A district court denied Indianapolis-based Community Health Network's motion to dismiss a false claims lawsuit brought by the Justice Department alleging that it engaged in a fraud scheme to keep referrals in its network.
Judge Richard Young of the U.S. District Court of Southern Indiana ruled Oct. 20 that the government has plausibly alleged False Claims Act and Stark law violations.
The Justice Department's case alleges that Community Health Network paid salaries to hundreds of physicians that were "excessive" or that took into account the volume of referrals. The Justice Department claims this was a "defensive" strategy to keep referrals in the network and violated the Stark law. The law prohibits physicians from referring Medicare patients for care at a facility with which the physician has an improper financial relationship.
Prosecutors also claim that Community Health Network leaders received "clear guidance" from a valuation firm that said the physicians' salaries were outside the range of fair market value and needed further justification to be in compliance with the Stark law.
The Justice Department also claims that Community Health Network then billed Medicare for inpatient and outpatient services provided by those physicians that were being compensated above fair market value, which resulted in the health system receiving millions of dollars of improper Medicare reimbursement, in violation of the False Claims Act.
The Justice Department is seeking damages caused by the alleged improper payments. The lawsuit stems from a whistleblower complaint filed by Community Health Network's former CFO, Thomas Fischer. He served as finance chief from 2005 to 2013.