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Tenet Healthcare to pay $513 million over referral, kickback scheme, DOJ says

Payout settles allegations of illegal kickbacks paid to clinic owners in exchange for referring patients for labor and delivery to Tenet hospitals.

Beth Jones Sanborn, Managing Editor

Hilton Head Hospital (Photo via Google)Hilton Head Hospital (Photo via Google)

Tenet Healthcare Corp. and two of its Atlanta-area subsidiaries have agreed to pay a total of $513 million to settle allegations of a scheme in which its hospitals paid bribes and kickbacks to prenatal clinic owners in exchange for referral of patients for labor and delivery services to Tenet facilities, the Department of Justice and multiple other agencies jointly announced Monday.

According to the DOJ, criminal information and civil complaints filed in 2013 and 2014 show Atlanta Medical Center, North Fulton Medical Center, Spalding Regional Medical Center and Hilton Head Hospital all participated in a scheme where bribes and kickbacks were paid to the owners and operators of prenatal care clinics that mostly served undocumented Hispanic women. The complaint claimed the kickbacks were paid in exchange for referring those patients for labor and delivery medical services to Tenet hospitals. More than $145 million in Medicaid and Medicare reimbursements were paid to Tenet based on the referrals, the DOJ said.

Authorities said clinics sometime told expectant mothers that Medicaid would cover the childbirth and newborn care costs only if they delivered at one of the Tenet hospitals. Sometimes they were informed they were required to deliver at one of the Tenet hospitals, giving them the impression they could not choose their hospital themselves, the DOJ said.

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"As a result, many expectant mothers traveled long distances from their homes to deliver at the Tenet hospitals, placing their health and safety, and that of their newborn babies, at risk," the DOJ said in a statement.

As part of their civil settlement, which allows Tenet to avoid prosecution, Tenet will pay $368 million to the federal government, the state of Georgia and the state of South Carolina to resolve the claims, which were part of a whistleblower, or qui tam, lawsuit filed by Ralph D. Williams, a Georgia resident, under the federal and Georgia False Claims Acts.  The laws allow whistleblowers to file suit for false claims against the government entities and to share in any recovery. Mr. Williams' share of the combined civil settlement amount is approximately $84.43 million, according to the DOJ.

In addition to the monetary penalty, Tenet must enhance their compliance and ethics programs and internal controls, and must staff an independent compliance monitor. The agreement is in place for three years but can be extended for up to another year.

One measure Tenet said they are already implementing to reduce the likelihood of similar fraudulent behavior is to restrict their facilities from contracting with referral sources for services when a non-referral source or vendor is available to perform the same service, a Tenet spokesperson said.

The two Tenet subsidiaries that previously operated Atlanta Medical Center and North Fulton Hospital in Georgia were also charged Monday in relation to the scheme. They will plead guilty to a single count of conspiracy to violate the Federal Anti-Kickback Statute and defraud the United States, and will forfeit over $145 million to the United States, an amount equal to monies paid to Atlanta Medical Center Inc. and North Fulton Medical Center Inc. by the Medicare and Georgia Medicaid programs for services provided to patients as part of the referral scheme, the DOJ said.

[Also: Running list of notable 2016 healthcare frauds]

Tenet completed the divestiture of both facilities on March 31, 2016, and the subsidiaries currently have no operating assets.Tenet said in a statement.

Additional charges against those two subsidiaries stem from the violation of a corporate integrity agreement that was put in place in 2006 and was in effect as many of the unlawful kickbacks and bribes were paid. The criminal information filed said Tenet employed in-house lawyers and also engaged outside counsel to review and approve agreements between the Tenet Hospitals, Atlanta Medical and North Fulton and the clinics. It alleges that certain executives at Tenet hospitals, Atlanta Medical Center and North Fulton concealed the kickbacks from Tenet in-house lawyers and outside counsel "because they knew that the agreements would not be approved if the true nature of the Clinica arrangements were disclosed to the lawyers," legal documents said.

The same document said those executives caused Tenet to authorized or make payments to Clinica without valid contracts in place, and make payment without proper documentation, which violated company policies and controls. The activities were also hidden from the Office of the Inspector General, and executives falsely certified compliance to the integrity agreement.

"The conduct in this matter was unacceptable and failed to live up to our high expectations for integrity," Trevor Fetter, Tenet chairman and chief executive officer, said in a statement. "The relationships between the four hospitals and Clinica de la Mama violated the explicit requirements of our compliance program and were inconsistent with the strong culture of compliance we've worked hard to establish at Tenet."

Twitter: @BethJSanborn