Texas Heart Hospital pays $48 million to settle kickbacks case with Department of Justice and MD Whistleblowers to get $13.920 million

Texas Heart Hospital of the Southwest LLP, a partially physician-owned hospital in Plano, Texas, and its wholly owned subsidiary, THHBP Management Company LLC (collectively, the “Heart Hospital”) have agreed to pay the United States $48 million to resolve claims that the Heart Hospital violated the False Claims Act by knowingly submitting claims to the Medicare program that resulted from violations of the Physician Self-Referral Law and the Anti‑Kickback Statute, the Justice Department announced today.

The Physician Self‑Referral Law, commonly known as the Stark Law, prohibits a hospital from billing Medicare 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.

“Although the business of healthcare continues to evolve, our mission remains the same — to ensure that medical decision making is based on patient care and free of influence by financial consideration,” said Stephen J. Cox, United States Attorney for the Eastern District of Texas.  “We commend the whistleblowers and their counsel for uncovering this arrangement and pursuing the case to a point where defendants and the United States were able to reach a resolution that both protects the taxpayer and ensures patient care, free from financial influence.”

“Inappropriate financial relationships between health care providers and their referral sources can distort physician decision-making and drive up health care costs for everybody,” said Acting Assistant Attorney General Jeffrey Bossert Clark of the Department of Justice’s Civil Division.  “The Department remains committed to ensuring that physicians act in the best interests of their patients rather than their pocketbooks.”

The settlement announced today resolves allegations that the Heart Hospital violated the Stark Law and the Anti-Kickback Statute by requiring physician owners to satisfy the Heart Hospital’s yearly 48 patient-contact requirement in order to maintain ownership in the hospital.

This settlement arises from a lawsuit filed by former Heart Hospital physician owners Mitchell Magee, M.D. and Todd Dewey, M.D. pursuant to the whistleblower or qui tam provisions of the False Claims Act, which permit private persons to bring a lawsuit on behalf of the government and to share in the proceeds.  Under the Act, the United States may intervene in such an action or permit the whistleblower to pursue it.  Although the Unites States declined to intervene in this case, it played a primary role in the discussions that led to the settlement.  Dr. Dewey and Dr. Magee will collectively receive $13,920,000 as their share of the recovery.

This matter was handled on behalf of the government by the U.S. Attorney’s Office for the Eastern District of Texas, the Justice Department’s Civil Division, and the Department of Health and Human Services Office of the Inspector General.

The case is captioned United States ex rel. Mitchell J. Magee and Todd M. Dewey v. Texas Heart Hospital of the Southwest, L.L.P., et al., Case No. 4:16-CV-00717-ALM (E.D. Tex.).  The claims resolved by this settlement are allegations only and there has been no determination of liability.