Click Fraud Protection Broken Promises: Whistleblower Receives Over $12 Million for Successful Qui Tam Lawsuit against Covenant Healthcare System - TZ Legal - Fraud Fighters
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HomeNewsBroken Promises: Whistleblower Receives Over $12 Million for Successful Qui Tam Lawsuit against Covenant Healthcare System

Broken Promises: Whistleblower Receives Over $12 Million for Successful Qui Tam Lawsuit against Covenant Healthcare System

6 April 2023.  The Department of Justice (DOJ) has recently announced that Covenant Healthcare System and two physicians have agreed to pay over $69 million in three civil settlements to resolve allegations of Anti-Kickback Statute (AKS) and Stark Law violations. The allegations involve improper financial relationships with referring physicians, including waiving rent for referrals, which caused the submission of false claims to various governmental healthcare programs. The whistleblower, a physician herself, will receive over $12 million for reporting these improper financial relationships.

One of the main violations cited in the settlement agreement was improper medical director arrangements with several physicians. According to allegations, Covenant Healthcare System entered into contracts with several physicians to serve as medical directors, which did not meet any exceptions under the Stark Law or AKS. Such agreements may have incentivized the referrals of patients and caused false claims to be submitted to Medicaid, Medicare, TRICARE, and FECA. Another allegation held that over a period of about four years, the healthcare system waived rent payments from a physician as payment for patient business that the physician referred to the healthcare system. Any claims submitted to federal healthcare programs by that physician and the hospital were tainted by this financial relationship in violation of the AKS and Stark Law. As a final example of the tangled financial relationships Covenant allegedly engaged in was that a physician-owned investment group comprised of Covenant-employed physicians finagled a deal on large medical equipment leasing in exchange for referrals from these patients. Accepting anything of monetary value in exchange for patient referrals taints claims made to government-funded healthcare programs, under the Anti-Kickback Statute.

The Anti-Kickback Statute (AKS) and Stark Law were enacted to prevent providers from engaging in financial relationships that may incentivize the referral of patients for specific medical services or products.   The AKS prohibits the exchange of anything of value to induce or reward the referral of patients, while the Stark Law prohibits physicians from referring patients to entities with which they have a financial relationship, unless they fall under specific exceptions. In the case of Covenant Healthcare System, it was alleged that the healthcare system had improper financial relationships with several referring physicians that caused false claims to be submitted to various healthcare programs.

As the U.S. Attorney for this case said about kickbacks, “Improper financial relationships and kickbacks undermine the integrity of federally-funded healthcare programs by influencing physician decision making.” The healthcare system paid approximately $67 million to the United States and $1.8 million to the State of Michigan, and two of the physicians have also paid roughly $407,000 and $346,000 for their parts in the fraud scheme.

This recent settlement involving Covenant Healthcare System and two physicians is a reminder of the importance of adhering to AKS and Stark Law regulations. Healthcare providers should ensure that all financial relationships meet established exceptions to avoid potential legal ramifications. The significant damages included in these settlements should also serve as a warning to other providers to ensure that their financial relationships comply with all regulatory guidelines. Whistleblowers are the boots-on-the-ground troops who can see—and say—when healthcare providers are taking shortcuts on regulatory compliance with government-funded healthcare programs.

If you would like to report Medicare, Medicaid, or TRICARE fraud, you can contact attorneys at Tycko & Zavareei LLP.  Eva Gunasekera and Renée BrookerRenée Brooker are former officials of the United States Department of Justice and prosecuted whistleblower cases under the False Claims Act. Eva was the Senior Counsel for Health Care Fraud. Renée served as Assistant Director at the United States Department of Justice, the office that supervises False Claims Act cases in all 94 United States District Courts. Eva and Renée now represent whistleblowers. For a free consultation, you can contact Eva Gunasekera at [email protected] or contact Renée at [email protected] (tel.: 202-417-3664). Visit Tycko & Zavareei LLP’s website for whistleblowers to learn more at

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