicare patients deserve to know that their care is based on their medical needs, not their doctor's financial gain.”
Zachary A. Myers, U.S. Attorney, Southern District of Indiana
John Commins is the news editor for HealthLeaders.
KEY TAKEAWAYS
CHN launched an 'illegal scheme' to recruit and hire hundreds of local physicians to capture their downstream referrals.
In exchange, the physicians were paid exorbitant salaries that were sometimes double what they earned in private practices.
To cover their tracks, CHN hired a valuation firm to analyze the compensation it proposed paying to its recruited specialists.
However, CHN knowingly gave the firm bogus compensation figures to gain a favorable review.