United States Files False Claims Act Complaint Against Erlanger Health System

Charlotte -- July 26, 2024: U.S. Attorney's Office, Western District of North Carolina For Immediate Release

U.S. Attorney Dena J. King announced that the United States has filed a complaint against Murphy Medical Center,

Inc. doing business as Erlanger Western Carolina Hospital and Chattanooga-Hamilton County Hospital Authority doing business as Erlanger Health System and Erlanger Medical Center (collectively, Erlanger) in the U.S. District Court for the Western District of North Carolina. The government alleges that Erlanger, a health care system located in Tennessee and North Carolina, violated the Stark Law and thereby submitted false claims to the Medicare program.

The Stark Law prohibits a hospital from billing Medicare for services referred by a physician with whom the hospital has an improper financial relationship that does not meet any statutory or regulatory exception. The government’s complaint alleges that Erlanger had employment relationships with a number of physicians that did not meet any Stark Law exception because the compensation Erlanger paid to the physicians was well above fair market value. The complaint alleges that Erlanger received referrals from these physicians in violation of the Stark Law and submitted claims to Medicare knowing that the claims for those referred services were not eligible for payment.

“Improper financial relationships between hospitals and physicians threaten the integrity of clinical decision-making and can influence the type and amount of health care that is provided to patients,” said Principal Deputy Assistant Attorney General Brian M. Boynton, head of the Justice Department’s Civil Division. “The department is committed to ensuring that physicians’ treatment decisions are based on the needs of their patients and not their own financial interests.”

“The government’s complaint alleges that Erlanger compromised Stark Law compliance to boost its financial standing, knowingly overpaying physicians whose practices generated profits for the hospital,” said U.S. Attorney King. “We are dedicated to enforcing the Stark Law and protecting patients and the Medicare program from financial relationships that undermine public trust and incentivize overbilling and waste of taxpayer dollars.”

“This complaint serves as a warning to health care entities that attempt to increase profits through improper financial arrangements with referring physicians,” said Special Agent in Charge Tamala E. Miles of the Department of Health and Human Services Office of Inspector General (HHS-OIG). “HHS-OIG will continue to investigate such deals to prevent financial arrangements that could compromise impartial medical judgment, increase health care costs, and erode public trust in the health care system.”

The United States filed its complaint in a lawsuit originally filed under the qui tam or whistleblower provisions of the False Claims Act, which allow private parties to file suit on behalf of the United States for false claims and to receive a share of any recovery. The Act permits the United States to intervene and take over the lawsuit, as it has done here in part. Those who violate the Act are subject to treble damages and applicable penalties.

The government’s intervention in this matter illustrates the government’s emphasis on combating health care fraud. One of the most powerful tools in this effort is the False Claims Act. Tips and complaints from all sources about potential fraud, waste, abuse and mismanagement can be reported to HHS at 800-HHS-TIPS (800-447-8477).

The Justice Department’s Civil Division and the U.S. Attorney’s Office for the Western District of North Carolina handled the case, with assistance from HHS-OIG.

The case is captioned United States of America, the State of North Carolina, and the State of Tennessee ex rel. Alana Sullivan and J. Britton Tabor v. Murphy Medical Center, Inc., et al. No. 1:21-CV-219-MR-WCM (W.D.N.C.).

The claims asserted in the United States’ complaint are allegations only. There has been no determination of liability.