Fresno’s largest hospital group fined $31.5 million in federal kickback probe
Fresno’s largest healthcare system and an affiliated health care technology company must pay the federal government $31.5 million to resolve allegations that they provided expensive wine, liquor, cigars and meals to physicians in exchange for patient referrals.
The settlement announced Wednesday by the U.S. Attorney’s Office for the Eastern District of California resolves allegations that Community Health System and Physician Network Advantage Inc. violated the False Claims Act.
“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 Michele Beckwith. “This settlement demonstrates this Office’s commitment to ensuring that patients’ best interests remain paramount.”
Community Health System is the parent organization that owns and operates Community Regional Medical Center and Clovis Community Medical Center.
PNA is a health care technology business formed and funded by CHS to support Fresno-area physicians’ adoption of the electronic health records platform used by Community, according to federal prosecutors.
The settlement also resolves allegations that CHS and PNA provided financial subsidies for electronic health records technology and equipment used by some physicians in their private offices in exchange for the referral of governmental health care program patients to CHS.
Additionally, it resolves allegations that CHS paid bonuses to certain physicians to reward referrals disguised as bonuses for their participation in clinical integration activities.
In total, 35 healthcare providers received payments from CHS, according to the release.
According to federal prosecutors, these financial benefits violated the federal Anti-Kickback Statute, resulting in false claims for the medical services referred by physicians receiving the benefits that were submitted to governmental health care programs. Prosecutors also contend that the conduct created financial relationships with referring physicians under the Physician Self-Referral Law, which seeks to safeguard the integrity of the Medicare program.
“Kickback arrangements aimed at improperly influencing medical decisions will remain a top investigative priority for our agency,” said Acting Special Agent in Charge Robb R. Breeden of the U.S. Department of Health and Human Services Office of Inspector General (HHS-OIG). “This settlement demonstrates HHS-OIG’s commitment to identifying and holding accountable those who engage in unlawful financial relationships at the expense of Medicare patients and the taxpayer.”
The settlement agreement is neither an admission of liability by CHS or PNA, nor a concession by the United States that its claims are not well founded, according to the settlement.
Community Health System’s Board Chair Roger Sturdevant responded to the settlement in a statement to The Bee.
“Our current Board and leadership team recognize that we are accountable to assuring compliance that is consistent with regulatory requirements and our own high standards. We have cooperated with the U.S. Attorneys’ Office in its review,” Sturdevant said. “Based on both our own internal assessment and external findings, we have identified and addressed areas for improvement. We are confident that our policies and procedures today address all areas of concern. It is important to note, that at no time were patients inappropriately billed and this issue had no impact on our clinicians’ ability to provide outstanding care.”
As part of the settlement, CHS has entered into a five-year Corporate Integrity Agreement with HHS-OIG that requires, among other conditions, the implementation of a risk assessment and internal review process designed to identify and address evolving compliance risks. The Corporate Integrity Agreement also requires an independent review organization to annually assess the policies and systems to track arrangements with some referral sources.
Whistleblower Michael Terpening, a former employee of PNA, will receive approximately $5 million as part of the announced settlement.
The full settlement is available here.
In November, Craig Castro, the former CEO of Community Health System announced his retirement. It’s not immediately clear Castro’s departure is related to the settlement. Craig Wagoner was announced as president and CEO in February.
In August 2022, The Fresno Bee published a four-part investigation, “Care and Conflict,” which found that, for years, the healthcare system took state and federal money intended to offset the cost of providing care for indigent patients to help fund a $1 billion hospital expansion in Clovis, which primarily serves Fresno’s wealthy mostly-white suburbs.
Last fall, two community groups sued CHS over alleged misuse of Medi-Cal funding. The lawsuit moved behind closed doors for negotiations in January, nonprofit news outlet Fresnoland reported.
This story was originally published May 14, 2025 at 1:07 PM.
