WASHINGTON Three former employees of a North Carolina hospital were the first to expose an alleged scheme by Adventist Health System to pay doctors excessive compensation to lock in their patient referrals to Adventist-owned hospitals, clinics and other outpatient services in Florida, North Carolina, Tennessee and Texas.

The US Justice Department announced that Adventist will pay a total of $118.7 million to the federal government and four states to settle a whistleblower (qui tam) lawsuit filed in December 2012 by those former employees, who are represented by whistleblower law firm Phillips & Cohen LLP. The settlement agreement also covers a separate qui tam lawsuit filed in 2013 that made the same allegations as some of those made earlier in Phillips & Cohen's qui tam lawsuit.

The Adventist settlement is the largest healthcare fraud settlement ever made involving physician referrals to hospitals, according to Peter Chatfield, a whistleblower attorney with Phillips & Cohen. It is nearly twice the previous largest settlement involving hospital kickback allegations, which was North Broward Hospital District's recent $69.5 million settlement.

A substantial portion of the settlement amount is based on allegations involving Florida Hospital Medical Group, an Adventist-owned physician practice in Florida whose doctors worked at several Adventist hospitals and dozens of Adventist-owned outpatient clinics. Those hospitals include Florida Hospital Altamonte, Florida Hospital Apopka, Florida Hospital Celebration Health, Florida Hospital Kissimmee, Florida Hospital Orlando, Florida Hospital Waterman (Tavares, Fla.), Florida Hospital for Children (Orlando, Fla.) and Winter Park Memorial Hospital.

The three whistleblowers were longtime employees at Adventist's Park Ridge Health in Hendersonville, NC, where they became aware of the alleged system-wide kickback scheme. Michael Payne was a risk manager and Melissa Church was the executive director of physician services at Park Ridge. Gloria Pryor was a compliance officer for physician offices at Park Ridge.

In addition to the charges related to the money-for-referrals scheme, Adventist settled a number of Medicare billing fraud allegations made in Phillips & Cohen's whistleblower lawsuit and supported by the government. Those allegations included "upcoding" Medicare claims and "unbundling" services to submit them as separate Medicare claims.