Major US hospital chain Tenet Healthcare Corporation, along with two of its off-shoot hospitals near Atlanta, pled guilty earlier this month to conspiracy to defraud the United States. Tenet obstructed the function of the US Department of Health and Human Services, as well as violating the Anti-Kickback Statute.

Here’s what they did:

Tenet paid bribes and kickbacks to a pre-natal clinic for referencing over 20,000 Medicaid patients to their hospitals. “In so doing, they exploited some of the most vulnerable members of our community and took advantage of a payment system designed to ensure that underprivileged patients have choices in receiving care,” said US Attorney John Horn of the Northern District of Georgia in a press release issued by the Department of Justice.

Some of the pregnant women were told that Medicaid would only cover the costs of childbirth and the necessary care afterward if they delivered their babies at a hospital owned by Tenet. Others were simply told they had to deliver at a Tenet hospital. Either way, the expecting mothers believed they had no choice in the matter. Tenet Healthcare Corporation jeopardized the care of 20,000 pregnant women in order to defraud the Medicaid program for nearly $150 million.

Not only did Tenet profit at the expense of vulnerable pregnant women, “…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,” also according to the allegations. Plus, executives at the accused hospitals hid these payments from the Department of Health and Human Services by lying about compliance with Tenet’s own corporate integrity agreement.

To sum it up, Tenet was giving money to a pre-natal clinic that would refer their pregnant patients to Tenet-owned hospitals. The patients were told they had to deliver their babies elsewhere or else not be financially covered by Medicaid. This happened to approximately 20,000 women. It all resulted in the Tenet hospitals receiving a total of roughly $150 million in Medicaid and Medicare funds.

Because these women felt they had no choice, they “were often directed to Tenet facilities miles and miles from their homes and on their journeys passed other hospitals that could have provided needed care. These women were thereby placed at increased risk during one of the most vulnerable points in their lives,” as said by US Department of Health and Human Services Special Agent in Charge Derrick Jackson.

Nobody from Tenet Healthcare Corp. will be seeing any jail time. However, they must pay over $513 million as part of the settlements.

Why Nobody Went to Prison

After agreeing to plead guilty to the charges, Tenet entered into a non-prosecution agreement with the Department of Justice’s Fraud Section and Attorney Horn. According to the press release, the terms of the agreement are that Tenet will avoid prosecution if they “cooperate with the government’s ongoing investigation and enhance their compliance and ethics program and internal controls.” In addition, Tenet will be assigned an “independent compliance monitor” to ensure this never happens again. The agreement is only for three years, with the option of a fourth year.

Essentially they were told to stop, and that from now on they would have a chaperone.

This is not at all to belittle the Department of Justice, who after all did help stop this terrible activity. It just seems strange that nobody should have to truly be held responsible, beyond having to spend half a billion dollars. Besides, that amount of money is ridiculously large to most of us, but as a company, Tenet made over $16.5 billion in 2014. Something seems to suggest they can handle the payments. (A fair amount of the $513 million they have to pay came from their criminal scheme anyway).

Tenet: a Criminal Company

Tenet Healthcare Corporation was founded in 1967 and currently owns 79 fully functioning hospitals, 20 short-stay hospitals, 9 health facilities in the United Kingdom, and over 470 outpatient centers. Clearly they are no rookie in the game. According to their website, one of their core values is integrity, stating that “We manage our business with integrity and the highest ethical standards.”

No, Tenet, you do not.

Enacted in 1972 in order to protect both patients and healthcare facilities from fraud or abuse, the Anti-Kickback Statute, or AKS, made it illegal to exchange or offer “anything of value” for patient referrals. A private citizen who successfully sues a healthcare facility for violation of the AKS is entitled to a percentage of the winnings, secured by the False Claims Act. This is exactly what happened to Tenet.

Ralph Williams, a resident of Georgia, filed a lawsuit against Tenet Healthcare Corporation for violating the AKS. Mr. Williams acted as a whistleblower, and it turned out he blew that whistle rather loudly. Tenet, as mentioned earlier, has been ordered to pay over $513 million, spread out as follows. The federal share is $244,227,535.30, the state of Georgia’s share is $122,880,339.70, and the state of South Carolina’s share is $892,125.

Ralph Williams will receive $84,430,000 as a settlement for whistleblowing Tenet.

The DOJ’s Stance

The Department of Justice did not criminally charge any individuals, only Tenet as a corporation. However, the DOJ seems hell-bent on ending fraud in the healthcare system. Quoted in the press release, head of the Department of Justice’s Civil Division Benjamin Mizer said:
The Department of Justice continues to devote enormous resources to exposing and pursuing alleged misconduct of improper financial relationships between hospitals and referral sources. Such relationships exploit vulnerable populations and threaten to drive up the cost of healthcare for everyone. In addition to yielding a substantial recovery for taxpayers, this settlement reflects the department’s lack of tolerance for these types of abusive arrangements, and the negative effects they can have on our health care system.”

Even the FBI was involved, and continues to be in similar cases. According to Acting Special Agent in Charge of the Atlanta Field Office George Crouch, the bureau “continues to play a significant role” in enforcing the federal laws regarding the healthcare industry. The FBI’s Major Provider Response Team was created in 2011 “in response to numerous healthcare related corporate-level schemes resulting in billions in losses to healthcare plans,” says Crouch.

That’s because what Tenet did is all too common of a practice.

This Happens Too Often

Health Management Associates (HMA) is an independent healthcare research and consulting firm founded in 1985. At the beginning of last year, HMA was brought up on federal charges of billing federal healthcare programs for “medically unnecessary inpatient admissions,” and of paying kickbacks to physicians in exchange for referrals, just like Tenet did. Eight different False Claims Act lawsuits have been filed against HMA, which owns and operates 71 hospitals in fifteen states. Apparently, this practice is all too common.

“Unlawful financial relationships between hospitals and physicians solely to increase referrals are, unfortunately, a common practice that corrupts the health care system,” said Wilfredo Ferrer, US Attorney for the Southern District of Florida. The corporate officers of HMA were pressuring emergency department physicians to admit patients who did not medically need to be admitted. One of the eight lawsuits alleges that HMA scheduled patients for surgery who only required outpatient care. On top of it all, HMA paid kickbacks to those physicians who referred patients to them. Not only does this place patients at risk, it can drive the cost of legitimate healthcare up. “Schemes such as this one can contribute significantly to the rising cost of delivering health care and create needless patient risk,” says Stuart Delery of the Justice Department’s Civil Division.

Surely you remember the name Bernie Madoff. The former stockbroker and chairman of NASDAQ defrauded thousands of investors for billions of dollars, pulling off the largest financial fraud in American history. Well, at the beginning of last year, JP Morgan Chase paid $2.6 billion to the government to settle private claims regarding accounts handled by Madoff. When in 2008 JP Morgan Chase began to learn about some of Madoff’s illegal dealings, they withdrew $300 million that was invested with Madoff. Instead of protecting clients, the biggest bank in the country made sure their assets were safe.

While this is not the same as kickback from healthcare corporations, it is similar in scope because investors were lied to and the liars benefitted. (In the Tenet case, Medicaid was the investor being tricked into paying for unnecessary/unreal services).

In February of this year, Delaware-based pharmaceutical company AstraZeneca, makers of Nexium, pled guilty to violations of the False Claims Act. They agreed to pay the government a total of $7.9 million in order to settle the allegations. Apparently, AstraZeneca gave kickbacks to Medco Health Solutions for giving Nexium “sole and exclusive status on certain Medco formularies,” according to the Department of Justice. (Note: A formulary is an official list of medicines that may be prescribed.)

The lawsuit was filed by two former employees of AstraZeneca, acting as whistleblowers just like Mr. Williams in the Tenet case. The two will collectively receive $1,422,000. “Pharmaceutical companies that pay kickbacks in order to boost profits will be held accountable for their improper conduct,” said Nick DiGiulio of the Dept. of Health and Human Services. “We will continue to crack down on kickback arrangements, which can undermine drug choices for patients and corrode the public’s trust in the health care system.”

Healthcare Fraud is Rampant

The list goes on. As reported by the Chicago Tribune, within the last year, eight hospitals near Downers Grove, IL were brought up on False Claims Act violations. The same goes for PharMerica Corporation, the second-largest nursing home pharmacy in the country. The same goes for Japanese drug manufacturer Daiichi Sankyo. Cephalon Inc. and DaVita Healthcare Partners are just two more companies who gave kickbacks for referrals.

Last year, healthcare fraud was actually the number one crackdown of False Claims Act violations, accounting for $1.9 billion in settlements. The most common charges include providing unnecessary care, paying kickbacks for referrals, and overcharging for services covered by Medicaid/Medicare.

In Conclusion

It almost feels like hospitals are turning into car repair garages. Go in with what you think is something minor, leave with a million new problems. However, if you pay a few extra dollars for a car repair, you still have a car. These patients who are being put at risk and used for monetary gain have more at stake: their health.

If this multi-billion dollar business of kickbacks and bribes continues, healthcare costs will only continue to rise. If significant amounts of money are being paid by Medicaid under false pretenses, then logic tells us significant amounts of money are not being paid by Medicaid in other instances where it is legitimate.

We just hope that violators of the False Claims Act continue to be caught and prosecuted, so that our health and well-being stops being bought and sold.