Texas Hospice Company Settles Allegations of Improper Payments to Physicians

A Texas-based hospice agency and a related home health company recently paid a $1.8 million settlement related to allegations of improper payments to physicians. FBI investigations that began in 2016 found the companies’ founders were finding ways to compensate physicians for referrals in violation of the Anti-Kickback Statute and other healthcare laws. Specifically, the companies had allegedly devised sham medical director arrangements for referring physicians when the medical director services were not needed. They also overcompensated the physicians (i.e., paid above fair market value) for necessary medical director services. According to the Justice Department, the companies used several other methods to commit fraud, including enticing referrals from physicians with improper gifts and benefits, such as travel and sports tickets. The founders also sold interests in Allstate Hospice to five different physicians, earning the physicians substantial quarterly dividends.

Settlements like this are becoming more common in the hospice and home healthcare industry. Here are some key takeaways for hospice and home health providers:

1. There can be only one medical director per agency. Compensation for the medical director must be fair market value and reasonable given the size and scope of the entity.

2. In addition to the medical director, a hospice may contract with hospice physicians and medical director designees (for coverage when the medical director is on vacation or not able to provide services). Compensation paid to hospice physicians and medical director designees must also be fair market value and reasonable given the size and scope of the entity.

3. The fair market value requirement includes all forms of compensation – not just cash compensation. Travel, sports tickets, and other gifts or benefits provided to a physician are forms of compensation.

4. Business interests must be sold to physicians at fair market value. If a company can payout substantial quarterly dividends to owners, as was the case with Allstate Hospice, it most likely has significant business value. The government may have determined that physicians were induced to refer business to Allstate with below fair market value buy-in prices.

If you have questions about how to ensure your hospice or home health organization pays fair market value for physician services, or you need a business valuation to ensure buy-in prices are fair market value, please contact Darcy Devine at ddevine@buckheadfmv.com.