Two of Tenet Healthcare Corp.'s former subsidiaries admitted to conspiring to defraud Medicaid by using referral contracts for translation services to funnel pregnant patients through their doors.
Atlanta Medical Center and North Fulton Hospital in Georgia each pled guilty to one count of conspiracy to violate federal anti-kickback laws and defraud the United States, Tenet said on Monday, as it finalized a $514 million settlement over its involvement in the scheme.
In 2014, the U.S. Justice Department joined a whistleblower lawsuit accusing Tenet and four of its hospitals of allegedly making illegal payments to clinics operated by Clinica de la Mama and Hispanic Medical Management in exchange for Medicaid patient referrals, a violation of the federal anti-kickback statute and Stark law.
The federal government alleged Tenet made payments to Hispanic Medical Management under the guise of commissioning translation, marketing and Medicaid eligibility determination services, but they were actually illegal kickbacks.
The federal government acknowledged that individuals at the hospitals withheld information from Tenet about the agreements and circumvented Tenet's policies and procedures to prevent such illegal conduct.
“Our Medicaid system is premised on a patient's ability to make an informed choice about where to seek care without undue interference from those seeking to make a profit,” said U.S. Attorney John Horn. “Tenet cheated the Medicaid system by paying bribes and kickbacks to a pre-natal clinic to unlawfully refer over 20,000 Medicaid patients to the 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.”
Tenet eventually sold Atlanta Medical Center and North Fulton Hospital in March 2016 and also sold one other involved hospital. The Dallas-based health system said Monday that neither of the hospitals have operating assets at this time. Spalding Regional Hospital in Griffin, Ga., and Hilton Head Hospital on Hilton Head Island, S.C., were also involved in the scheme.
“The conduct in this matter was unacceptable and failed to live up to our high expectations for integrity,” said Trevor Fetter, chairman and CEO of Tenet. “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.”
The health system says it has revamped its policies for referral source arrangements and is strengthening its audit and oversight activities in light of the alleged conduct. It will be in a compliance-monitoring program for the next three years with an independent monitor overseeing its referral source arrangements.
Tenet announced the underlying $514 million settlement in August.
The hospital chain has faced some rough financial times lately, posting a net loss of $59 million in the first quarter of 2016, compared to a net income of $47 million a year before. In May, it dramatically increased its reserve for the eventual false claims settlement to $407 million, which still didn't cover the full extent of the hit. In the second quarter, it fell short of analysts' expectations with a 44 cent per share net loss from continuing operations.