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Methodist Le Bonheur Healthcare Accused of Healthcare Kickbacks in Tennessee
NASHVILLE, TN – The United States has filed a complaint in intervention alleging violations of the False Claims Act (FCA) and the Anti-Kickback Statute (AKS) by Methodist Le Bonheur Healthcare (MLH) and Methodist Healthcare Memphis Hospitals (collectively, Methodist)
for paying unlawful kickbacks to West Clinic, P.C. (West) in exchange for West’s patient referrals, announced U.S. Attorney Mark H. Wildasin for the Middle District of Tennessee.
The government began investigating the wrongdoing alleged in today’s complaint in response to a lawsuit filed under the qui tam, or whistleblower, provisions of the False Claims Act, which allows private citizens with knowledge of false claims to bring civil suits on behalf of the government and to share in any recovery.
The qui tam action was initially filed on May 30, 2017, by Jeffrey H. Liebman, the former President of Methodist University Hospital. In December 2019, David M. Stern, M.D., the former Executive Dean and Vice Chancellor at the University of Tennessee Health Sciences Center, who served on the Board of Directors of MLH from 2011 to 2017, joined the lawsuit. Stern was also a member of the Executive Cancer Council and the Steering Committee for the West Cancer Center.
The complaint sets forth in detail the unlawful kickbacks, disguised through a sophisticated business integration wherein Methodist purchased substantially all of the outpatient locations of the largest oncology practice in the Memphis area, owned by West.
At the time of the arrangement, Methodist lacked a comprehensive cancer treatment center. The multi-agreement transaction purported to be a lawful way to allow West’s patients to be treated at Methodist locations by West-employed physicians for outpatient and inpatient services, with West providing management services to Methodist’s adult oncology service line.
As a result of the deal, Methodist would receive increased Medicare reimbursements relating to the cancer care. The parties described it as a “partnership” to achieve a cancer “center without walls,” where patients would go to Methodist-owned facilities for all their cancer-related care in what was called the West Cancer Center.
However, there was never any formal partnership created, as to do so likely would have violated regulatory requirements. As part of Methodist’s business combination with West, Methodist made a separate for-profit $7 million investment in ACORN Research, LLC (ACORN), an entity in which West and its Medical Director and shareholder, Dr. Lee Schwartzberg, had a personal financial interest.
Through the deal, Methodist provided an immediate influx of millions of dollars in cash to West through its purchase of certain assets, as well as the ACORN investment, which resulted in a repayment of $3.5 million in debt owed to West and its shareholder, Dr. Schwartzberg. Kickbacks for the revenues Methodist generated from the West referrals, however, were disguised as payments Methodist made to West during the seven years of the deal, and expressly for certain services that were supposed to be – but were not – provided under the management services agreement.
As a result of the transaction, Methodist, which prior to the deal had no outpatient cancer treatment, was able to establish a new stream of income in the reimbursements for outpatient treatment that previously went to West. Methodist also realized a huge increase in referrals for inpatient services from West, which previously referred the bulk of its patients to Methodist’s competitors, including Baptist Memorial Hospital.
By purchasing West’s outpatient locations, Methodist was able to bill Medicare not only for the facility and professional components of outpatient treatment but also for the chemotherapy and other drugs provided, for which Methodist could recoup a staggering discount in costs through the 340B Discount Drug Program, resulting in $50 million in profits to Methodist in one year alone.
Key Facts
- State: Tennessee
- Category: Fraud & Financial Crimes
- Source: DOJ Press Release â†â€â€
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