Michele Beckwith Acting U.S. Attorney | U.S. Attorney for the Eastern District of California
Community Health System and its affiliate, Physician Network Advantage Inc., have agreed to pay $31.5 million to the United States to resolve allegations of violating the False Claims Act. Acting U.S. Attorney Michele Beckwith announced that these violations were based on financial benefits provided to referring physicians. Community Health System operates in Fresno County and includes hospitals such as 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 office's commitment to ensuring that patients' best interests remain paramount.
The settlement addresses claims that Community Health System and Physician Network Advantage Inc. offered extravagant benefits to induce Fresno-area physicians to refer patients to their facilities for medical services, breaching the False Claims Act. PNA is a healthcare technology business formed by Community to support local physicians' adoption of an electronic health records platform used by Community. The United States contends that PNA was instrumental in securing business for Community through unlawful means, including providing expensive wine, liquor, cigars, and meals at a custom-built lounge known as HQ2.
Additionally, the settlement resolves allegations that Community and PNA offered financial subsidies for electronic health records technology and equipment used by certain physicians in exchange for referrals of governmental healthcare program patients. It also addresses claims that bonuses were paid ostensibly for clinical integration activities but were actually intended as rewards for referrals.
The United States argues these actions violated the federal Anti-Kickback Statute, leading to false claims submitted for services referred by benefiting physicians. It further contends this conduct created financial relationships under the Physician Self-Referral Law (Stark Law), which prohibits billing for services referred by financially linked physicians unless specific exceptions are met—exceptions allegedly not satisfied in this case.
Acting Special Agent in Charge Robb R. Breeden of HHS-OIG remarked, “Kickback arrangements aimed at improperly influencing medical decisions will remain a top investigative priority for our agency.” He highlighted HHS-OIG’s dedication to holding accountable those engaging in unlawful financial relationships at Medicare patients' expense.
As part of the settlement, Community entered into a five-year Corporate Integrity Agreement with HHS-OIG requiring a risk assessment and internal review process designed to address compliance risks. An independent review organization will annually assess policies related to referral sources.
The settlement also resolves claims brought under the qui tam provisions of the False Claims Act by relator Michael Terpening, who will receive approximately $5 million from the recovery action captioned United States ex rel. Terpening v. Fresno Community Hospital and Medical Center et al., 1:19-CV-01699 (E.D. Cal.).
This resolution resulted from collaboration between the U.S. Attorney’s Office for the Eastern District of California and HHS-OIG with assistance from the FBI and USPS Office of Inspector General. Assistant U.S. Attorney David Thiess handled the case.
It is important to note that these resolved claims are allegations only; there has been no determination of liability.
