Texas Docs' Kickback Convictions: A Warning for Physicians

Leigh Page


October 07, 2019

"Texas has a version of the Anti-Kickback Statute that targets commercial payers and self-pay patients, and it's been on the books for two decades, but it has never been enforced," Laughton says. He says he hears about the same problems from colleagues in other states.

Why hasn't the Texas law been enforced? Laughton says the law is poorly drafted. He also speculates that "saving money for the Blue Crosses and the UnitedHealthcares of the world is not a popular cause."

A Wake-up Call

A similar case took place in New Jersey last year. A federal court found that BioDiagnostic Laboratories illegally paid doctors millions of dollars in bribes to refer blood work to its laboratory.

The case netted 53 convictions by the time it concluded in 2018, and 38 of those convicted were doctors. The BioDiagnostic case is said to have led to the largest number of medical professionals convicted of health care fraud ever.

The New Jersey case has had "a major deterrent effect," according to Jacob T. Elberg, an attorney who led the BioDiagnostic prosecution and is now an associate professor of law at Seton Hall University in New Jersey.

Even before the convictions came down, "many people stopped engaging in the behavior because they realized the government was taking enforcement in this area seriously," he says.

With the Forest Park verdict and convictions in the New Jersey case the year before, doctors who take payments for private-pay referrals are experiencing a wake-up call. Federal prosecutors have successfully rolled out a new legal strategy that makes it possible for them to go after such arrangements.

There is a misperception among providers that if they just don't take Medicare and Medicaid, they are going to be OK.

"There is a misperception among providers that if they just don't take Medicare and Medicaid, they are going to be OK," says David Edquist, an attorney at the law firm of von Briesen & Roper in Milwaukee, Wisconsin. "But as these verdicts have shown, they are absolutely at risk."

State Cases Can Morph Into Federal Cases

With the new convictions, federal prosecutors are now taking it upon themselves to enforce the state laws. They have done so by invoking the Travel Act, a 58-year-old federal law that piggybacks onto commercial bribery laws that exist in many— but not all— states.

Essentially, the Travel Act transforms state cases into federal cases. To use the Travel Act, prosecutors only need to demonstrate a federal connection, such as using the Federal Reserve System to deliver the money or even transporting money in a car on the interstate, according to health law attorneys.

They also note that in addition to the Travel Act, federal prosecutors are using a legal concept called honest services, which involves federal mail fraud or wire fraud laws. This strategy can be invoked if a defendant uses the US mail or Internet to undertake the fraud.

The charge involves activities that deny someone the "right to honest and faithful services." For example, a patient might be referred to a less convenient location as a result of payments for a doctor's referrals.

The Travel Act was used in the Forest Park and BioDiagnostic cases, and the honest services tactic was a companion charge in the BioDiagnostic case. Both charges were also used in several smaller cases before the two big verdicts, notes Bradley M. Smyer, a health law attorney at the firm of Alston & Bird in Dallas, Texas.

Smyer says federal authorities first signaled, in a characteristically understated way, that they were starting to use the Travel Act in health care fraud cases in a 2014 report by the US Department of Health and Human Services (HHS) and the US Department of Justice.


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