Indiana Health Network Agrees to Pay $345 Million to Settle Alleged False Claims Act Violations

If you’ve ever wondered about the integrity of the medical profession, here is another prime example of why you should be concerned.

Community Health Network Inc. (Community), a health care network headquartered in Indianapolis, has agreed to pay the United States $345 million to resolve allegations that it violated the False Claims Act by knowingly submitting claims to Medicare for services that were referred in violation of the Stark Law.

The Stark Law seeks to safeguard the integrity of the Medicare program by prohibiting a hospital from billing for certain services referred by physicians with whom the hospital has a financial relationship, unless that relationship satisfies one of the law’s statutory or regulatory exceptions.

Under the Stark Law, when a hospital employs a physician, the hospital may not submit claims for certain services referred by that physician unless the physician’s compensation is consistent with fair market value and not based on the value or volume of their referrals to the hospital.

In this lawsuit, the United States alleged that the compensation Community paid to its cardiologists, cardiothoracic surgeons, vascular surgeons, neurosurgeons and breast surgeons was well above fair market value.

Community also awarded bonuses to physicians that were tied to the number of their referrals, and that Community submitted claims to Medicare for services that resulted from these unlawful referrals.

The complaint alleged that beginning in 2008 and 2009, senior management at Community embarked on an illegal scheme to recruit physicians for employment for the purpose of capturing their lucrative “downstream referrals.”

Community successfully recruited hundreds of local physicians, including cardiovascular specialists, neurosurgeons and breast surgeons, by paying them salaries that were significantly higher — sometimes as much as double — what they were receiving in their own private practices.

Community was well aware of the Stark Law requirements that the compensation of employed physicians had to be fair market value and could not take into account the volume of referrals.

Community hired a valuation firm to analyze the compensation it proposed paying to its recruited specialists. The complaint alleged that Community knowingly provided the firm with false compensation figures so that the firm would render a favorable opinion.

The complaint further alleged physicians ignored repeated warnings from the valuation firm regarding the legal perils of overcompensating its physicians.

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