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Lessons from the Forest Park Case and the revitalization of the Travel Act


Viewed through the lens of the prosecutor and the government’s expert

gavel money

As an attorney whose practice focuses on healthcare, six laws come to mind, which every healthcare industry participant should know: the Anti-Kickback Statute (AKS), the Stark Law, the False Claims Act (FCA), the Health Insurance Portability and Accountability Act of 1996 (HIPAA), the Social Security Act, and the Affordable Care Act (ACA). The rationale is that compliance programs, government investigations/enforcement actions, and whistleblower cases often include one or more of these laws.

Of course, there are a plethora of other healthcare and criminal laws which are relevant and may carry significant legal and financial harm if violated. One of those laws is the Travel Act of 1961, 18 U.S.C. § 1952 (Travel Act). The Travel Act was passed during the Kennedy Administration and is often considered a wire fraud statute and anti-bribery statute. Fundamentally, the Travel Act makes it “illegal to travel or ‘use mail or any facility’ in interstate or foreign commerce with the intent to (1) distribute the proceeds of unlawful activity, (2) commit violent crime in furtherance of unlawful activity, or (3) ‘otherwise promote, manage, establish, carry on, or facilitate the promotion, management, establishment, or carrying on, of any unlawful activity.’”

It may seem obvious that a kickback is often viewed as a bribe. The AKS, is a criminal law “that prohibits the knowing and willful payment of ‘remuneration’ to induce or reward patient referrals or the generation of business involving any item or service payable by the Federal health care programs.” A key difference between the AKS and the Travel Act is that the AKS only applies to federal programs, whereas the Travel Act extends beyond conduct involving government programs and into the realm of private insurance and programs. In light of this, as well as recent indictments of healthcare providers and professionals under the Travel Act in cases such as United States of America v. Bernard Greenspan (D. N.J.) (“Biodiagnostic”) and United States of America v. Beauchamp (N.D. Tex.) (“Forest Park Case”), the healthcare industry should re-evaluate its conduct and compliance programs to avoid a similar fate.

I am fortunate to present two individuals who played vital roles in the United States Department of Justice’s prosecutions in the Forest Park Case - Andrew Wirmani, AUSA who prosecuted the case and Don Barbo, Managing Partner at VMG who served as the government’s healthcare valuation expert witness.

RR: Please share with us a bit about your background, as well as what led the Government to utilize the Travel Act in the Forest Park Case.

AW: Let me start by saying that my comments today are in my personal capacity and do not necessarily reflect the views of the Department of Justice, the Northern District of Texas, or any other government agency.

For the last eight-and-a-half years, I have served as an Assistant United States Attorney prosecuting complex-white collar cases, principally in the healthcare arena. Over the years, I have held various positions in the office. Prior to government service, I worked for several years at Jones Day as a trial and appellate litigator. I received my law degree in 2006 from the University of Texas and clerked for the Texas Supreme Court and the United States Court of Appeals for the Fifth Circuit thereafter.

During the investigation of the Forest Park case, it became apparent that the majority of the illicit conduct involved private insurance patients. Instead of limiting the investigation to the federal money at issue, we researched a number of bribery/kickback statutes that do not require the presence of Federal healthcare programs, including Honest Services Wire Fraud, Federal Programs Bribery, and the Travel Act predicated on state kickback or commercial bribery statutes. We ultimately determined that the Travel Act squarely applied to the facts of the case, presented a sound legal theory, and had the most jury appeal in this situation. At the time, healthcare prosecutors across the country were discussing potential use of the Travel Act in similar situations and the District of New Jersey had already successfully used the statute in its Biodiagnostic case. Our use of the Travel Act was approved within the hierarchy of Department of Justice, and the court (Judge Fitzwater at the time) issued a lengthy pretrial order affirming its applicability in healthcare cases.

RR: Since both the AKS and the Travel Act are criminal statutes, please share with us some of the key differences. Does one statute send a stronger deterrent message over another?

AW: The Travel Act applies to a broader payor mix than the AKS, but, at the same time, it reaches a narrower set of kickback relationships. To secure jurisdiction, the AKS requires the presence of one or more “Federal healthcare programs,” which includes, but is not limited to, Medicare, Medicaid, TRICARE, and the Department of Labor/Office of Worker’s Compensation. By contrast, the Travel Act potentially criminalizes kickback arrangements involving federal payors, private payors, or no insurance at all. In this sense, it is much broader than the AKS. But while the AKS, assuming the presence of federal payors, potentially applies to any renumeration for referrals, the Travel Act only criminalizes bribes that influence a fiduciary relationship. In healthcare cases, that is almost always going to be the doctor-patient relationship.

So, for example, while the AKS is often used to prosecute kickbacks to marketers who make referrals, the Travel Act—absent a viable aiding and abetting or conspiracy theory—is unlikely to reach that conduct. In short, you can think of the AKS as applying to kickbacks involving “Federal healthcare programs” and the Travel Act as applying to kickbacks involving fiduciary relationships.

To the extent the Travel Act has greater deterrent force, it is only because its use in healthcare cases makes clear that kickback arrangements devoid of federal payors still constitute federal crimes. In terms of penalties, the AKS, as recently amended, actually carries greater penalties, (i.e., a five-year maximum penalty under the Travel Act versus a 10- year maximum penalty for violating the AKS).

RR: The $200 million scheme was designed to induce doctors to steer patients with primarily private insurance to Forest Park Medical Center. Could a whistleblower bring a False Claims Act case that focused on this type of conduct or is this a criminal action that only the Government could bring?

AW: That is an interesting question. I am not aware of any such case and, as always, it would depend on the facts. But if you think of the Travel Act as being broader than the AKS in terms of payor type, then, theoretically, one FCA area that comes to mind where it might apply—where the AKS does not—is federal programs outside the scope of the AKS, such as the Federal Employee Health Benefits Program (FEHBP). You would have to look at the provider contracts of the private insurance companies that administer the FEHBP and the attestations providers are required to sign. I would note that a large portion of the “private” insurance money involved in the Forest Park case was part of the FEHBP.

RR: The criminal indictment also referenced various fraudulent activities were committed by the defendants under FPMC’s out of network business models involving commercial insurance payers, including FPMC waiving or substantially reducing out of network co-pays and deductibles from patients, and instructing patients to not discuss this with their commercial insurance plans to avoid alarming the commercial payers. Did the government or the commercial payers impacted bring any specific criminal or civil actions against the defendants for this?

AW: No. Outside the context of FPMC, private insurance companies have brought civil fraud claims based on the upfront, undisclosed waiver or reduction of out of network copays and coinsurance with varying degrees of success. And in the Nexthealth pharmacy fraud case I prosecuted, the government alleged the waiver/self-funding of copays as healthcare fraud in the context of money laundering charges in an information and plea deal. In FPMC, the waiver of out-of-network coinsurance was instrumental to the crime in that surgeons receiving bribes could not fulfill their end of the bargain by referring patients to the hospital if the costs to the patient were prohibitive. But rather than basing independent charges on this conduct, the government alleged the upfront, guaranteed waiver or reduction of coinsurance as a manner and means of the kickback/bribery conspiracy. So we presented evidence of the conduct to prove the conspiracy, but the fraudulent waiver of coinsurance was not the object of the conspiracy, and the jury was not asked to determine whether the practice constituted fraud.

RR: Let’s take a peek behind the curtain. Experts play a vital role in any case. What did areas of traditional healthcare law did you and Don focus on in order to determine the facts at issue?

AW: Some of the defendants had agreements that recited that the payments at issue were fair market value and commercially reasonable. Don’s job was to explain those concepts to the jury so we could argue that these recitations were not true in practice and that the agreements were just used to conceal the illegal conduct.

DB:For valuation and commercially reasonable purposes, I focused on applying FMV/GMV and CR relative to the Stark Law and AKS.

RR: Don has served as an expert on both sides of the aisle. What areas of valuation were focused on in the Forest Park Case? And, what made the conduct an outlier in terms of what other entities typically do?

DB:I was asked to study the subject market services agreement between FPMC and various physicians and offer my opinions at trial whether the marketing fees paid to the physicians were within a fair market value range, and if the arrangements were commercially reasonable, relative to the services being performed by the physicians. Based on my analysis, I could not determine if the fees were within a reasonable FMV range due to the contractual services being overly broad, vague, and open-ended in nature. Also, a key service required from the physicians under their market services agreements was the development of a marketing plan, and a related budget, and on-going services to implement and monitor the market services, with FPMC’s marketing staff. However, the marketing plans were never delivered, and the related marketing services required were not performed. In spite of this, the marketing fees continued to be paid by FPMC to the physicians. Therefore, the arrangements were not commercially reasonable, which I also testified to.

RR: From a compliance standpoint, what are the main take-aways from the Forest Park Case from both a healthcare valuation standpoint, as well as legal liability vantage point, that providers and other entities should consider when structuring arrangements?

AW: It is critical for those operating in the health care arena to not just seek legal advice, but to follow that advice in practice. Providers need to make sure that their healthcare lawyers understand the negotiations that led to the agreement and what the parties intend to do in practice and how that conforms to the agreement. For example, you can have a contract that is legitimate on its face, but if there are email or other communications that indicate the deal is really for referrals, then the agreement is pretty much worthless. In fact, because many healthcare agreements recite that the payments are not for referrals, those agreements can actually became evidence of a defendant’s willful violation of the law where there is contrary evidence.

DB:FMV and CR opinions should be obtained for contractual arrangements involving hospitals and physicians. In my opinion, this should be done not just for business models involving DHS and governmental payers, but also for business models focused on commercial payers, to ensure proper and consistent business arrangements are being conducted.

The contractual arrangements, once approved by qualified healthcare counsel and properly executed by the parties, need to be closely and timely monitored to ensure that the required services and related fees are being performed in a contractually compliant manner.

About the Author

Rachel V. Rose, JD, MBA, advises clients on compliance and transactions in healthcare, cybersecurity, corporate and securities law, while representing plaintiffs in False Claims Act and Dodd-Frank whistleblower cases. She also teaches bioethics at Baylor College of Medicine in Houston. Rachel can be reached through her website, www.rvrose.com.

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