Feds announce record-breaking $17M SNF kickback settlement

A Florida skilled nursing facility (SNF) agreed to pay a record-breaking $17 million to settle claims that it violated the False Claims Act (FCA) (31 U.S.C. §§3729-3733) by paying kickbacks to doctors in exchange for Medicare patient referrals. The Department of Justice announced the settlement, which is the largest ever to involve SNFs and alleged kickbacks.

Kickback scheme

Hebrew Homes Health Network, Inc. provides skilled nursing services at seven rehabilitation and skilled nursing facilities in the Miami area. Hebrew Homes is alleged to have participated in an illegal kickback scheme from 2006 through 2013, during which time it contracted with and hired numerous physicians as “medical directors.” The medical director contracts set forth the physicians’ hours and job duties. Each facility had several medical directors who were receiving payments of several thousand dollars each month. These positions were actually “ghost positions,” and most of the medical directors performed only very few of their contractual duties because the payments were really made in exchange for Medicare patient referrals to Hebrew Homes facilities. Such compensation agreements were the subject of a warning contained in a recent Fraud Alert issued by the HHS Office of Inspector General (OIG) (see OIG warns physicians of compensation arrangement risks, Health Law Daily, June 10, 2015).

Anti-Kickback Statute and the False Claims Act

The Anti-Kickback Statute, 42 U.S.C. §1320a-7b(b), prohibits soliciting or making payments in exchange for referrals or services that are covered by federal health care programs. The statute is intended to prevent physician medical judgment from being compromised by improper payments. Additionally, the FCA prohibits false or fraudulent Medicare claims.

Settlement terms

To settle the claims, Hebrew Homes and William Zubkoff, former President and Executive Director of Hebrew Homes, will pay $17 million. In addition, Zubkoff resigned from the company, and Hebrew Homes entered into a five-year corporate integrity agreement (CIA) with the OIG, which requires it to change its medical director hiring and employment policies.

Whistleblower

The lawsuit was initiated by Stephen Beaujon, former Chief Financial Officer of Hebrew Homes, under the whistleblower provisions of the False Claims Act. As a result of the settlement, Beaujon will receive $4.25 million.