Adventist Health System's $118.7 million settlement started with a whistleblower lawsuit by 3 former hospital employees

Sep 21, 2015, 16:30 ET from Phillips & Cohen LLP

WASHINGTON, Sept. 21, 2015 /PRNewswire-USNewswire/ -- Three former employees of a North Carolina hospital were the first to expose an alleged scheme by Adventist Health System to pay doctors excessive compensation to lock in their patient referrals to Adventist-owned hospitals, clinics and other outpatient services in Florida, North Carolina, Tennessee and Texas.

The US Justice Department announced today that Adventist will pay a total of $118.7 million to the federal government and four states to settle a whistleblower (qui tam) lawsuit filed in December 2012 by those former employees, who are represented by whistleblower law firm Phillips & Cohen LLP. The settlement agreement also covers a separate qui tam lawsuit filed in 2013 that made the same allegations as some of those made earlier in Phillips & Cohen's qui tam lawsuit.

The Adventist settlement is the largest healthcare fraud settlement ever made involving physician referrals to hospitals, according to Peter Chatfield, a whistleblower attorney with Phillips & Cohen. It is nearly twice the previous largest settlement involving hospital kickback allegations, which was North Broward Hospital District's recent $69.5 million settlement.

"We alleged Adventist's hospitals paid doctors outrageous sums and offered overly generous benefits and lax billing oversight as part of a corporate strategy to capture and control physician referrals for inpatient and outpatient services near its hospitals," Chatfield said. "Federal law prohibits hospitals from paying doctors directly or indirectly for referrals so that doctors make recommendations for care based on what's best for the patient – not what's best for the doctor's bank account."

A substantial portion of the settlement amount is based on allegations involving Florida Hospital Medical Group, an Adventist-owned physician practice in Florida whose doctors worked at several Adventist hospitals and dozens of Adventist-owned outpatient clinics. Those hospitals include Florida Hospital Altamonte, Florida Hospital Apopka, Florida Hospital Celebration Health, Florida Hospital Kissimmee, Florida Hospital Orlando, Florida Hospital Waterman (Tavares, Fla.), Florida Hospital for Children (Orlando, Fla.) and Winter Park Memorial Hospital.

The three whistleblowers were longtime employees at Adventist's Park Ridge Health in Hendersonville, NC, where they became aware of the alleged system-wide kickback scheme. Michael Payne was a risk manager and Melissa Church was the executive director of physician services at Park Ridge. Gloria Pryor was a compliance officer for physician offices at Park Ridge.

"My clients went through internal channels at the hospital to get their concerns about deals with doctors and improper billing practices addressed for several years," Chatfield said. "They decided to file a whistleblower lawsuit after they confirmed that the alleged money-for-referrals scheme was system-wide at Adventist and it was clear management wasn't going to stop it."

In addition to the charges related to the money-for-referrals scheme, Adventist settled a number of Medicare billing fraud allegations made in Phillips & Cohen's whistleblower lawsuit and supported by the government.  Those allegations included "upcoding" Medicare claims and "unbundling" services to submit them as separate Medicare claims.

The government joined Phillips & Cohen's whistleblower lawsuit – which was not publicly known until today because it was under seal – after investigating the whistleblowers' allegations. Attorney James Wyatt of Wyatt & Blake LLP, in Charlotte, N.C., served as whistleblowers' local counsel on the case.

Payne, Church, Pryor and their attorneys expressed their appreciation for the work by the government's lawyers and investigators to stop the alleged schemes and recover millions for the government.

In particular, they thanked David Finkelstein, Trial Lawyer with the Justice Department's Civil Division, and Jonathan Ferry, Assistant US Attorney in the US Attorney's Office for the Western District of North Carolina, for their outstanding work on the case.

Payne, Church and Pryor also thanked their families for their support and encouragement to do the right thing by pursuing their qui tam lawsuit for the past three years.

The False Claims Act allows private citizens to file "qui tam" lawsuits against any entity defrauding the government to recover funds for the government. Whistleblowers are rewarded with 15 percent to 25 percent of the recovery when the government joins the case. The amount of the whistleblowers' rewards in this case hasn't been determined yet.

The settlement agreement, the whistleblowers' complaint and a photo of the whistleblowers are posted on Phillips & Cohen's website.

About Phillips & Cohen LLP
Phillips & Cohen ( is the nation's most successful law firm representing whistleblowers, with recoveries for governments totaling more than $11.6 billion in civil settlements and criminal fines. The firm represents whistleblowers in "qui tam" lawsuits as well as cases brought under the whistleblower reward programs of the Securities and Exchange Commission, the Commodity Futures Trading Commission and the Internal Revenue Service.



SOURCE Phillips & Cohen LLP