Jeffrey Paul Madison, Health Care Kickback Conspiracy, Texas 2025

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TYLER, Texas – A former Texas hospital chief executive officer has been sentenced to 36 months in federal prison for conspiring to violate the Anti-Kickback Statute.

Jeffrey Paul Madison, 49, of Burnet, Texas, was sentenced to 36 months in federal prison by U.S. District Judge Jeremy D. Kernodle on January 15, 2025.

Madison was found guilty by a jury on November 30, 2023, following a seven-week-long trial, along with five other defendants, including Susan L. Hertzberg, Matthew John Theiler, David Weldon Kraus, Thomas Gray Hardaway, and Jeffrey Paul Parnell, for their roles in a conspiracy that involved kickbacks to physicians for laboratory referrals in violation of the Anti-Kickback Statute.

The conspiracy involved two rural Texas hospitals, Little River Healthcare (LRH) based in Rockdale, and Stamford Memorial Hospital based in Stamford, partnering with Boston Heart Diagnostics (BHD), a clinical laboratory based in Framingham, Massachusetts, that specialized in advanced cardiovascular lipid testing.

As part of the scheme, the hospitals billed the tests to insurers as hospital outpatient services, with the hospitals charging insurers a much higher rate than BHD could receive as a clinical laboratory. The hospitals utilized a network of marketers who in turn operated management services organizations (MSOs) that offered investment opportunities to physicians throughout the State of Texas.

Madison also agreed to pay $5,343,630 to resolve allegations under the False Claims Act involving illegal payments to physicians for laboratory referrals in violation of the Anti-Kickback Statute.

Madison’s sentencing is the latest development in a long-running investigation into the kickback scheme, which has resulted in numerous guilty pleas and convictions, including from Robert O’Neal, who pleaded guilty to conspiracy to commit illegal remunerations and conspiracy to commit money laundering in January 2022.

The case is a reminder of the importance of holding healthcare executives accountable for their roles in schemes that defraud the government and put patients at risk.