Tenet fraud probe signals feds’ growing interest in criminal cases

“You have to have some level of senior management involved and some sort of pattern that ... this was part of a strategy or policy or intent of the organization to bill in this way.” Sheryl Skolnick Director of research and healthcare analyst Mizuho Securities USA

The Justice Department has launched a criminal investigation into previously disclosed allegations that Tenet Healthcare Corp. hospitals paid kickbacks for maternity referrals. The probe reflects a growing appetite among prosecutors to pursue criminal charges in corporate healthcare fraud cases.

In a filing to the Securities and Exchange Commission this month, Tenet said four of its hospitals in Georgia and South Carolina are under criminal investigation related to a whistleblower lawsuit filed in 2009. Tenet spokesman Donn Walker declined to comment further.

Meanwhile, the Justice Department has adopted a procedure to make sure its civil division shares all new whistle- blower complaints with its criminal division to allow the department to conduct parallel investigations.

In the Tenet case, the civil complaint alleges that the hospitals paid kickbacks to a company called Hispanic Medical Management to send pregnant women from the company’s prenatal clinics to Tenet hospitals to deliver their babies. Those patients— most of whom were in the country illegally—would then be eligible for emergency Medicaid coverage. The government also alleged the hospitals included those improperly referred patients when seeking supplemental Medicare funding for treating uninsured and low-income patients.

Tenet has countered in court documents that its hospitals’ contracts with Hispanic Medical Management were meant to “create a culturally sensitive and attractive prenatal environment for women.” The management company has provided translators and community outreach, helping families apply for Medicaid coverage, according to Tenet, which called the efforts an “attractive solution” for handling an underserved population.

A former Hispanic Medical Management owner and a former Tenet employee have been criminally charged in the matter. The civil suit has been put on hold pending further criminal proceedings, according to Tenet’s SEC filing.

Tenet officials said the Justice Department informed the company on April 10 that the four hospi- tals named in the civil suit are also under criminal investigation. Those hospitals are: Atlanta Medical Center; Hilton Head (S.C.) Hospital; North Fulton Hospital, Roswell, Ga.; and Spalding Regional Medical Center, Griffin, Ga.

Criminal investigations and charges in big healthcare fraud cases are becoming more common, said Sheryl Skolnick, director of research at Mizuho Securities USA, even though it’s more difficult to bring criminal than civil charges because there must be proof of intent.

“You have to have some level of senior management involved and some sort of pattern that … this was part of a strategy or policy or intent of the organization to bill in this way,” Skolnick said.

Last week, Leslie Caldwell, the Justice Department’s assistant attorney general for its criminal division, stressed her division’s commitment to fraud prosecutions during remarks at an American Bar Association conference on healthcare fraud. Under the Justice Department’s new policy, she said, all new whistle-blower complaints in the civil division are shared with her division. “Parallel investigations maximize the department’s ability to secure the appropriate outcome in each matter— whether it be financial penalties, restitution, federal program exclusion or criminal prosecution of both corporations and individuals,” Caldwell said.

Patrick Burns, co-director of the Taxpayers Against Fraud Education Fund, a not-for-profit partly funded by whistle-blowers and law firms representing them, said prosecutors are seeking to maximize financial returns for the government in large cases, especially as the recovery amounts climb.

In a separate matter, Tenet also disclosed this month that it is in discussions with the Justice Department over a potential settlement involving the corporation’s use of implantable defibrillators at 56 hospitals from 2002 to 2010.