The U.S. Justice Department has intervened in a whistleblower lawsuit alleging Community Health Network broke the law by billing Medicare for services delivered by physicians who had improper financial relationships with the Indiana hospital system.
Since at least 2008, Community Health Network knowingly paid employed physicians a salary above fair market value and awarded bonuses based on the referrals they made to the hospital system, in violation of the Stark law, according to the complaint-in-intervention filed Jan. 6 in U.S. District Court in Indianapolis.
As a result, Community Health Network submitted false claims to Medicare for those services and received millions of dollars in reimbursement, the Justice Department alleged.
"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 Justice Department's Civil Division said in press release. "We are committed to eliminating these improper inducements and thereby ensuring the Medicare program remains fiscally sound to serve our nation's senior citizens."
In an emailed statement, Community Health Network said the lawsuit involves administrative issues unrelated to patient care.
"Community Health Network is committed to upholding the highest regulatory and ethical standards in all our business practices, including physician compensationm," the statement read. "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 physician self-referral law, commonly known as the Stark law, aims to curb Medicare and Medicaid spending by prohibiting physicians and hospitals from making referrals based on their financial self-interest. Physicians have argued that the 1989 law conflicts with outcomes-based care. The CMS wants to revamp the regulations to encourage more value-based arrangements.
Whistleblower Thomas Fischer, who was Community Health Network's chief financial officer from 2005 to 2013, initially brought the False Claims Act lawsuit in 2014. The Justice Department intervened in part, while the State of Indiana declined to get involved.
According to the department's complaint, Community Health Network hired hundreds of physicians to secure their referrals and paid them "staggering" salaries above fair market value, against the advice of compensation consulting firms.
Providers can run afoul of the Stark law if they pay doctors a salary above fair market value, which is generally above the 75th percentile. Community Health Network set salaries in the 90th percentile of national benchmark data, according to the complaint.
Because Medicare generally paid more for services when they are performed in a hospital compared with a doctor's office, Community Health Network stood to collect more money from the federal government once the physicians became employees, the complaint alleged.
The hospital system calculated that increase in reimbursement it would receive from employing physicians and used it to fund their high salaries, according to the complaint. Moreover, Community Health Network allegedly awarded bonuses to its physicians based on doctors meeting a target that took into account the volume and value of its referrals to the network.