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United States: Hospitals, Doctors (And Others) Beware: DOJ May Apply Travel Act to Healthcare Prosecutions

A recent federal jury verdict in Dallas affirms the U.S. Department of Justice’s determination to extend federal prosecutions to healthcare arrangements involving commercial payers by utilizing the federal Travel Act, which was predicated in this case on underlying state commercial bribery law.

The use of the Travel Act for criminal prosecutions in private healthcare cases reflects greater scrutiny of healthcare system practices by federal prosecutors and an increasingly aggressive approach to enforcing the healthcare laws criminally against all system participants, including surgeons, primary care physicians, healthcare administrators, consultants and investors.

Doctors, hospitals and others in the healthcare space should take to heart the increasingly aggressive position the U.S. Department of Justice (DOJ) is taking, including through an expansive application of state bribery laws under the Travel Act, in bringing federal healthcare prosecutions. In its prosecutions, the government is not limiting its focus to arrangements with government-funded programs, such as Medicare and Medicaid, but is using the Travel Act to extend its prosecutorial reach to private insurance matters as well. Federal prosecutors have begun relying on local commercial bribery laws of individual states to bring indictments in cases involving questionable patient referral arrangements.

A recent verdict involving the Forest Park Medical Center (FPMC), a physician-owned surgical hospital in Dallas, highlights the scrutiny that healthcare practices may face and the extended tools federal prosecutors will reach for to drop the hammer on healthcare referral practices that, in their view, are improper. This month, following a jury trial in United States v. Beauchamp, et al., 3-16 Cr. 516D (NDTX), seven defendants, including surgeons, other healthcare providers and an FPMC managing director, were convicted of conspiracy to pay or receive healthcare bribes for arranging patient referrals. Ten defendants previously had pled guilty.

According to the indictment, FPMC capitalized on out-of-network financial arrangements with insurance carriers by setting its own prices for medical services and being “reimbursed at substantially higher rates than in-network providers.” Referred patients allegedly were assured that they would “receive in-network benefits” and did not have to pay out-of-network costs – even though FPMC billed the patients’ plans and programs at the higher out-of-network rates. To further induce these patients, the FPMC allegedly did not collect patients’ coinsurance payments. Most of the affected payers were private, but the government identified TRICARE and the Federal Employees’ Compensation Act, federally funded programs, as additionally impacted payers.