Community Health System and its affiliate, Physician Network Advantage Inc., have agreed to pay $31.5 million to resolve allegations of violating the False Claims Act, according to Acting U.S. Attorney Michele Beckwith. The allegations involved financial benefits provided to referring physicians in Fresno County, where Community Health System operates hospitals including Community Regional Medical Center and Clovis Community Medical Center.
Acting U.S. Attorney Beckwith stated, “We cannot allow medical decisions to be distorted by kickback schemes or efforts to buy physicians’ loyalty with lucrative side perks.” She emphasized the commitment to ensuring patients' best interests remain a priority.
The settlement addresses claims that Community Health System and PNA offered extravagant benefits to induce referrals from Fresno-area physicians. These included expensive wine, liquor, cigars, and meals provided at PNA’s office lounge known as HQ2. The United States contends that these actions violated the federal Anti-Kickback Statute and created improper financial relationships under the Stark Law.
Further allegations include providing financial subsidies for electronic health records technology and equipment in return for patient referrals covered by governmental health care programs. Bonuses were allegedly paid for clinical integration activities when their true purpose was rewarding referrals.
Acting Special Agent in Charge Robb R. Breeden of HHS-OIG commented on the matter: “Kickback arrangements aimed at improperly influencing medical decisions will remain a top investigative priority for our agency.”
As part of the resolution, Community entered into a five-year Corporate Integrity Agreement with HHS-OIG requiring risk assessments and internal reviews to address compliance risks. An independent review organization will also assess policies related to referral sources annually.
The settlement resolves claims brought under the qui tam provisions of the False Claims Act by relator Michael Terpening, who will receive approximately $5 million as part of this agreement.
This resolution was achieved through coordination between the U.S. Attorney’s Office for the Eastern District of California and HHS-OIG, with support from the FBI and U.S. Postal Service Office of Inspector General. Assistant U.S. Attorney David Thiess managed the case.
It is important to note that these resolved claims are only allegations, with no determination of liability made against Community Health System or PNA.