Sally Yates & The Yates Memo

  • On September 19, 2016, the Department of Justice entered into a $30 million settlement with North American Health Care, Inc. and two executives in connection with allegations that the company provided medically unnecessary rehabilitation services. As part of the settlement, the company’s Chairman of the Board will pay $1 million and the Senior Vice President of Reimbursement Analysis will pay $500,000.
  • On September 27, 2016,  Tuomey Healthcare System’s former CEO agreed to a $1 million payment and a four-year exclusion from participation in federal healthcare programs in connection with alleged Stark Law violations involving his hospital. This settlement followed a $237.4 million judgment against the hospital for improper financial relationships and the resulting sale of the hospital to a nearby health system.
  • On October 24, 2016,  the government entered into a $145 million settlement agreement with Life Care Centers of America Inc. and its owner in connection with allegations that the company provided medically unnecessary rehabilitation services. The government’s press release explicitly noted that the settlement resolved separate allegations against the owner that he had been unjustly enriched by the conduct. (It should be noted that Life Care and its owner vigorously defended these allegations and did not admit to any personal liability in the settlement).

Lessons Learned:

In the current enforcement environment the Department of Justice Attorneys have been given significant latitude and instruction to leave no stone unturned when it comes to how the fraud occurred as well as who committed the fraud. If the later can be proven, the DOJ will go after those individuals personally as well as against the organization. Therefore, from CEO to manager the investigation will focus on who knew what when and the involvement or omission of governance for fraud.

This clearly is an expensive wake-up call for all levels of healthcare employees — including Compliance Officers. This highlights the importance of a solid Compliance Plan and the need for training. Time will tell how many of these cases will be brought be whistleblowers vs. self-disclosure or worse, government subpoena.

Authored by Michael Rosen, ESQ