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Our Take: Community Health Network violated Stark Law, DOJ complaint alleges

Jan 13, 2020
Indianapolis-based Community Health Network (CHN) is facing new allegations that it fraudulently billed Medicare and violated the Physician Self-Referral Law, more commonly known as the Stark Law, after the Department of Justice (DOJ) filed a complaint last Tuesday with the U.S. District Court for the Southern District of Indiana.

The health system’s former chief financial officer first lodged the allegations in 2014 in a whistleblower lawsuit. The federal government intervened in that case last August and now has filed its own complaint against CHN.

According to the DOJ, the health system had “employment relationships with a number of physicians that did not meet any Stark Law exception because the compensation [CHN] paid to the physicians was well above fair market value and because [CHN] conditioned paying bonuses on physicians achieving a minimum target of referral revenues to the hospital.”

“[CHN] received referrals from these physicians in violation of the Stark Law and submitted claims to Medicare knowing that the claims for those referred services were not eligible for payment,” the DOJ added.

The health system has denied any wrongdoing.

“We are confident that we have complied with the laws and regulations that govern the way we operate our health network,” a CHN spokeswoman said.

Our Take: If Community Health Network did, in fact, pay its employed and affiliated physicians salaries above fair market value, along with bonuses and other considerations, in exchange for referrals, as the lawsuit contends, then it seems pretty clear that the health system violated the Stark Law — which prohibits physicians and hospitals from making referrals for services paid for by a government program, such as Medicare, to a provider with which they have a financial relationship.

The whistleblower alleged that CHN’s referral scheme started around 2009 and that, over the span of nearly a decade, the health system filed at least tens of thousands of fraudulent claims for services related to the referrals.

Regulators can levy fines of up to $15,000 per illegally billed service and three times the amount overpaid by the government. Given that, it’s safe to say that CHN could be looking at paying millions of dollars if there’s a trial and the decision goes against the health system.

However, as we reported back in October, CMS and the Department of Health and Human Services (HHS) have proposed reforms to the Stark Law and federal anti-kickback laws. Those statutes were implemented when our health care system was structured mostly on fee-for-service arrangements. Now that we’re moving toward value-based care, it can be argued that at times these laws interfere with efforts to coordinate care and reduce waste.

CMS’ proposed rule to reform the Stark Law would create exceptions that would make it possible for providers to enter into value-based arrangements “without fear that legitimate activities to coordinate and improve the quality of care for patients and lower costs” would run afoul of the law.

Will the proposed CMS/HHS rules be finalized before the CHN case can be brought to trial, and could those changes influence the outcome of the case? Or will CHN follow the lead of Sutter Health, who recently paid $46 million to settle similar allegations of violating the Stark Law? Time will tell.

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