Community Health System facilities in Fresno include Downtown Fresno's Community Regional Medical Center. Photo contributed

The United States Department of Justice announced Wednesday that Community Health System and affiliated Physician Network Advantage Inc. (PNA) have agreed to pay $31.5 million to the United States to resolve allegations of physician kickbacks.

Community Health System and PNA were accused of offering benefits enticing physicians in the Fresno area to refer patients to Community facilities, a violation of the False Claims Act. PNA is a health care technology business funded by Community. It supports Fresno-area physicians in adopting the electronic health records system used by Community.

The Justice Department alleged that PNA’s offices were home to a custom-built lounge where physicians were provided expensive wine, liquor, cigars and meals in exchange referring federal health care program patients to Community.

“We cannot allow medical decisions to be distorted by kickback schemes or efforts to buy physicians’ loyalty with lucrative side perks,” said Acting U.S. Attorney Beckwith. “This settlement demonstrates this Office’s commitment to ensuring that patients’ best interests remain paramount.”

A statement from Community Health System acknowledged shortcomings in its compliance as it embraced a federal push to expand electronic health records to enhance patient care.

“We are confident Community’s investment and approach to widespread implementation of electronic health records, including at primary care practices, supported enhanced patient care and was in the best interest of our patients,” Community Health System Board Chair Roger Sturdevant said in a statement Wednesday. “However, it is clear we needed stronger oversight measures to assure that both Community and our vendor partner maintained appropriate compliance at all times.”

Sturdevant expressed that both the board and leadership team recognize their accountability to remain compliant with both regulatory requirements and the provider’s “own high standards.”

“While we are confident that physician referrals were driven by Community Health System’s position as a leading provider of hospital-based and specialty services, we recognize that even the appearance of inappropriate incentives must be addressed,” Sturdevant said. 

Fresno CPA Michael Turpening is receiving $5 million as part of the settlement. In 2019 he filed a whistleblower complaint about PNA’s practices. According to that document, he became aware of the transactions after a 2017 fire at PNA’s headquarters revealed a surplus of expensive wine being held for Community.  He began investigating financial documents available to him in his role as controller for PNA.

A total of 35 health care providers affiliated with Community Medical and other medical practices were listed as having violated the False Claims Act from 2015 to 2018; the improper payments and subsidies are alleged to have occurred between 2013 and 2024.

The settlement also addresses the claims that the parties provided financial support for electronic health records technology and equipment used in the private offices of certain physicians in exchange for patient referrals.

Additionally, it settles allegations that Community awarded bonuses to physicians under pretense of clinical integration participation, when bonuses were, in fact, intended to reward patient referrals.

The United States also alleges that the financial incentives provided by PNA violated anti-kickback statutes, which led to the submission of false claims to government health care programs. It also claims that the conduct created improper financial relationships with referring physicians, violating the Physician Self-Referral Law.

The Physician Self-Referral Law, or “Stark Law,” is designed to protect the integrity of the Medicare program by prohibiting hospitals from billing or other services referred by physicians with whom they have a financial relationship.

“Kickback arrangements aimed at improperly influencing medical decisions will remain a top investigative priority for our agency,” said Acting Special Agent in Charge Robb R. Breeden of the U.S. Department of Health and Human Services Office of Inspector General (HHS-OIG). “This settlement demonstrates HHS-OIG’s commitment to identifying and holding accountable those who engage in unlawful financial relationships at the expense of Medicare patients and the taxpayer.”

The settlement includes Community entering a five-year corporate integrity agreement requiring the implementation of a risk assessment and an internal review process identifying and addressing compliance risks, among other conditions.

PNA intends to cease its business operations, active since 2010, by Aug. 31, 2025.