Flower Mound Hospital to Pay $18.2 Million to Settle Federal and State False Claims Act Allegations Arising from Improper Inducements to Referring Physicians

Published 1:40 pm Thursday, December 2, 2021

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Flower Mound Hospital Partners LLC (Flower Mound Hospital), a partially physician-owned hospital in Flower Mound, Texas, has agreed to pay $18.2 million to resolve allegations that it violated the False Claims Act by knowingly submitting claims to the Medicare, Medicaid and TRICARE programs that resulted from violations of the Physician Self-Referral Law and the Anti‑Kickback Statute.

The Physician Self‑Referral Law, commonly known as the Stark Law, prohibits a hospital from billing for certain services referred by physicians with whom the hospital has a financial relationship, unless that relationship satisfies one of the law’s statutory or regulatory exceptions. The Anti‑Kickback Statute prohibits offering or paying remuneration to induce the referral of items or services covered by Medicare, Medicaid and other federally funded programs. Both the Stark Law and the Anti-Kickback Statute are intended to ensure that medical judgments are not compromised by improper financial inducements.

The settlement resolves allegations that Flower Mound Hospital violated the Stark Law and the Anti-Kickback Statute when it repurchased shares from physician-owners aged 63 or older and then resold those shares to younger physicians. The United States alleges that Flower Mound Hospital impermissibly took into account the volume or value of certain physicians’ referrals when it (1) selected the physicians to whom the shares would be resold and (2) determined the number of shares each physician would receive.

“Improper financial arrangements between hospitals and physicians can distort physician decision-making and drive up health care costs for everybody,” said Acting Assistant Attorney General Brian M. Boynton of the Justice Department’s Civil Division. “Patients deserve the independent and objective judgment of their health care professionals”

“The Stark Law and the Anti-Kickback Statute are designed to ensure that physician financial considerations can never influence patient care,” said U.S. Attorney Chad E. Meacham for the Northern District of Texas. “The system relies in part on whistleblowers who come forward to report financial improprieties at their workplaces. We urge anyone with concerns to reach out. The Justice Department is committed to enforcing laws that safeguard patient interests.”

“To deliver optimal patient care and protect the integrity of federal health care programs, providers should dutifully operate in accordance with the Stark Law and Anti-Kickback Statute,” said Special Agent in Charge Miranda Bennett of the U.S. Department of Health and Human Services Office of Inspector General (HHS-OIG). “Providers are expected to deliver and bill for services based on their medical appropriateness and necessity, not their potential profitability. HHS-OIG and our partners are committed to enforcing these safeguards for HHS programs and beneficiaries.”

“Today’s outcome highlights the commitment of the Department of Defense Office of Inspector General, Defense Criminal Investigative Service (DCIS) and our law enforcement partners to protecting the integrity of our federal healthcare programs, including the Department of Defense’s healthcare program, TRICARE,” said Special Agent in Charge Michael C. Mentavlos of the DCIS Southwest Field Office. “DCIS will aggressively investigate companies and individuals that attempt to defraud taxpayer-funded healthcare programs, particularly those programs intended to care for our warfighters, their family members and our military retirees.”

Medicaid is funded jointly by the states and the federal government. The State of Texas paid for a portion of the Medicaid claims at issue and will receive a total of approximately $500,000 from the settlement with Flower Mound Hospital.

In connection with the settlement, Flower Mound Hospital entered into a five-year Corporate Integrity Agreement (CIA) with the HHS-OIG. The CIA requires, among other things, that Flower Mound Hospital maintain a compliance program and hire an Independent Review Organization to review arrangements entered into by or on behalf of the hospital. It also increases individual accountability by requiring compliance-related certifications from key executives.

The civil settlement includes the resolution of claims brought under the qui tam or whistleblower provisions of the False Claims Act by Leslie Jennings, M.D., a physician-owner at Flower Mound Hospital. Under those provisions, a private party can file an action on behalf of the United States and receive a portion of any recovery. Dr. Jennings will receive approximately $3 million as his share of the recovery in this case. The qui tam case is captioned United States ex rel. Jennings v. Flower Mound Hospital Partners, LLC, et al., Civil Action No. 3-19-CV-02676-B (N.D. Tex.).

The resolution obtained in this matter was the result of a coordinated effort between the Justice Department’s Civil Division, Commercial Litigation Branch, Fraud Section, and the U.S. Attorney’s Office for the Northern District of Texas with assistance from HHS-OIG and DCIS.

The investigation and resolution of this matter illustrates the government’s emphasis on combating healthcare fraud. One of the most powerful tools in this effort is the False Claims Act.  Tips and complaints from all sources about potential fraud, waste, abuse and mismanagement can be reported to the Department of Health and Human Services at 800-HHS-TIPS (800-447-8477).

The matter was handled by Trial Attorney Jonathan Thrope and Assistant U.S. Attorney Kenneth Coffin.

The claims resolved by the settlement are allegations only and there has been no determination of liability.