Two-hospital Erlanger Health System, Chattanooga, Tenn., will pay $40 million to settle civil allegations that it paid kickbacks to physician groups for patient referrals -- in the form of medical directorships, recruiting deals, favorable leases and unspecified joint ventures. The public system also signed a five-year corporate integrity agreement with HHS' inspector general's office but did not admit wrongdoing.
The Chattanooga-Hamilton County Hospital Authority approved the agreement Monday. Authorities said a criminal investigation is continuing. Erlanger President James Brexler said he had been told by authorities that no current system employees or executives were under investigation. Erlanger will pay the $40 million from $125 million in cash reserves, a move that could put it in technical default of bond covenants.
The federal government alleged that Erlanger, an academic medical center affiliated with the University of Tennessee, entered into illegal relationships with physicians beginning in 1995. Erlanger said it cooperated with the investigation and changed the business practices in question some time ago.