WASHINGTON (Legal Newsline) – Texas-based, investor-owned Tenet Healthcare Corp. and subsidiary hospitals in Atlanta are paying a significant settlement and will stay under the shadow of corporate integrity agreements.

The holding corporation and four Atlanta-based subsidiaries on Oct. 3 agreed to pay $513 million to settle civil False Claims Act claims and criminal Anti-Kickback Statute (AKS) charges associated with the referral of 20,000 Medicaid patients to the Tenet hospitals.

"It is a very large settlement," Sara Lord, a partner at Arnall, Gold & Gregory in Washington, D.C., told Legal Newsline.

"What's interesting about the agreement is that it includes resolution of both criminal and civil charges – a $145 million forfeiture to Medicaid and Medicare to settle a criminal charge of conspiracy to defraud the government and violating the AKS and $368 million to settle the civil FCA violations."

Atlanta Medical Center, Hilton Head Hospital, North Fulton Medical Center and Spalding Regional Medical Center were charged with violating AKS by paying kickbacks to Hispanic Medical Management for referrals. Hispanic Medical then allegedly sent pregnant women to the Tenet hospitals exclusively when delivery time came.

Besides violating AKS, that put the pregnant women and unborn children at risk as they had to travel long distances to the Tenet hospitals, according to the criminal information filed by the government.

In addition, the two hospitals reportedly received more than $145 million between 2000 and 2013 for fraudulent Medicaid and Medicare patient referrals.

"This case, and its resolution, are pretty complicated. There are a number of different agreements," Lord said.

"For starters, two Tenet health care facilities – Atlanta Medical Center and North Fulton Medical Center – pleaded guilty to a criminal offense – a conspiracy to defraud the government and pay illegal health care kickbacks."

In return, parent company Tenet HealthSystem Medical Inc. and the two other hospitals entered into a three-year non-prosecution agreement (NPA) related to the charges.

"Basically, the NPA says that if Tenet and the two hospitals comply with the terms of a Corporate Integrity Agreement (CIA) for three years, the government will dismiss any criminal charges that may come out of these two cases," Lord said.

It's not the first time Tenet finds itself in legal hot water. The corporation and its subsidiaries were operating under the terms of a CIA issued in 2006 by the Department of Health and Human Services' Office of the Inspector General (HHS-OIG) related to an earlier FCA case, Lord said.

Tenet and its subsidiary hospitals allegedly violated the terms of the CIA by engaging in the kickback and Medicare and Medicaid patient referral schemes. Furthermore, Tenet executives and board members had signed legal documents certifying the corporation and its subsidiaries were in full compliance during this period.

That may leave them open to criminal charges of lying to the government as individuals.

¨This case is an indication that not only is the government taking health care fraud seriously, which we all knew, but that government agencies are examining what happens after CIAs are put in place," Lord said.

The health care system and the behavior of industry participants continues to come under close scrutiny in the wake of the the Affordable Care Act of 2009, Lord added.

"Health care is a significant part of the economy, and the government is a major source of funding," Lord said. "The government has stepped up its anti-fraud and law enforcement efforts since the Affordable Care Act was enacted.¨

HHS-OIG has the authority to see that a health care services provider – a medical center or a hospital, for example – is barred from participating in the Medicare and Medicaid programs.

That could be the death knell for a health care company. What has evolved instead of mandatory exclusion is the creation of CIAs. As part of the settlement, Tenet and its subsidiaries will enter into new, stricter five-year CIAs.

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