Tenet Healthcare Settles Fraud Case for $514 Million
If you work in compliance in the healthcare industry, you have a tough job. The number and variety of risks that healthcare providers face is daunting. The False Claims Act is a mighty weapon in the hands of federal prosecutors.
Hospitals are under the enforcement microscope given the significant role they play in the delivery of healthcare. Tenet Healthcare Corporation, a national hospital chain, recently paid $514 million in civil and criminal penalties to settle allegations that its hospitals in Georgia and South Carolina paid kickbacks for obstetric referrals. Two Tenet subsidiaries plead guilty to one count of conspiracy to violate federal anti-kickback laws.
In exchange, Tenet earned a non-prosecution agreement, a civil settlement and a three-year corporate monitor.
The kickback scheme involved payments to Hispanic Medical Management, an operator of prenatal clinics in exchange for referrals of low-income patients, typically undocumented Hispanic women, to Tenet hospitals. By increasing the referrals, Tenet increased its revenues from Medicaid fees.
To cover the scheme, Tenet used sham contracts with the prenatal services operator for translation and other services. Tenet earned approximately $145 million in increased Medicaid revenues.
Under these contracts, the Tenet hospitals purported to pay HHM to provide various services to the Tenet Hospitals including management services, marketing consulting services, translation services, translation management services, Medicaid eligibility determination paperwork, community outreach, educational classes, and birth certificate services. The true purpose of the relationship, however, was to induce the owners and operators of HHM to refer patients to the Tenet Hospitals and arrange for services to be provided to the HHM patients and their newborns at the Tenet hospital.
The alleged services that were purported to be provided by HHM pursuant to these contracts were, in some instances, either: (1) not needed; or (2) duplicative of services already being provided; (3) substandard; or (4) not rendered at all. In truth and in fact, the contracts were a pretext to allow certain executives at the Tenet Hospitals to pay over $12 million to the owners and operators of HHM in exchange for referring the HHM patients to the Tenet hospitals.
HMM referred over 20,000 Medicaid patients to Tenet hospitals in Georgia and South Carolina for obstetrics services. As a result, low-income patients were required to travel long distances to Tent hospitals rather than receive services at local or nearby hospitals.
HMM misled the patients about Medicaid’s coverage of their costs for prenatal care and delivery. Specifically, the clinic operator told the patients that Medicaid would only cover their expenses if they went to a Tenet hospital.
Throughout the life of the conspiracy, Tenet in-house and outside lawyers reviewed and approved the contracts. Certain executives at the Tenet hospitals and others concealed material facts from Tenet lawyers and outside counsel because they knew that the agreements would not be approved if the true nature of the arrangements were disclosed to the lawyers.
The case was initiated by a Georgia whistleblower, an accountant, who will receive $84 million of the settlement under the False Claims Act. The whistleblower initiated a civil suit against Tenet alleging the kickbacks, and the US and Georgia State governments joined the lawsuit.
Tenet has a poor history in the area of fraud. Tenet is the new name for the prior company, Tenent Healthcare, which settled a massive fraud case for $900 million. Many of the illegal payments involved in this case occurred while Tenet was under a prior Corporate Integrity Agreement for the earlier fraud settlement.
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