- The federal government Tuesday filed a compliant against Indianapolis-based health system Community Health Network over alleged fraudulent billing of Medicare for millions of dollars over a decade.
- The nonprofit health system is accused of knowingly billing Medicare for services referred by a doctor who had a financial relationship with CHN. This includes the provider paying bonuses to physicians who reached a minimum target of referral revenues to the hospital, which violates the Stark healthcare fraud and abuse law, and paying employed physicians a salary well above fair market value.
- According to a whistleblower, CHN submitted tens if not hundreds of thousands of fraudulent claims to federal healthcare programs for services related to these kickback-tainted referrals, in violation of the False Claims Act, from at least 2008 to 2017.
In July 2014, former CHN executive Thomas Fischer alleged the system had engaged in a scheme to improperly incentivize physicians to illegally refer patients to its hospitals and medical facilities beginning roughly in 2009. The aggressive payment policies coincided with the appointment of a new CEO, Bryan Mills, who still leads the system.
Fischer was hired as CHN's chief financial officer in 2005 and also became chief operating officer starting in 2012. He was fired from his dual posts in 2013 for his attempts to reform these practices, he says. The DOJ initially intervened in part with Fischer's suit and the state of Indiana declined to get involved.
In an effort to expand its market share and gain leverage against competitor networks and payers, CHN gave employed and affiliated physicians high base salaries, performance and retention bonuses, lump sum payments and surgical center investment opportunities in exchange for referrals, according to the lawsuit.
The nine-hospital integrated system also steered lucrative commercial business to surgical centers owned by the physicians, Fischer said, and set physician salaries in the 90th percentile of national benchmark data — well above fair market value, which usually caps at the 75th percentile — against the advice of outside consultants, who called the payments "staggering."
"Improper financial relationships between hospitals and physicians corrupt clinical decision-making, threaten patient care, and ultimately drive up Medicare costs," Assistant Attorney General Jody Hunt of the Department of Justice's Civil Division said in a statement.
At the time of the initial lawsuit, 33% of CHN's revenues stemmed from Medicare payments, and 10% from Indiana Medicaid accounts.
According to Fischer, the overcompensation resulting from the scheme caused CHN's physician group to lose tens of millions of dollars a year. From 2012 to 2013, losses topped $100 million each year.
CHN vigorously denies any improper activity, telling Healthcare Dive in a statement the lawsuit only involves "certain administrative issues" and that it is "confident" it complied with the law.
"We have cooperated fully with the government's requests leading up to this point, and we are disappointed with their decision. We believe that it is a waste of the government’s time and resources to pursue these meritless claims," the system said, pledging to fight what is construed as "meritless" allegations in court.
The Stark law, passed in 1989, bans physicians from referring patients for referring services paid for by Medicare or another government payer to an entity with which they have a "financial relationship." This includes the doctors having interest or ownership in a facility, immediate family members and more.
HHS' Office of the Inspector General can pursue civil action against Stark Law violators, resulting in potential fines of up to $15,000 for each illegally billed service, plus three times the amount of the government overpayment.
The law has come under fire recently by physicians arguing it conflicts with care coordination efforts. Comments solicited by HHS from major healthcare organizations on the Stark law recently were overwhelmingly supportive of loosening its three decades-old restrictions, a measure the government floated in early 2019.