Delaware hospital system will pay $47 million to settle whistleblower allegations of billing fraud

DOVER, Del. — Delaware’s largest hospital system will pay more than $47 million to settle whistleblower allegations by its former compliance officer that it provided kickbacks to outside doctors in return for patient referrals, resulting in fraudulent Medicaid billing.

The settlement announced Friday comes nearly seven years after Ronald Sherman filed his whistleblower lawsuit, which remained under seal for more than a year, against Christiana Care Health System.

The lawsuit alleged that Christiana Care employees, including nurse practitioners, hospitalists and physician assistants, treated patients referred by non-CHSS physicians at no cost or below fair market value.

Those outside physicians then billed insurers, primarily Medicaid, for care that was actually provided by Christiana employees.

In exchange for the unearned billings, the physicians continued to funnel patients to Christiana Care rather than to other hospitals, according to the lawsuit.

The alleged fraud occurred between April 2011 and September 2013 involving Christiana’s neonatology department, and between April 2011 and April 2017 invoving the cardiovascular surgery, urology, neurosurgery and ear, nose and throat departments.

State and federal authorities said the scheme violated anti-kickback laws and state and federal false claims statutes.

Attorneys for Sherman said the case is believed to be the largest False Claims Act settlement in Delaware history and similar lawsuits could be brought against other hospitals nationwide.

“Any other hospital in the country which operates under that model that led to this settlement should consider changing its practices immediately,” Dan Miller, lead counsel for Sherman, said in a statement.

Miller suggested that the scheme was partly a reaction to new industry rules in 2003 limiting the number of hours that hospitals could require medical residents to work.

“To fill the gap left behind by residents, many hospitals hired mid-level providers such as nurse practitioners and physician assistants,” he said. “At Christiana Care, we alleged that services performed by mid-level providers were billed for by private attending physicians who were in a position to make future referrals to the hospital. Put differently, we alleged that Christiana Care paid kickbacks to the private physicians in the form of free employees.”

Under the settlement, Christiana Care will pay about $32 million to the federal government and roughly $11 million to the state of Delaware, with half of each amount being restitution. Sherman will receive slightly more than $12 million, with roughly $9 million coming from the federal government and $3 million from the state. Christiana Care will also pay $4.6 million to Sherman’s attorneys.

A statement issued by Shane Hoffman, a spokesman for Christiana Care, noted that the settlement involves no admission of liability.

“We are pleased to settle this matter as we focus forward on meeting the evolving health needs of the diverse communities we serve,” it said.

In 2010, Christiana Care paid $3.3 million to settle a similar whistleblower suit alleging Medicare and Medicaid fraud involving neurology doctors. As part of that settlement, Christiana entered into a “corporate integrity agreement” with the inspector general’s office of the U.S. Department of Health and Human Services.

That agreement, among other things, required Christiana to maintain programs to detect and encourage internal reporting of potential violations of laws prohibiting kickbacks and patient referrals in return for financial consideration. Christiana also was required to report probable violations and overpayments to the government.

The lawsuit alleges that Sherman was stonewalled and marginalized by Christiana officials including Dr. Janice Nevin, the president and CEO, after expressing concerns about questionable billing practices that the hospital continued to engage in despite the earlier settlement. He was fired by Nevin in 2014.

“Mr. Sherman had an obligation to investigate compliance concerns. The mere fact that he was doing so appeared (to) cause a ‘problem’ for Dr. Nevin, which she was unable to explain during her deposition,” former federal prosecutor Virginia Evans said in an export report commissioned by Sherman’s attorneys.