Featured Health Business Daily Story, Oct. 25, 2016

Tenet to Pay $513M in Civil, Criminal Fines; Some Execs Had Certified Compliance

Reprinted from REPORT ON MEDICARE COMPLIANCE, the nation's leading source of news and strategic information on Medicare compliance, Stark and other big-dollar issues of concern to health care compliance officers. Sign up for a $92 two-month trial subscription today.

By Nina Youngstrom, Managing Editor
October 17, 2016Volume 25Issue 37

What started as a whistleblower complaint by an employee at another hospital chain ended in Tenet Healthcare Corp. paying $513 million in civil and criminal fines and entering a three-year non-prosecution agreement with the Department of Justice over a kickback scheme with a maternity clinic. If Tenet fails to comply with the terms of the non-prosecution agreement, including the use of an “independent compliance monitor,” the hospital chain could be prosecuted for violating the anti-kickback law at a time when it was under a corporate integrity agreement (CIA) from a 2006 false claims settlement for alleged kickbacks and upcoding.

The resolution of the allegations, which was announced Oct. 3, is complicated, but Tenet admitted to the misconduct in the non-prosecution agreement. There’s also a guilty plea by Atlanta Medical Center and North Fulton Hospital, two Atlanta-area hospitals owned by a Tenet subsidiary, Tenet HealthSystem Medical, and a $145 million fine, as well as a $368 million false claims settlement for the misconduct by the two hospitals and two others owned by the subsidiary, Spalding Regional Medical Center Inc. in Griffin, Ga., and Hilton Head Hospital in South Carolina. All of the Georgia hospitals in the case have been sold to WellStar Health System, Tenet said in a press release.

“It’s a massive case,” says New York City attorney Becky Martin, with McDermott Will & Emery. “If your company has a CIA and the conduct the CIA covers continues or appears in a somewhat different form, the company may well be facing a different category of penalty.” The global settlement also is a reminder that executives who sign compliance certifications that are routinely included in CIAs shouldn’t be cavalier. “You are on the line,” says Martin, former co-chief of the civil frauds unit in the U.S. Attorney’s Office for the Southern District of New York.

Report on Medicare Compliance

At the heart of this case are kickbacks paid by the four Tenet hospitals to clinics serving Medicaid maternity patients who were mostly undocumented Hispanic women (RMC 2/24/14, p. 4). The scheme was uncovered by an executive who didn’t work for Tenet. Instead, whistleblower Ralph Williams was chief financial officer at the time for Clearview Regional Medical Center in Monroe, Ga., which was owned by Health Management Associates. The hospital also allegedly paid the clinics, which were owned by Clinica de la Mama, for patient referrals. When Williams raised questions about the payments, he allegedly was assured there was nothing to worry about and that Tenet hospitals made them too, which was confirmed when Williams found an old Tenet contract with the clinic in a drawer, says his attorney, Marlan Wilbanks, with Wilbanks & Bridges in Atlanta. “It was a serendipitous thing that the guy who was a whistleblower in a half-billion dollar case never actually worked at Tenet,” he says. The HMA hospital was also named in the false claims lawsuit, and settled with DOJ last year for $595,155.

The kickback scheme and the executives’ role in it are set forth in a statement of facts in the non-prosecution agreement. Tenet HealthSystem Medical agrees the information is accurate and “admits and accepts responsibility for the acts of its officers, directors, employees, and agents,” according to the statement of facts.

Certain executives at the four Tenet hospitals had their eye on referrals from Clinica de le Mama, which provided prenatal care for a flat fee to pregnant Hispanic women — including undocumented aliens — and controlled where they gave birth to their babies. Because Medicaid then pays the tab for certain kinds of emergency medical services for undocumented aliens, including emergency labor and delivery and services to newborns, the Tenet hospitals saw a revenue stream in serving the clinic patients.

Contracts Were a ‘Pretext’

That led to contracts between the Tenet hospitals and Clinica de la Mama. Supposedly, the clinics would provide management services, marketing consulting services, translation services, translation management services, Medicaid eligibility determination paperwork, community outreach, educational classes and birth certificate services. But the real deal was to induce the referrals of clinic patients, according to the statement of facts. The services were, in some cases, not necessary, duplicative, substandard, or not provided.

Despite the scam with the clinics, certain executives at the Tenet hospitals certified in writing every quarter, as required by Tenet’s CIA, between July 2008 and October 2011, that there were no reportable events. Also, Tenet’s regional senior vice president of operations certified annually from 2007 to 2012 “that Tenet was in compliance with federal healthcare program requirements and the requirements of the CIA,” according to the statement of facts. The certifications, which were submitted to OIG, “were false and misleading because they did not disclose, among other things, reportable events relating to Clinica under the CIA.”

The contracts, which lasted from 2000 to 2013, were a “pretext” for the Tenet hospitals to pay $12 million to Clinica de la Mama’s owners for the referrals, which generated for the hospitals $125 million in Georgia and South Carolina Medicaid reimbursement and $20 million in Medicare disproportionate share hospital payments.

In some cases, patients at the clinics were told that Medicaid covered only their delivery and their newborns’ care if they went to the Tenet hospitals, the statement of facts said. In other cases, they were told they had to deliver at the Tenet hospitals. Schedules were set so the maternity patients saw clinic physicians who agreed to deliver at the Tenet hospitals.

Tenet’s in-house and outside lawyers were available to review agreements between the hospitals and Clinica del la Mama, according to the statement of facts, but certain executives at the Tenet Hospitals hid the “true purpose” and “true nature” of the contracts.

The non-prosecution agreement also requires Tenet to enhance its compliance program in various ways. A biggie: Tenet must hire a compliance monitor to keep an eye on things and reduce the risk that kickback and Stark violations recur. The monitor will review documents, test Tenet’s compliance program, observe systems and procedures on-site, and interview current and former directors, employees, partners and agents. The monitor will submit written reports on its reviews to the government and to Tenet, and disclose “improper activities” to the government and to Tenet’s chief compliance officer, general counsel and other officers.

Atlanta Medical Center and North Fulton Medical Center pleaded guilty to conspiracy to defraud the United States by obstructing the lawful government functions of HHS and to kickback violations.

In a statement, Tenet CEO Trevor Fetter said that “the conduct in this matter was unacceptable and failed to live up to our high expectations for integrity. The relationships between the four hospitals and Clinica de la Mama violated the explicit requirements of our compliance program and were inconsistent with the strong culture of compliance we’ve worked hard to establish at Tenet. We take seriously our responsibility to operate our business in accordance with the highest ethical standards, every day and in every interaction.”

Certifications Could Lead to FCA Lawsuit

CIA certifications should give health care executives pause, Martin says. Although they vary from CIA to CIA, executives generally are certifying compliance with laws and regulations in their areas of responsibility. “If you are the certifying official, it puts you in the crosshairs of an enforcement action if the conduct in question was a violation of the CIA,” she says. In fact, while the case law is mixed, the U.S. Court of Appeals for the 11th Circuit held in U.S. ex rel. Matheny v. Medco Health Solutions, Inc., 671 F.3d 1217 (11th Cir. 2012) that false certifications under CIAs can be a predicate for a false claims case, Martin says. It’s a combustible mix with the Yates memo, which is DOJ’s pledge to hold culpable individuals accountable, including the former CEO of Tuomey Health System (RMC 10/3/16, p. 1), when settling corporate civil or criminal fraud cases.

Martin also noted that the statement of facts referenced “deliberate concealment” of information from Tenet lawyers about the contracts with Clinica de la Mama. This language suggests that it’s not a matter of “someone making a minor, inadvertent misstep,” she notes.

But another attorney, who asked not to be identified, said it was “completely disingenuous” for DOJ to act like Tenet’s lawyers were “misled because the ‘true intent’ was related to referrals. ‘True intent’ is not a fact or something that lawyers need to know for contracts like this,” he contends. “The lawyers certainly knew that Clinica referred to the hospital and if the lawyers needed to know more, the lawyers should have asked.” What’s most troublesome, he says, is he thinks there was “clearly” a basis for the contracts between the hospitals and the clinics that had nothing to do with referrals. Therefore, “if the payments were fair-market value, it is hard to explain how this contract is different from typical contracts that hospitals have with referral sources,” the attorney says.

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