Covenant Healthcare System and two of its physicians have paid out more than $69 million to settle alleged kickbacks violating the False Claims Act, the Department of Justice announced Wednesday.
The Saginaw, Michigan-based regional hospital system had finalized the settlement in 2021, but the agreement was kept under wraps as law enforcement continued to investigate the physicians, Mark Adams, M.D. and Asim Yunus, M.D., according to a release from the U.S. Attorney’s Office for the Eastern District of Michigan.
The organization paid out about $67.2 million to the federal government and $1.8 million to the state of Michigan, while the two physicians’ settlements with the feds totaled about $750,000, per the announcement.
“Improper financial relationships and kickbacks undermine the integrity of federally-funded healthcare programs by influencing physician decision-making,” U.S. Attorney Dawn Ison said in the announcement. “This outcome emphasizes our Office’s commitment to pursuing justice against parties on both sides of those relationships—the hospital seeking to influence the physician via certain compensation schemes and the physician accepting the compensation."
Covenant’s settlement resolves four allegations related to the Anti-Kickback Statute and the Physician Self-Referral Law, or the Stark Law. These include:
- medical director contracts with six physicians (including Yunus) between 2006 and 2016 that led to referrals violating the False Claims Act;
- Adams’ employment from 2006 to 2009, in which referrals by Adams to Covenant were prohibited under the False Claims Act;
- the forgiveness of a physician’s rented office space payments from 2009 to 2013 as remuneration in exchange for referrals in violation of the Anti-Kickback Statute and the False Claims Act; and
- improper negotiations over equipment leased to Covenant by a group owned by employed physicians that violated the Anti-Kickback Statute and the False Claims Act.
Together, the allegations constitute improper financial relationships with eight referring physicians and the physician-owned investment group and resulted in the submission of false claims to the Medicare, Medicaid, TRICARE and FECA programs, the DOJ said.
“Financial relationships that are based solely on monetary gain undermine the trust that we place in our nation’s medical providers and can result in costly reductions to our federal healthcare programs,” Special Agent in Charge Mario M. Pinto of the U.S. Department of Health and Human Services Office of Inspector General, said in a statement. “We will continue to work together with our law enforcement partners to ensure the appropriate use of taxpayer dollars.”
The investigation and resulting civil settlements stemmed from whistleblower claims brought by Stacy Goldsholl, M.D., who joined Covenant in 2010 and left in 2012 as CEO of its medical group and a vice president for the system, according to her LinkedIn profile. She will receive nearly $12.4 million from Covenant’s settlements, DOJ said.
Covenant Healthcare System is a non-profit organization headlined by its flagship 623-bed Covenant Medical Center. It serves 20 northeast and central Michigan counties across more than 20 inpatient and outpatient facilities—including seven critical access and community hospitals—and employs more than 4,400 people, according to its website.
Fierce Healthcare has reached out to the system for any additional comment on the settlement.
“I would like to commend the new leadership at Covenant for making things right once its past wrongdoing was brought to its attention by federal investigators,” Ison said.