Executive Summary
A Texas hospital chief executive officer (CEO) settled a False Claims Act case for $5.3 million. The allegations involved illegal payments for laboratory referrals.- Risk managers should alert their CEOs to this risk.
- The arrangement was organized by a management services organization.
- Physicians can be misled by a CEO’s reassurances.
By Greg Freeman
A former Texas hospital chief executive officer (CEO) has agreed to pay $5.3 million to resolve False Claims Act allegations involving illegal payments to physicians for laboratory referrals in violation of the Anti-Kickback Statute. The case holds lessons for risk managers and their top executives.
The settlement resolves allegations that the CEO caused the submission of false claims for laboratory testing to Medicare, Medicaid, and TRICARE from January 2015 to June 2018, according to a report from the Department of Justice (DOJ). The CEO allegedly participated in a kickback scheme in which the hospital paid commissions to recruiters.
The CEO did not contest the allegations and accepted responsibility. Under the terms of the settlement agreement, the CEO has been excluded from participating in federal healthcare programs for 25 years. He also agreed to cooperate with the DOJ investigations of, and litigation against, other participants in the alleged schemes. Risk managers should bring this case to the attention of their CEOs and other top executives, says Amanda B. Hill, JD, with the Hill Health Law Group in Bee Cave, TX.
“The message here is that no one is beyond rebuke when it comes to the Fed. This was a former CEO of a local hospital that was a little bit too ambitious for their own good and had a referral scheme they had set up,” she says. “They had used a management services organization, an MSO, which is very common. When people hear that, they think oh, it’s okay because lawyers wrote it up and that’s how everyone does it, it’s probably fine.”
But it was not fine because they encouraged referrals to a certain lab, and, in exchange, they gave doctors distributions from the MSO. It was all set up to get the referrals to the labs, disguised as medical director fees, Hill explains.
“If your motives are to have illegal kickback schemes, no matter how you paper it up, the government’s going to find the motive. That’s what happened,” Hill says. “He can’t just hide behind the paperwork and say, ‘Oh, well, I was working for a company, and that’s what the company determined to do, and I have no liability.’”
Hill notes that the CEO is personally liable for the settlement. His actions also created potential liability for the physicians and others involved in the arrangement.
“People just think they can hide behind the company and take advantage of all these protections, that they can kind of do what they want. The doctors in this situation probably thought they trusted their CEO,” she says. “The CEO told them he had given this a lot of thought and had legal counsel review it, so it’s completely legitimate. Why wouldn’t you trust a hospital CEO?”
Many business deals are disguised as legitimate consulting arrangements for what appears to be reasonable compensation, Hill says, when the goal is really, in effect, to elicit referrals.
“In some industries, it’s perfectly acceptable to reward those who refer business to you,” she says. “However, in the world of federal healthcare programs, paying for referrals is a crime.”
Source
- Amanda B. Hill, JD, Hill Health Law Group, Bee Cave, TX. Telephone: (512) 329-2620. Email: [email protected].
Greg Freeman has worked with Relias Media and its predecessor companies since 1989, moving from assistant staff writer to executive editor before becoming a freelance writer. He has been the editor of Healthcare Risk Management since 1992 and provides research and content for other Relias Media products. In addition to his work with Relias Media, Greg provides other freelance writing services and is the author of seven narrative nonfiction books on wartime experiences and other historical events.
A former Texas hospital chief executive officer has agreed to pay $5.3 million to resolve False Claims Act allegations involving illegal payments to physicians for laboratory referrals in violation of the Anti-Kickback Statute. The case holds lessons for risk managers and their top executives.
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