Community Health Network Resolves $345M Case for Unlawful Physician Referrals

Indianapolis-based Community Health Network has recently reached a resolution with the Department of Justice (DOJ), agreeing to a substantial $345 million settlement to address allegations of improper physician referrals and related violations of the False Claims Act.

This legal agreement, disclosed earlier this week, stems from a whistleblower complaint filed in 2014 by Thomas Fischer, the former chief financial officer and chief operating officer of the nonprofit organization. The complaint underwent a thorough investigation led by the Department of Health and Human Services’ Office of Inspector General (HHS OIG) and the Federal Bureau of Investigations (FBI), leading to this significant settlement.

The DOJ asserted that Community Health Network knowingly submitted misleading claims to Medicare spanning the years 2008 to 2017. The crux of the allegations centers around senior management’s purported “unlawful scheme” to recruit physicians with the primary goal of securing lucrative ‘downstream referrals.’ Principal Deputy Assistant Attorney General Brian M. Boynton, heading the Justice Department’s Civil Division, underscored the importance of the Stark Law in preventing undue financial influence on physicians’ clinical judgment.

The comprehensive $345 million settlement is composed of a $167 million restitution component and is coupled with a five-year Corporate Integrity Agreement with HHS OIG. This agreement is designed to ensure ongoing compliance with healthcare regulations. The Justice Department’s complaint and settlement documents unveiled a concerning pattern of conduct by Community Health Network. 

It is alleged that the organization enticed and retained a substantial number of physicians across diverse specialties by offering salaries deemed “well above market value.” These remunerations, according to the complaint, were “significantly higher” than those in private practice. Notably, cardiovascular specialists, including cardiologists, cardiothoracic surgeons, and vascular surgeons, saw their salaries allegedly double. Furthermore, financial performance bonuses linked to specified referral targets were reportedly granted.

The complaint further alleged that Community Health Network ignored warnings and provided inaccurate information to a valuation firm, Sullivan Cotter, engaged to evaluate its payment proposals. Consequently, the organization purportedly submitted a substantial number of Medicare claims for specific services that were unlawfully referred.

Zachary A. Myers, the U.S. attorney for the Southern District of Indiana, expressed concern about the compensation arrangements, emphasizing that overpayment to doctors and bonuses tied to the hospital’s increased Medicare billing through doctor referrals eroded patient trust. Myers stated that such arrangements not only incentivized unnecessary medical services but also led to wasteful expenditure of taxpayer dollars.

Community Health Network, a nonprofit entity with an extensive healthcare network comprising 10 acute and rehabilitation hospitals, over 200 care sites, and affiliates throughout Central Indiana, disclosed total revenues and gains exceeding $3.1 billion in the fiscal year 2022. However, despite this robust financial performance, the organization reported a $182 million decrease in net assets.