IU Health, HealthNet to pay $18M to settle false-claims case

Indiana University Health and HealthNet Inc. have agreed to pay a total of $18 million to resolve a whistleblower lawsuit alleging they submitted claims to the government in violation of anti-kickback laws. Federal and state authorities announced the settlement agreement Thursday afternoon.

The lawsuit claimed the two health care providers left their pregnant patients’ care to lower-cost nurse midwives instead of having them treated by doctors. When billing Medicaid, the two claimed the services were provided by doctors, the complaint said.

The lawsuit was brought by Dr. Judith Robinson, former director of women’s services at HealthNet and medical director of obstetrics and gynecology services at IU Health.

The suit said some newborn babies suffered permanent neurological injuries, and some mothers had to undergo emergency caesarian sections. There were even some cases of maternal and fetal death, the suit claimed, but a statement from the U.S. Justice Department said there was no evidence of physical injury or harm to patients as a result of the allegations.

HealthNet, which admitted no wrongdoing in the settlement, issued a statement saying it "vehemently disputes, and aggressively defended the allegations raised by Dr. Robinson in the lawsuit."

"HealthNet elected to resolve the matter in order to avoid the significant time, expense, and administrative burdens associated with protracted litigation," the organization said.

In a separate but smilar statement, IU Health said "there is no merit in Dr. Robinson’s allegations of inappropriate patient care, referrals or billing practices. Instead, the settlement agreement reflects IU Health’s desire to avoid the continued expense and distraction of prolonged litigation."

Under the settlement agreement, IU Health and HealthNet are expected to each pay approximately $5.1 million to the United States and $3.9 million to the state of Indiana.

IU Health is the largest health system in Indiana, and HealthNet is the largest provider of midwifery services in the state.

According to the Justice Department, between May 1, 2013 and Aug. 30, 2016, IU Health provided HealthNet with “continuous and substantial financial support” in the form of an interest-free line of credit, the balance of which exceeded $10 million. HealthNet was allegedly not expected to substantially repay the outstanding balance.

The Justice Department alleged that the financial arrangement was intended to induce HealthNet to refer its OB/GYN patients to IU Health’s Methodist Hospital. IU Health then billed Medicaid for patient hospital stays, tests and procedures.

The anti-kickback statute prohibits the knowing and willful payment to induce the referral of services or items that are paid for by a federal health care program, such as Medicaid. Claims submitted to federal health care programs in violation of the law are also false claims under the False Claims Act.

“The arrangement between IU Health and HealthNet took advantage of Hoosiers on Medicaid by limiting their health care options exclusively to those within the IU Health Network, contriving a system that benefited only IU Health,” Indiana Attorney General Curtis Hill said in a statement.

U.S. Attorney Josh J. Minkler added: “Waste, fraud and abuse can never be tolerated and tear at the fabric of first-class health care in this country.”

IU Health defended its relationship with HealthNet and said goal of the partnership was to "ensure delivery of service in the most appropriate care setting."

"The arrangement with HealthNet actually resulted in substantial financial losses, which IU Health considers to be part of its nonprofit mission," the hospital system said. "IU Health remains committed to supporting HealthNet and its critical role in the effective delivery of services to pregnant women and their families."

The settlement was a result of an investigation by the Department of Health and Human Service’s Office of Inspector General and the Indiana Attorney General’s Office Medicaid Fraud Unit.