Catholic Health System, Buffalo: Payments That Outlasted the Contracts

Catholic Health System in Buffalo agreed to pay nearly $3.3 million to settle Stark allegations about administrative payments to referring physicians. The government said the hospital system paid nonemployee physicians under improper arrangements, then billed Medicare for services they referred. The whistleblower’s complaint adds the detail an insider would recognize: payments allegedly ran automatically, sometimes after the contracts had expired.

The U.S. Attorney’s Office for the Western District of New York announced the settlement on May 16, 2025.

Administrative Pay Allegedly Exceeded the Work’s Value

Catholic Health’s physician arrangements allegedly lacked a reasonable business justification or paid more than the administrative work was worth. The government’s terms were commercial reasonableness and fair market value. The government said no exception to the Stark Law, also called the Physician Self-Referral Law, covered these arrangements.

That law connects a physician’s financial relationship with a hospital to the hospital’s ability to collect Medicare payment for certain referred services. Here, the government alleged that the physicians sent Catholic Health patients needing laboratory tests, hospital care or medical supplies, and Catholic Health submitted the resulting Medicare claims. The physicians were not hospital employees. The administrative fee was their financial tie to the hospital.

The administrative fee and the Medicare bill sit on opposite sides of the hospital’s accounts. The fee pays the physician. The bill seeks payment for the business the physician sends.

An Audit Allegedly Found No Timesheets

The whistleblower alleged that a 2018 audit found no timesheets from the physicians supporting $200,000-a-year arrangements. According to the complaint’s account of the payments, Catholic Health processed payments automatically, including some after the agreements had expired. The payment process allegedly kept going without either the time records or, in those instances, a contract still in force.

The whistleblower recalled the chief medical officer speaking about the arrangements in meetings:

That allegation matters because it puts the value of the work in front of a senior medical executive.

The settlement was larger than the annual spending described in the complaint: approximately $2.5 million a year on physician administrative services outside formal medical-staff duties. The alleged missing timesheets and automatic payments make the same question hard to avoid: what work was the hospital buying?

The Payment Trail an Insider Can See

The Buffalo allegations connect the agreements, the missing work records, the payment process and the referrals behind the Medicare claims. A finance employee may know why a payment continued. Someone reviewing physician agreements may know what service the fee was supposed to buy. A person in the meetings may know how management responded to questions about whether the work was done.

A study in the Journal of Forensic and Investigative Accounting explains why the contract alone is an incomplete picture. Types of Hospital Frauds: Nature and Methods of Prevention, published in 2023, examined 80 hospital fraud cases described in Justice Department announcements. Its discussion of referral schemes points to payments concealed as compensation for services and the need to check whether those services existed:

The paper gives concrete examples of what work leaves behind: consulting deliverables, meetings and receipts, or evidence of collection work. In Buffalo, the whistleblower alleged an absence of timesheets. Both put the work behind the fee at the center of the inquiry. For someone who knows why the hospital kept paying, that is a much more recognizable starting point than an abstract dispute about valuation.

A Whistleblower Brought the Buffalo Case

A whistleblower started the qui tam case under the False Claims Act. The settlement announcement said the whistleblower would receive a share of the settlement.

A whistleblower case under the False Claims Act can pay 15% to 30% of what the government recovers. Here, the complaint’s value lies in its allegations about how the payments worked inside the system: the audit, the missing records and the medical executive’s objection.

The Pattern Beyond Buffalo

Physician relationships matter to a hospital’s healthcare business because referrals feed imaging, laboratory and surgical volume. That helps explain why hospitals seek those relationships, including through employment and practice acquisitions. Catholic Health’s alleged arrangements involved nonemployees receiving administrative fees, a different way for the hospital and a referring physician to have a financial relationship.

The UPMC Hamot and Medicor settlement in 2018 concerned alleged payments for physician and administrative services intended to secure referrals. The government said some contracted services duplicated other work, went unperformed or served no real need. The connection to Buffalo is the gap between what an agreement purported to purchase and the work behind the payment.

Community Health Network settled a different physician-compensation case in 2023. The government alleged that it supplied false pay figures to an outside valuation firm and disregarded that firm’s warnings about excessive compensation. That case adds another part of the payment trail: the information used to justify the price.

Catholic Medical Center’s Separate Call Coverage Case

Catholic Medical Center in Manchester, New Hampshire settled its call coverage kickback case in 2022. The government alleged that the hospital paid its own cardiologists to cover another cardiologist’s patients during vacations or other absences, giving the referring physician that coverage for free.

That noncash benefit was the alleged inducement for referrals. The Buffalo case concerned a different organization and payments for administrative services. In both cases, the government alleged that physician benefits led to improper claims against public health care programs. Taxpayers bear the cost when hospitals bill for referrals that their financial arrangements should have ruled out.

The Reason Behind the Administrative Fee

If you know why physician fees kept moving when the work went undocumented or the agreements expired, speak with our whistleblower experts about those payments. We connect your knowledge of the arrangements to the referrals and claims, and bring in hospital fraud whistleblower lawyers who know physician-compensation and Stark cases. We stay with you from the first call through resolution, building your strongest Stark whistleblower case.