Dunes Surgical Hospital and USPI: The Referral Trail Through a Trainer Budget

In the Dunes Surgical Hospital athletic trainer settlement, the hospital and USPI agreed to pay $14,126,889 over alleged kickbacks outside physician salaries. The government alleged that Dunes funded athletic trainers through a physician group’s nonprofit affiliate and supplied another group with discounted clinic resources. The hospital was allegedly helping pay for the people and facilities that sent patients its way.

The Department of Justice announced the resolution on September 16, 2024. Dunes is a surgical hospital in Dakota Dunes, South Dakota. USPI is United Surgical Partners International.

How Athletic Trainer Funding Allegedly Generated Referrals

The athletic trainers Dunes allegedly helped fund generated referrals to both the hospital and the physician group. The money passed through the CNOS Foundation, a nonprofit affiliated with the physician group CNOS. Dunes’ contributions allegedly helped fund the trainers’ salaries, while CNOS physicians also referred patients to the hospital.

The settlement agreement puts the contributions at between $300,000 and $375,000 per year during the period from May 1, 2014 through December 31, 2019. The government alleged that inducing or rewarding CNOS referrals was a purpose of those payments. The nonprofit sat between the hospital’s money and the trainer positions it allegedly supported.

That is what makes the arrangement recognizable to someone outside physician compensation. A person handling foundation contributions or a trainer budget could see a different part of the transaction from someone reviewing doctors’ pay. A contribution to a nonprofit can describe where money went while leaving its referral purpose out of view.

The industry incentive is familiar. Referrals feed a hospital’s imaging, laboratory and surgical volume, one reason hospitals buy physician practices. At Dunes, the agreement says referrals from CNOS and the other physician group accounted for a significant portion of the hospital’s procedures.

Another Physician Group’s Clinic Costs Became the Benefit

Dunes allegedly gave a different physician group clinic space, administrative and clinical staff, and supplies for free or below fair market value. The agreement identifies that group as Dunes Anesthesia, which operated as Siouxland Pain Clinic inside the hospital. Its physicians referred patients to Dunes too.

The alleged benefit reduced the group’s cost of operating its clinic. Space, staff and supplies are separate expenses, but the government treated them as parts of the same referral arrangement. It alleged that a purpose of providing those resources was to induce or reward the group’s referrals.

The distinction matters to the employee looking at expenses. In the trainer arrangement, money allegedly passed through a nonprofit to support a workforce that generated patients. In the clinic arrangement, Dunes allegedly supplied resources another practice would otherwise have to pay for. Looking only at a physician’s salary would miss the benefit the government described in each.

How the Referral Arrangements Reached Government Claims

The government alleged that both arrangements produced false claims to Medicare, TRICARE and Medicaid. Taxpayer-funded health care programs bore the cost of the alleged referral bargains. Its case connected the benefits to referrals, then connected those referrals to the hospital’s bills. That is how a contribution or a staffing expense becomes a hospital False Claims Act case.

The allegations involved both the Anti-Kickback Statute and the Stark Law. Both sit behind the broader pattern of hospital kickbacks and physician compensation.

USPI’s Management Role and the Voluntary Disclosure

USPI’s involvement extended to management through its wholly owned subsidiary, USP Siouxland. On July 1, 2014, that subsidiary acquired partial ownership of Dunes and signed a management agreement covering day-to-day oversight. Both physician arrangements began before that acquisition.

The government alleged that two USPI employees supporting the subsidiary’s management learned of the foundation contributions and approved an increase after it took over.

A new USPI audit and compliance review program began in 2019 and helped identify the issues. The companies stopped the foundation contributions and the clinic’s space, supply and employee arrangements. Dunes and USP Siouxland made their voluntary disclosure to the Department of Health and Human Services Office of Inspector General.

The agreement allocated $12,755,532 to the federal government. South Dakota, Iowa and Nebraska were to receive approximately $1.37 million collectively for their Medicaid share.

What Staff Could See Between the Budget and the Bill

A contribution ledger and a referral report can describe opposite ends of the same arrangement. For someone who handles nonprofit accounting, trainer payroll or clinic expenses, the important connection is the benefit the hospital funded and the business that came back. The Dunes allegations put both ends in view.

Contribution approvals and trainer funding could show the hospital’s support for the nonprofit. Clinic staffing costs, space arrangements and supply records could show the resources supplied to the practice. Referral reports and the resulting program claims could connect that support to hospital business. These are the kinds of records a healthcare staff whistleblower may already understand through their work.

The paper Types of Hospital Frauds: Nature and Methods of Prevention, published in the Journal of Forensic and Investigative Accounting in 2023, explains why that view matters. It notes that collusion can defeat controls that divide responsibilities among departments, and that assistants and surrounding staff may notice unusual referral patterns. A contribution approval, payroll entry and patient referral can look ordinary when each department sees only its own part.

Hospital Physician Noncash Kickbacks Reach Beyond Payroll

Hospital physician noncash kickbacks can involve paying a practice’s expenses or providing something valuable instead of paying the physician directly. The same paper makes the point plainly:

Other hospital settlements show why the direction of the benefit matters. Pacific Alliance Medical Center allegedly paid above fair market value to rent office space from physicians. Trinity Hospital’s rental payments to two referring physicians likewise allegedly exceeded fair market value. Dunes’ clinic allegation ran the other way: the hospital supplied the space and other resources too cheaply. In either direction, the practice allegedly benefited.

A hospital’s free call coverage for a referring cardiologist was the alleged benefit at Catholic Medical Center. The hospital allegedly paid its own cardiologists to cover the referring doctor’s patients. In the Fresno Community Health System settlement, physician lounge amenities included wine, liquor, cigars and meals allegedly provided with the hospital system’s funding and knowledge. Staffing relief and lounge expenses sit outside a physician’s salary too.

Ownership can carry the same referral incentive. The Texas Heart Hospital qui tam case concerned an alleged rule that physician owners meet a yearly 48-patient-contact minimum to keep their stake. Flower Mound Hospital allegedly bought back older physicians’ shares and resold them to younger physicians, with the shares allocated by each doctor’s referral volume or value. There, the valuable benefit was a stake in the hospital.

USPI also participated in the separate OASIS Hospital convertible bond settlement. The Justice Department alleged that OASIS paid a referring physician group interest on convertible bonds.

An Insider’s View of the Referral Bargain

Dunes and USPI reported these arrangements themselves, and the resolution identified no whistleblower. A whistleblower case under the False Claims Act can pay 15% to 30% of what the government recovers.

What the Hospital Expected From the Funding

An athletic-trainer budget may tell you more about a hospital’s referral strategy than its physician payroll does. Speak with our whistleblower experts about the funding and the referrals. We work with you to build the case around those decisions and the claims they produced, bring in whistleblower lawyers who know hospital referral arrangements, and stay at your side through the case.