Penn Highlands DuBois: Employment Services Before Employment Began

Penn Highlands Healthcare agreed to pay $735,000 to the United States in the Penn Highlands DuBois settlement over alleged improper physician compensation for work predating employment. The allegation puts a simple question in front of anyone who knows the arrangement: what employment services did the hospital buy from physicians who did not yet work for it?

Penn Highlands Healthcare is a nonprofit hospital system serving northern, central and western Pennsylvania. Penn Highlands DuBois was formerly DuBois Regional Medical Center. The U.S. Attorney’s Office for the Western District of Pennsylvania announced the settlement on May 28, 2024.

The Services Allegedly Predated the Agreement Too

The government alleged that Penn Highlands DuBois paid $420,000 in improper physician compensation from July 1, 2009, through June 30, 2012. The payments went to a referring physician and another physician employed by his practice, which the government announcement called Women’s Care of Pennsylvania.

The payments fell under a Consulting, Medical Director and Related Services Agreement. But the employment services it supposedly paid for came before the agreement took effect, according to the government, when neither physician worked for Penn Highlands DuBois.

The Stark Law, also called the Physician Self-Referral Law, restricts a hospital’s Medicare and Medicaid billing for certain services referred by physicians with whom it has a financial relationship. That relationship has to meet one of the law’s exceptions. The government alleged that Penn Highlands submitted claims resulting from a relationship that violated the law. The alleged arrangement reached beyond the hospital’s payroll: taxpayers funded the Medicare and Medicaid claims that followed those referrals.

The Complaint Described a Fight to Keep Referrals

The whistleblowers’ amended complaint alleged that the compensation arrangement aimed to head off competition in women’s healthcare in DuBois and protect the hospital’s core business. It described payments to the referring physician exceeding $3.2 million from July 1, 2009, through June 30, 2013.

The complaint used DRMC for the hospital’s former name. Its allegation about the medical directorships and board appointment was blunt:

The complaint also alleged that the hospital paid $600,000 to acquire a practice it named Women’s Care of Western Pennsylvania, LLC, a price far above the practice’s fair market value.

Why a Physician’s Referrals Matter to a Hospital

Physician employment can bring a hospital the imaging, laboratory work and surgery that follow the physician’s referrals. The value of a practice extends beyond what the physician earns seeing patients in an office. That helps explain the complaint’s allegation about protecting core business: losing a physician’s referrals can mean losing hospital services downstream.

That is the business setting for hospital kickbacks and physician-compensation disputes. The question raised by the Penn Highlands complaint is what the hospital intended to buy with the compensation: the work described in the arrangement, or the flow of patients the physician could bring. The complaint alleged the latter.

What the Contract and Work Records Can Show

In the Penn Highlands allegations, the dates exposed the mismatch: the agreement paid for employment services from a time when neither physician worked for the hospital.

A study in the Journal of Forensic and Investigative Accounting, Types of Hospital Frauds: Nature and Methods of Prevention, examined 80 hospital fraud cases described in Justice Department announcements from 2010 through 2021. The 2023 paper describes how bogus consulting and other services can conceal referral bribes as legitimate compensation.

The paper points to contracts and evidence of actual performance, including consulting deliverables, meetings and receipts. It also identifies provider staff as people who may recognize unusual referral patterns. Someone inside the practice may know what happened behind a payment that looks ordinary in the hospital’s accounts.

The value lies in how those records fit together, especially when the contract’s description and the actual work tell different stories. We work with insiders to connect that knowledge to the payments and referrals behind a hospital whistleblower case.

The Same Mismatch in Other Physician-Payment Cases

The New York-Presbyterian Hudson Valley settlement concerned a different mismatch between service agreements and paid work. The government alleged that the hospital continued paying an oncology practice through 2019 under agreements that had expired in 2016.

Hudson Valley admitted paying for work that went undone, fell short of the agreed duties or lacked time records. It also admitted continuing payments despite knowing, or having reason to know, that the practice was not doing much of the promised work. One hospital allegedly paid for work before its contract began, and the other kept paying after its agreements ended.

At UPMC Hamot and Medicor, the hospital allegedly paid for unnecessary, duplicative or unperformed services to secure referrals.

The Community Health Network case concerned alleged inflated physician salaries to capture downstream referrals, false compensation figures supplied to a valuation firm and ignored warnings from that firm.

Three Former Medical Providers Brought the Penn Highlands Case

Three medical providers who had worked for Penn Highlands started the qui tam case under the False Claims Act. The government joined the case to pursue some of their allegations. The settlement provided a combined 21% whistleblower share for the three former providers.

A whistleblower case under the False Claims Act can pay 15% to 30% of what the government recovers.

When the Payment and the Start Date Disagree

If you know about hospital physician payments that do not match the work performed, speak with our whistleblower experts about those payments. We connect what you know about the work, the payments and the referrals to build your strongest hospital whistleblower case. We stay with you through its resolution and bring in whistleblower lawyers who know hospital physician-compensation cases.