Community Health, feds still wrangling over false claims allegations
It’s a massive case against a large Indiana hospital system that shows no signs of wrapping up soon.
Three years after the federal government filed a lawsuit against Community Health Network, alleging the system engaged in a years-long scheme to recruit physicians and pay them huge salaries and bonuses in return for referrals, the two sides continue to wrangle in scores of court filings.
This month, Community Health pushed back against questions from the U.S. Justice Department that it identify every physician it employs who received incentive compensation and explain how the bonuses were calculated or determined.
“Community objects to this interrogatory as overly broad, unduly burdensome and not proportional to the needs of the case,” the hospital system said in a Feb. 17 filing.
Even so, the Indianapolis-based system, which operates eight hospitals and hundreds of clinics, surgery centers and urgent-care centers, acknowledged that it employed a total of 1,201 physicians between 2008 and 2020.
It said that of the more than 6,000 instances in which a physician received incentive compensation during the period, in only 200 instances did a physician get incentives for meeting a so-called “service line financial performance metric.”
Examples of metrics, it said, are patient safety, clinical efficacy and cost effectiveness. Community said it was preparing a spreadsheet that provided “relevant data” for the 200 instances.
An exhibit filed by the Justice Department on Feb. 17 outlines incentive compensation at Community East and North “general surgery integration.” According to the three-page exhibit, the physician metrics include attendance at scheduled meetings (“vacation time excused”), patient survey (“likelihood to recommend physician to my family members or friends”), timely chart completion and operational efficiencies (“physician on campus 15 minutes before case start time”).
It also has an entry for “referral development,” which measures how many patients the physician could keep in network for various procedures, taking note of patients who went elsewhere, tracked as “identification of leakage.”
The lawsuit has been targeted for trial in mid-2024, but like many large, complex cases, could get delayed by months as the two sides argue over procedures and what documents or testimony should be compelled and entered into evidence.
The docket, in the court of U.S. District Judge Richard Young in Indianapolis, is bulging with motions and rulings. The number of filings in the docket recently surpassed 500, a testament to the complexity of the case and the determination by both sides to press hard.
The U.S. Justice Department filed a False Claims Act lawsuit in January 2020 against Community Health Network, saying the system knowingly submitted or caused submissions of false claims to Medicare from 2008 to at least 2017.
The alleged scheme, the government said, was brought to light with the help of Thomas Fischer, who served as Community Health’s chief financial officer from 2005 until his sudden exit in 2013.
In a separate lawsuit, filed in 2014 and unsealed Tuesday, Fischer said he was fired in retaliation for repeatedly asking questions about the large salaries, which the health system continued to pay during a market downturn and cost-cutting initiative.
The government is seeking to recover unspecified damages from false claims, payment by mistake and unjust enrichment as a result of the health system’s conduct. The complaint was filed in the U.S. District Court for the Southern District of Indiana in Indianapolis.
The government filed its complaint in a lawsuit originally filed under the whistleblower provisions of the False Claims Act, which allow private parties to file suit on behalf of the United States for false claims and to receive a share of any recovery. The federal government has since intervened and taken over the lawsuit.
In doing so, the government said, Community Health violated the Stark Law, which prohibits doctors from referring patients to hospitals and other facilities if the doctor might benefit financially, especially through the form of higher salaries or bonuses.
Community Health has called the government’s complaint “meritless” and said it cooperated with the investigation. It said it was disappointed that the Justice Department filed a complaint.
“This lawsuit involves certain administrative issues that are completely unrelated to patient care,” Community Health said in a written statement to IBJ in 2020. “We are confident that we have complied with the laws and regulations that govern the way we operate our health network. We are committed to fighting these allegations which have no merit.”
Community declined comment Monday on how the lawsuit has stretched out for more than three years and filled the docket with hundreds of filings.
Fischer has said he was fired in retaliation for repeatedly asking questions about the large salaries. Fischer declined to comment on Monday.
The government has said that Community “aggressively recruited” hundreds of physicians, including breast cancer surgeons, cardiovascular specialists and neurosurgeons, by offering and paying salaries that were significantly higher than what those physicians received in their own practices.
The lawsuit said Community had hired two outside accounting firms to review the physicians’ salaries. One of the firms, Indianapolis-based Katz, Sapper & Miller, concluded that the compensation was “staggering” and “high compared to productivity in all specialties and primary care.”
The other, Chicago-based Sullivan Cotter, found that the salaries were above fair-market value and needed to be below the 75th percentile of national benchmark salary data.
“Despite this guidance, Community set the physicians’ salaries at the 90th percentile of national benchmark data,” Young wrote. “Moreover, to induce a favorable opinion, Community did not provide Sullivan Cotter with accurate compensation information.”
Community Health had argued for dismissal on the grounds that the Justice Department had failed to show the compensation paid to the physicians violated the Stark Law. It also argued that the False Claims Act was not a proper enforcement mechanism for the Stark Law.
The government said Community Health’s arrangement with physicians amounted to a “fraudulent scheme” because the health system paid the doctors large salaries and bonuses to secure their referrals. That allowed Community Health to receive more from Medicare for those services and receive higher reimbursement than the physicians received when those services were performed by the physician practice.
The compensation that Community Health paid to numerous physicians was well above fair market value, the government said, and it conditioned paying bonuses on physicians achieving a minimum target of referral revenues to the hospital system.
The government is seeking to recover unspecified damages from false claims, payment by mistake, and unjust enrichment as a result of the health system’s conduct.