Texas-based hospital chain Tenet Healthcare Corporation and two of its Atlanta-area hospitals, Atlanta Medical Center and North Fulton Hospital, have agreed to pay more than $513 million to resolve civil and criminal claims related to violations of the federal False Claims Act (FCA) and Anti-Kickback Statute (AKS). Settlement of the underlying cases, which are styled U.S. ex rel. Williams v. Health Management Associates Inc., No. 3:09-cv-00130 (M.D. Ga.) and U.S. v. Atlanta Medical Center, Inc. No. 16-cr-00350 (N.D. Ga), are one of the largest FCA and AKS settlements this year.

On October 3, 2016, the United States filed a bill of information charging Atlanta Medical and North Fulton with one count of conspiracy to defraud the United States and pay and receive kickbacks and bribes. The government alleged that, from 2000 to 2013, Atlanta Medical and North Fulton paid prenatal clinics providing medical services to women (many of whom were undocumented, uninsured and indigent) for referrals for labor and delivery, postnatal, and infant services. According to the government, business documents show that these referrals resulted in “extremely generous” Medicaid reimbursements and a profitable relationship between the hospitals and the clinics.

For more than a decade, the hospitals concealed their scheme using sham contracts. Under the contracts, the hospitals paid the clinics for various services, including translation and birth certificate services. The services, however, were “(1) not needed; or (2) duplicative of services already being provided; (3) substandard; or (4) not rendered at all.” Tenet further concealed its scheme by hiding the real nature of the contracts from its attorneys. As the government noted, “[a]t various times throughout the conspiracy, certain executives at the Tenet Hospitals . . . and others concealed material facts from Tenet lawyers and outside counsel because they knew that the agreements would not be approved if the true nature of the Clinica arrangements were disclosed to the lawyers.”

In 2006, Tenet likewise resolved FCA allegations relating to its referral practices, settling allegations of fraudulent billing and AKS violations and agreeing to pay the government more than $900 million. In connection with that settlement, Tenet agreed to enter into a five-year Corporate Integrity Agreement (CIA) with HHS-OIG. Under the terms of the CIA, Tenet was required to strengthen its policies, procedures and controls for referrals and provide additional training related to referral source contracts. Tenet also agreed to provide yearly certifications of compliance with the federal health program requirements and the CIA. This annual certification required a quarterly certification by hospital executives that they had disclosed any reportable events under the CIA.

According to the government’s Statement of Facts, the current misconduct occurred during the time period when Tenet was operating under the CIA. Yet, Tenet and hospital executives never disclosed its relationship with the pre-natal clinics, violating the terms of the CIA.

To resolve the criminal allegations, Atlanta Medical and North Fulton pleaded guilty to the conspiracy charge. The hospitals also agreed to $145 million in criminal forfeiture. To resolve the civil FCA allegations, Tenet agreed to pay $368 million related to Atlanta Medical and North Fulton. This settlement also includes resolving FCA allegations related to Tenet’s Georgia-based Spalding Regional Medical Center’s and South Carolina-based Hilton Head Hospital’s roles in paying for referrals. Tenet will also divest Atlanta Medical, North Fulton and Spalding Regional. In exchange for these steps and a commitment to take remedial measures, including “substantially restricting the types of services that they permit their hospitals to purchase from a referral source,” the United States agreed to enter into a Non-Prosecution Agreement. Under the NPA, Tenet will retain an independent compliance monitor for at least three years.

The negotiated settlements and agreements are awaiting approval by the district courts.