In Biggest Stark-Based FCA Settlement Ever, Indiana Hospital Pays $345M, Has Unusual CIA

Health Care Compliance Association (HCCA)

Health Care Compliance Association (HCCA)

Report on Medicare Compliance 33, no. 1 (January 8, 2024)

Community Health Network (CHN) in Indiana has agreed to pay $345 million to settle false claims allegations that it paid over-the-top salaries to hundreds of physicians and rewarded them for their referrals in violation of the Stark Law, the U.S. Department of Justice (DOJ) said Dec. 19.[1] The money flowed even though more than one valuation firm told CHN that some compensation was above fair-market value.

This is the largest False Claims Act (FCA) settlement in connection with alleged Stark violations ever, according to DOJ.[2]

The settlement includes a five-year corporate integrity agreement (CIA) that requires an independent review organization (IRO) to perform reviews of both fee-for-service claims and arrangements (e.g., for compliance with the Anti-Kickback Statute and Stark Law).[3] The HHS Office of Inspector General (OIG) also requires CHN to hire a “compliance expert” to review the effectiveness of its compliance program. The compliance expert’s reports must be reviewed by the board and submitted to OIG.

“Not only is the dollar amount significant, but the oversight OIG is imposing on Community Health is significant,” said attorney Bob Wade, with Nelson Mullins in Nashville, Tennessee. Typically, a CIA requires an IRO for claims or physician financial relationships, but not both, he explained. “And it’s extremely rare to see a compliance expert to the board,” Wade said. He can think of only one other case in the hospital False Claims Act (FCA) world: Halifax Hospital Medical Center’s $85 million Stark-based settlement in 2014.

CHN’s settlement was set in motion by a whistleblower, Thomas Fischer, who was its chief financial officer for eight years. Fischer’s second amended complaint was filed in 2020 and DOJ intervened and filed its complaint in intervention Jan. 6, 2020.

“The big thing was that many of the physicians were [allegedly] paid above the 90th percentile,” said attorney Adam Robison, with King & Spalding in Houston. “According to DOJ’s complaint, in many instances they didn’t have fair-market value analyses to support that compensation.”

In a statement, Kris Kirschner, director of corporate communications for CHN, said, “The civil settlement resolves the government’s claims with no finding of wrongdoing. Community has always sought to compensate employed physicians based on evolving industry best practices with the advice of independent third parties. Physician compensation is a complex and highly regulated issue. What is important to remember is this matter involved alleged technical violations and is completely unrelated to the appropriateness and quality of care Community provided its patients.”

According to DOJ’s complaint, in 2008 CHN embarked on a physician recruitment campaign, employing hundreds of physicians, including cardiovascular specialists, neurosurgeons and breast surgeons, in what it called “integrations” with the hospital. Many of them were from the Indianapolis area and already had privileges at CHN. “These integrations were ‘defensive’ in nature, meaning that CHN recruited and employed these physicians to secure their referrals and out of concern that their referrals would ‘leak’ to CHN’s local competitors,” the complaint alleged. They were recruited with salaries that were allegedly far higher than what the physicians made in their own practices and that were above FMV. For example, CHN basically doubled the salaries of cardiovascular specialists.

The money for the big salaries came from what CHN allegedly called the “hospital differential” or “provider-based differential”—the increase in Medicare reimbursement for services when they’re performed in a hospital instead of a physician practice.

Because upper management was aware of Stark Law requirements, CHN asked Sullivan Cotter, a valuation firm, to weigh in on the salaries. The valuation firm said for compensation to be FMV, it had to be less than the 75th percentile of national benchmark salary data or the compensation per productivity (measured by work units or collections) had to be less than the 60th percentile. If those two benchmarks weren’t met, Sullivan Cotter considered the compensation outside fair market value but it could be justified with certain other “business judgment factors,” such as community need for the services, according to the complaint.

“Despite the repeated and clear guidance it received from Sullivan Cotter, CHN set the physicians’ salaries by ‘backing into’ the 90th percentile of national benchmark data,” DOJ alleged. “Moreover, CHN did not provide Sullivan Cotter with accurate compensation information.”

CHN consulted other valuation experts. For example, in 2013, CHN hired Katz Sapper & Miller (KSM) to analyze the compensation it paid its physicians in 2012 and the first half of 2013. KSM determined it was “high compared to productivity in all specialties and primary care,” the complaint alleged. “Despite these findings, CHN continued to pay its physicians salaries that it knew were well above fair market value and continued to submit claims to Medicare for designated health services referred by the physicians in direct violation of the Stark Law and FCA.” The complaint also alleged that CHN gave physicians bonuses if they met a target of “hospital downstream revenue specific to the physician,” which means the compensation was calculated in a way that allegedly took into account the volume or value of referrals in violation of Stark.

[View source.]

Written by:

Health Care Compliance Association (HCCA)

Health Care Compliance Association (HCCA) on:

Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
- hide
- hide