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$45.6 Million Settlement Related to Improper Medical Director Payments at 6 SNFs



In November 2023, Prema Thekkek, her management company, Paksn Inc. (“Paksn”), and 6 SNFs that are owned by Thekkek or managed by Paksn (collectively, the “Defendants”) reached a settlement with the Department of Justice (“DOJ”) to resolve allegations of false claims to Medicare and Medicaid resulting from patient referrals related to physician kickbacks.[1] The Defendants have agreed to enter into a 5-year Corporate Integrity Agreement with HHS-OIG and to pay the United States and California a total of $45.6 million. The settlement stems from a whistleblower complaint filed in 2015 by Paksn’s former Vice President of Operations and Chief Operating Officer, Trilochan Singh, under the qui tam provisions of the False Claims Act. Subsequently, the United States filed a complaint under the False Claims Act on June 15, 2021. The settlement resolves false claims liability stemming from the alleged actions of the 6 SNFs, under the direction of Ms. Thekkek and Paksn, described below.


According to the complaint, the Defendants entered into dozens of sham medical director and associate medical director agreements with area physicians. The complaint alleges that these contracts were not used to pay for legitimate administrative services but instead to pay physicians to refer hospital patients to the Defendants’ seven skilled nursing facilities (SNFs). Over 12 years (2009 – 2021), the 6 SNFs allegedly compensated these referring physicians with monthly stipends of $1,500 to $10,000. The DOJ press release stated, “Specifically, the defendants hired physicians who promised in advance to refer a large number of patients to the SNFs, paid physicians in proportion to the number of their expected referrals, and terminated physicians who did not refer enough patients.”


The complaint points out specific risk areas for SNFs and other facilities to avoid when contracting with medical directors. Following are some of the government findings and allegations that led to the complaint filing.


  1. The Defendants sought out physicians with large patient bases and active practices at local acute care hospitals because those physicians were in a position to refer patients to the SNFs.

  2. According to the Complaint, medical director contracts commonly provide for an hourly compensation rate to be paid to physicians based on the submission of monthly invoices; however, the Defendants’ physician contracts were fixed monthly stipends, regardless of the amount or type of services actually provided in any given month.

  3. While Defendants’ contracts included requirements for physicians to submit documentation of services provided, this requirement was not enforced.

  4. Defendants terminated physicians when they did not refer enough patients to the facilities.

  5. Contracts included a list of services for the physicians to provide, but the lists were boilerplate — the Defendants and physicians never intended for the physicians to provide the listed services.

  6. Defendants contracted with more physicians than necessary for the performance of legitimate services.

  7. The contracts did not specify the physicians’ work schedules, their precise duration of work, or the exact charge for such intervals; furthermore, aggregate compensation paid to the physicians was not consistent with fair market value in arms-length transactions.


Fair Market Value Takeaways

The settlement reinforces the importance of monitoring medical director arrangements and ensuring that compensation in long-term care arrangements is fair market value, commercially reasonable, and meets the volume or value standard, i.e., physicians are paid fair market rates for actual services provided and that physician services are only purchased when a legitimate business purpose — not related to referrals — exists for buying them.


BFMV has reviewed and consulted on physician arrangements with skilled nursing and rehabilitation facilities, hospice and home health agencies, health systems, and physician practices nationwide. Contact us for more information. For additional information pertaining to medical director compensation, check out our free ebook on compensation philosophies for home health and hospice medical directors.

[1] The case is captioned United States of America ex rel. Trilochan Singh v. Paksn, Inc. et al., No. 15‑cv-09064 (C.D. Cal.).

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