On March 29, 2023, the Department of Justice (DOJ) issued a press release announcing three related civil settlements totaling over $69 million with Covenant Healthcare System and two physicians—Dr. Mark Adams, a neurosurgeon, and Dr. Asim Yunus, an electrophysiologist, to resolve alleged False Claims Act violations. The settlements resolve allegations of a kickback scheme of physicians’ improper referrals to the hospital system. The case arose from a whistleblower complaint filed by a former vice president and CEO of one of the divisions at Covenant, Stacy Goldsholl, in 2012.

The relator’s complaint against Covenant included allegations of violations of the False Claims Act, Michigan Medicaid False Claims Act, the Anti-Kickback Statute, and the Stark Law. According to the announcement, the complaint alleged improper financial relationships by Covenant with eight referring physicians and a physician-owned investment group, resulting in the submission of false claims to the Medicare, Medicaid, TRICARE, and FECA programs. For example, the complaint alleged that Covenant awarded medical directorships and above fair market compensation to physicians who were top referral sources. The complaint alleged that Goldsholl, the whistleblower, raised this concern but was terminated in 2012.

The DOJ listed the following allegations as resolved by the settlement:

• “At various points between 2006 to 2016, Covenant had contracts with Asim Yunus, M.D., Kimiko Sugimoto, M.D., Sujal Patel, M.D., Sussan Bays, M.D., Guy Boike, M.D., and Thomas Damuth, M.D. to serve as medical directors, and none of these arrangements satisfied any exceptions to the Stark Law or the AKS, such that referrals these physicians made to Covenant violated the False Claims Act.”
• “From June 1, 2006, to December 14, 2009, Covenant employed Mark Adams, M.D., and this financial relationship did not satisfy any exception to the Stark Law, such that referrals for designated healthcare services by Adams to Covenant were prohibited and violated the False Claims Act.”
• “From January 21, 2009, through July 31, 2013, Covenant rented office space to Ernie Balcueva, M.D. Covenant forgave Balcueva’s rent payments, constituting remuneration that Covenant paid in exchange for referrals from Balcueva in violation of the AKS and the False Claims Act, and creating a financial relationship that did not meet any exception to the Stark Law, also violating the False Claims Act.”
• “Covenant permitted Covenant Physician Investment Group [(CPIG)], a group owned by Covenant-employed physicians for the purpose of purchasing large medical equipment that CPIG would lease to Covenant, to secure an equipment lease through non-arm’s-length negotiations, in order to induce referrals of patients from these physicians, in violation of the AKS and the False Claims Act.”

The DOJ’s settlement with Covenant was actually finalized in 2021 and resulted in payments by Covenant of $67,191,436.39 to the United States and $1,808,563.61 to the State of Michigan. The case remained sealed until March 29, 2023, while the DOJ continued to investigate the physicians—Adams and Yunus. As a result of that investigation, Adams will pay to the United States a sum of $406,551.15, and Yunus will pay $345,987.54 to the United States. The whistleblower will receive $12.3 million.

The DOJ’s press release is available here.