DOJ Announces Largest Stark Law FCA Settlement Since 2006

Earlier this month, the Department of Justice (“DOJ”) issued a press release announcing that healthcare system Community Health Network Inc. (“Community”) agreed to pay $345 million to resolve allegations that it had violated the False Claims Act by knowingly submitting claims to Medicare for services that were referred to it in violation of the Stark Law. In connection with the settlement, Community also entered into a five-year Corporate Integrity Agreement with the Department of Health and Human Services Office of Inspector General.

The Stark Law broadly prohibits providers from billing for certain services referred by physicians with whom they have a financial relationship. While the Stark Law does contain a bona fide employment exception, any payment must be consistent with fair market value and not take into account volume or value of referrals. As we previously covered, the original qui tam and DOJ’s complaint-in-intervention alleged that Community recruited physicians to become Community employees by offering salaries well in excess of fair market value and paying bonuses based on the number of patients each physician referred to receive services at the hospital.  Community engaged a valuation firm to prepare formal fair market value (“FMV”) opinions, but DOJ alleged that Community provided the firm with false information and “ignored repeated warnings from the valuation firm regarding the legal perils of overcompensating its physicians.”  Community’s settlement represents the largest settlement of FCA allegations premised on Stark Law violations since 2006.

A copy of the settlement agreement can be found here.

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