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Prosecutors have gotten aggressive in their use of the Travel Act to pursue physicians and other providers for fraud, including those paid by private insurers.
The Travel Act is a federal criminal statute that forbids the use of the U.S. mail or any interstate commerce with intent to distribute the proceeds while committing an unlawful activity.
Review referral arrangements
Federal prosecutors are using state commercial bribery laws to indict physicians and providers for participating in questionable referral arrangements. In United States v. Greenspan, a federal judge found that Biodiagnostic Laboratory Services (BLS) executives had conspired with David Nicoll, BLS president and part owner, and his brother, Scott Nicoll, to pay bribes to doctors in the form of cash, checks and other means to induce them to send patient blood specimens to BLS.
In some instances, BLS executives paid bribes to doctors through consulting companies, which they created to hide the fact that BLS was the true bribery source. Prosecutors used New Jersey’s commercial bribery statute to convict the doctors of violating the Travel Act. The physicians were sentenced to at least two years in jail while David Nicoll was sentenced to six years.
In United States v. Beauchamp, the U.S. Department of Justice indicted 21 doctors and executives at Forest Park Medical Center (FPMC), a physician-owned hospital in Dallas, for violating the federal Anti-Kickback Statute and the Travel Act.
FPMC's strategy was to maximize profit for physician investors by refusing to join private health insurer networks, allowing its owners and managers to enrich themselves through out-of-network billing and reimbursement.
Physicians and hospital executives also paid bribes to physicians for hospital referrals. Hospital executives hid the scheme by laundering the kickback/bribe money through “business” ventures. Virtually all of the schemes were masked as consulting or marketing fees paid as a percentage of the revenue generated or anticipated from the referrals to FPMC.
FPMC allegedly received more than $200 million from referrals tainted by the scheme. Federal prosecutors used the Texas commercial bribery statute to rope in the illegal activity under the Travel Act.
Things to remember about the Travel Act
· Prosecutors have discovered that the Travel Act invalidates some defenses normally made through the Anti-Kickback Statute’s safe harbor provisions.
· Many of the state laws underpinning the Travel Act have never been enforced or are rarely enforced.
· The Travel Act allows prosecutors to analyze state commercial bribery laws and look for the state that is most likely to bring a criminal conviction because most acts of commercial bribery will touch on multiple states.
· Converting state crimes to federal offenses increases prison time and other penalties.
· The statute of limitations for federal crimes is longer than for state crimes, allowing prosecutors to go after older wrongdoings.
Although the Travel Act itself isn’t new, the government’s attempt to broaden the scope of the law should leave health providers nervous. Healthcare executives must do their due diligence when reviewing contracts and/or engaging in any financial arrangement.
Many doctors and business owners at Forest Park hired an attorney to review the various sham referral arrangements and were given the “OK,” which shows why it’s important to not only hire an attorney, but to ensure that the lawyer is well-versed in healthcare law. Otherwise, the consequences could be dire.
Doris O. Dike, JD, is a/the healthcare attorney at Friedman & Feiger LLP, a law firm based in Dallas. She represents physicians, specialty pharmacies, home health companies, healthcare entrepreneurs and other healthcare providers nationwide. She can be reached at firstname.lastname@example.org.