Emergency Room

Tenet Whistleblower Lawsuit Could Produce $238 Million

One of the largest hospital chains in the United States has set aside $238 million in anticipation of a multi million dollar settlement with the government over whistleblower allegations claiming the company paid kickbacks to a chain of prenatal clinics in the Atlanta, Georgia area in return for patient referrals. Tenet Healthcare Corp. made national news on Monday when the hospital chain notified shareholders that it hasreserved significantly more than the $20 million it had previously set aside to cover liability in the Tenet whistleblower lawsuit.

The hospitals named in the Tenet whistleblower lawsuit include four of the company’s Georgia hospitals—Georgia-Atlanta Medical Center, North Fulton Regional Hospital, Spalding Regional Medical Center and Clearview Regional Medical Center (formerly owned by Tenet)—as well as Hilton Head Hospital in South Carolina. Other defendants in the Tenet whistleblower case include Hispanic Medical Management Inc. and its affiliates, Cota Medical Management Group Inc. and International Clinical Management Services Inc.

Tenet whistleblower Ralph Williams filed the lawsuit in 2009. He was formerly the chief financial officer (CFO) of Clearview Hospital, which was owned by Tenet at the time of his employment. The U.S. Justice Department decided to intervene in Williams’ case in 2014.

Williams claims that Clearview and Tenet created false contracts in an effort to conceal kickback payments made to a prenatal clinic chain called Clinica de la Mama. The kickbacks were allegedly offered in exchange for referrals of tens of thousands of undocumented of Medicaid patients, which reportedly make up the majority of Clinica de la Mama patients.

Court pleadings in the Tenet whistleblower case show that Clinica de la Mama clinics collected as much as $20,000 a month from each hospital, allegedly given to refer pregnant women to the hospitals to deliver their babies. The Anti-Kickback Statute prohibits hospitals from paying kickbacks to clinics, doctors or anyone else in exchange for patient referrals. The Statute is intended to ensure that a doctor’s medical judgment is based on the best interests of their patients, not on improper financial incentives.

In 2014, Clearview Hospital’s former CEO, as well as the former CEO of the now-defunct Hispanic Medical Management Inc., pleaded guilty to conspiring to pay or receive kickbacks. The charges stated that Hispanic Management’s CEO and others would only allow obstetricians with delivery privileges at the hospitals that paid kickbacks to see Clinica de la Mama patients. Relatedly, the Clinica de la Mama staff allegedly directed patients to those same hospitals when they went into labor.

One of the charges from the criminal case stated that the majority of the Clinica de la Mama patients were not made aware that they had the option of delivering their child at a different hospital. If a pregnant patient asked if it was possible to deliver her child at a different hospital, the Clinica de la Mama staff were allegedly instructed to discourage them from doing so by emphasizing the high likelihood of getting Medicaid to cover the cost of their labor and delivery if they went to the directed hospital. Likewise, the Clinica staff was also allegedly instructed to inform patients that if they chose to deliver at a different hospital, Medicaid might not cover the costs.

According to the Atlanta Business Journal, Medicaid was billed for more than 30,000 births by undocumented Hispanic women in connection with the alleged kickback scheme, which carried a cost to the federal government of between $150 million and $200 million. According to the Tenet whistleblower lawsuit, this amount still doesn’t take into account an additional undetermined amount of Medicare funds parceled out to hospitals and medical centers that provide care to a disproportionate share of low income and/or indigent patients.

In a securities filing that discussed the Tenet whistleblower lawsuit, the hospital chain expressed the possibility of the Justice Department making a counterproposal to the company’s $238 million offer. “There can be no assurance that the ongoing discussions to resolve these matters will be successful,” the company wrote. The filing also said one or more of Tenet’s hospital subsidiaries could enter a guilty plea or a deferred prosecution agreement as part of a Justice Department deal.

An agreement for hundreds of millions would represent a huge False Claims Act settlement, especially for a health care provider. Many of the larger scale FCA settlements stem from pharmaceutical companies or medical device manufacturers—it is something of a surprise when a health care provider is put on the hook for such a large amount.

But maybe it isn’t all that surprising for the Tenet whistleblower case…it turns out that Tenet Healthcare was in a similar situation years ago: In 2006, the company paid $900 million to settle claims that it manipulated “outlier” payments reserved for Medicare patients considered extraordinarily costly.

The proposed settlement from Mr. Williams’s case is likely to be finalized within the next few months. The Tenet whistleblower lawsuit is captioned U.S. ex rel. Williams v. Health Management Associates Inc. et al., case number 3:09-cv-00130, in the U.S. District Court for the Middle District of Georgia.

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