DOJ’s MSO Kickbacks Crackdown Continues with $6M Settlement
By the 91pornWhistleblower Team
The Department of Justice recently announced a $6 million settlement from a laboratory CEO, physicians, and marketers who allegedly used management services organizations (“MSOs”) as vehicles for illegal kickback payments.1 MSOs are business entities that provide administrative and other services to healthcare providers, but in this case they were allegedly used to disguise kickback payments as investment distributions. Former True Health Diagnostics CEO Christopher Grottenthaler agreed to pay $4.25 million for his role in the scheme, and two physicians and seven marketers also agreed to pay $1.82 million to resolve the case.
MSOs as a Cover for Kickbacks
According to the DOJ, marketers, including True Health employees, allegedly offered and paid physicians kickbacks disguised as MSO “investment” distributions to induce referrals. Grottenthaler allegedly facilitated True Health’s continued participation in the scheme even after receiving warnings that the marketers “are a powder keg waiting to explode on us” and that “people are gonna go to prison.”
The settlement also resolves allegations that Grottenthaler arranged for True Health to pay additional kickbacks disguised as consulting fees, processing and handling fees, and waivers of copayments and deductibles to induce laboratory testing referrals.
The DOJ Prioritizes False Claims Act Kickback Cases
The DOJ has prioritized enforcement of the Anti-Kickback Statute and Stark Law related to purported MSOs. Classic signs that an MSO is being used to facilitate kickbacks include paying investor returns with no meaningful risk or services provided, and parallel inducements such as “consulting” fees or copay waivers made alongside MSO distributions.
With this settlement, the DOJ has secured over $59 million in civil False Claims Act recoveries for kickbacks to healthcare providers disguised as MSO investment distributions.
Marlene Koury, partner at Constantine Cannon, noted that “MSO ‘investment’ arrangements that lack genuine business risk or correlate payments with referral volume are red flags for potential AKS violations. Creative structuring cannot disguise what are fundamentally illegal inducements.”
Assistant Attorney General Brett A. Shumate of the Justice Department’s Civil Division stated “The Department of Justice will continue to pursue and prioritize healthcare fraud, including redressing illegal kickbacks. Kickbacks to doctors can undermine medical decision-making, subject patients to wasteful medical treatments, and squander taxpayer money.”
The DOJ Relies on Whistleblowers to Report MSO Kickback Schemes
This case originated from a qui tam lawsuit filed by STF LLC under the False Claims Act’s whistleblower provisions. The government intervened and expanded the case, adding several additional claims and defendants. The DOJ noted in its press release that the government’s pursuit of this case “illustrates the government’s emphasis on combating healthcare fraud,” further noting that “one of the most powerful tools in this effort is the False Claims Act.” The relators in this case will receive $148,750 as a reward.
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Tagged in: Anti-Kickback and Stark, False Claims Act, qui tam,