On October 3rd, 2016 the U.S. Department of Justice announced that U.S. hospital chain, Tenet Healthcare Corporation, and two of its Atlanta-area subsidiaries had agreed to pay over $513 million to the federal government and to the states of Georgia and South Carolina in order to resolve criminal charges and civil claims relating to a scheme involving false claims and the provision of kickbacks in exchange for more than 20,000 patient referrals.[i]While that particular legal fight seems to be over, there is still an unresolved and related spillover case with potential ripple effect in Compliance World… S.B. v. Tenet Healthcare Corp., No. 1:17–cv–00075–RWS (N.D. Ga). To better understand this spillover case, let’s look at the facts from Tenet’s last year’s non-prosecution agreement.
According to the criminal information and civil complaints, Atlanta Medical Center Inc., North Fulton Medical Center Inc., Spalding Regional Medical Center Inc. and Hilton Head Hospital, all Tenet subsidiaries, engaged in a scheme of providing kickbacks to the owners and operators of several prenatal care clinics[ii] that served primarily undocumented Hispanic women[iii] [iv] in return for the referral of those patients for labor and delivery medical services. According to the criminal information, expectant mothers were informed at the prenatal care clinics that Medicaid would only cover the costs associated with their childbirth if they delivered at one of the Tenet hospitals, all of which led these patients to believe that they could not select the hospital of their choice. The government further claimed that, in return for these referrals, the defendants entered into translation, management and consulting services agreements with the clinics, which, in truth, were nothing more than disguised bribes.[v]
While last year’s settlement resolved the False Claims and Anti-Kickback claims against Tenet, it did not resolve the patients’ state law claims. Those claims are being argued in a class action suit in S.B. v. Tenet Healthcare Corp. in which the plaintiff argues that she was fraudulently convinced to deliver her two children at a Tenet hospital in Atlanta and that she, and other class action patients, ended up paying more for healthcare than they would have elsewhere. It is interesting to note that the class action plaintiff did not sue the prenatal care clinic but rather sued Tenet directly, under the theory that the clinic acted as an agent of Tenet and, therefore, Tenet should be held liable for the representations and statements made by the clinic under a theory of agency. In this regard, the class action plaintiff has argued, relying on the government’s case, that since the ultimate purpose of the scheme was to generate referrals, the clinics acted as agents of Tenet rather than as independent contractors. In turn, Tenet has denied the existence of any agency relationship maintaining that the actions of the prenatal care clinics were their own and, accordingly, has filed a motion to dismiss.
If the plaintiff’s agency theory is successful, it will certainly have effects in future anti-corruption enforcement actions and civil claims as it would provide yet another avenue for recovery and for private action against companies involved in corruption schemes. Stay tuned, this is about to get more interesting…
[i] Following through on their commitment to go after individuals for violating anti-corruption laws, on January 24th, 2017 the Department of Justice also indicted the former CEO of one of the Tenet Hospitals charging him with one count of mail fraud, one count of health care fraud and two counts of major fraud against the United States.
[ii] The entities involved are Hispanic Medical Management, Inc., d/b/a Clínica De La Mama and Clínica del Bebé
[iii] While undocumented women are not eligible for regular Medicaid coverage, they are generally eligible for Medicaid emergency medical assistance when delivering their babies.
[iv] Florida practitioners should bear in mind that according to the Pew Hispanic Center, the estimated number of undocumented immigrants in Georgia in 2014 was 375,000 while in Florida was 875,000 (3rd largest among all states). Seehttp://www.pewhispanic.org/interactives/unauthorized-immigrants. Accordingly, it would not be surprising for the government to now turn its eyes further south to Florida to scrutinize for similar arrangements.
[v] While Tenet argued that these were legitimate business arrangements, the facts of the case indicated that at the time one of the Tenet hospitals entered into the translation services agreement it did not have a large Hispanic patient population and, accordingly, would not need translators unless the clinic referred Hispanic patients to that hospital. See Court order on motion to dismiss at 16, United States, et al v Health Management Associates et al, No. 3:09-cv-130 (M.D.Ga June 24, 2014) available at https://ecf.gamd.uscourts.gov/cgi-bin/show_public_doc?2009-00130-163-3-cv.