Covenant HealthCare, two physicians to pay $69M in false claims settlement

Saginaw, Mich.-based Covenant HealthCare and two physicians have paid $69 million in three civil settlements for allegedly violating the False Claims Act, the Justice Department reported March 29. 

The healthcare system and physicians allegedly had improper financial relationships with eight physicians and a physician-owned investment group. The parties allegedly submitted false claims to Medicare, Medicaid, Tricare and the Federal Employees' Compensation Act program. 

Covenant had contracts with Asim Yunus, MD, Kimiko Sugimoto, MD, Sujal Patel, MD, Sussan Bays, MD, Guy Boike, MD, and Thomas Damuth, MD, to act as medical directors between 2006 and 2016. These contracts were not exempt from any anti-kickback laws or the Stark Law, so referrals to Covenant made by these physicians allegedly violated the False Claims Act. 

Mark Adams, MD, was contracted by Covenant from 2006 to 2009. The financial relationship was also not exempt from the Stark Law and referrals made by Dr. Adams allegedly violated the False Claims Act. 

Covenant rented office space to Ernie Balcueva, MD, who received rent payment forgiveness from Covenant, allegedly in exchange for referrals. This also was not an exception to anti-kickback laws or the Stark Law and violated the False Claims Act. 

Covenant also allowed its Covenant Physician Investment Group to secure an equipment lease through non-arm's-length negotiations to drive up patient referrals from these physicians, which also violated the False Claims Act. 

Dr. Adams will pay $406,551 and Dr. Yunus will pay $345,987 to the U.S. to resolve the false claims. Covenant will pay $67.2 million to the U.S. and $1.8 million to the state of Michigan. 

The settlement was finalized in 2021 and sealed until investigations into Drs. Adams and Yunus were complete.

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