Indianapolis-based Community Health Network has agreed to a $345 million settlement to resolve allegations that, dating back to 2008, it violated the False Claims Act and Stark law.
The settlement, announced Dec. 19, stems from a whistleblower complaint filed in 2014 by the nonprofit health system's former CFO and COO under the qui tam provisions of the False Claims Act.
The United States filed suit against CHN in 2020, alleging that the system violated the False Claims Act by knowingly submitting claims to Medicare for services that were referred in violation of the Stark law, which requires that the compensation of employed physicians be fair market value and cannot account for the volume of referrals.
The U.S. complaint alleged that, starting in 2008, CHN's senior management engaged in a scheme to recruit physicians for employment with outsized pay in an effort to secure profitable referrals. The salaries offered to cardiologists, cardiothoracic surgeons, vascular surgeons, neurosurgeons and breast surgeons for CHN employment were sometimes up to double what physicians earned in private practices, the complaint alleged.
The government alleged that CHN provided false compensation information to a valuation firm, ignored the consultants' warnings about legal risks of overcompensation and awarded bonuses to physicians based on their referrals to providers within the CHN network.
CHN said the $345 million settlement will be paid from its reserves, which reported operating revenue of $3.1 billion in 2022. The nonprofit system has more than 200 sites of care and affiliates throughout Central Indiana, including 10 hospitals.
"This is completely unrelated to the quality and appropriateness of the care Community provided to patients," CHN Spokesperson Kris Kirschner said in a statement shared with Becker's. "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 system said it "has always sought to compensate employed physicians based on evolving industry best practices with the advice of independent third parties" and "has always sought to provide complete and accurate information to our third-party consultants."
"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," Zachary Myers, U.S. attorney for the Southern District of Indiana, said in the Justice Department news release.
"Community Health Network overpaid its doctors. It also paid doctors bonuses based on the amount of extra money the hospital was able to bill Medicare through doctor referrals," Mr. Myers said. "Such compensation arrangements erode patient trust and incentivize unnecessary medical services that waste taxpayer dollars."
Under the settlement, CHN will enter into a five-year corporate integrity agreement with HHS in addition to its $345 million payment to the U.S.