FRESNO, Calif. — May 14, 2025 — The U.S. Department of Justice announced today that Community Health System (CHS), a prominent healthcare provider in Fresno County, and its affiliate, Physician Network Advantage Inc. (PNA), have agreed to pay $31.5 million to resolve allegations of violating the False Claims Act by offering improper financial incentives to physicians in exchange for patient referrals.
The settlement, announced by Acting U.S. Attorney Michele Beckwith of the Eastern District of California, stems from allegations that CHS and PNA provided lavish perks—including expensive wine, cigars, meals, and subsidized technology—to referring physicians, thereby violating federal laws that prohibit kickbacks and self-dealing in medical referrals.
“We cannot allow medical decisions to be distorted by kickback schemes or efforts to buy physicians’ loyalty with lucrative side perks,” said Acting U.S. Attorney Beckwith. “This settlement demonstrates our office’s commitment to ensuring that patients’ best interests remain paramount.”
Details of the Allegations
According to the U.S. government, CHS and PNA implemented a variety of strategies to influence physician referral behavior:
- Luxury Lounge Incentives: At a facility known as “HQ2,” PNA—funded and formed by CHS—allegedly hosted physicians in a custom-built lounge offering expensive wine, liquor, cigars, and meals to court referrals.
- Technology Subsidies: Certain referring physicians allegedly received financial assistance for electronic health records (EHR) systems and equipment used in their private practices.
- Disguised Bonuses: CHS allegedly paid bonuses to physicians under the guise of participation in clinical integration initiatives, though the actual purpose, according to the government, was to reward patient referrals.
The alleged conduct violated the Anti-Kickback Statute and the Physician Self-Referral Law (Stark Law)—two key federal statutes aimed at preventing financial influence over patient care decisions. The alleged violations resulted in improper billing to Medicare and other government healthcare programs.
Federal Oversight and Reforms
As part of the resolution, CHS has entered into a five-year Corporate Integrity Agreement with the U.S. Department of Health and Human Services Office of Inspector General (HHS-OIG). The agreement includes:
- Implementation of enhanced risk assessments and internal audits
- Oversight by an independent review organization
- Strict monitoring of financial relationships with referral sources
“Kickback arrangements aimed at improperly influencing medical decisions will remain a top investigative priority,” said Robb R. Breeden, Acting Special Agent in Charge at HHS-OIG. “This settlement reinforces our commitment to holding accountable those who place financial interests over patient care.”
Whistleblower Action
The case originated from a whistleblower lawsuit filed by Michael Terpening under the False Claims Act’s qui tam provisions, which allow private citizens to sue on behalf of the government and share in any recovery. As part of the settlement, Mr. Terpening will receive approximately $5 million for his role in uncovering the alleged misconduct.
The qui tam lawsuit is captioned United States ex rel. Terpening v. Fresno Community Hospital and Medical Center, et al., Case No. 1:19-CV-01699 (E.D. Cal.).
The investigation involved a coordinated effort by the U.S. Attorney’s Office for the Eastern District of California, HHS-OIG, the Federal Bureau of Investigation, and the U.S. Postal Service Office of Inspector General. Assistant U.S. Attorney David Thiess led the case for the U.S. Attorney’s Office.
Legal Status
The settlement resolves civil claims, and there has been no admission of liability by CHS or PNA.
