The U.S. Department of Justice (DOJ) recently announced a settlement with a hospital operated by Indiana University Health, Inc. and a federally qualified health center operated by HealthNet, Inc. to resolve claims that the parties violated the Anti-Kickback Statute, the Federal Claims Act and Indiana law. Each of the parties will pay over $5 million to the United States and approximately $3.9 million to the State of Indiana. The lawsuit was originally brought by a qui tam relator, a physician and former employee of the hospital and HealthNet, and later joined by the DOJ and the State. The Anti-Kickback Statute prohibits, in relevant part, the knowing and willful payment of any remuneration to induce the referral of services or items that are paid for by a federal health care program, such as Medicaid. Claims submitted to federal health care programs in violation of the Anti-Kickback Statute are false claims under the False Claims Act. The government alleges that the parties had, for over a decade, established a series of illegal referral based relationships to guarantee that Medicaid beneficiaries were directed to the hospital for both inpatient and outpatient services and collaborated to provide services focused on collections for patient services, rather than improving health outcomes, in violation of the federal Anti-Kickback Statute and Indiana law. In particular, the government alleges that, in exchange for a no-interest loan to HealthNet, the hospital was guaranteed that high-risk maternity patients would deliver at the hospital, thereby allowing the hospital to benefit from expensive services provided to critically ill infants.

The nature of the loan to HealthNet is disputed by Indiana University Health and HealthNet. Pursuant to an affiliation agreement between the two providers, the hospital provided NealthNet with support services and financial support through short-term and long-term loans. The loans were not capped in amount, secured by collateral or required to accrue interest. Moreoever, there were no substantial efforts on the part of HealthNet to repay the balance of the loan. At the time that the complaint was filed, the outstanding loan debt allegedly had grown to over $13.7 million. The government claimed that the loan amounted to unfettered access to hospital funds, rather than covering only HealthNet’s shortfall or specific HealthNet costs. The loan was one of several financial arrangements between the parties. Other arrangements included (i) the assignment of the right to bill for patient services provided at the hospital to HealthNet to be billed as FQHC consultations,  and a no cost lease to HealthNet, each allegedly offered in exchange for the obligation to refer all patients to the hospital for services outside the scope of those performed by HealthNet; (ii) an alleged agreement to use nonphysicians to treat high-risk patients while billing under the NPI of an on-call physician; and (iii) an allegedly fraudulent model for physician reviews of ob/gyn ultrasounds and billing for such reviews, each claimed by the government to be violations of the federal False Claims Act and Indiana law.

Neither Indiana University Health nor HealthNet admitted to wrongdoing as part of the settlement. The physician relator will receive approximately $2.8 million of the settlement amount.