Indiana-based Community Health Network agreed to pay $345 million as part of a settlement with the Department of Justice (DOJ) resolving allegations it overcompensated physicians it employed at a rate that violated the Stark Law.
Of the settlement total, $167 million is restitution, according to the settlement agreement published by the DOJ on Tuesday. The agency intervened in the case in 2020 on the back of allegations raised in 2014 by Community’s former Chief Financial and Chief Operating Officer Thomas Fischer under the qui tam provisions of the False Claims Act. Fischer’s whistleblower award has yet to be determined.
The case marks the largest False Claims Act settlement based on Stark Law violations in the history of the DOJ.
The details: The Stark Law prohibits hospitals from billing for certain Medicare services referred by physicians with whom the hospital has a financial relationship. The law states a physician’s compensation must be consistent with market value and not based on their referral production.
From 2008 to at least 2017, Community knowingly submitted or caused the submission of false claims to Medicare because its compensation arrangements with physicians did not satisfy the requirements of any applicable exception to the Stark Law, according to the DOJ’s complaint. In some cases, the hospital allegedly paid physicians double what they were earning in private practice and offered further performance bonuses based on referral targets.
To legitimize its alleged scheme, Community engaged with a valuation firm to analyze its compensation practices and provided the firm false data so it would return a favorable opinion, according to the DOJ.
Compliance considerations: Community agreed to a five-year corporate integrity agreement with the Department of Health and Human Services’ Office of Inspector General, under which it must retain an independent organization to review its status annually.
“An important focus of our healthcare fraud enforcement efforts has been to ensure compliance with the … Stark Law,” said Principal Deputy Assistant Attorney General Brian Boynton in remarks delivered in Indianapolis. “… We are focused on ensuring that physicians provide objective medical advice to their patients—advice that is not tainted by improper financial relationships.”
Company response: “This is completely unrelated to the quality and appropriateness of the care Community provided to patients,” said Community spokesperson Kris Kirschner in an emailed statement. “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.”
The settlement did not include any finding of wrongdoing.