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Miami Nursing Home To Pay Record $17M in Whistleblower Suit

A Miami-based nursing home network agreed Tuesday to pay a record $17 million to settle a False Claims Act suit brought by its former CFO, accusing it of running a kickback scheme. The case is United States of America et al v. Plaza Health Network et al., aka Hebrew Homes.

From 2006 through 2013, Hebrew Homes allegedly hired physicians as medical directors —really “ghost positions” — at its facilities, who had to perform few or no contractual job duties.  Instead, these physicians were paid to refer patients to Hebrew Homes facilities, dramatically increasing the number of referrals. Each facility had several of these medical directors, who were paid thousands monthly.  Hebrew Homes did not admit to liability with the settlement. 

“Illegal inducements paid to physicians in exchange for patient referrals will not be tolerated,” Benjamin C. Mizer, principal Deputy Assistant Attorney General for the DOJ's Civil Division, said in a statement. “Medicare funds should be used to provide care for our senior citizens, not as an inducement to physicians to refer business.”

The settlement is the largest in U.S. history for a nursing home allegedly violating the Anti-Kickback Statute. The company entered a five-year Corporate Integrity Agreement with the U.S. Department of Health and Human Service’s Office of the Inspector General and agreed to alter its policies regarding how it will hire and maintain medical directors. The former CFO will receive more than $4 million from the settlement.

This decision underscores the need for employers in the health care industry to rigorously comply with the federal Anti-Kickback Statute, which prohibits the exchange (or offer to exchange), of anything of value, in an effort to induce (or reward) the referral of federal health care program business. It is broadly drafted and establishes penalties for individuals and entities on both sides of the prohibited transaction. Conviction for a single violation may result in a fine of up to $25,000 and imprisonment for up to five years. In addition, conviction results in mandatory exclusion from participation in federal health care programs. Absent a conviction, individuals who violate the Anti-Kickback Statute may still face exclusion from federal health care programs. The government may also assess substantial civil money penalties. Under the False Claims Act, whistleblowers may bring “qui tam” actions alleging violations of the Anti-Kickback Statute.  If the Federal government brings a successful action as a result of the qui tam action, the whistleblower receives a percentage of the ultimate recovery.

Employers should regularly audit their practices to look for any signs of inappropriate financial transactions in exchange for referrals. Their employment agreements and policies should expressly forbid such conduct, and employers should also establish internal procedures through which employees who wish to raise complaints are encouraged to come forward. Establishing an office of an ombudsperson to handle complaints can provide employees with a vehicle to have their voices heard. Further, individuals who come forward should be informed that they have the right to make complaints without fear of retaliation. By taking proactive steps, health care industry employers can reduce the risk that the first time they learn about a kickback issue is upon receipt of a whistleblower lawsuit.