Tenet has been locked in a legal battle against allegations that four of its hospitals violated the Anti-Kickback Statute and the False Claims Act. Recently, in an attempt to settle the allegations, Tenet made an offer to pay $238 million.
The criminal investigation into Tenet, which was initiated last year, arose out of a civil lawsuit filed under the qui tam provision of the False Claims Act. The lawsuit alleges that contractual arrangements between four of the Tenet hospitals and Georgia-based Hispanic Medical Management violated the Anti-Kickback Statute and the False Claims Act, specifically, that the hospitals paid illegal kickbacks to clinics that referred undocumented pregnant patients to them for deliveries paid for by Medicaid. This is an illegal kickback because while undocumented patients are not eligible for regular Medicaid coverage, they typically qualify for emergency medical assistance when they deliver their babies. The government alleged that the hospitals included the Medicaid-ineligible women when seeking additional Medicaid funds intended to support hospitals that treat a large number of low-income patients.
In a recent Securities and Exchange Commission (SEC) filing, Tenet said it began discussions with the Department of Justice and the State of Georgia in January, attempting to resolve both the criminal investigation and the civil litigation. Initially, in December 2013, Tenet made an offer of approximately $20 million to settle the case, reflecting the “low end of the range of probable liability in connection with the civil litigation.” On February 18, 2016, Tenet bumped up their official offer, to $238 million, to settle the matters.
Tenet’s SEC filing included a statement on the settlement proposal, stating, “we expect that the DOJ will make a counterproposal, and there can be no assurance that the ongoing uncertainties and potentially wide range of outcomes associated with any potential resolution, we cannot estimate the ultimate amount of potential loss or range of reasonable possible loss we may face.”
Criminal Investigation
The criminal investigation stems out of a subpoena from the Department of Health and Human Services in Atlanta, received by Tenet in 2012, requesting Tenet documents. The investigation has continuously centered on the relationship with Hispanic Medical Management, who Tenet contracted with for translation, marketing, management, and Medicaid eligibility determination services. The four Georgia hospitals involved in the investigation are: Atlanta Medical Center; South Fulton Medical Center, which consolidated with Atlanta Medical Center in 2013; North Fulton Regional Medical Center; and Spalding Regional Medical Center.
In 2014, federal investigators filed criminal charges against two people involved in the kickback scheme, a former owner of HMM and a former employee of a Tenet hospital. On April 10, 2015, the DOJ informed Tenet that the criminal investigation expanded to include four of its hospitals.
What Next?
The DOJ will have the opportunity to respond to Tenet’s settlement offer, and either accept it, or reject it, as they did with the $20 million offer in December 2013.
According to Sheryl Skolnick, the Director of Research and a healthcare analyst at Mizuho Securities USA, criminal investigations and charges in big Medicare and Medicaid fraud cases are becoming more comment. Historically, she said, criminal prosecution was more common in the smaller Medicare and Medicaid fraud cases. One of the reasons the DOJ may have been focusing on smaller cases first is because it is difficult to bring criminal charges, since the standard of proof is higher than it is in civil cases.
“You have to prove intent, which at a corporate level means you have to have some level of senior management involved and some sort of pattern that you can essentially say this was not just a fluke of a one-off situation but rather this was part of a strategy or policy or intent of the organization to bill in this way,” Skolnik stated.
This rise in criminal investigations of companies and potential fraud cases of all sizes, means companies must be increasingly vigilant as to what is going on at all levels, but especially senior management level.
We will be sure to monitor the progress of settlement negotiations between Tenet and the DOJ, and are interested whether Tenet and the DOJ will be able to come to one single settlement agreement, or if it will go through two separate trials, one concluding the criminal investigation, and the other concluding the civil allegations.