Fresno hospital kickback scheme was fueled by wine, cigars and Vegas strip clubs

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One of the astir brazen — and costliest — infirmary kickback schemes involving the region’s largest infirmary radical took spot wrong a nondescript, thenar tree-lined aesculapian plaza successful northbound Fresno.

That’s wherever a healthcare exertion institution founded with wealth from Community Regional Medical Center built an exclusive vino and cigar lounge, implicit with backstage humidor lockers for cigar storage, a state-of-the-art fume ventilation system, and luxury wines and liquors valued astatine astir $1 million.

Only a prime fewer executives and physicians had entree to the office-turned-lounge adjacent First Street and Alluvial Avenue, known arsenic “HQ2.” It was a spot wherever doctors, healthcare executives and doc radical leaders were generously rewarded for utilizing the company’s physics wellness grounds strategy and fraudulently referring patients successful usurpation of respective national laws, according to a 2019 unsealed national whistleblower lawsuit.

The alleged conspirators planned to physique a grander “ranch” luxury retreat utilizing funds generated from the kickback scheme, according to the complaint, which was unsealed Wednesday.

The strategy came to airy lone aft a 2017 gathering occurrence astatine the aesculapian plaza revealed a cache of a 1000 bottles of wine,arousing suspicions from the whistleblower, an accountant, of improper spending.

The U.S. Attorney’s Office announced Wednesday that Community Health System and healthcare exertion affiliate Physician Network Advantage Inc. (PNA) person agreed to wage $31 cardinal to the national authorities to settee allegations that it violated the False Claim Act.

Community Health System (CHS), Fresno’s largest healthcare group, owns downtown Fresno’s Community Regional Medical Center and the Clovis Community Medical Center, arsenic good arsenic a wellness program and doc network. Community Medical Centers (CMC) is the sanction of the radical that includes the hospitals and clinics nether the CHS umbrella.

PNA is simply a wellness attraction exertion concern founded and funded by CMC to enactment Fresno-area physicians’ adoption of the physics wellness records level utilized by Community, according to national prosecutors. PNA’s CEO Chris Roggenstein is simply a “longtime friend” of erstwhile CHS CEO Craig Castro, according to the lawsuit.

At the bosom of the ailment is simply a strategy that PNA provided lavish benefits to doctors and doc radical executives successful speech for enrolling successful CMC’s physics wellness grounds exertion known arsenic “Epic EHR.”

The suit besides alleges physicians and aesculapian groups who joined the web made fraudulent referrals to CMC facilities successful usurpation of the Anti-Kickback Statute.

The kickback strategy involves respective large players successful Fresno’s aesculapian system, from infirmary executives to aesculapian records companies to immoderate of the largest doc groups successful the Central Valley.

Some of the 17 luxury gifts, trips and donations listed successful the suit included:

• A travel to Paris, France for Castro and his household totaling astir $63,000.

• A backstage level for Timothy Joslin, erstwhile CEO of CRMC, to spell to Las Vegas.

• Strip clubs and meals for CMC executives and physicians during a Las Vegas aesculapian league successful January 2016.

• A $9,400 travel to Spain for Scott Wells, president of Santé Health and Santé Foundation, arsenic good arsenic Joyce Fields-Keene CEO of Central California Faculty Medical Group, oregon CCFMG (now known arsenic Inspire Health Medical Group).

“The whistleblower suit makes claims regarding idiosyncratic choices that don’t bespeak our precocious standards arsenic a non-profit wellness system, oregon the values of our existent enactment squad and board. And a fig of elements successful the 2019 suit bespeak either inaccurate oregon incomplete information,” said Michelle Von Tersch, elder vice president and main of unit for CHS.

In a statement, PNA said it cooperated with the Civil Division of the U.S. Attorney’s Office successful Sacramento successful its reappraisal of Community Health System’s physics aesculapian records programme that began astir 15 years ago. “The colony brings this substance to a decision without immoderate determination oregon admittance of ineligible liability for PNA,” the connection said.

Thirty-five doctors were known to person received outgo from CHS, according to the colony agreement.

How the Fresno kickback strategy worked

According to the complaint, CMC embarked connected the seven-year, $75 cardinal prime betterment inaugural successful oregon astir 2010 to regenerate their concern and objective information strategy with caller exertion — the Epic EHR system.

CHS Board Chair Roger Sturdevant said that, successful 2009, the national authorities directed the healthcare manufacture to modulation to physics wellness records, which CHS did to supply patients with a “robust, consistent, and unafraid physics wellness records system.”

“However, it is wide we needed stronger oversight measures to guarantee that some Community and our vendor spouse maintained due compliance astatine each times.” Sturdevant told The Bee successful a statement. “While we are assured that doc referrals were driven by Community Health System’s presumption arsenic a starring supplier of hospital-based and specialty services, we admit that adjacent the quality of inappropriate incentives indispensable beryllium addressed.”

In 2010, Physician Network Alliance, Inc. was formed with the sole intent and concern relation of expanding suspect CMC’s Epic EHR web of Fresno country aesculapian practices — and to structure the amerciable kickback payments and elaborate gifts, the suit says.

According to the complaint, arsenic aboriginal arsenic 2011 CMC and PNA started giving kickbacks to Fresno-area physicians successful the signifier of cash, costly wine, strip-clubs, trips with backstage planes, and escaped oregon heavy discounted entree to the Epic EHR software.

PNA would bring successful physicians and doctors groups into the network, each of which were taxable to support by CMC. In oregon astir 2014 and 2015, CMC and PNA changed their gathering exemplary truthful that PNA could clasp immoderate of the wealth received from the doc group, licensing fees and different monthly fees for attraction and enactment of the Epic EHR system.

Defendant PNA was capable to clasp a currency surplus from the Epic EHR lawsuit fees, truthful PNA began to usage the excess currency for other gifts and question for CMC executives and CMC web physicians, specified arsenic the European and Vegas trips.

PNA allegedly provided jobs to household members of CMC executives astatine the petition of CMC.

The HQ2 cigar lounge was constructed sometime aft 2014 with an estimated $1.1 cardinal of CMC funds, the ailment said.

Michael Terpening, the erstwhile controller for PNA, discovered the “illegal activity” aft a occurrence astatine PNA’s office successful 2017, successful which 40 to 50 boxes of vino — totaling 1,000 bottles — were recovered successful a retention room.

When Terpening approached his brag Roggenstein astir the wine, helium was told it was “leftover from the vacation party.”

Terpening and his lawyer could not beryllium reached for comment.

Discovery of the vino surplus led Terpening to go suspicious of different ample expenditures submitted arsenic deductible “business expenses” for PNA, the ailment said.

But, according to the complaint, Roggenstein ignored Terpening’s proposal to cease the amerciable activity, and alternatively “redoubled his transgression efforts.”

Roggenstein and CMC had plans to physique retired the “HQ Ranch,” a luxury retreat for CMC executives and doc practices that would see a cigar and vino lounge “large and grander successful standard than HQ2,” a skeet shooting scope and a tiny off-road conveyance course.

“Once helium realized that neither Defendant Mr. Roggenstein, Defendant PNA, nor Defendant CMC had immoderate volition of remedying the supra conduct, and successful an effort to discontinue the amerciable conspiracy, Mr. Terpening resigned from his presumption arsenic a Controller for Defendant PNA,” the ailment said.

The suit alleged the defendants violated 3 national laws done its kickback scheme: the Anti-Kickback Statute, the False Claims Act and the Stark Law.

The Anti-Kickback Statute makes it a transgression to knowingly and willingly offer, pay, solicit oregon person immoderate remuneration to induce a idiosyncratic to notation to an idiosyncratic for the furnishing of immoderate point oregon work covered nether national healthcare program.

Claims submitted knowingly and successful usurpation of the Anti-Kickback Statute represent a “false oregon fraudulent” assertion nether the False Claims Act, according to the lawsuit. The Stark Law prohibits a doc oregon aesculapian supplier from referring Medicare patients for definite services to an entity with which a physician’s contiguous household has a fiscal relationship.

What’s adjacent for Fresno infirmary group?

The 2019 ailment lists respective defendants, including: Fresno Community Hospital and Medical Center; Physician Network Advantage, Inc.; Santé Health System; Santé Health Foundation; Berj Apkarian; Craig Castro; Central California Faculty Medical Group; Timothy Joslin; Michael Muruyama; Grant Nakamura; Patrick Rafferty; Christopher Roggenstein; and Michael Synn.

On Tuesday, summons were issued to the defendants.

In tribunal filings, the U.S. The Attorney’s Office said it chose not to intervene astatine this clip fixed the colony with defendants Santé Health System, Inc., Santé Health Foundation, Central California Faculty Medical Group, Grant Nakamura and Michael Synn.

But it has near unfastened the anticipation that it whitethorn instrumentality enactment pending further investigation.

A scheduling league is acceptable for Aug. 21 astatine 11:30 americium successful the Yosemite Federal Courthouse with Magistrate Judge Helena M. Barch-Kuchta.