Former Compliance Officer Exposes Kickback Scheme
Christiana Care Health System to Pay Restitution and Penalties
Dover, Del. – Delaware’s largest hospital system, Christiana Care Health System, has agreed to pay over $47 million to settle allegations made by its former compliance officer, Ronald Sherman, that the hospital provided kickbacks to outside doctors in exchange for patient referrals, resulting in fraudulent Medicaid billing. The settlement, announced on Friday, comes after nearly seven years of litigation.
Fraudulent Billing and Patient Referrals
Whistleblower Lawsuit Reveals Unethical Practices
Sherman’s lawsuit, which had been under seal for over a year, alleged that Christiana Care employees, including nurse practitioners, hospitalists, and physician assistants, treated patients referred by non-CHSS physicians either for free or below fair market value. These outside physicians would then bill insurers, primarily Medicaid, for services that were actually provided by Christiana employees. In return for these unearned billings, the physicians continued to refer patients to Christiana Care, rather than other hospitals.
The fraudulent scheme took place between April 2011 and September 2013 in Christiana’s neonatology department, and between April 2011 and April 2017 in the cardiovascular surgery, urology, neurosurgery, and ear, nose, and throat departments. State and federal authorities have determined that this scheme violated anti-kickback laws and state and federal false claims statutes.
Implications for Other Hospitals
Legal Experts Warn of Possible Nationwide Lawsuits
Attorneys for Sherman believe that this case represents the largest False Claims Act settlement in Delaware’s history and anticipate that similar lawsuits could be brought against other hospitals across the country. Lead counsel for Sherman, Dan Miller, stated, “Any other hospital in the country which operates under that model that led to this settlement should consider changing its practices immediately.”
Miller suggests that the fraudulent scheme may have been a response to new industry regulations implemented in 2003, which limited the number of hours that hospitals could require medical residents to work. To compensate for this gap, many hospitals, including Christiana Care, hired mid-level providers such as nurse practitioners and physician assistants. The lawsuit alleges that Christiana Care paid kickbacks to private physicians by allowing them to bill for services performed by mid-level providers, thus ensuring future referrals to the hospital.
The Settlement Details
Financial Restitution and Attorneys’ Fees
Under the settlement, Christiana Care will pay approximately $32 million to the federal government and around $11 million to the state of Delaware. Half of each amount will be restitution. Sherman, the whistleblower, will receive slightly over $12 million, with $9 million coming from the federal government and $3 million from the state. Additionally, Christiana Care will pay $4.6 million to Sherman’s attorneys.
In a statement released by Shane Hoffman, a spokesman for Christiana Care, it was noted that the settlement does not involve an admission of liability. The statement further stated, “We are pleased to settle this matter as we focus forward on meeting the evolving health needs of the diverse communities we serve.”
A History of Allegations
Past Settlement Reflects Hospital’s Troubled Past
This is not the first time Christiana Care has faced allegations of fraudulent billing. In 2010, the hospital paid $3.3 million to settle a similar whistleblower suit that accused the hospital of Medicare and Medicaid fraud involving neurology doctors. As part of that settlement, Christiana Care entered into a “corporate integrity agreement” with the inspector general’s office of the U.S. Department of Health and Human Services.
The agreement required Christiana Care to establish programs to detect and encourage internal reporting of potential violations of anti-kickback laws and patient referral regulations. The hospital was also obligated to report probable violations and overpayments to the government.
Whistleblower Alleges Retaliation
Sherman’s lawsuit claims that after expressing concerns about the hospital’s questionable billing practices, which continued despite the previous settlement, he was stonewalled and marginalized by Christiana officials, including Dr. Janice Nevin, the president and CEO. Sherman was ultimately fired by Nevin in 2014.
Former federal prosecutor Virginia Evans, in an expert report commissioned by Sherman’s attorneys, stated, “Mr. Sherman had an obligation to investigate compliance concerns. The mere fact that he was doing so appeared to cause a ‘problem’ for Dr. Nevin, which she was unable to explain during her deposition.”
The settlement brings an end to a long legal battle, but it may serve as a warning to other hospitals engaging in similar practices. As the healthcare industry evolves, the focus on ethical billing practices and patient referrals becomes increasingly crucial.
