DOJ alleges system paid 'excessive' salaries to keep specialist referrals in network

Written by Angie Stewart | February 11, 2020 | Print  |

The Department of Justice filed a lawsuit alleging that Indianapolis-based Community Health Network illegally paid specialists "excessive" salaries in an "aggressive," "defensive" strategy to keep referrals within the system.

From 2008 to at least 2017, CHN allegedly employed hundreds of physicians, including ones specializing in orthopedic surgery and neurosurgery, by compensating them well above fair market value using calculations based on referral and utilization patterns.

CHN then billed Medicare for inpatient and outpatient services provided by those physicians, in violation of Stark Law, according to court documents. As a result, CHN "received millions of dollars in Medicare reimbursement to which it was not entitled," the DOJ alleges.

Prosecutors allege CHN leaders received "clear guidance" from a valuation firm that said the physicians' salaries were outside the range of fair market value and needed further justification to be in compliance with Stark Law, which prohibits physicians from referring Medicare patients for care at a facility the physician has an improper financial relationship with.

CHN allegedly provided the firm with falsely deflated compensation figures for four neurosurgeons recruited and employed from 2008-10. The system also failed to disclose that it was guaranteeing compensation to three of those surgeons, the DOJ alleges.

In one instance, CHN allegedly guaranteed one neurosurgeon a base salary of $650,000 for the first year of employment and $675,000 for the second year, but told the valuation firm that the figures were $420,320 and $463,052, respectively.

Another surgeon — whom the system believed could capture one-third of the volume of neurosurgery and spine cases in four Indiana counties — was guaranteed a $921,600 salary based on 12,000 work relative value units, but the wRVUs were later significantly reduced to reflect lower productivity estimates.

The government is seeking damages caused by improper payments, plus interest, costs and expenses. The lawsuit stems from a whistleblower complaint filed under the False Claims Act by Thomas Fischer, who served as CHN's CFO from 2005 to 2013.

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