Breaking News: Former Tenet Hospital Executives Facing Criminal Trial for Kickbacks

As you may recall, back in April, 2018, in my post What’s The Downside Risk for Hospital Executives?, I wrote about the fact that Trevor Fetter, the former CEO of Tenet Healthcare, had no skin in the game: his strategy put the company into a nosedive. It lost hundreds of millions. But upon being pushed out, Fetter walked away with a $22.9 million severance package. I described it as Win if you win. Win if you lose.

But it appears as if mortals (those folks serving lower in the Tenet food chain) can have some serious skin in the game.

John Holland and William Moore, both former Tenet Healthcare hospital CEOs, are facing trial in a criminal case that alleges that they personally violated the federal Anti-Kickback Statute.

The case against Holland and Moore relates to criminal charges and an accompanying civil case brought years ago against Tenet itself. In that earlier case, Tenet settled, agreeing to pay $513 million to resolve both the civil and criminal allegations.

The issues underlying the Tenet corporate settlement arose from arrangements between Tenet hospitals (Holland and Moore were the facility CEOs) and a chain of clinics called Clinica de la Mama. The chain had contracts to provide translators, marketing and other services at Tenet hospitals.

However, prosecutors allege that the payments to Clinica de la Mama were, at least in part, to induce it to refer patients to the Tenet hospitals for births covered under Medicaid.

From press reports, it doesn’t appear as if either Holland or Moore personally benefited, at least in terms of cash, from any of the alleged happenings. However, that, in and of itself, is not dispositive.

The defendants also appear to be arguing that because the government was going to have to pay for the labor and delivery services anyway, whether at the Tenet hospitals or someplace else, the government suffered no loss. That, too, doesn’t seem to be a great argument. Setting aside fake cases, it could be argued that any case that is steered by reason of an alleged kickback caused no damage to the government because the case was going to be performed somewhere. But that’s not what underlies the AKS.

Instead, the AKS is aimed at making sure that referrals are made in the best interests of patients, not profits.

Of course, the facts underlying the particular prosecution of Holland and Moore are complex. Were the payments to Clinca de la Mama fair market value for what Tenet received in return? Or was some potion for the referral of patients? Or, due to the “one purpose rule,” were the payments indeed fair market value and no more for what was received in services in return, but also motivated by a purpose to receive referrals?

Holland and Moore certainly have skin in the game.

Comment or contact me if you’d like to discuss this post.

Mark F. Weiss

www.advisorylawgroup.com

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