Ind. Health System Hit with $345 Million Settlement

Sarasota, FL (WorkersCompensation.com) – Indianapolis based Community Health Network Inc. (CHN) has agreed to a settlement of $345 million in a case going as far back as 2008.

Located in Marion County, Indiana, CHN operates a fully integrated healthcare system that consists of acute care and/or specialty hospitals, immediate care centers, primary care and specialty employed physicians, ambulatory care centers, freestanding surgery centers, outpatient imaging centers, endoscopy centers, and long-term care facilities.

According to the settlement complaint, Bryan Mills became the Chief Executive Officer in 2008 at which time he began an actively assertive hiring campaign of specialist physicians. At the time, CHN referred to the increased employment as “integrations” but openly discussed the strategy as a way to “capture downstream revenues and referrals.”

As part of the recruitment strategy, CHN offered lucrative salaries that were not only above fair market value, but significantly higher than the newly employed physicians had been making through their own private practices. In several cases, salaries of cardiac specialists were doubled for the new recruits. For each specialty, CHN would estimate salaries based off the physician’s referral patterns, and a “hospital reimbursement differential”. 

Hospitals receive a higher reimbursement than the same physician services in the office.  Under the new arrangement, CHN would receive a higher reimbursement for the same physicians services that were formerly done in the employed physician’s office. That increase was used to fund the excessive salaries. 

CHN retained the services of both Sullivan Cotter and Katz Sapper & Miller to analyze physician salaries in a feigned attempt to verify that they were not in danger of violating the Stark Law. While CHN did not provide an accurate representation of their compensation data for analysis, both companies were clear in their analysis that CHN was paying far above fair market value, and in danger of violating the Stark Law.

CHN chose to continue their salary practices, and in addition to paying exorbitant salaries, CHN also structured their incentive compensation based on physicians meeting a target of referrals within the hospital system. 

CHN has agreed to pay out $345 million to resolve allegations that it violated the False Claims Act by knowingly submitting claims to Medicare for referred services in violation of the Stark Law. In addition to the settlement payout, they have agreed to enter into a five-year Corporate Integrity Agreement with HHS-OIG. The case is the result of a whistleblower complaint filed in 2014 by the former Chief Financial and Chief Operating Officer, Thomas Fischer.

To add insult to injury, CHN announced last month that the organization has been hit with a data breach that occurred through an email account in September. The full scope of the impact has yet to be determined, however individual names, date of birth, and claims information was included in the breach. 

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