Breaking News: Former Tenet Hospital Executives Facing Criminal Trial for Kickbacks

As you may recall, back in April, 2018, in my post What’s The Downside Risk for Hospital Executives?, I wrote about the fact that Trevor Fetter, the former CEO of Tenet Healthcare, had no skin in the game: his strategy put the company into a nosedive. It lost hundreds of millions. But upon being pushed out, Fetter walked away with a $22.9 million severance package. I described it as Win if you win. Win if you lose.

But it appears as if mortals (those folks serving lower in the Tenet food chain) can have some serious skin in the game.

John Holland and William Moore, both former Tenet Healthcare hospital CEOs, are facing trial in a criminal case that alleges that they personally violated the federal Anti-Kickback Statute.

The case against Holland and Moore relates to criminal charges and an accompanying civil case brought years ago against Tenet itself. In that earlier case, Tenet settled, agreeing to pay $513 million to resolve both the civil and criminal allegations.

The issues underlying the Tenet corporate settlement arose from arrangements between Tenet hospitals (Holland and Moore were the facility CEOs) and a chain of clinics called Clinica de la Mama. The chain had contracts to provide translators, marketing and other services at Tenet hospitals.

However, prosecutors allege that the payments to Clinica de la Mama were, at least in part, to induce it to refer patients to the Tenet hospitals for births covered under Medicaid.

From press reports, it doesn’t appear as if either Holland or Moore personally benefited, at least in terms of cash, from any of the alleged happenings. However, that, in and of itself, is not dispositive.

The defendants also appear to be arguing that because the government was going to have to pay for the labor and delivery services anyway, whether at the Tenet hospitals or someplace else, the government suffered no loss. That, too, doesn’t seem to be a great argument. Setting aside fake cases, it could be argued that any case that is steered by reason of an alleged kickback caused no damage to the government because the case was going to be performed somewhere. But that’s not what underlies the AKS.

Instead, the AKS is aimed at making sure that referrals are made in the best interests of patients, not profits.

Of course, the facts underlying the particular prosecution of Holland and Moore are complex. Were the payments to Clinca de la Mama fair market value for what Tenet received in return? Or was some potion for the referral of patients? Or, due to the “one purpose rule,” were the payments indeed fair market value and no more for what was received in services in return, but also motivated by a purpose to receive referrals?

Holland and Moore certainly have skin in the game.

Comment or contact me if you’d like to discuss this post.

Mark F. Weiss

Continue Reading...

Hospital-Centric Healthcare

Payor Agreements and Hidden False Claims Act and Criminal Traps

It was a neighborhood like many others.

Neat, but not too neat front yards. Newspapers brought in by 8:00 a.m. and maybe by 10:00 a.m. on weekends.

And, all was within the bounds of normal, giving, of course, wide birth to the meaning of the word, for this is nonfiction, not fiction. But with one outlier, of course.

They assembled just before daybreak, approximately a dozen SWAT-clothed FBI agents accompanied by the local police and, of course, a reporter with a camera. Then, they raided the gray house with a just as neat front yard but, to the well-eyed, just a tad too many security cameras.

Later that day, the reporter wrote that the man living in the house ran a 7 to 8 figure financial scam out of his, I suppose, just as neat den.

Ah, crime lurking in the “normal” neighborhood.

Unfortunately, crime and other misdeeds lurk in other neighborhoods, too. For example, inside of a provider agreement between a medical group and a payor.

Standard form provider agreements often closely and specifically define who, by classification, may be considered within the group for purposes of billing the payor. Many such define group physicians as the group’s employed physicians, thereby excluding subcontractors.

Yet, at the same time, it’s equally common for many medical groups to either regularly or from time to time staff using subcontracted physicians.

Although a set of concerns (breach of contract, fraud, and so on) is present in any such situation, the potential for trouble explodes when the provider agreement covers federal healthcare program patients. For example, many provider agreements cover both commercial and Medicare Advantage patients.

In that case, when the group submits a claim for a procedure on a covered Medicare patient performed by a subcontracted physician, the claim is potentially a false claim, triggering liability under the federal False Claims Act. And, although the FCA is a civil statute, it has a criminal cousin, 18 U.S.C. 287, commonly referred to as the criminal false claims act.

As if that weren’t enough, the same lurking billing violation can trigger liability under a host of federal criminal statutes, from mail and wire fraud, to the Travel Act, to federal health care fraud.

Criminal and, at least, serious civil, liability lurks in many neat neighborhoods. Create your own neighborhood watch to make sure that it’s not lurking behind your medical group’s otherwise metaphorical neat lawn.

Comment or contact me if you’d like to discuss this post.

Mark F. Weiss

Continue Reading...

Assessing Risk

Another Hospital CEO (and His Senior VP) Sentenced to Years in Prison

It’s getting harder for hospital CEOs to stay out of jail. Or to get released.

OK, in all fairness, James R. Cheek was the former CEO of Hope Medical Park Hospital in Hope, Arkansas. Cheek will be spending 3 years in federal prison, followed by 3 more years of supervised release. He won’t be lonely, though, because his former Senior VP, Herschel J. Breig, Sr. received the same sentence. Both will be broke, because they were also ordered to pay $6 million in restitution to the United States Government.

In Messrs. Cheek and Breig’s case, it wasn’t cheating Medicare or bribing doctors for referrals that got them in trouble. In fact, it was something far less legally grey. Better said, it was something completely black and white: The failure of the hospital that they led as the senior executives, to collect, account for, and pay over payroll taxes to the I.R.S.

You can draw your own conclusion as to whether Cheek and Breig are (1) merely unlucky, (2) incredibly stupid, or (3) career criminals, because at the time of their sentencing they were already serving time in federal prison for nearly identical crimes committed in Texas in regard to payroll taxes from another hospital they once controlled.

Don’t join them.

Most instances of the failure to turn over payroll taxes aren’t as egregious as those of Cheek and Breig, who apparently pocketed some or all of the IRS’s missing money.

Instead, it’s often the case of the employer’s officers desperately dipping into the pot of withheld funds to cover legitimate business expenses, like a loan. They have every intention to come up with the cash and pay the IRS all that’s due. Unfortunately, their financial situation worsens and the government comes knocking.

Not every corporate officer is liable for the payment of payroll taxes, only those who’re responsible for the entity’s financial affairs.

Not every failure results in criminal prosecution. Those that don’t are pursued in civil actions, which seek both the original amount due as well penalties, which can be as much as the amount of the taxes themselves.

Unfortunately, it’s easy for medical groups to fall into the “failure to withhold and pay over to the government” trap, at least in the sense of civil liability. That’s the situation that can result from misclassifying employees, whether physicians or staff, as independent contractors. In the IRS’s view, as well as that of state tax authorities, the “employer” should have withheld and paid over payroll taxes for the “employees.” Obviously, that didn’t happen.

It’s one thing for an organization’s “responsible person,” for example, the medial group’s managing partner or its president and CFO, to think that the group is running a risk. It is. But so are the “responsible persons” who themselves are civilly liable for the failure to withhold, if not criminally liable as well.

Comment or contact me if you’d like to discuss this post.

Mark F. Weiss

Continue Reading...