Here’s why doctors should worry about the feds’ novel approach to prosecuting health care kickback cases – By Kevin Krause (Dallas News) / April 14 2019
Texas doctors who cut business deals with hospitals thought they were in the clear, as long as they avoided Medicare patients and those covered by other federal health insurance programs.
That way, they couldn’t run the risk of violating the federal anti-kickback law. That’s the way it’s always been.
Using a 60-year-old law, federal prosecutors have found a way to target health care kickback schemes that involve private insurance. The guilty verdicts against surgeons and others in the Forest Park Medical Center case are sending shock waves throughout the U.S. medical community and could upend many doctor-hospital relationships. The trial also revealed just how important doctors are to the financial survival of hospitals, and how far hospitals will go to attract them.
Some attorneys are crying foul, saying the government has moved the goalposts by using the Travel Act, which was passed to crack down on organized crime. Many attorneys are scrambling to advise their clients accordingly. A lot of money is at stake. Marketing agreements, in particular, are suddenly in the hot seat. But consulting agreements, medical directorships and office leasing arrangements are all in the mix, too.
“I think there is a lot of worry,” said Carolyn McNiven, a San Francisco health care lawyer who, like others, was closely watching the seven-week trial in Dallas. “I think a lot of people are walking into a buzz saw that they don’t know is coming.”
The Travel Act gives federal jurisdiction to a wide range of crimes, including bribery, if state lines are crossed using mail or electronic communications. But until recently, it’s never been used in health care fraud cases.
Federal prosecutors used it in Dallas successfully for the first time, in the Forest Park trial that wrapped up last week.
The jury found that Forest Park paid lucrative benefits to surgeons in the form of free advertising in exchange for them bringing their expensive surgeries to the hospital. Such quid pro quos are considered illegal kickbacks.
Dr. Michael Rimlawi is one of seven defendants who were convicted and found guilty of one of the more serious charges in the indictment for conspiracy to pay and receive health care bribes and kickbacks. (Rose Baca/Staff Photographer)
Dr. Michael Rimlawi, one of the convicted Forest Park surgeons, appeared stunned by the guilty verdict against him last week. He faces up to 15 years in prison.
“I’m in disbelief,” Rimlawi told supporters gathered around him at the federal courthouse in Dallas. “I thought we had a good system, a fair system.”
McNiven and other health care lawyers say they believe the government will view the Forest Park case as a green light to launch more prosecutions in similar cases involving private insurance provided by such companies as Aetna and United Healthcare.
“The entire health care industry is looking at Dallas,” said Nick Oberheiden, a Dallas health care lawyer. “I think this is a complete shakeup.”
James A. Fisher, who has represented whistleblowers in health care fraud cases, said the new enforcement effort is a major step forward.
“I am glad the government aggressively prosecuted that case, because this is a serious problem. If the doctor’s decision is influenced by anything other than the patient’s best interest, then that is a corrupted process,” he said. “It will bring more integrity into decision-making by physicians.”
Two of the nine Forest Park defendants on trial were found by the jury to have violated the Travel Act: Wilton “Mac” Burt, a founder and top manager of the hospital, and Dr. Shawn Henry, a Fort Worth spine surgeon who referred patients to the hospital. The Forest Park prosecution also involved some federal insurance programs like Tricare, the military’s health program.
Four of the defendants were acquitted of charges related to the Travel Act, which some lawyers say should temper the government’s enthusiasm for the law.
Dr. Richard Toussaint, a founder of Forest Park Medical Center, is serving his prison sentence for his role in a $40 million bribery and kickback scheme. (File Photo/Staff)
Tom Melsheimer represented Dr. Nick Nicholson, a bariatric surgeon, the only Forest Park defendant to be acquitted last week of all charges against him.
“The verdict can be viewed as a pretty serious rebuff of the Travel Act theory as applied to the doctors,” he said. “No doctor who participated in the marketing program was convicted of a Travel Act count.”
Two other Forest Park founders and physicians, Dr. Richard Toussaint and Dr. Wade Barker, pleaded guilty to violating the Travel Act.
Most Forest Park defense attorneys declined to comment after the verdicts. Some said they plan to appeal. The convictions are not final until affirmed by an appellate court.
Doctors and their surgeries are critical for a hospital’s bottom line, and thus getting patients in the door and on the operating table has become big business — to such an extent that prosecutors say Forest Park had to bribe doctors for surgeries when it opened and for several years afterward.
Two Forest Park doctors, for example, operated there up to 14 times a day, from early morning until night, according to trial testimony. A recent survey found that doctors legally generate an average of $2.4 million per year for their affiliated hospitals.
The survey shows that doctors “continue to drive the financial health and viability of hospitals,” said Travis Singleton, executive vice president of Merritt Hawkins, a Dallas physician search firm that conducted the survey. The results were released as the Forest Park trial got underway.
Certain medical specialties generate the most revenue. Orthopedic and cardiovascular surgeons, for example, bring in an average of over $3 million for their hospitals each year, according to the survey.
Marketing arrangements between doctors and hospitals are commonplace across Texas, according to testimony during the Forest Park trial. Under such contracts, hospitals pay to advertise the practices of doctors who bring their surgeries to the hospital. But Forest Park picked up 100 percent of the tab even though the ads barely, if ever, mentioned the hospital.
That is a benefit, prosecutors argued — a lucrative one that helped the doctors grow their practices significantly.
The Forest Park surgeons argued there were no strings attached to that money. But prosecutors convinced a jury otherwise, showing that the doctors were being paid to steer their patients to Forest Park — and hiding behind legal contracts to do so.
At least three other Dallas hospitals have paid doctors for patients using marketing agreements, according to federal prosecutors.
Two of them, Vista Hospital and Victory Hospital, have since shut down like Forest Park. The third, Pine Creek Medical Center, paid a $7.5 million fine to the government in 2017 for a scheme similar to the one at Forest Park — paying doctors for patient referrals with free advertising on billboards, radio and TV, and the internet, according to the U.S. attorney.
The Pine Creek case came to light in a whistleblower lawsuit filed by two of the hospital’s former marketers. That scheme, however, involved Medicare and Tricare beneficiaries and did not employ the Travel Act and Texas’ commercial bribery law.
Pine Creek’s new chief executive, Dan Gideon, said his hospital has some new owners and is meeting the terms of its five-year corporate integrity agreement with the government. He said no additional concerns have been raised.
Competing for patients
At Forest Park, surgeries meant big bucks.
When the hospital opened in 2009, there was already a healthy competition for patients. Forest Park had another challenge: It wasn’t in any insurance networks and it didn’t accept Medicare patients.
Forest Park’s top administrator, Alan Beauchamp, didn’t mince words about the urgency of patient referrals.
“We need more bodies on the table,” he told Israel Ortiz, a clinic owner and co-defendant who admitted to selling patients to Forest Park.
The question then for hospitals, especially new ones, is how to legally attract patients without offering improper financial incentives.
Jacob T. Elberg, an associate professor at Seton Hall University School of Law in New Jersey, understands those business pressures.
When he was a federal prosecutor, he led a massive kickback prosecution in New Jersey that ultimately resulted in the convictions of over 50 defendants, including 38 doctors. The case, which wrapped up last year, involved a lab called Biodiagnostic Laboratory Services, which paid kickbacks to doctors for patient referrals.
Elberg’s case is believed to be the first time a federal jury convicted someone of violating the Travel Act in a health care fraud case.
Alan Beauchamp was considered the mastermind of Forest Park’s bribery and kickback conspiracy. He pleaded guilty to his role.
The Travel Act was passed in 1961 to crack down on organized crime. The law makes it illegal to use the mail or other forms of interstate commerce to commit any “unlawful activity,” such as bribery. The federal law essentially piggybacks on state commercial bribery laws like the one in Texas, which apply to health care schemes involving private health insurance.
The government doesn’t even have to show patient harm in such cases.
Elberg, who was chief of the District of New Jersey’s health care and government fraud unit, said many states don’t have the resources or the expertise to take on large-scale prosecutions for health care bribes and kickbacks.
Texas has never enforced its commercial bribery law, according to testimony in the Forest Park trial.
“This is an area where there hasn’t been as much enforcement as there should be,” Elberg said.
Certain health care providers have taken advantage of that for years, he said. But Elberg said his case had a major deterrent effect.
“We were aware of misconduct that was ongoing that stopped as a result of this,” he said.
Oberheiden, the Dallas lawyer, said having a marketing contract that on its face complies with the law will no longer suffice for doctors.
“If the motives behind it are not legitimate, then the contract is not worth the paper it’s written on,” he said.
Lawyers, Oberheiden said, will need to be careful about authorizing such contracts and then closing their eyes to what they will be used for. And clients need to understand that “if undisclosed motives don’t match the language of the contract, then it’s useless.”
Jeff Ansley, a Dallas health care lawyer, called the Forest Park case and its use of the Travel Act a creative yet “very aggressive prosecution.”
He said the case will add confusion to the question of which doctor business practices are appropriate. The Justice Department should provide more legal guidance on the matter, Ansley said, particularly since doctors aren’t trained in the business of medicine.
“There is a lot of gray out there,” he said of doctor marketing arrangements. “It’s increasingly unclear where the lines are.”
A physician injects painkillers into a patient suffering from back problems at Forest Park Medical Center in 2014. The hospital went out of business while federal authorities were investigating its payment of kickbacks to doctors. (File Photo/Staff)
In the Forest Park case, well-educated and respected practitioners had their business agreements vetted by lawyers and still got convicted, Ansley said. They included surgeons who pioneered techniques that cut down on infection and speed up recovery.
“You wouldn’t think they went to medical school to commit fraud, and here they are,” Ansley said.
McNiven, the San Francisco lawyer, echoed those concerns, saying those in the health care industry rely on “predictability” in enforcement.
“The application of the Travel Act really upended what people thought were the acceptable rules of the road,” she said. “I do feel like this is hiding the ball.”
Most lawyers are familiar with the federal Stark and anti-kickback laws, but they aren’t thinking about state commercial bribery laws like the one Texas has on the books, she said.
Jason Ross, an attorney for Burt, said the government’s prosecution should concern “individuals and companies in the health care industry.” He said it “marks an expansion of federal law enforcement” by “alleging fraud against private insurers by way of the Travel Act’s ability to federalize state laws.”
“The specter of more aggressive federal criminal enforcement of this type could certainly shift the balance of power in favor insurance companies, to the detriment of health care providers,” Ross said.
Ansley and McNiven said the ultimate impact of the Forest Park case might be to discourage many doctors from engaging in any sort of business relationships.
And that would be bad for doctors and patients, they said.