The Department of Justice announced that a former Texas chief executive officer has been sentenced to three years in federal prison for conspiring to violate the federal Anti-Kickback Statute (AKS). Jeffrey Paul Madison, the former CEO of Little River Healthcare, also agreed to pay more than $5.3 million to resolve allegations under the federal False Claims Act.
Madison and his hospital, along with Stamford Memorial Hospital, partnered with Boston Heart Diagnostics, a clinical laboratory that specialized in advanced cardiovascular lipid testing. Boston Heart Diagnostics would charge a fee for processing blood testing while the hospitals billed the tests to insurers as hospital outpatient services, a much higher rate than Boston Heart Diagnostics could receive as a clinical laboratory.
Additionally, the hospitals used a network of marketers who operated management services organizations that offered investment opportunities to Texas physicians. The management services organizations were more or less a way to facilitate payments to physicians as a kickback for their referrals to the laboratory. The hospitals paid a portion of their laboratory revenues to marketers, who kicked back a portion of those funds to the referring physicians who ordered Boston Heart Diagnostics tests from the hospitals or directly from Boston Heart Diagnostics. Boston Heart Diagnostics used those kickbacks to increase referrals, thereby increasing their revenues.
Co-conspirators of Madison were charged with lesser prison sentences and monetary fines. One co-conspirator, Robert O’Neal, responsible for coordinating physician referrals and recommending the ordering of services to the rural hospitals and Boston Heart Diagnostics, pled guilty to conspiracy to commit illegal remunerations, in violation of Anti-Kickback Statute, and to conspiracy to commit money laundering. Peter J. Bennett, a co-conspirator who created sham trusts and shell corporations to launder millions of dollars in healthcare kickback proceeds, was convicted of money laundering conspiracy, money transmitting conspiracy, and perjury. Bennett used his law firm’s Interest on Lawyers Trust Account (IOLTA), operating account, and a personal bank account to launder the kickback proceeds.
“Patients should be able to trust that their physicians are ordering tests and making laboratory referrals based on what is best for the patient, and not because the physicians are looking to pad their pockets with profits from kickbacks,” said United States Attorney Damien M. Diggs. “For several years, these defendants utilized an elaborate marketing scheme to facilitate payments to physicians in return for the physicians’ laboratory referrals. Improper financial relationships such as these undermine the integrity of federally-funded healthcare programs by influencing physician decision-making. This case emphasizes our District’s commitment to justice by pursuing both the hospital and lab executives who sought to influence the physicians and the physicians who accepted the illegal kickbacks.”
“The Justice Department will continue to pursue individuals — including C-suite executives — who commit health care fraud,” said Principal Deputy Assistant Attorney General Brian M. Boynton, head of the Justice Department’s Civil Division. “Kickbacks to physicians from laboratories or other healthcare providers can undermine healthcare decision-making, subject patients to unnecessary medical services and waste taxpayer funds.”