Indiana Hospital System to Pay $135M to Settle Healthcare Fraud Claims

In January 2025, the Indiana-based hospital system Community Health Network agreed to settle alleged claims of healthcare fraud for $135 million. The alleged fraud included overpayments to physicians for their Medicare census which is considered Medicare fraud and Medicaid fraud, which transform the healthcare violations  into violations of the False Claims Act, Anti-Kickback Laws, and Stark Law. The case was first brought to light by an internal whistleblower, who filed the claim with the assistance of a healthcare fraud , back in 2014. The settlement is Community Health Network’s second settlement in connection with the claims. Community Health Network settled previous allegations of healthcare fraud and abuse for $345 million in December 2023.

Community Health Network Kickback Allegations

In this recent False Claims Act settlement, Community Health Network was alleged to have overpaid physicians to incentivize them to send their patients to Community Health Network facilities. Specifically, these incentives included over inflating physician salaries and paying above-fair market value rent to physician-owned real estate. The Department of Justice, in conjunction with the Indiana Attorney General, began investigating this case over a decade ago when the healthcare fraud and abuse scheme was revealed by an internal officer of the company.

Since these patients were insured under the federal healthcare programs (i.e., primarily Medicare and Medicaid), Community Health Network was allegedly in violation of various federal laws designed to prevent physicians from determining their patient treatment plan based on personal financial gain, in addition to the False Claims Act.

Laws Violated in the Community Health Network Scheme

Several laws were allegedly violated in the case, which contributed to the amount recovered by the Department of Justice and the whistleblower. These alleged violations include:

• False Claims Act (31 U.S.C. § 3729): The False Claims Acts prohibits fraudulent claims being used to make payment with taxpayer federally funded money from the government. This includes claims that arise from improper referrals violating other federal laws. In the Community Health Network case, by overpaying physicians and violating anti-kickback laws, they were also submitting false claims that violated the False Claims At.
• Stark Law (42 U.S.C. § 1395): The Stark Law is also commonly known as the physician self-referral law. The law prohibits physicians from referring patients to facilities they have financial arrangements with. This law is supposed to protect the treatment of patients from any self-dealing by the physician. Here, Community Health Network violated these laws by influencing physicians to refer patients to their facilities by inflating employed-physician salaries and paying above-market rent to physician-owned facilities.
• Anti-Kickback Statute (42 U.S.C. § 1320): Known as the AKS, the statute prohibits “remuneration” (i.e., cash, gifts, benefits, etc.) from being given in exchange for patient referrals under federal healthcare programs. The overpayment of salaries and inflated rents violated the AKS.

Role of the Whistleblower in the Community Health Network Claim

The whistleblower in this claim was the former Chief Operating Officer and Chief Financial Officer of Community Health Network. The inside knowledge that the officer had visibility on for the overpayment of physicians was initially revealed in 2014. While revealing this information, the executive was also wrongfully terminated, which additionally triggered a cause of action for the retaliation claims that are protected by and prohibited under the False Claims Act.

At the conclusion of the settlement, the whistleblower released a statement:

“I hope these settlements will help empower and inspire others working in healthcare organizations across the country to speak up and speak out if and when they see potential fraud – both internally within their organizations and, if internal whistleblowing doesn’t work, to report to the government…These claims are not mere technicalities; they directly affect patients, hospital employees and the high cost of healthcare. This settlement puts money back into the healthcare system and is a victory for Indiana and federal taxpayers.”

Whistleblower Award Under the False Claims Act

The Community Health Network case is a prime example of the importance of whistleblowers under the False Claims Act. Whistleblowers, also known as relators, can file what are known as “qui tam” lawsuits on behalf of the government if they have allegations of fraudulent payments being made using federal funding. Whistleblowers work closely with whistleblower attorneys to file the matter procedurally correct and help present the evidence needed to prevail.

After reviewing the claim, the federal government can either accept or decline the case. If the government declines the matter the whistleblower may continue to pursue the claim in certain circumstances, or the government can sometimes try to kill the case if it declines the matter. A whistleblower can potentially be entitled to 15% to 30% of the government’s total recovery as a whistleblower award; depending on the amount of contribution by the whistleblower and the government’s decision on whether to intervene or not.

Here, the settlement amount recovered by the federal government for Community Health Network’s allegations was $135 million for this round of settlement, in addition to the hundreds of millions prior.. Therefore, the whistleblower’s award potentially ranges from $20 million to $40 million for this iteration of the False Claims Act settlement. The False Claims Act sets the framework for whistleblowers to be rewarded for providing crucial information that the government relies on to prevent healthcare fraud and abuse. Interested whistleblowers can reach out to a whistleblower attorney to find out more information on filing a qui tam lawsuit.