Home News Covenant Healthcare Pays $69M to Resolve Allegations of False Claims

Covenant Healthcare Pays $69M to Resolve Allegations of False Claims

Covenant Healthcare Pays $69M to Resolve Allegations of False Claims

Covenant Healthcare System and two physicians paid over $69 million to resolve allegations under the False Claims Act of improper financial relationships.

United States Attorney Dawn N. Ison made the announcement on Wednesday, March 29, stating that the allegations were made against eight referring physicians and a physician-owned investment group, which resulted in the submission of false claims to the Medicare, Medicaid, TRICARE, and FECA programs.

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.

AKS and the Stark Law are intended to ensure that physicians’ medical judgments are not compromised by improper financial incentives, and that they 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.

The settlement was finalized in 2021, and resulted in Covenant paying 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 then led to their settlements. 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.