After years of anticipation, seven guilty verdicts in the Forest Park Medical Center criminal trial (in addition to the 10 pre-trial guilty pleas) have reshaped the health care landscape in Texas, and the nation is watching. While the exact fallout from the stunning conclusion will take some time to play out (appeals will be filed), there are two immediate takeaways of how health care compliance has permanently been impacted.
One of the most closely watched elements of the Forest Park case was the federal government’s use of the Travel Act, a federal law criminalizing business activities illegal on the state level. While originally geared towards organized crime, prosecutors in the Forest Park case used the Travel Act in the health care context to target a physician kickback scheme where federal programs were not involved. The most interesting but unresolved issue is exactly how successful, if at all, the Travel Act can be in health care enforcement efforts in Texas. Unlike the federal government’s success in New Jersey, the verdicts in Forest Park reveal the Travel Act was not expressly relied upon by the jury to convict the physicians involved.
Nevertheless, Forest Park demonstrates that the Travel Act is a very real and controversial enforcement tool the federal government believes can be successful and is willing to use to combat fraud and abuse. Based on this new federal strategy, health care arrangements in Texas must include a risk assessment of the application of the Travel Act. We would recommend this risk assessment even when no funds from federal programs are involved. The possibility of the federal government’s involvement naturally increases risk and the specter of scrutiny. Anyone involved in a health care arrangement should take immediate steps to reevaluate their arrangements taking into account this heightened level of risk.
Another aspect of the Forest Park case which that was illuminating was the importance placed on the intent of the parties involved. At the center of the case were marketing agreements developed with the assistance of qualified health care counsel, which on their face appeared to be bona fide arrangements. More importantly, the agreements were developed and appeared to be structured in compliance with applicable kickback regulations. However, throughout trial the federal government pressed that the true intent of the parties was to induce referrals despite what the terms of the marketing agreement indicated. The Forest Park case reinforces a critical understanding in health care compliance that form must equal substance. Even when parties attempt to structure arrangements within the requirements of applicable rules and regulations, the underlying intent must be aligned, as any deviation can give rise to significant issues regardless of the form. As evidenced by the Forest Park case and the testimony supplied by many of those involved in the scheme who had already pled guilty, the greatest risk of exposing the truth behind the intent of the parties of any arrangement are is those individuals involved in the arrangement. Therefore, anyone involved in a health care arrangement should examine the circumstances beyond the document and ensure the intent and actions of all involved are consistent with compliance expectations.
The Forest Park case is a signal that a bigger and brighter spotlight is now shining on the health care industry in Texas from a fraud and abuse perspective. Gone are the days when one could be comfortable with the historical inaction of the Texas government in kickback enforcement efforts as now the federal government has a powerful new tool to step in to enforce state laws. Even if the Travel Act is not successful on the technical merits, the Forest Park case is a clear signal the federal government can still use it to get in the door to obtain criminal indictments and potentially lead to convictions. With the use (and success?) of the Travel Act, all health care arrangements in Texas, regardless of which payors are involved, are facinge a heightened level of scrutiny and should be reevaluating their arrangements from a regulatory compliance risk perspective.
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