Tenet probe shows feds' growing interest in criminal fraud cases
By Lisa Schencker | May 14, 2015 (FiDA highlight)
The U.S. Justice Department has launched a criminal investigation into previously disclosed allegations that Tenet Healthcare Corp. hospitals paid kickbacks for maternity referrals. The probe reflects a growing appetite among prosecutors to pursue criminal charges in corporate healthcare fraud cases.
Tenet spokesman Donn Walker declined to comment on the issue, saying only, “We have disclosed this investigation in our public filings for some time.”
In a filing to the Securities and Exchange Commission this month, Tenet said four of its hospitals in Georgia and South Carolina are under criminal investigation related to a whistle-blower lawsuit filed in 2009.
The Justice Department, meanwhile, recently adopted a procedure that ensures that its Civil Division shares all new whistle-blower complaints with its Criminal Division to allow the department to conduct parallel investigations.
In Tenet's case, the civil complaint alleges that the hospitals paid kickbacks to a company called Hispanic Medical Management to send them pregnant women from the company's prenatal clinics to deliver their babies. Those patients—most of whom, according to the complaint, were in the country illegally—would then be eligible for emergency Medicaid services.
The government also alleged the hospitals included those patients obtained from tainted referrals when seeking additional Medicare funds intended to support hospitals that treat large numbers of low-income patients.
Tenet has countered in court documents that its hospitals' contracts with Hispanic Medical Management were meant to “create a culturally sensitive and attractive prenatal environment for women” who might deliver their babies at the hospitals.
The management company provided translators and community outreach and helped families apply for emergency Medicaid coverage, according to Tenet. The government's allegations “rest on the hospitals' open desire to care for a deserving, but underserved population and the attractive solution they designed to do so,” the company said.
Two individuals—a former Hispanic Medical Management owner and a former employee of one of the Tenet hospitals—have been charged criminally in the matter. The civil suit has been put on hold pending further proceedings in the criminal case, according to Tenet's SEC filing.
Tenet said the Justice Department informed the company on April 10 that the four hospitals named in the civil suit are also under criminal investigation. Those hospitals are Atlanta Medical Center; Hilton Head (S.C.) Hospital; North Fulton Hospital, Roswell, Ga.; and Spalding Regional Medical Center, Griffin, Ga.
Criminal investigations and charges in big Medicare and Medicaid fraud cases are becoming increasingly common, said Sheryl Skolnick, director of research and a healthcare analyst at Mizuho Securities USA. Historically, criminal prosecution was more common in smaller Medicare and Medicaid fraud cases, she said. It's more difficult to bring criminal charges because the standard of proof is higher than in civil cases.
“You have to prove intent, which at a corporate level means you have to have some level of senior management involved and some sort of pattern that you can essentially say this was not just a fluke of a one-off situation but rather this was part of a strategy or policy or intent of the organization to bill in this way,” Skolnick said.
But the Justice Department now seems to be extending those criminal investigations to large, publicly traded corporations, she said. “It was pretty much just a matter of time before they would move up the chain now that they have some success under their belt—see what's cooking at the corporate level."
Leslie Caldwell, the Justice Department's assistant attorney general for the Criminal Division, said as much during an address in September 2014 when she called whistle-blower cases “a vital part of the Criminal Division's future efforts.”
Caldwell reiterated the division's commitment to fraud cases, including those by healthcare executives, during remarks Thursday at the American Bar Association's 25th Annual National Institute on Health Care Fraud.
Under a new policy, she said, all new whistle-blower complaints in the Civil Division are shared with her division. “Parallel investigations maximize the department's ability to secure the appropriate outcome in each matter—whether it be financial penalties, restitution, federal program exclusion or criminal prosecution of both corporations and individuals,” Caldwell said Thursday.
Caldwell pointed to convictions against more than 20 individuals in a fraud case against the American Therapeutic Corp. as an example of a recent complex criminal healthcare fraud case.
Patrick Burns, co-director of the Taxpayers Against Fraud Education Fund, a not-for-profit organization partly funded by whistle-blowers and law firms representing them, said prosecutors are seeking to maximize the financial returns for the government in large cases, especially as the recovery amounts climb.
Whistle-blowers are entitled to a portion of whatever money the government is able to recover under the False Claims Act. That's not true in criminal cases.
“As the amount of money has gone up, the Department of Justice has looked for a way to manage down whistle-blower awards,” Burns said.
Burns said he doesn't believe the approach has been much of a deterrent because the Justice Department rarely holds individuals accountable for the fraud by excluding them from Medicare and Medicaid and sending them to prison.
“Yes, we need to recover America's stolen billions but we also need to bring personal pain to the executives who design, operationalize and greenlight these massive frauds,” Burns said.
But Skolnick said the rise in criminal investigations means companies must be “increasingly vigilant."
In a separate matter, Tenet also disclosed this month that it is in discussions with the Justice Department over a potential settlement involving its use of implantable defibrillators at 56 hospitals from 2002 to 2010.
The government has spent years investigating suspected overuse of the devices at hospitals across the country. The investigation has yielded settlements with just a few hospitals so far: Irvine, Calif.-based St. Joseph Health; the now defunct MedCath; and Catholic Health Initiatives. None of those companies admitted liability as part of their settlements.
The investigation has been controversial among doctors, who say Medicare's coverage rules for the devices are not aligned with other medical guidelines.
Lisa Schencker covers legal issues and enforcement agencies. Before joining Modern Healthcare in 2014, she was an education reporter for the Salt Lake Tribune and before that wrote for the Bakersfield Californian and the Scranton (Pa.) Times-Tribune. She has bachelor’s and master’s degrees in journalism from the University of Illinois at Urbana-Champaign.
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