A recent qui tam case  was brought against the Community Health Network (CHN) by the U.S. Attorney  for the Southern District of Indiana. This case was brought to the attention of the U.S. Attorney by a whistleblower.

Many of the local physicians recruited by CHN already had hospital privileges, practiced at and/or referred patients to CHN. These integrations were defensive in nature and an attempt to secure patient referrals that could go to competitors.

CHN paid the physicians well above Fair Market Value (FMV) and even paid bonuses to physicians that achieved a minimum referral target to the hospital. The whistleblower claimed that CHN executives were counting on an increased stream of referrals to justify the large compensation packages.

The U.S. Attorney’s complaint asserts that this attempt to secure referrals violates the Stark Law. The government also brought False Claim Act charges, because it believes that these referred services were not eligible for payment.

We have provided business advice on healthcare acquisitions for over 20 years. Part of any successful negotiation between a hospital and physician organization is to establish a total physician compensation package that complies with the local FMV. This approach will also prevent any major change in the physician’s compensation as agreements are renewed in the future.