The $40 million settlement announced October 24, 2005, between Erlanger Medical Center (Erlanger), the United States, and the State of Tennessee brought to a close a two-year investigation of the Chattanooga, Tennessee, hospital's financial relationships with faculty plan physicians. Payments to the United States totaled $37 million; the State of Tennessee received $3 million of the settlement amount. In addition, as part of the settlement, Erlanger entered into a five-year comprehensive corporate integrity agreement (CIA) with the OIG.

The investigation leading to the settlement focused on remuneration paid by Erlanger to physicians affiliated with University of Tennessee Physicians (UTP), a faculty practice plan formed by Erlanger, and to a number of large physician groups practicing in the area. The government alleged that Erlanger's financial arrangements with these physicians, in the form of medical director contracts, recruiting agreements, joint venture agreements, and leases, violated both the Stark law and the antikickback statute. By virtue of these prohibited financial arrangements, the government alleged, the claims submitted by Erlanger to Medicare, Medicaid, and Tricare for inpatient and outpatient hospital services and home health services referred, ordered, or arranged for by the UTP and other affiliated physicians were filed in violation of the FCA.

The CIA requires that Erlanger establish and maintain a compliance program that includes a compliance officer and compliance committee; written standards, including a code of conduct and policies and procedures; training and education; procedures to ensure compliance with the antikickback statute and Stark law; an internal disclosure program; screening for ineligible persons; and a self-reporting mechanism. The CIA places a heavy emphasis on oversight of Erlanger's financial arrangements with any actual or potential source of health care business, or actual or potential recipients of health care business from Erlanger (Arrangements). It calls for specific "Arrangements Training" pertaining to Arrangements that potentially implicate the antikickback statute or Stark law and Erlanger's policies and procedures relating to Erlanger's Arrangements; stringent procedures for tracking and monitoring Erlanger's Arrangements to ensure that each Arrangement complies with the antikickback statute and Stark law, including an "Arrangements Database"; and an annual Arrangements Review conducted by an Independent Review Organization.

Erlanger denied the allegations referenced in the settlement. The press release announcing the settlement noted Erlanger's cooperation in the government's investigation. Erlanger's President and Chief Executive Officer stated in a letter announcing the settlement to Erlanger employees that, prior to the federal government's investigation, Erlanger had begun instituting a more stringent and comprehensive internal compliance review and corrections.

The settlement resolved only the government's civil and administrative claims against Erlanger. It did not cover any criminal liability on the part of Erlanger or any civil or administrative claims against individuals who were the subjects of criminal investigation or charges.