Chattanooga, Tenn.-based Erlanger Health System must defend against a pair of False Claims Act lawsuits after a federal judge denied the system’s dismissal bids.
Former CFO J. Britton Tabor and former Chief Compliance Officer Alana Sullivan filed a whistleblower complaint against the health system in 2021 and the Justice Department filed its lawsuit in July 2024.
Together, the lawsuits allege that Erlanger offered, paid and provided unlawful kickbacks, excessive pay and other illegal financial incentives to employed and non-employed physicians who refer patients to the health system, in violation of the Anti-Kickback Statute and Stark law.
The whistleblowers’ lawsuit was amended in 2024 to focus their allegations on allegedly improper financial relationships between Erlanger and physicians it did not employ.
The Justice Department’s lawsuit focuses on allegations that Erlanger billed the government for procedures performed at Erlanger by employed physicians whom the system allegedly compensated in violation of Stark law.
Federal Judge Curtis Collier of the U.S. District Court for the Eastern District of Tennessee denied Erlanger’s motion to dismiss the whistleblower’s lawsuit on March 9 and the motion to dismiss the Justice Department’s lawsuit on Feb. 26.
Marlan Wilbanks, an attorney representing the whistleblowers, said in a March 10 news release shared with Becker’s that the whistleblowers and Justice Department will now work in tandem to litigate the cases.
The amount of alleged taxpayer losses caused by Erlanger cannot be known until discovery is complete, but under the damage calculations provided for in the False Claims Act, the amount of damages and penalties that could potentially be recovered exceeds $100 million, according to the release.
Erlanger said in a statement that the allegations are without merit and it will “vigorously defend its practices in the months ahead.”
“Erlanger is extremely comfortable with its physician compensation/contracting processes and, in every instance raised here, sets compensation based on amounts determined by outside consultants to be fair market value,” the statement said. “Erlanger paid physicians based on amounts that outside experts advised was fair market value. Erlanger did not pay for referrals.”
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