The Indiana Hospital Association spoke out against the settlement, which was the highest amount of its kind. Photo from Getty Images.

News Release

INDIANAPOLIS — Indianapolis-based Community Health Network has agreed to pay the United States a whopping $345 million to settle decade-old allegations that it submitted fraudulent claims to Medicare, the U.S. Department of Justice announced Tuesday.

The U.S. alleged that, in 2008 and 2009, Community leadership began recruiting physicians — many of them specialists — to get their “downstream referrals.” Community paid those physicians far above market value and included incentives based on referral targets, according to the U.S. complaint. Then, it allegedly submitted those inflated claims to Medicare.

The Stark Law bans hospitals from billing Medicare for certain services referred by its own physicians unless the doctor’s compensation is consistent with fair market value and not based on referrals.

“Hoosier Medicare patients deserve to know that their care is based on their medical needs, not their doctor’s financial gain,” said Zachary A. Myers, U.S. Attorney for the Southern District of Indiana, in a news release. “When doctors refer patients for CT scans, mammograms, or any other medical service, those patients should know the doctor is putting their medical interests first and not their profit margins.”

But the powerful Indiana Hospital Association said there was no proof of “unnecessary care” provided to patients and called the settlement amount “extraordinary.”

“… When adopted, the (Stark Law) had a laudable purpose(:) to prevent physicians from receiving financial incentives that result in a patient receiving unnecessary care,” health law expert Steven Pratt said on the association’s behalf. “Unfortunately, the law is not being enforced to achieve this purpose. Instead, without showing any unnecessary care or any harm to patients or Medicare, hospitals are frequently required to pay extraordinary damages to settle claims.”

The Stark Law settlement amount is the largest of kind — and it’s the second one Community has paid in recent years. The health system agreed to a $20.3 million settlement in 2015, also over Medicare billing.

Pratt said Congress could step in to change what Stark Law settlements can include “so that any damages are based upon patients having received unnecessary care, and any settlement amounts do not unnecessarily contribute to health care costs.”

Community also entered into a corporate integrity agreement this month with the U.S. Department of Health and Human Services’ Office of the Inspector General. It sets in place five years of government monitoring.

The settlement comes from a 2014 whistleblower complaint by Community’s former Chief Financial and Chief Operating Officer Thomas Fischer.

“I am grateful for this recovery. These claims are not mere technicalities; they directly affect patients, hospital employees and the high cost of healthcare,” Fischer said in a separate news release from his Indianapolis legal counsel. “This puts money back into the healthcare system and is a victory for the Indiana taxpayer.”

But most of the case continues, even 10 years on, according to firm DeLaney & DeLaney.

The settlement includes only the claims on which the federal government intervened. The firm said it would continue to pursue additional fraud claims against Community, as well as Fischer’s own employment and retaliation claims.