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July 24, 2015 Healthcare Fraud

Indianapolis Health Network Agrees to Settle False Claims Act Allegations for $20 Million

When it comes to reimbursement for surgical procedures, Medicare and Medicaid maintain strict guidelines with regard to the location of the surgery and whether it took place in a hospital or independent facility. Recognizing that hospitals have a much higher overhead rate, and generally cost more to operate and maintain, surgical procedures performed in a hospital setting can be reimbursed at a higher rate than those performed in an office or ambulatory surgical center.

In today’s post,[1] we look at a recent settlement between the federal government and the Indiana-based Community Health System, which is alleged to have ignored this important billing distinction and received several years’ worth of reimbursements at the higher hospital rate when, in fact, patients were receiving care at independent facilities.

Details of the allegations against Community Health Network

The Community Health Network operates eight hospitals within the Indiana cities of Indianapolis and Anderson, along with 200 care centers across the Midwestern state. According to allegations,[2] from 2007 through 2009, the company routinely billed Medicare and Medicaid for the inflated hospital rate despite the fact many of its patients were receiving surgical care at a local, independent care center. In other cases, the network billed these inflated rates for procedures actually performed at centers not even owned by the network and performing the procedures on referral. These referrals, alleges the government, maintained lucrative contracts with the network, allowing it to bill the inflated rates and pass a portion of the extra profits along to the independent contractor care centers.

Interestingly, the U.S. Department of Health and Human Services sent a preemptive warning to the network in 2007, explaining that it could not bill hospital rates for surgeries performed in independent clinics. However, the practice is alleged to have continued for another two years after this point, triggering the government to launch an investigation and ultimately raise allegations of intentional fraud.

Community Health vehemently denies allegations

The executives of Community Health passionately assert that the issues with billing were mere oversights, and denounced the government’s attempts to classify it otherwise. The CEO said in a statement, “We’re very disappointed with the federal government’s characterization of this issue….At most, this was an innocent and unintentional billing error. In fact, we continually reached out for guidance to assure our billing method was appropriate.”

By contrast, the Department of Justice remarked, “This recovery sends the message that health care providers must comply with all applicable state and federal regulations when billing the United States Government for services, or they will face consequences….”

In addition to its $20.3 million settlement, the network has agreed to enter into a corporate integrity agreement, wherein it agreed to implement stricter controls on Medicaid and Medicare billing procedures.

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[1] “Community Health to Pay $20M to settle False Claims Charges,” last modified June 30, 2015,

[2] “Community Health to Pay $20 Million in Fraudulent Billing Settlement,” last modified June 30, 2015