Community Health System has agreed to a $31.5 million fine to resolve allegations that its physicians were taking kickbacks.
Community affiliate Physician Network Advantage Inc. (PNA) is also part of the settlement, according to the U.S. Department of Justice.
The big picture: According to the settlement, Community and PNA allegedly provided extravagant benefits to push physicians in the Fresno area to refer their patients to Community-run facilities for medical services, which violates the False Claims Act.
- PNA also had a custom-built lounge at its offices, known as HQ2, where the group provided expensive wine, liquor, cigars and meals to physicians who were referring patients to Community, all with the knowledge and funding of the healthcare provider.
- Further, the federal government accused Community and PNA of providing payments for electronic health records technology and equipment used by certain physicians in their private offices in return for the referral of governmental health care program patients to Community. The settlement also resolved allegations that Community paid bonuses to certain physicians to reward referrals.
- The federal government argued that the financial benefits handed out by Community violated the Anti-Kickback Statute, which resulted in false claims for the medical services referred by physicians receiving the benefits.
- Whistleblower Michael Terpening, the former controller for PNA, brought the claims to the Department of Justice under qui tam provisions of the False Claims Act and will receive around $5 million as part of the settlement.
What we’re watching: As part of the settlement, Community has entered into a five-year Corporate Integrity Agreement with The Department of Health and Human Services Office of Inspector General that requires a risk assessment and internal review process to address compliance risks.
- The agreement also requires an annual independent review to track referral sources.
Driving the news: Turpening filed the claim, which was unsealed in federal court on Wednesday, in December 2019.
- Per the claim, Community provided cash, expensive wine, cigars, strip clubs, trips with private planes and other benefits to physicians in exchange for referrals.
- Terpening discovered the kickbacks after a 2017 fire at PNA’s headquarters revealed a surplus of expensive wine was held for Community.
- Terpening also filed the claim against Santé Health System, Santé Health Foundation, former Community CEOs Craig Castro and Timothy Joslin, Community executive Berj Apkarian, Central California Faculty Medical Group (CCFMG) and several other executives and physicians.
Go deeper: The claim details a number of kickbacks given out to the defendants starting in 2014, after Community and PNA changed their billing model so PNA could retain a cash surplus to use for extravagant gifts.
- PNA paid for a trip to Paris for Castro and his family in September 2014 that was worth around $63,000.
- Community executives had strip clubs and meals paid for by PNA in January 2016 while in Las Vegas for a medical conference.
- Santé Health President Scott Wells and CCFMG CEO Joyce Fields-Keene were given a trip to Spain in 2016 which totaled around $9,400.
- In June 2016, PNA also paid for a trip to Napa Valley for Castro and Jason Liao in June 2016, totaling $20,200, and PNA purchased hundreds of bottles of luxury wine for a Community Medical Centers foundation fundraiser event that totaled $53,400.
- The allegations also include $4,000 that PNA was directed to contribute to the campaign fund for former State Sen. Andreas Borgeas, at the request of Community in June 2017.
- Further, Community contributed around $1.1 million to renovate PNA’s headquarters to build a state-of-the-art wine and cigar lounge at HQ2, which includes a refrigerated wine room, high-end lounge seating, private humidor lockers for cigars, a state-of-the-art smoke ventilation system and thousands of bottles of luxury wine and liquor which were valued at around $750,000 to $1.2 million.
- Community would allegedly use HQ2 to recruit medical groups and physicians to join their network and allowed them to make reservations to HQ2 through PNA. A reservation included table service and free access to wine, liquor and food, all of which were submitted to Community as PNA expenses.
- The claim also stated that PNA employed several children of Community executives and defendants at the behest of Community.
- Terpening details in the complaint that he asked PNA executive Christopher Roggenstein to stop the illegal kickback scheme, but Roggenstein allegedly redoubled his efforts, including entering into a lease with Community to begin developing a retreat called HQ Ranch in 2017. The claim stated that HQ Ranch would include a cigar and wine lounge that is larger than HQ2, a skeet shooting range and an off-road vehicle course. It is unclear if HQ Ranch was ever completed.
What they’re saying: “We cannot allow medical decisions to be distorted by kickback schemes or efforts to buy physicians’ loyalty with lucrative side perks,” said Acting U.S. Attorney Michele Beckwith. “This settlement demonstrates this Office’s commitment to ensuring that patients’ best interests remain paramount.”
- Community Board Chair Roger Sturdevant released the following statement on Wednesday after the settlement was announced:
- “In 2009, the federal government directed the healthcare industry to transition to electronic health records. Community Health System embraced this directive, recognizing that our hospital and physician practices could better support our patients through a robust, consistent, and secure electronic health records system.
- “We are confident Community’s investment and approach to widespread implementation of electronic health records, including at primary care practices, supported enhanced patient care and was in the best interest of our patients.
- “However, it is clear we needed stronger oversight measures to assure that both Community and our vendor partner maintained appropriate compliance at all times. While we are confident that physician referrals were driven by Community Health System’s position as a leading provider of hospital-based and specialty services, we recognize that even the appearance of inappropriate incentives must be addressed.
- “Our current Board and leadership team recognize that we are accountable to assuring compliance that is consistent with regulatory requirements and our own high standards. We have cooperated with the U.S. Attorneys Office in its review. Based on both our own internal assessment and external findings, we have identified and addressed areas for improvement. We are confident that our policies and procedures today address all areas of concern. It is important to note, that at no time were patients inappropriately billed and this issue had no impact on our clinicians’ ability to provide outstanding care.
- “As the leading healthcare provider in our region, we want to assure the communities we serve that our commitment to continually improve our practices and to deliver quality healthcare services, remains unchanged.”
Read the original whistleblower complaint:
