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$47 Million Kickback Settlement Related to Improper Coding and Billing for Physician Services

A Delaware-based health system has agreed to pay more than $47 million to settle a whistleblower lawsuit alleging violations of the anti-kickback statute (“AKS”) and the Stark Law. In summary, Christiana Care Health Services, Inc., Christiana Care Health System, Christiana Hospital, and Wilmington Hospital (collectively, “CCH”) allegedly entered into agreements with outside private surgical groups that falsely billed government healthcare programs using codes for bundled/global services that were at least partially provided by CCH-employed hospitalists, residents, and nurse practitioners (“NPs”). CCH allegedly provided free services to private groups to compensate their affiliated physicians for lucrative patient referrals.



Whistleblower Ronald Sherman, Chief Compliance Officer at CCH from 2007 to 2014, brought the lawsuit in 2017, three years after he was terminated by CCH, allegedly for raising compliance concerns. According to the complaint, starting sometime before 2010, CCH entered into exclusive contracts with private outside surgical groups, including neonatology, neurosurgery, cardiovascular surgery, otolaryngology, and urology practices. CCH received lucrative patient referrals from the private physicians while CCH employees performed many of the procedures and provided much of the clinical care that was billed and collected by the private groups. The complaint reiterated that the private physicians billed the government as if they had performed services themselves when, in fact, the services were provided by CCH employees. 


Specifically, the complaint detailed red flags raised during comprehensive internal chart and billing audits of neonatology services initiated by Mr. Sherman, including the following:

  • Most of the services being billed by the private neonatology group were being performed by CCH employees; moreover, the private neonatologists were not personally present, consulted, or called for any part of their credited treatments and procedures that were actually being performed by the CCH hospitalists and NPs.

  • Chart progress notes made by the private neonatologists were generally absent or deficient and did not meet government documentation requirements. When documentation was completed by the private physicians, it was inadequate to substantiate the 24-hour billing codes being claimed by the private group.

  • The private neonatologists were routinely “unavailable” for clinical duties, leading the hospital employees to adopt a common practice of substituting for the private specialists for the medical management and treatment of infants. Furthermore, when emergent or complex cases were presented — including those requiring specialist supervision by law, the neonatologists rarely came in but instead relied on telephone consults.

  • CCH was not billing for services performed by CCH employees but was billing government payers for facility, equipment, and staff charges associated with those respective services.

  • The private group was falsely billing 24-hour codes encompassing individual services and evaluations that its providers did not render. The services provided by CCH employees were being credited to the group physicians through the bundled/global charges.

  • The billings of both CCH and the private neonatology group violated the False Claims Act and were, therefore, violations of the AKS and the Stark law.

During his tenure, Mr. Sherman brought the audit results through official internal channels, but his warnings were ultimately ignored, and his employment was ultimately terminated. CCH has agreed to pay $42.5 million to the United States and the State of Delaware and $4.6 million to the attorneys representing Mr. Sherman to settle the case. Mr. Sherman’s share of the settlement is more than $12 million.


BFMV has reviewed and consulted on physician arrangements with health systems and physician practices nationwide. Contact us for more information.

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