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Indianapolis Health System to Pay $345 Million to Settle Stark Law Allegations


Community Health Network, Inc. (“Community Health”) is a non-profit healthcare system with more than 200 hundred affiliated sites throughout central Indiana. As such, Community Health is one of the larger Midwest hospital/health systems in the United States. A lawsuit filed by the Department of Justice (“DOJ”) claimed that actions taken by Community Health violated provisions of both the False Claims Act and Stark Law. Often intertwined, the False Claims Act makes it illegal for entities to knowingly submit false claims to the government, while Stark Law limits the extent to which physicians can be compensated for referring patients to receive certain health services payable by Medicare or Medicaid. In this instance, the DOJ asserted that Community Health began violating these laws in 2008 when it provided compensation for certain healthcare professionals that was above fair market value, awarded bonuses that were tied to the overall number of referrals made, and submitted claims to Medicare for services provided as a result of these allegedly unlawful referrals.

In lieu of these claims, Community Health has agreed to settle with the DOJ for $345 million. Community Health has also agreed to enter into a five-year Corporate Integrity Agreement with the Office of Inspector General for the Department of Health and Human Services (“OIG”). These agreements generally require entities to fulfill certain compliance-related obligations. In return, the OIG typically agrees not to seek the exclusion of such entities from participation in federal healthcare programs, such as Medicare or Medicaid.

In a statement released on behalf of Community Health, spokesperson Kris Kirschner assured the public that the settlement “is completely unrelated to the quality and appropriateness of the care Community provided its patients” and “resolves the government’s claims with no finding of wrongdoing.” The Indiana Hospital Association (“IHA”) seemed to express its support for Community Health in saying that the settlement is only the most recent example of a flawed enforcement model pertaining to Stark Law. The IHA believes that requiring hospitals to pay extraordinary damages without the showing of any unnecessary care or harm to patients does not serve the important purpose for which the law was initially enacted.

At Quarles, we stand ready to proactively counsel your healthcare organization on any local, state, or federal regulations such as the Stark Law. Oftentimes, that proactive legal guidance can save your organization from the perils of an ever-increasing watchful eye of the federal government. We also regularly represent our healthcare clients upon the first signs of a governmental investigation into Stark and other healthcare regulations.

The case is captioned United States and the State of Indiana ex rel. Thomas Fischer v. Community Health Network, Inc., et al., No. 1:14-cv-1215 (S.D. Ind.).

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