We often work with valuation experts to ensure compensation payments between healthcare organizations and physicians are fair market value and commercially reasonable for purposes of compliance with the Stark Law and the Anti-Kickback Statute. A recent fraud settlement highlights the importance of ensuring the organization understands how to effectively work with valuation experts.

In December 2023, Community Health Network, Inc (“CHN”), agreed to pay $345 million to resolve allegations it violated the False Claims Act by knowingly submitting claims to Medicare for services that were referred in violation of the Stark Law. The False Claims Act action was brought by a whistleblower, the former Chief Financial Officer of CHN. The complaint alleged CHN’s senior management recruited specialty physicians and paid them excessive salaries, sometimes more than double what they received in their own practices, for purposes of capturing their lucrative downstream referrals. CHN is also accused of having inappropriately paid physicians incentive compensation based on achieving referral targets. 

The complaint further alleged CHN hired a valuation firm to analyze the compensation it proposed paying these specialists but claims CHN knowingly provided the valuation firm with false information so the firm would render a favorable opinion, as well as ignoring repeated warnings from the valuation firm regarding the ramifications of overpaying the physicians. 

The nine-figure settlement demonstrates the significant repercussions of overpaying physicians and other referral sources and how important it is that organizations establish and follow compensation policies for their employed and contracted providers designed to comply with Stark and the Anti-Kickback Statutes. Valuation experts are a critical part of this process; however, as this settlement demonstrates the organization must ensure it provides the valuation firm with accurate data and heeds the valuation firm’s advice. 

This week on the podcast, I spoke with Randy Gott, Senior Vice President of the Coker Group (www.cokergroup.com) about how to work successfully with valuation experts. Check out our conversation and Randy’s tips:

Please see full Podcast here.