A Michigan hospital system paid $69 million to settle whistleblower allegations it engaged in illegal referral and kickback schemes.

Covenant Healthcare System rented office space to a physician but forgave the rent in exchange for the physician referring Medicare patients to the hospital system in violation of the federal Anti-Kickback Statute, the Department of Justice (DOJ) said in a press release Wednesday.

Covenant also allegedly employed physicians, including Mark Adams and Asim Yunus, between 2006 and 2016 who self-referred patients to Covenant in violation of the federal Physician Self-Referral Law. Also known as the Stark Law, the rule aims to prevent doctors from steering Medicare patients to facilities in which they have a financial interest.

Covenant made an improper medical equipment leasing deal with a physician group owned by Covenant-employed doctors designed to induce referrals of Medicare patients to the hospital system, the DOJ added.

Covenant violated the False Claims Act (FCA) by billing Medicare for services that resulted from the improper referrals and kickbacks, the DOJ said.

The agency reached a $67.2 million settlement with Covenant in 2021 but kept it under seal while it continued to investigate Adams and Yunis. Covenant paid $1.8 million to Michigan.

Adams paid $406,551 to settle the DOJ’s allegations, and Yunis will pay $345,988, the agency said.

Stacy Goldsholl, a physician who originally brought the claims against Covenant and the two doctors, will receive a combined $12.4 million under the qui tam provisions of the FCA.

“Improper financial relationships and kickbacks undermine the integrity of federally funded healthcare programs by influencing physician decision-making,” said U.S. Attorney Dawn Ison in the Eastern District of Michigan’s release. “This outcome emphasizes our office’s 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.”

Covenant did not respond to a request for comment.

Adrianne Appel writes regulatory news, policy, and trends for Compliance Week. She previously reported about policy developments for Bloomberg Law and Bloomberg Government.

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