Erlanger Health System is facing a federal lawsuit alleging it violated the Stark Law by overpaying physicians who improperly referred patients to the Chattanooga, Tenn.-based system.
The government filed a complaint July 26 in the U.S. District Court for the Western District of North Carolina, claiming the health system paid physicians "well above fair market value" and knowingly submitted claims to Medicare that were not eligible for payment.
The Physician Self-Referral Law, commonly known as the Stark Law, prohibits physicians from referring patients to receive services payable by Medicare or Medicaid from entities with which they have a financial relationship, unless an exception applies. According to the complaint, Erlanger had employment relationships with physicians that didn't meet an exception since they were compensated above fair market value.
"The government's complaint alleges that Erlanger compromised Stark Law compliance to boost its financial standing, knowingly overpaying physicians whose practices generated profits for the hospital," Dena King, U.S. Attorney for the Western District of North Carolina, said in a news release. "We are dedicated to enforcing the Stark Law and protecting patients and the Medicare program from financial relationships that undermine public trust and incentivize overbilling and waste of taxpayer dollars."
In a statement to Becker's, a spokesperson for Erlanger said the health system intends to "vigorously defend" against the lawsuit.
"Erlanger paid physicians based on amounts that outside experts advised was fair market value," the statement said. "Erlanger did not pay for referrals. A complete picture of the facts will demonstrate that the allegations lack merit and tell a very different story than what the government now claims."