Tenet Healthcare Corporation Resolves False Claims Act Allegations for More than $29 Million

Recently, VHS of Michigan – doing business as The Detroit Medical Center Inc (DMC), Vanguard Health Systems Inc. (Vanguard), and Tenet Healthcare Corporation (Tenet) – agreed to pay $29,744,065 to resolve allegations that they violated the False Claims Act by providing kickbacks to referring physicians.

DMC operates multiple hospitals in the Detroit region, including Sinai-Grace Hospital and Harper University Hospital. DMC operated as a nonprofit hospital system until 2010, when it transferred to join Vanguard Health Systems. Then, in October 2013, Tenet acquired Vanguard owned-and-operated hospitals and outpatient facilities, including DMC and the two aforementioned hospitals.

The settlement resolves allegations that DMC, Vanguard, and Tenet caused false or fraudulent claims to be submitted to Medicare. Specifically, the hospitals, Sinai-Grace and Harper University, leased the services of DMC-employed mid-level practitioners – such as nurse practitioners or physician assistants – to 13 physicians at either no cost or below fair market value, in violation of the Anti-Kickback Statute (AKS).

The government further alleged that the 13 physicians were chosen for this benefit because of the large number of patient referrals to the two hospitals involved, and the purpose of the arrangements was to induce the physicians to refer additional Medicare patients to DMC facilities. This allegedly took place from January 1, 2014, through December 31, 2017.

The case was initially brought under the qui tam provisions of the False Claims Act by a former employee of Wayne State University Medical School, which is affiliated with DMC. That employee will receive more than $5 million as part of the settlement.

The AKS prohibits any offering, paying, soliciting, or receiving any remuneration to induce referrals of items or services covered by Medicare and other federally funded programs.

“This outcome makes clear that when doctors refer patients for care at hospitals, they must do so based on their own professional judgment and the medical needs of their patients, not personal financial benefit,” said U.S. Attorney Dawn N. Ison for the Eastern District of Michigan. “Our office stands ready to scrutinize even the most complicated financial arrangements and to pursue justice wherever appropriate.”

A spokesperson noted that the health system – along with former and current owners – “admitted no liability in settling the matter” and once they “became aware of the allegations, Tenet and DMC fully cooperated with the government throughout its investigation. The matter was resolved fully to avoid the expense and operational distraction. We remain committed to full compliance with all state and federal health care program requirements and providing high-quality care to serve our community.” The spokesperson also noted that no new leases were signed once Tenet took ownership of the DMC facilities, indicating that the actions have since stopped.