January 23, 2024

Providing compensation to physicians to make referrals for health care may seem like business as usual for some in the medical community, but doing so for items or services covered by Medicare, Medicaid and other federally funded health care programs can result in severe consequences for businesses and individuals that engage in such referral schemes. 

This was exemplified by a recent November 2023 settlement between the Department of Justice, the owner of six skilled nursing facilities (SNF) in California, the management company operating the SNFs, and the SNFs themselves for the payment of $45.6 million relating to kickbacks to doctors for referring patients to the SNFs. 

The referral scheme was investigated by the Department of Health and Human Services and prosecuted by the Department of Justice based on alleged violations of the federal Anti-Kickback Statute. The case was set into motion by the management company’s former Chief Operating Officer via a False Claims Act (FCA) complaint, also known as a whistleblower claim or qui tam action.  Whistleblowers in FCA complaints where the federal government intervenes, as it did here, generally stand to receive between 15% and 25% of the total financial penalties imposed on the defendants. 

Why the Referral Scheme Was Investigated for Violating the Anti-Kickback Statute

According to the Department of Justice press release announcing the settlement, Prema Thekkek, her management company Paskn Inc., and the six SNFs owned by Thekkek and/or operated by Paksn (including those doing business as Bay Point Healthcare Center, Gateway Care & Rehabilitation Center, Hayward Convalescent Hospital, Hilltop Care and Rehabilitation Center, Park Central Care & Rehabilitation Center, and Yuba Skilled Nursing Center) entered into “medical directorship agreements” with physicians over the course of 12 years that purported to pay the physicians for administrative services, but instead were vehicles by which the physicians were paid to refer clients to the SNFs. 

As a result of the investigation pursued by the Department of Health and Human Services, the DOJ determined that the defendants hired physicians who promised in advance to refer large numbers of patients to the SNFs, paid those physicians in proportion to the number of patients they referred, and terminated those physicians who did not refer a sufficient number of patients. The DOJ pointed to specific examples of Thekkek paying $2000 a month to physicians who promised at least ten referrals per month and terminating a payment of $1500 a month to a physician who only referred two patients per month. 

Pursuant to the Anti-Kickback Statute. it is a crime to have any paid referral arrangement (whether in cash, property, or in-kind arrangement) for any health care services or goods for which payment is made under federal health care programs such as Medicare or Medicaid, subject to certain exceptions. The Anti-Kickback Statute targets both those who make payments for referrals and those who receive them, and violation of the statute is a felony. An individual found guilty of violating the Anti-Kickback Statute faces up to ten years in prison and a $100,000 fine, in addition to being excluded from federal health care programs.  

The Role of the Whistleblower and False Claims Act in the Settlement

The Medicare and Medicaid programs are of course sprawling federal programs, and it is impossible for federal regulators to police each of the innumerable claims for financial reimbursement submitted pursuant to these programs each day. Thus, the federal government relies on private citizen whistleblowers with knowledge of such fraud to come forward with that information. 

Pursuant to the FCA, a whistleblower can file a complaint against an individual or entity alleged to have defrauded the federal government – including through violations of the Anti-Kickback Statute – and earn a financial reward for doing so in the form of a percentage of the total financial penalties levied on the defendant. After a person files an FCA complaint, the federal government may intervene in the lawsuit and assist in investigating and prosecuting the complaint – as was the case here. In such cases, the whistleblower stands to receive between 15% and 25% of the financial penalties. But even where the federal government does not intervene, the whistleblower may continue with the FCA lawsuit and stand to receive up to 30% of the financial penalties in such cases. 

In this case, an FCA complaint was filed in 2015 by Paksn’s former Vice President of Operations and Chief Operating Officer. It is relatively common for an executive level insider such as this to act as a whistleblower in an FCA suit, but anyone with sufficient knowledge and/or evidence of fraudulent actions violating the FCA can pursue such a claim, including but not limited to nurses, data entry analysts, billing specialists and others.  

Contact a California FCA Attorney Today

A plaintiff in a successful FCA lawsuit has the potential of obtaining a financial reward between 15% and 30% of the total penalties levied against the defendant. It is important to work with legal counsel with the experience to not only assist you in compiling and submitting your information in pursuit of obtaining the largest whistleblower reward possible – while at the same time protecting victims of fraud and promoting fair market competition – as well as the experience to protect you from retaliation and obtain justice on your behalf. If you have information that you believe may form the basis of an FCA claim, contact our office today to schedule a consultation with one of our attorneys to determine your next steps.  

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