Deeper Than the Headlines: Tenet Health

Tenet Health announced on Aug. 1, 2016 that it believes it has come to an agreement with the U.S. government for a $514 million settlement associated with a lawsuit alleging it paid for maternity patient referrals.

The case was filed by a whistleblower, Ralph Williams, who was a former Chief Financial Officer for a hospital in Georgia. In his complaint, he alleged that the hospital was paying kickbacks to Clinica de la Mama which was a clinic catering to undocumented Hispanic women for maternity care services. Clinica would steer patients for delivery services to the hospitals that paid them kickbacks. The Chief Operating Officer of Clinica pleaded guilty. Clinica told patients they would need to deliver their babies in the hospitals identified by Clinica. If patients questioned being required to deliver at the named hospital, Clinica told them that their Medicaid applications were more likely to be accepted if they delivered at the hospital recommended by Clinica.

To disguise the kickbacks, the payments were hidden in a contract for Spanish interpreters and patient Medicaid eligibility determination services. Court documents show that one such contract called for over 670 hours of translation services per month.

However, Williams could not confirm that any interpreter services were provided by Clinica. When the CFO asked the director of nursing services about how interpreter services were provided, she answered that Clinica did not provide any Spanish translation (see email below):

The contract with Clinica had already been approved and in place before Williams began working at the hospital as CFO. He found a hard copy of the contract in the office he’d been given. He thought it was odd that the Clinica contract had not been loaded into the hospital’s contract management system nor had it been reviewed by legal during the original approval process. Note on the signed cover sheet below that “No” was checked answering the question about whether legal review was required.

When the prior CFO and CEO sought approval of the contract from the corporate offices, they stated that the reason for the request was to “grow OB service line volume.” (See highlighted portion below):


If the payments for services had truthfully been for interpreter services, then it would have been a cost center for the hospital and not a business opportunity to increase patient volume with a “56% rate of return” on their $1.8 million investment with Clinica’s Hispanic maternity program” (see highlights below).

The CEO knew of Clinica’s services. At his prior employment with a Tenet hospital, the same scheme was in place and the financial return was so good that he pursued the same scheme with Clinica. The CEO plead guilty to charges of healthcare fraud.

How An Effective Compliance Program Would Have Prevented It

More details of the Tenet settlement are likely to come forth but this case study shows that having an effective compliance program is incredibly important for identifying and preventing this type of wrongdoing.

First, relationships between hospitals and any possible referral sources need to be diligently examined. We know the Anti-kickback statute prohibits anyone from knowingly and willfully offering or paying any remuneration (including any kickback, bribe, or rebate) directly or indirectly, overtly or covertly, in cash or in kind to any person to induce such person to refer an individual to a person for the furnishing or arranging for the furnishing of any item or service for which payment may be made in whole or in part under a Federal health care program. The “one-purpose” rule also states that if even one purpose of the remuneration is for referrals then it violates the statute. In other words, and as an example, if 90% of a payment is for legitimate purposes, and just 10% of the payment is for referrals, then the statute has been violated.

Second, exceptions to standardized procedures should probably be examined by a compliance program. In this particular case, the contract was not in the contract management system and legal review of the agreement was bypassed. Both compliance and legal departments should be involved in reviewing the reasons and rationale given for why a contract is not being reviewed by the departments. Bypassing these departments in the review process should have raised an eyebrow.

Lastly, exit interviews should be performed with employees on their way out of the institution. In this case, the CFO who had raised concerns was fired after doing so. If the compliance program had an established procedure for exit interviews, they might have been able to uncover the concerns and taken corrective action as necessary.

Even with a strong compliance program, not all wrongdoing can be prevented. This is especially true if the CEO himself is involved in the wrong-doing. CEO involvement in non-compliant activities is just one more reason for an organization’s Chief Compliance Officer to have a strong reporting relationship to the institution’s Board of Directors or Governing Board.