Texas Docs' Kickback Convictions: A Warning for Physicians

Leigh Page


October 07, 2019

Smyer notes a sentence deep in the report stating that a guilty plea in a September 2013 case represented "a departure from ordinary charging theories in healthcare fraud cases." In that case, the owner of ambulatory surgery centers in Illinois and Indiana pleaded guilty under the Travel Act to paying physicians to refer patients to the centers or conduct surgeries there.

It took five to six more years after this case for the bigger BioDiagnostic and Forest Park convictions. These cases took years of research, plea-bargaining, and groundwork by multiple federal agencies. The BioDiagnostic case, for example, involved the US Attorney for the District of New Jersey, Federal Bureau of Investigation, Office of Inspector General of HHS, Internal Revenue Service, and the US Postal Service.

Why, Edquist asks, would federal prosecutors invest all this time and effort to protect commercial payments? It's true that both the Forest Park and BioDiagnostic cases included federal AKS charges due to some Medicare or Medicaid payments that were involved, but the great majority of payments were commercial and thus not subject to the federal law.

Edquist doesn't think federal prosecutors are particularly interested in using taxpayer dollars to help private insurers. Instead, he feels they are using the commercial payments to gain leverage over defendants so that the federal charges will stick.

With additional counts and more money at stake, the threat of potential jail time and fines under sentencing guidelines can be much higher.

"With additional counts and more money at stake, the threat of potential jail time and fines under sentencing guidelines can be much higher, increasing the likelihood of plea bargains and cooperation," he says.

Each violation of the Travel Act involves a maximum sentence of 5 years in prison. The actual payments to doctors, which can involve millions of dollars, significantly increase offense level calculations under federal sentencing guidelines.

How Doctors Are Paid

Forest Park, a small surgery hospital facing stiff competition, developed a three-pronged strategy to drum up business, according to an account of the case by Edquist and other lawyers at von Briesen & Roper.

The hospital did not join commercial insurers' provider networks and thereby attained out-of-network payment status and maximized its prices, according to prosecutors . Then it offered payments to surgeons who performed their surgeries there and to primary career physicians who referred patients there.

Forest Park's payments to doctors were substantial. For example, one spinal surgeon received $7 million over several years, and two bariatric surgeons who were investors in the surgery hospital received $4.5 million and $3.4 million, respectively.

Forest Park set up alleged business ventures to pay doctors in the form of services and gifts. Two shell companies offered management support and marketing services to them. The hospital also provided advertising services, sporting event tickets, expensive meals, discounts on diamonds, and opportunities to invest in the hospital, according to an account of the case by attorneys at the New York law firm Holland & Knight.

Forest Park transferred some surgeons' Medicare and Medicaid patients to other hospitals and offered to pay them $350 per lead, according to an account of the case by an attorney at the Chicago law firm K&L Gates.

However, ultimately, some patients in federal programs made their way into Forest Park, allowing federal AKS charges to be filed.

 Although the Forest Park strategy mostly involved advertising and gifts, entities making the payments can also sign a clinical directorship or a management contract with the doctors and pay them for their services, according to Edquist.


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