$69 Million Settlement over Alleged Violations of False Claims, Anti-Kickback Statute, and Stark Law
A $69 million settlement related to improper financial relationships between physicians and a large health system was announced on March 29, 2023, by the U.S. Attorney in the Eastern District of Michigan. Covenant Healthcare System (CHS), based in Saginaw, MI, and two physicians have paid over $69 million to resolve the allegations. The CHS portion of the settlement was finalized in 2021 but was sealed due to the ongoing physician investigation, which has now also been settled.
According to the DOJ announcement, CHS paid $67.2 million to the federal government and $1.8 million to the state of Michigan, while the two physicians’ settlements totaled approximately $750,000. The investigation and resulting civil settlements were initiated under qui tam provisions by whistleblower Stacy Goldsholl, M.D., who served as CEO of Covenant’s medical group and vice president for the system from 2010 to 2012. Goldsholl will receive nearly $12.4 million of the CHS settlements.
The settlement resolves four allegations related to the Anti-Kickback Statute (AKS) and the Physician Self-Referral (“Stark”) Law. These include:
Medical director contracts with six physicians between 2006 and 2016 that didn’t meet exceptions under Stark or AKS;
A physician’s employment from 2006 to 2009 that didn’t meet exceptions under Stark or AKS;
Forgiveness of another physician’s lease payments for rented office space from 2009 to 2013 as remuneration in exchange for referrals; and
Non-arm’s-length negotiations for equipment leased by CHS from a physician-owned group.
The defendants admitted no wrongdoing, and Covenant is not subject to a Corporate Integrity Agreement (CIA), as is often imposed in governmental resolutions of this type. A statement by CHS suggested this is in large part due to the age of the claims, subsequent internal scrutiny, and corrective action taken by successive CHS leadership toward compliance.
Supplying physicians with items or services of value for less than fair market value, or relieving physicians from financial obligations they would otherwise incur, creates substantial risk for hospitals. The settlement reinforces the importance of ensuring that any remuneration to physicians is fair market value, commercially reasonable for necessary services and time worked, well-documented, and entirely free from any expectation of referral quid pro quo.
BFMV is experienced in the valuation of professional healthcare service arrangements, including compensation for physicians and other advanced practice providers. Contact us for more information or assistance.