Like dancing the tango, engaging in a kickback takes two.

Supplier Medline Industries agreed to an $85 million settlement of a whistle-blower lawsuit brought by a former Medline executive who alleged the company paid bribes and kickbacks—the latter disguised as rebates, donations from Medline's foundation or loans that would never be collected as long as the customer kept buying—to hundreds of providers, according to the whistle-blower's second amended complaint.

The case was brought by Sean Mason, who worked for the Mundelein, Ill., company from December 1998 through September 2005, according to the complaint. Mason is scheduled to receive nearly $23.8 million from the settlement that Medline is paying to the federal government, and Medline is also paying $6 million to the four law firms that represented Mason, according to the settlement.

Even if the allegations are true—and Medline denies all wrongdoing in the settlement—the hospitals involved didn't necessarily do anything wrong, said David Glaser, a healthcare lawyer and partner with Fredrikson & Byron in Minneapolis.

“One party can have improper intent; it doesn't mean the other one does,” Glaser said. In order for the rebate schemes to be a kickback, he added, “There has to be a third party being deceived. It depends on how the various hospitals recorded the discounts. If they had the discounted rates on their cost reports, I don't see how it's a kickback.”

In a statement, Medline said there were no allegations that government programs paid more because of these former practices. The federal government declined to intervene in the case, according to court records.

“The government's decision not to intervene is telling,” said Glaser, who has followed the case, filed in U.S. District Court in Chicago, but was not involved in it. “That certainly would calm me down. I would be much more nervous if the government did intervene.”

The healthcare providers contacted for this story all denied any wrongdoing. None of them was named as a defendant and several cited that fact in declining to comment about the allegations; those that did provide statements also cited that fact.

For example, the complaint contains several allegations regarding Mount Sinai Medical Center in New York. These include that Mount Sinai executives received Super Bowl tickets and round-trip airfare to see the game in Jacksonville, Fla., in 2005 and that Medline contracted to pay Mount Sinai what the complaint calls “prebates” based on its level of purchasing.

In a statement, the hospital said, in part, “Since Mount Sinai was never a party to the case, it was unable to rebut these allegations and have them dismissed from the lawsuit. Mount Sinai has a rigorous compliance program and strict policies governing relationships with vendors that prohibit the behavior alleged in the Medline case. Our review showed that these policies were followed.”

Similarly, Nashville-based HCA said in a statement that its relationship with Medline followed its processes for dealing with vendors. The complaint alleges that Medline paid for an HCA purchasing official to participate in a pro-am golf event, but the company's statement said HCA paid for its executive's participation.

The complaint alleged that HealthSouth Corp., Birmingham, Ala., was the largest recipient of a so-called consignment loan from Medline. Mason alleged that Medline would enter into agreements to buy a provider's inventory of products purchased from competitors equal to 8.5%, or about one month's worth, of goods that the provider had agreed to buy from Medline in a year. The providers would keep the products, but if they stopped purchasing from Medline, Medline could force them to repay this loan, according to Mason's complaint.

HealthSouth received a $2 million consignment payment in return for an agreement covering 2001 through 2003 and subsequent years, according to the complaint. In December 2003, HealthSouth—by then under new management after federal regulators had revealed its fraudulent accounting—signed a group-purchasing agreement with MedAssets but was forced to buy from Medline instead of MedAssets's preferred suppliers in some cases to avoid repaying the $2 million, according to the complaint.

In a statement, HealthSouth noted that it was not a party to the lawsuit and denied any wrongdoing.