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The Justice Department announced that Adventist Health System has agreed to pay the United States $115 million to settle allegations that it violated the False Claims Act by maintaining improper compensation arrangements with referring physicians and by miscoding claims. Adventist is a non-profit healthcare organization that operates hospitals and other health care facilities in 10 states including California.

The allegations arose from two lawsuits filed respectively by whistleblowers Michael Payne, Melissa Church and Gloria Pryor, who worked at Adventist’s hospital in Hendersonville, North Carolina, and Sherry Dorsey, who worked at Adventist’s corporate office, under the qui tam provisions of the False Claims Act. Sherry Dorsey was a former chief operating officer of Physician Enterprise, a division of Adventist Healthcare. The act permits private parties to file suit on behalf of the United States for false claims, and to share in any recovery. The whistleblowers’ share of the settlement has not yet been determined.

Sherry Dorsey worked at corporate headquarters and reported to top Adventist executive. At a meeting with executives in August 2012, Dorsey allegedly raised questions about 85 physicians who were paid above the 90th percentile of Medical Group Management Association benchmarks for their specialties. Many of them were paid $1 million a year, and some got $2 million or $3 million, according to the complaint. “It was humanly impossible for each of the doctors to have work relative value units [RVUs] that would normally be attributed to the work of 5, 6, or 7 full-time doctors in the same field of practice,” the complaint said. Dorsey suggested assessments of the coding and billing practices of the physicians to determine if there were any irregularities, but she allegedly was rebuffed because the audits would be too expensive. Still, Dorsey continued to sound alarms about physician compensation. Adventist allegedly quantified Stark-related overpayments, but didn’t repay them. “She was, in essence, told to play ball, to not raise too much of a fuss about it,” says Atlanta attorney Marlan Wilbanks, who represents Dorsey.

The other complaint filed by Michael Payne, Melissa Church and Gloria Pryor describes how Adventist hospitals pay physicians generously even though their practices lose money. The losses are “tolerated” only because the hospitals track the value of the physicians’ referrals and “know they can more than make up for those losses through the marginal gains in income that the [hospitals realize]” from the referrals for inpatient and ancillary services, the complaint alleged.

There were no subpoenas or depositions on the way to the resolution of two false claims cases. Because Adventist self-disclosed some violations to the Department of Justice, it was given credit for cooperation, and the case moved through with relative speed and no formal litigation,

The cases, United States ex rel. Payne, et al. v. Adventist Health System/Sunbelt, Inc., et al. No. 12-856 (W.D.N.C), and United States ex rel. Dorsey v. Adventist Health System Sunbelt Healthcare Corp., et al., No. 13-217 (W.D.N.C), were handled by the Civil Division’s Commercial Litigation Branch, the U.S. Attorney’s Office of the Western District of North Carolina and HHS-OIG. The claims settled by this agreement are allegations only, and there has been no determination of liability.