(Story updated at 5:09 p.m. ET)
Physician staffing giant TeamHealth Holdings will pay $60 million to settle allegations that a hospitalist services provider it acquired overcharged the CMS.
IPC, a physician group practice TeamHealth purchased in 2015, allegedly encouraged its hospitalists to overbill Medicare and Medicaid, according to the U.S. Justice Department.
According to the lawsuits, IPC encouraged its hospitalists to bill for their services at the highest possible levels. In some cases IPC hospitalists billed for more services in one day than could possibly have been provided in a 24-hour period.
A request for comment by TeamHealth was not immediately available Monday afternoon.
The suit was initially filed by a former IPC physician, Dr. Bijan Oughatiyan, who claimed IPC trained its hospitalists to overbill. Some hospitalists with lower billing levels also allegedly faced pressure by IPC executives to “catch up” to their colleagues.
As part of the settlement, TeamHealth entered into a five-year Corporate Integrity Agreement with the HHS’ Office of Inspector General, which will help TeamHealth “promptly detect future fraud and abuse,” according to the DOJ news release.
The company’s failure to smoothly integrate IPC after its purchase for $1.6 billion is one of the main causes for poor earnings performance throughout 2016. That prompted private equity firm Blackstone Group to buy TeamHealth for $6.1 billion.and take it private.
Teamhealh shareholders filed a class-action lawsuit in December, alleging TeamHealth accepted an inferior takeover offer from the Blackstone when a much more lucrative bid had been on the table.
The Blackstone acquisition closed Monday.
In addition to dragging down earnings, the debt-financed acquisition of IPC caused TeamHealth’s long-term debt to balloon from $737 million before the transaction to $2.4 billion after.
The earnings decline and high debt load caused TeamHealth’s stock price to collapse. That drew the attention of bargain-hunting hedge fund Jana Partners a year ago. The company demanded three board seats to right the course of TeamHealth’s “missteps” by the board and management.
Jana ultimately got the seats and worked to replace long-time CEO Michael Snow in September with Leif Murphy, the former chief financial officer of hospital chain LifePoint Health.
Until Envision Healthcare and Amsurg merged this year, TeamHealth was the nation’s largest physician staffing company with about 19,000 employed physicians and annual revenue of more than $4 billion.
Physician staffing companies contract with hospitals and post-acute facilities to provide physicians and other clinicians to staff emergency rooms, serve as hospitalists and staff specialty departments such as radiology, anesthesiology and neo-natal units.