Indiana health system allegedly violated Stark Law by awarding physician referrals, offering high salaries

Community Health Network's motion to dismiss a case alleging the health system violated the Stark Law by rewarding physician referrals and exceeding fair market physician compensation values was denied Oct. 20 by the U.S. District Court. 

The allegations were first raised in a complaint filed in 2014 by the Indianapolis-based health system's CFO. The state declined to intervene after an investigation, but the DOJ alleged that Community Health system's hiring policy offered high salaries and bonuses that took into account the volume or value of referrals, a violation of the Stark Law. 

In its motion to dismiss, Community Health argued that employment arrangements satisfied the bona fide employment exception under the Stark Law. 

The court argued that the arrangements did not meet this exception because the salaries exceeded fair market value, were determined in a manner that took into account the volume or value of referrals and were commercially unreasonable. 

The court also said that the exception is an affirmative defense that the government didn't have to anticipate or address and is therefore not appropriate for a dismissal. The court added that multiple experts had already informed Community Health that their compensation was above fair market value, and the health system did not decrease the compensation in response.

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