Federal program exclusion shows importance of fraud, waste, abuse compliance

Recent actions taken by the U.S. Attorney’s Office in the Eastern District of Texas (EDTX) and the U.S. Department of Health and Human Services (HHS-OIG) against individual physicians, a hospital CEO, and a hospital should cause providers to take note for the following reasons: (1) the Anti-Kickback Statute (AKS) and Stark Law violations remain a focus of the government; (2) the False Claims Act was utilized; and (3) the defendants cooperated.

Before delving into the specifics of the settlement and other critical facts and circumstances, it is important to appreciate what cooperation credit is. In 2019, the U. S. Department of Justice (DOJ) announced formal guidance and updated Justice Manual (Section 4-4.112). Importantly, the DOJ does not only extend cooperation credit in False Claims Act cases. Credit for defendants is available in other situations, such as cases involving the Foreign Corrupt Practices Act. As the DOJ notes:

Under the policy, cooperation credit in False Claims Act cases may be earned by voluntarily disclosing misconduct unknown to the government, cooperating in an ongoing investigation, or undertaking remedial measures in response to a violation. Even if the government, cooperating in an ongoing investigation, or undertaking remedial measures in response to a violation. Even if the government already has initiated an investigation, for example, a company may receive credit for making a voluntary self-disclosure of other misconduct outside the scope of the government’s existing investigation that is unknown to the government. Similarly, a company may earn credit by preserving relevant documents and information beyond existing business practices or legal requirements, identifying individuals who are aware of relevant information or conduct, and facilitating review and evaluation of data or information that requires access to special or proprietary technologies.

Bottom line – if you are or your company is the subject of a government investigation, the most prudent step that can be taken is to hire knowledgeable outside counsel and cooperate with the government. The Eastern District of Texas settlement illustrates this point.

To resolve False Claims Act allegations involving illegal remuneration, which violates the AKS and Stark Law, seven physicians and a hospital executive agreed to pay $1,106,499. The heart of the illegal remuneration stemmed from attempting to disguise the kickbacks as a form of investment arrangement. “Our office [EDTX] is committed to looking through the disguise a putting an end to any arrangement where the purpose is to improperly influence medical decision making through the payment of kickbacks.” In this case, seven doctors received thousands of dollar in illegal remuneration from eight management service (MSOs) in exchange for ordering laboratory tests from Rockdale Hospital d/b/a Little River Healthcare (Little River), True Health Diagnostics LLC (True Health), and Boston Heart Diagnostics (Boston Heart). The remuneration was premised on volume-based commissions paid to independent contractor recruiters, who used MSOs to pay numerous doctors for their referrals. “These payments were allegedly disguised as investment returns but in fact were based on, and offered in exchange for, the doctor’s referrals.” (emphasis added).

As part of their respective settlements, the individual physicians agreed to cooperate with the DOJ’s investigations of and litigation against other parties involved in the case. Equally as important is that fact that Richard DeFoore of Anson, Texas, the former CEO of Jones County Regional Healthcare, not only paid $50,000 to cooperate, but is still excluded for three years from participation in federal healthcare programs. In sum, this settlement serves as a reminder that the DOJ does consider AKS and Stark Law violations material to payment and often times, a False Claims Act case is brought. Cooperation is important but persons should evaluate their compliance programs, too, in order to ensure that the AKS, Stark Law, and False Claims Act are not violated in the first place.