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By Eric Topor
A former Tenet Healthcare senior vice president is facing up to 50 years in prison on health-care fraud charges that he used bribes and other kickbacks in a $400 million scheme to induce Medicaid referrals to Tenet hospitals ( United States v. Holland , S.D. Fla., No. 17-cr-20054, indictment 1/24/17 ).
The federal government charged John Holland with four fraud counts in the U.S. District Court for the Southern District of Florida Jan. 24, and accused the former executive of running the fraud scheme from 2000 through 2013. The government said Tenet netted $127 million in tainted Medicaid reimbursements, which also boosted Tenet’s Medicare disproportionate share hospital payments by $22 million.
Holland’s indictment comes amid a Department of Justice effort to hold individuals accountable for corporate fraud. The charges come on the heels of Tenet’s $513 million settlement with the government in October 2016, which included an admission of guilt from two Tenet subsidiaries and a nonprosecution agreement conditioned on the company cooperating in continuing investigations of individuals who might be culpable in the fraud scheme ( 192 HCDR, 10/4/16 ).
Holland pleaded not guilty to the charges, according to his attorney, Richard H. Deane, with Jones Day in Atlanta. Deane said in a statement that "[t]he allegations relate to contracts from more than 10 years ago that were openly reviewed and approved at multiple levels of the company, including by their lawyers, under circumstances in which there was no personal benefit or gain to Mr. Holland.” Deane additionally said Tenet’s resolution of the charges “should have ended the matter” and that he and his client “look forward to presenting this case to a jury.”
Jesse A. Witten, a partner at Drinker Biddle & Reath in Washington who specializes in health-care fraud defense, told Bloomberg BNA Feb. 2 “where the company pleads guilty, as Tenet did, there is a pretty great chance the government will also want to bring a criminal case against a corporate executive.” However, Witten noted, it’s “much more difficult to get a jury to convict an individual than it is to press a corporation to settle or even plead guilty.”
Holland could be liable for severe monetary penalties and restitution if convicted, in addition to a maximum possible 50-year prison sentence. The government Jan. 30 filed notices of forfeiture against two homes owned by Holland, one located in Dallas and the other in Park City, Utah.
Health-care fraud attorneys have been closely watching the DOJ’s moves against individuals accused of fraud since the department’s 2015 directive (informally known as the Yates memo) from former Deputy Attorney General Sally Q. Yates to focus more on holding culpable individuals accountable in corporate fraud investigations. Linda Baumann, a health-care attorney with Arent Fox in Washington, told Bloomberg BNA Feb. 2 she’s seen “a ramp-up of health-care fraud prosecutions against individuals over the past 6-8 months.”
One recent example includes the Jan. 23 intervention by the U.S. Attorney’s Office for the Eastern District of Texas in a False Claims Act lawsuit against an Oklahoma official Herbert S. Williamson, who is accused of receiving kickbacks in exchange for lucrative ambulance services contracts ( United States ex rel. Dean v. Paramedics Plus, LLC, E.D. Tex., No. 14-cv-203, complaint in intervention 1/23/17 ). The Tenet investigation began as a whistle-blower’s FCA lawsuit which later morphed into criminal prosecutions of individuals, and the DOJ very well may follow the same path in the Paramedics Plus litigation.
Baumann said the increase in attention to individual criminal liability wasn’t surprising given the Yates memo’s directive, though “we didn’t see a tremendous increase in individual prosecutions initially.” Baumann said “it likely took some time to develop these cases,” and also said it was possible that “there was a push by the government to wrap up investigations, as much as possible, before the administration changed.”
Witten said individual fraud prosecutions following corporate settlements are “still the exception rather than the rule,” but added that “we are beginning to see more of it.” One indication of the DOJ’s intention on this front might be its increasing use of corporate cooperation provisions in FCA settlements since the Yates memo was issued. These provisons direct corporate entities to cooperate fully with investigations of individuals who could be involved in related fraud.
Tenet’s corporate resolution and admission of guilt in the kickback scheme included such a cooperation provision. Additionally, Yates said in a November 2016 speech that the DOJ had adjusted its internal policy on prosecution of corporations (known as the “Filip factors”) to provide full cooperation credit to corporations only if they voluntarily self-disclose potential fraud.
Baumann said “settlement agreements requiring that entities cooperate with further related investigations can facilitate such prosecutions.” She also said it was “significant” that Tenet was under a corporate integrity agreement while the fraud scheme was ongoing and that and Holland, allegedly, made false certifications of compliance. “Generally, the government sees fraud and abuse violations that occur during a CIA as more serious,” Baumann said, “and thus is more likely to proceed against involved parties.”
Still, Witten said he expects to see “more efforts by the OIG to exclude executives following large settlements with their companies” rather than outright prosecutions. Witten noted that excluding individuals from participation in federal health-care programs is easier than securing a criminal conviction “and also has a deterrent effect, although less than a criminal conviction.”
Holland and “other co-conspirators” were accused of paying $12 million in kickbacks to Hispanic Medical Management Inc. (MMA) in the form of management, translation, consulting and outreach services that were either unneeded, duplicative or never actually rendered. The government said these sham arrangements were really kickbacks to induce the MMA to refer its maternity patients, many of whom were Medicaid beneficiaries, to Tenet hospitals for delivery of their children.
A DOJ spokeswoman declined to comment on whether charges against additional individuals involved in the alleged scheme would be forthcoming. Two other individuals, one from the MMA and one from a Tenet hospital, pleaded guilty to fraud charges stemming from the referral scheme in 2014, and the MMA agreed to a $1 million settlement in 2015.
The government said MMA patients were told that Medicaid would only pay for deliveries performed at Tenet hospitals, or that they were required to deliver at Tenet hospitals. The government said this resulted in potential harm to expectant mothers and babies because it required them in some instances to travel much farther than necessary for delivery services.
The government accused Holland of taking “affirmative steps” to alter Tenet accounting procedures and falsifying billing records to conceal the illegal kickbacks, as well as falsely certifying to the Department of Health and Human Services Office of Inspector General that Tenet was complying with Medicare and Medicaid regulations and a 2006 corporate integrity agreement.
Jones Day and Marrero Bozorgi PL are representing Holland. The DOJ and the U.S. Attorney’s Office for the Southern District of Florida are representing the government.
To contact the reporter on this story: Eric Topor in Washington at firstname.lastname@example.org
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The indictment is at http://src.bna.com/lUa.
Copyright © 2017 The Bureau of National Affairs, Inc. All Rights Reserved.
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