The United States Department of Justice (DOJ) and the Indiana Attorney General’s Office have reached a $135 million settlement with Indiana-based Community Health Network (Community) over a Preti Flaherty whistleblower client’s allegations that Community violated the False Claims Act, as well as the Anti-Kickback Statute and Stark Law.

Those laws prohibit hospitals from paying kickbacks and other financial incentives to physicians to corrupt their medical decision-making and induce them to send patients to hospitals willing to pay the most for the referrals. This $135 million settlement follows a related $345 million settlement announced in December 2023 for similar allegations concerning Community’s payments to other physicians, bringing the total settlements in this case to a record-setting $480 million.

This settlement is the culmination of the False Claims Act case brought by whistleblower Thomas Fischer more than ten years ago. It also resolves Mr. Fischer’s claims related to his allegation that Community wrongfully fired him for reporting his concerns about Community’s conduct related to physician compensation.

Mr. Fischer, a seasoned healthcare finance and operations executive, had worked for Community for decades, first as an outside financial advisor and then as its Chief Financial Officer and Chief Operating Officer. He was named “CFO of the Year” in 2012 by the Indianapolis Business Journal.

After reporting his concerns internally at Community, and then directly to federal healthcare officials and DOJ, he began working with attorney Tim McCormack, now at Preti Flaherty, to file a complaint under the False Claims Act in an effort to fix the problems he identified.

As Mr. Fischer explained, “My efforts were intended to hold the Community executives and its board of directors accountable for their actions. I have so much respect and appreciation for the work of the thousands of hard-working and honest Community Health Network employees who have dedicated their lives to patient care and serving the community of Indianapolis and Indiana more broadly.”

This most recent settlement would have represented the largest settlement in a case of its type (by a margin of $20 million) but for the fact that DOJ and Community settled the first part of Mr. Fischer’s case for $345 million in December 2023. Taken together with its $20.3 million settlement with DOJ in 2015, Community has now paid more than half a billion dollars in three False Claims Act settlements in the last decade.

Under the False Claims Act, once a whistleblower brings forward allegations of fraud, the government may litigate those claims (with the assistance of the whistleblower). If the government declines to pursue claims, the whistleblower and their legal team may litigate those “declined” claims on behalf of the government. The settlement in December 2023 covered the claims that the government chose to take the lead in pursuing.

This recent settlement resolves the “declined” claims, including allegations that Community overpaid employed physicians (both physicians directly employed by Community and by an independent oncology group – Community Hospital Oncology Physicians – that contracted exclusively with Community). The declined claims alleged that the excessive payments to physicians were paid to ensure that they sent their patients to Community facilities, in violation of federal and state laws, including the Stark Law. The Stark Law prohibits payments of any kind – including inflated salaries – to physicians to influence where they treat or refer patients.

This settlement also covers allegations that Community paid above-fair market value rent to a physician-owned real estate partnership to induce the physician owners to refer patients to a Community-owned ambulatory surgical center in violation of the Anti-Kickback Statute.

Reflecting upon the historic settlements, Mr. Fischer stated, “This has been a long journey – more than ten years and thousands of hours of work – and I couldn’t have done it without the unwavering support of my wife, Gayle.”

Mr. Fischer continued, “I am profoundly grateful for the diligence, persistence, and skill of the great government teams (both the US and Indiana) that worked on this case – especially lead DOJ attorney Arthur DiDio – and the incredible efforts of my legal team who represented me throughout.”

Mr. Fischer hopes this settlement will encourage other whistleblowers: “I hope these settlements will help empower and inspire others working in healthcare organizations across the country to speak up and speak out if and when they see potential fraud – both internally within their organizations and, if internal whistleblowing doesn’t work, to report to the government.”

“These claims are not mere technicalities: they directly affect patients, hospital employees, and the high cost of healthcare. This settlement puts money back into the healthcare system and is a victory for Indiana and federal taxpayers,” Mr. Fischer said.

“I could not be prouder of Mr. Fischer’s tenacity,” said Mr. McCormack. “Cases like this are vital to keeping financial incentives away from medical judgment. Without a brave insider like Mr. Fischer willing to speak up and then blow the whistle, Community likely would have gotten away with this alleged fraud.”

Mr. McCormack continued: “After three False Claims Act settlements worth more than half a billion dollars in the last ten years, it will be interesting to see what steps Community takes to reform its physician compensation and billing practices. With this case, both DOJ and the Indiana Attorney General’s Office have demonstrated their tenacious commitment to fighting suspected healthcare fraud.”

Preti Flaherty partner Michael Smith added: “This has been a great team effort and it’s been an honor to represent Mr. Fischer. We were fortunate to work on this case with exceptional lawyers from multiple firms, including lead litigation counsel Veronica Nannis and her team at Joseph, Greenwald & Laake. The government teams, which included the U.S. Department of Justice – particularly lead DOJ attorney Arthur DiDio, the U.S. Attorney’s Office for the Southern District of Indiana, and the Indiana Medicaid Fraud Control Unit, provided important support as we pursued the declined claims.”

The case is U.S. and State of Indiana ex rel Fischer v. Community Health Network, Inc., et al., Case No. 1:14-cv-1215-RLY-MKK. Fischer is represented by Tim McCormack, Michael Smith, Elizabeth Quinby, and Michael Hanify, Preti Flaherty Beliveau & Pachios, LLP; Veronica Nannis, Jay Holland, Steven Pavsner, and Virginia Grimm, Joseph, Greenwald & Laake, PA; Bruce Greenberg and Anthony Zatkos, Lite DePalma Greenberg & Afanador, LLC; and local and employment counsel Kathleen DeLaney and Anna Conklin, DeLaney & DeLaney LLC. The government’s team is led by Arthur DiDio of the U.S. Department of Justice, United States Attorney for the Southern District of Indiana Zachary A. Myers and Civil Chief for the U.S. Attorney’s Office, Southern District of Indiana, Shelese Woods; Indiana Attorney General Todd Rokita; Director of the Indiana Medicaid Fraud Control Unit Matthew Whitmire, and Indiana Deputy Attorney General Lawrence Carcare.

A copy of the December 2024 settlement agreement may be found here. A copy of the December 2023 settlement agreement may be found here. Copies of the United States’ complaint, Mr. Fischer’s original complaint and the Second Amended Complaint are also linked here.