Covenant Healthcare pays $69M to settle false claims accusations

April 4, 2023 : Two physicians have paid over $69 million to settle allegations of improper financial associations under the False Claims Act.

As stated by Attorney Dawn N. Ison of the United States on Monday, April 3, the allegations were made against eight referring doctors and a physician-owned investment company, which resulted in the surrender of false claims to the Medicare, TRICARE, Medicaid, and FECA schedules.

The Anti-Kickback Statute (“AKS”) denies offering, paying, soliciting, or receiving payment to induce referrals of items or services covered by Medicaid, Medicare, and other federally-funded agendas.

The Physician Self-Referral Law, generally known as the Stark Law, bans a hospital from billing Medicare for particular services referred by doctors with whom the hospital has an improper financial interpretation, including the payment of compensation that exceeds the reasonable market value of the services provided by the doctor and the provision of free or below-market price.

AKS and the Stark Law are planned to ensure that improper financial incentives do not bargain physicians’ medical judgments and that they are founded on the best interests of their patients.

The compromise with Covenant resolves the following allegations:

In the time period from 2006 to 2016, Covenant had contracts with Asim Yunus, M.D., Sujal Patel, M.D., Sussan Bays, M.D., Kimiko Sugimoto, M.D., Guy Boike, M.D., and Thomas Damuth, M.D. to act as medical directors. None of these arrangements satisfied any peculiarities to the Stark Law or the AKS, such that referrals; these doctors made to Covenant violated the False Claims Act.

In the period June 1, 2006, to December 14, 2009, Covenant hired Mark Adams, M.D. This financial relationship did not satisfy any abnormality to the Stark Law, such that referrals for assigned healthcare services by Adams to Covenant were prohibited and desecrated the False Claims Act.

From January 21, 2009, to July 31, 2013, Covenant rented an office room to Ernie Balcueva, M.D. Covenant pardoned Balcueva’s rent payments, constituting payment that Covenant paid in exchange for referrals from Balcueva in infringement of the AKS and the False Claims Act, and building a financial relationship that did not meet any peculiarity to the Stark Law, also violating the False Claims Act.

The Covenant permitted Covenant Physician Investment Group (“CPIG”), a group possessed by Covenant-employed physicians, the purpose of buying sizeable medical equipment that CPIG would lease to Covenant to reserve an equipment lease through non-arm’s-length negotiations to effect referrals of patients from these physicians in breach of the AKS and the False Claims Act.

The compromise was finalized in 2021, resulting in Covenant bearing the United States $67,191,436.39 and the State of Michigan $1,808,563.61.

This compensation remained under seal while the United States continued its inquiry into Adams and Yunus, leading to their payments. Consistent with their concession agreements with the United States, Adams spent the United States $406,551.15, and Yunus bore the United States $345,987.54.