On the same day the company was officially taken private by The Blackstone Group, TeamHealth Holdings agreed to pay $60 million in fines to settle allegations that one of its subsidiaries deliberately overcharged government payers for its hospitalist services.
IPC Healthcare, which TeamHealth acquired for $1.6 billion in 2015, is said to have violated the False Claims Act “by billing Medicare, Medicaid, the Defense Health Agency and the Federal Employees Health Benefits Program for higher and more expensive levels of medical service than were actually performed, (a practice known as ‘up-coding,’)” according to a Department of Justice. The DOJ also claims IPC “knowingly and systematically encouraged false billings by its hospitalists” even going so far as to exert “corporate pressure on hospitalists with lower billing levels to ‘catch up’ to their peers.”
Under the terms of the settlement, TeamHealth Holdings will avoid admitting any wrongdoing, but in addition to the financial penalty the company must enter a five-year corporate integrity agreement with the Department of Health and Human Services Office of the Inspector General. This agreement covers the company’s hospital medicine division and is intended to “increase TeamHealth’s accountability and transparency so that the company will avoid or promptly detect future fraud and abuse,” according to the department.
The lawsuit was originally filed in 2009 under a whistleblower provision of the False Claims Act by Dr. Bijan Oughatiyan, a hospitalist employed by IPC from 2003-2008. Dr. Oughatiyan is reported to have received over $11 million in compensation for his role as a whistleblower in accordance with the False Claims Act.
A TeamHealth spokesperson acknowledged that the company was aware of the pending litigation when it acquired IPC and that the company had worked closely with the Department of Justice to resolve the matter. All of the allegations detailed in the lawsuit predate TeamHealth’s purchase of IPC.
The acquisition pushed TeamHealth deeper into debt and caused serious integration headaches. Months later, industry rival AmSurg made an offer to buy TeamHealth in a deal that would have created one of the largest healthcare services companies in the country. TeamHealth ultimately rebuffed, shocking many of its shareholders and sending the company’s stock tumbling. That, coupled with slow growth and poor earnings throughout much of 2016, made TeamHealth a target of activist investor Jana Partners, which was able to secure several board seats and pave the way for Blackwater’s takeover.
Unfortunately, allegations and lawsuits such as these are not uncommon in the era of managed care and accelerating consolidation. Several other companies, including Tuomey Healthcare, reached settlements under the False Claims Act in 2016 alone. From TeamHealth’s point of view, working with the DOJ and eventually cutting a check was simply the cost of doing business.