DOJ Reaches $45 Million Settlement with Skilled Nursing Facilities Over False Claims Act and Anti-Kickback Allegations

The United States Department of Justice (DOJ) recently reached a $45.6 million settlement with six skilled nursing facilities (SNFs) and their owner and management company, to resolve allegations that the parties violated the False Claims Act and Anti-Kickback Statute. The six SNFs were either owned by Prema Thekkek and/or operated by her management company Paksn Inc., and included: Kayal Inc. (doing business as Bay Point Healthcare Center), Nadhi Inc. (doing business as Gateway Care & Rehabilitation Center), Oakrheem Inc. (doing business as Hayward Convalescent Hospital), Bayview Care Inc. (doing business as Hilltop Care and Rehabilitation Center), Aakash Inc. (doing business as Park Central Care & Rehabilitation Center) and Nasaky Inc. (doing business as Yuba Skilled Nursing Center), collectively referred to as the “SNF Defendants.”

The claim was initially brought by Paksn’s former Vice President of Operations and Chief Operating Officer under the qui tam provisions of the False Claims Act.

The DOJ alleges that from November 15, 2009, through December 31, 2021, the SNF Defendants (under the direction and control of Thekkek and Paksn) systematically entered into medical directorship agreements with physicians that were purportedly providing compensation for administrative services, but were actually ways to pay kickbacks to entice the physicians to refer patients to the six SNFs. According to the DOJ, the SNF Defendants did this by hiring physicians who promised in advance to refer a large number of patients to the SNFs , paid physicians in proportion to the number of their expected referrals, and terminated physicians who did not refer a sufficient number of patients.

There was one specific instance cited where a Paksn employee told Thekkek that two physicians were “promising at least 10 patients for $2000 per month,” to which Thekkek replied, “good job. Make sure they give you patients every day. [W]e can also expand to other buildings with them, if possible.” There was another alleged instance where an employee told Thekkek that the SNF Defendants had paid a certain doctor “$1500 each month and he only send us 2 patients so we didn’t pay him anything from Jan[uary] onwards.” Thekkek also was known to complain if the employees did not pay medical directors on time every month as they “will not give us patients.”

The consent judgment amount totaled $45,645,327.25. The defendants agreed to make payments of at least $385,000 over the next five years and due to lack of funds, the settlement outlines the terms of payment to be made from all defendants, including garnishment of Thekkek’s annual disposable income.

As we commonly see, the claims resolved by the settlement are only allegations and no determination of liability has been made.

“Kickbacks can impair the independence of physician decision-making and waste taxpayer dollars,” said Principal Deputy Assistant Attorney General Brian M. Boynton, head of the Justice Department’s Civil Division. “The department is committed to preventing illegal financial relationships that undermine the integrity of our public health care programs.”

Corporate Integrity Agreement

In addition to the settlement, the defendants entered into a five-year corporate integrity agreement with the Department of Health and Human Services Office of Inspector General. The corporate integrity agreement includes requirements such as having an Independent Review Organization review any of the SNF-physician relationships.