DETROIT – A regional hospital system and two physicians have paid over $69 million in three related civil settlements to resolve possible False Claims Act violations, United States Attorney Dawn N. Ison announced today.

Ison was joined in the announcement by Special Agent in Charge Mario M. Pinto of the U.S. Department of Health & Human Services, Office of Inspector General (HHS-OIG), Chicago Regional Office, Special Agent in Charge Scott Pierce, United States Postal Service Office of Inspector General, Central Area Field Office and Special Agent in Charge Patrick J. Hegarty, Department of Defense Office of Inspector General, Defense Criminal Investigative Service (DCIS), Northeast Field Office.  

Covenant Healthcare System, a regional hospital system based in the Saginaw, Michigan area, paid $69 million to resolve allegations under the False Claims Act of improper financial relationships with eight referring physicians and a physician-owned investment group, resulting in the submission of false claims to the Medicare, Medicaid, TRICARE, and FECA programs.  Two of these physicians, neurosurgeon Dr. Mark Adams and electrophysiologist Dr. Asim Yunus will pay the United States $406,551.15 and $345,987.54, respectively, to resolve allegations related to their relationships with Covenant.

The Anti-Kickback Statute (“AKS”) prohibits offering, paying, soliciting, or receiving remuneration to induce referrals of items or services covered by Medicare, Medicaid, and other federally-funded programs.  The Physician Self-Referral Law, commonly known as the Stark Law, prohibits a hospital from billing Medicare for certain services referred by physicians with whom the hospital has an improper financial arrangement, including the payment of compensation that exceeds the fair market value of the services actually provided by the physician and the provision of free or below-market rent.  Both the Anti-Kickback Statute and the Stark Law are intended to ensure that physicians’ medical judgments are not compromised by improper financial incentives and instead are based on the best interests of their patients.

The settlement with Covenant resolves the following allegations:

At various points between 2006 to 2016, Covenant had contracts with Asim Yunus, M.D., Kimiko Sugimoto, M.D., Sujal Patel, M.D., Sussan Bays, M.D., Guy Boike, M.D., and Thomas Damuth, M.D. to serve as medical directors, and none of these arrangements satisfied any exceptions to the Stark Law or the AKS, such that referrals these physicians made to Covenant violated the False Claims Act.

 

From June 1, 2006, to December 14, 2009, Covenant employed Mark Adams, M.D., and this financial relationship did not satisfy any exception to the Stark Law, such that referrals for designated healthcare services by Adams to Covenant were prohibited and violated the False Claims Act.

 

From January 21, 2009, through July 31, 2013, Covenant rented office space to Ernie Balcueva, M.D.  Covenant forgave Balcueva’s rent payments, constituting remuneration that Covenant paid in exchange for referrals from Balcueva in violation of the AKS and the False Claims Act, and creating a financial relationship that did not meet any exception to the Stark Law, also violating the False Claims Act.

 

Covenant permitted Covenant Physician Investment Group (“CPIG”), a group owned by Covenant-employed physicians for the purpose of purchasing large medical equipment that CPIG would lease to Covenant, to secure an equipment lease through non-arm’s-length negotiations, in order to induce referrals of patients from these physicians, in violation of the AKS and the False Claims Act.

 

As a result of this settlement, which was finalized in 2021, Covenant paid the United States $67,191,436.39 and the State of Michigan $1,808,563.61.  This settlement remained under seal while the United States continued its investigation into Adams and Yunus, which led to the settlements with Adams and Yunus.  Consistent with the terms of their respective settlement agreements with the United States, Adams paid the United States $406,551.15, and Yunus will pay the United States $345,987.54.

“Improper financial relationships and kickbacks undermine the integrity of federally-funded healthcare programs by influencing physician decision making,” said U.S. Attorney Ison.  “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.”  U.S. Attorney Ison added, “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.”

“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 health care programs,” said Special Agent in Charge Mario M. Pinto of the U.S. Department of Health and Human Services Office of Inspector General. “We will continue to work together with our law enforcement partners to ensure the appropriate use of taxpayer dollars.

“These settlements send a clear message to healthcare providers that the government is vigilantly protecting federal benefit programs,” said Special Agent in Charge Scott Pierce of United States Postal Service Office of Inspector General, Central Area Field Office. “The USPS OIG appreciates our law enforcement partners for their commitment and efforts in this investigation. The USPS OIG will continue to vigorously investigate those who engage in activities that harm federal benefit programs and the U.S. Postal Service.”

"Protecting TRICARE, the healthcare system for military members and their dependents, is a top priority for the Defense Criminal Investigative Service (DCIS), the law enforcement arm of the Department of Defense Office of Inspector General," stated Special Agent in Charge Patrick J. Hegarty, DCIS Northeast Field Office.  "The settlements announced today demonstrate our ongoing commitment to work with the Department of Justice and our law enforcement partners to investigate allegations of improper financial relationships that place unnecessary financial pressure on the TRICARE system."

The civil settlements resolve the claims brought by Stacy Goldsholl, M.D., under the qui tam or whistleblower provisions of the False Claims Act.  Under these provisions, a private party may file an action on behalf of the United States and receive a portion of any recovery.  The qui tam case is captioned United States ex rel. Goldsholl v. Covenant Healthcare System, et al., No. 12-15422 (E.D. Mich.).  The whistleblower will receive a combined $12,384,927.36 from the three settlements.  The claims resolved by the settlements are allegations only; there has been no determination or admission of liability.

The matter was investigated by Assistant U.S. Attorney Jonny Zajac of the U.S. Attorney’s Office for the Eastern District of Michigan, with assistance from HHS-OIG, the Defense Criminal Investigative Service, and the United States Postal Service-OIG.