Attorney: Feds may block Christiana Care settlement of fraud claims

A dispute between Christiana Care and the U.S. Department of Justice could block a reported $47 million settlement that the hospital system has tentatively reached with its former compliance chief, Ronald Sherman, according to a letter sent last week by Sherman’s attorney to a Delaware judge. 

If finalized, the settlement would end a lawsuit Sherman brought six years ago, in which he claimed that Christiana Care defrauded taxpayers between 2010 until 2017 by participating in a wide ranging "kickback scheme" that allowed independent doctors to bill Medicaid for services that hospital staff had actually performed. 

In exchange for the unearned billings — many of which were allegedly for the care of newborns — the doctors would send lucrative patient referrals back to Christiana Care, according to Sherman, who served as the hospital system’s chief compliance officer from 2007 to 2014.

The lawsuit landed at a time when Christiana Care, Delaware’s largest hospital system, was expanding its profitable maternity wing and vying to become a medical research hub in the Mid-Atlantic region.

Christiana Care did not respond to a request to comment for this story.

When I first reported on the case in 2018 for The News Journal, hospital officials said the following:

"We were already aware of many of the allegations made in the lawsuit. We thoroughly investigated them at the time that they were first brought to our attention, and we implemented safeguards and took appropriate actions to ensure continued compliance with the law. These included confirming processes and protocols for the appropriate use of physician assistants and nurse practitioners in delivering high-quality, safe care."

Read Sherman’s civil complaint here

Despite Christiana Care’s past denial of wrongdoing, the Philadelphia Inquirer was first to report in September that hospital officials had set aside $47 million for a tentative settlement to Sherman’s lawsuit sitting in the U.S. District Court of Delaware.  

Sherman’s attorney Dan Miller told the Inquirer then that he believed the settlement would be the largest in Delaware history for any case involving a whistleblower bringing civil charges against a government contractor under the federal False Claims Act.   

Yet, that lucrative settlement now appears to be in peril.

On Friday, Miler sent Judge Richard G. Andrews a letter in which he said that federal officials – who must approve any settlement – have balked at the scope of the tentative deal. 

Miller told Andrews that Department of Justice officials insisted the settlement can not wipe away Christiana Care’s liability for alleged misdeeds that were not “asserted in the settlement process” – namely that the hospital caused private physicians to submit false Medicaid billing claims. 

The disagreement had been ongoing for five or six weeks, Miller said, and “no material progress has been made” between Christiana Care and DOJ officials.  

In a sharply worded response letter also sent on Friday, Christiana Care attorney Michelle Morgan said her team “categorically” disagrees with Miller’s characterizations, and insisted that details he disclosed about settlement discussions “are not complete.” 

Morgan further expressed dismay that Miller “opted to disclose details regarding confidential settlement discussions.”

Miller did not respond to a request to comment for this story. An interview request sent to Morgan is pending.

In all, the drama indicates that what appeared to be the final chapter to the 6-year lawsuit against Delaware’s biggest and most politically powerful hospital could instead become the prelude to an acrimonious trial.  

A trial was set to begin earlier this spring before settlement discussions ramped up, pausing the court proceedings.

Pretrial hearings would resume if the settlement negotiations break down completely. 

Miller closed his letter to Judge Andrews by stating that Christiana Care must decide whether the settlement is null or void, or whether they will sign the agreement without protections from claims that it induced private doctors to fraudulently bill Medicaid.

Miller suggested Andrews set a Nov. 3 deadline for such a decision. 

Instead, on Friday, Andrews issued an oral order telling the two sides that they must file a joint status letter by Nov. 17.

Contact Karl Baker at kbaker6@protonmail.com or on Signal at 206-595-0057. 

To learn more about this case, please find my past reporting for The News Journal at the following links:

• https://www.delawareonline.com/story/news/2019/11/26/unredacted-docs-claim-christiana-care-execs-feared-losing-referrals-private-doctors/4297875002/

• https://www.delawareonline.com/story/money/business/2019/01/04/christiana-care-asks-judge-toss-suit-claiming-medicaid-kickbacks/2480493002/

• https://www.delawareonline.com/story/news/2018/09/20/christiana-care-defrauded-taxpayers-kickback-scheme-suit-says/925523002/

• https://www.delawareonline.com/story/news/2019/03/29/christiana-care-whistleblower-claims-not-clearly-frivolous-delaware-judge-says/3300819002/