In a recent case Hebrew Homes Health Network, Inc. and its former president and executive Director agreed to pay $17 million to settle allegations that Hebrew Homes violated the federal anti-kickback statute. According to the United States Department of Justice, the Hebrew Homes case is the largest settlement ever involving alleged violations of the anti-kickback statute by a skilled nursing facility.

An examination of the allegations in the Hebrew Homes case reveals a classic scheme to pay physicians for their patient referrals. Hebrew Homes operates seven rehabilitation and skilled nursing facilities in Dade County. According to the allegations in the case, Hebrew Homes hired numerous physicians ostensibly to serve as medical directors for the facilities, and the medical director contracts specified numerous duties that the medical directors were to perform and the hourly requirements. Each facility had several such medical director contracts at any given time, and each medical director was paid several thousand dollars monthly per the contract. The government alleged that in reality these medical director positions were shams, and most of the medical directors were required to perform few, if any, of their contractual duties. Instead, according to the government, the medical directors were paid for their patient referrals to the Hebrew Homes facilities, and these referrals increased exponentially once the medical directors began receiving their payments.

Although the $17 million payment is a substantial penalty in itself, there were additional penalties imposed by the government to settle the case. The president and executive director of Hebrew Homes agreed to resign and to no longer be an employee of the company. In addition, Hebrew Homes agreed to enter into a five year corporate integrity agreement with the government, and that agreement requires independent monitoring of Hebrew Homes’ arrangement with patient referral sources, establishing a written code of conduct and employee training, and changes to its policies on hiring and contracting with medical directors.

The Hebrew Homes case was the culmination of a coordinated effort by the Department of Justice, the U.S. Attorney’s Office of the Southern District of Florida, the FBI, and the Office of Inspector General of the U.S. Department of Health and Human Services, and it is a vivid example of the government’s increasing scrutiny of arrangements between physicians and healthcare facilities where the physicians are in a position to refer Medicare patients to the facility.

The government also used this case to send a warning to the industry. “Illegal inducements paid to physicians in exchange for patient referrals will not be tolerated,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer in announcing the Hebrew Homes settlement. “Medicare funds should be used to provide care to our senior citizens, not as an inducement to physicians to refer business.”  Shimon R. Richmond, the Special Agent in Charge of the Office of Inspector General said: “Hebrew Homes’ intricate kickback scheme in this record-setting case threatened the impartiality of physician referrals, the financial integrity of Medicare and the public’s trust in the health care system. Our agency will continue to investigate nursing homes and other health care providers that seek to illegally boost profits at the expense of federal health care programs.”