Four Houston-Area HCA Hospitals: The Discount Was the Alleged Kickback

Four hospitals agreed to pay $8.6 million in the HCA Houston hospitals ambulance swapping settlement of 2017 over alleged transport discounts traded for referrals. The government said the hospitals saved on rides they would otherwise have had to pay for, while ambulance companies received more lucrative Medicare and Medicaid transport business. The hospital’s saving was the alleged kickback.

The U.S. Attorney’s Office for the Southern District of Texas announced the settlement on October 4, 2017. It covered Bayshore Medical Center, Clear Lake Regional Medical Center, West Houston Medical Center and East Houston Regional Medical Center. All four were affiliated with Hospital Corporation of America, based in Nashville, Tennessee.

Texas, which had paid some of the Medicaid claims, was to receive more than $300,000 of the settlement.

How the Ambulance Swap Worked

The hospitals allegedly exchanged referrals for free or heavily discounted patient transports. Without that bargain, the government said, the hospitals would have owed substantially more for those rides. The ambulance companies accepted less on the hospital’s side of the business in exchange for access to other transports paid for by Medicare and Medicaid.

That is a noncash referral benefit: the recipient keeps money it would otherwise spend. In the alleged exchange, taxpayers financed the referrals that made the hospitals’ discounts worth offering.

The important divide was between transports the hospital had to finance and other transports that brought the ambulance company government-paid business. The alleged exchange joined those separate streams of money.

The Anti-Kickback Statute prohibits giving or receiving benefits to induce referrals for services covered by federal health care programs.

Why the Hospital Side Mattered

The settlement reached the hospitals that allegedly received the benefit. The chief counsel to the Inspector General of the Department of Health and Human Services emphasized that responsibility for a referral arrangement can extend to a company that does not bill Medicare or Medicaid for the services itself. The company receiving the discount has a part in the bargain even when another company sends the transport claim.

That was the enforcement shift. The Southern District of Texas described this as its second announcement holding medical institutions accountable for ambulance swapping. Before those settlements, the office said, almost all such cases had concentrated on the ambulance companies.

For someone who understands a hospital’s transport purchasing, that distinction matters. The alleged hospital kickback arrangement sat where an expense decision met a referral decision. Someone familiar with what the hospital expected in return for its business may understand that connection better than someone who sees only the ambulance claims.

The Investigation Reached Beyond Individual Bills

The government’s announcement credited the Health and Human Services Inspector General’s data-analysis tools as instrumental to the settlement.

A transport charge shows what one ride cost. The allegation concerned an exchange across rides: a concession on some transports in return for referrals for others. Understanding that exchange calls for an account of the relationship as well as the price.

Why an Invoice Can Miss the Bargain

The 2023 paper Types of Hospital Frauds: Nature and Methods of Prevention, published in the Journal of Forensic and Investigative Accounting, explains why complexity and collusion can conceal hospital fraud. Patients generally receive the service while an insurer or government program pays the provider. The people deciding where business goes and the people paying for it can be looking at different parts of the transaction.

The paper describes how a third party working with management can give an auditor false confirmation that appears convincing, and why checks that rely on people reviewing one another’s work fail when those people share an interest in the bargain.

In its discussion of patient referrals, the paper also identifies staff knowledge as useful: employees may notice unusual referral patterns that an auditor would need to ask about. That analysis helps explain the value of someone who knows the transport bargain. The HCA allegation turns on what the discount bought, something the price on an invoice cannot explain on its own.

Three Whistleblowers Brought Two Cases

Three whistleblowers filed two qui tam cases under the False Claims Act. The settlement resolved their claims as well as the government’s. Their cases put the hospital side of the transport arrangement before the government.

A whistleblower case under the False Claims Act can pay 15% to 30% of what the government recovers. For an insider who knows why a transport discount was offered or accepted, the connection between that benefit and the referrals is the point to bring to our whistleblower experts.

The Pattern Beyond These Hospitals

The expense-saving benefit also has a close parallel outside ambulance services. William Beaumont Hospital agreed to an $84.5 million settlement in 2018 that included allegations of free or discounted office space and staff for referring physicians. The Justice Department’s account described those benefits alongside excessive physician compensation used to secure referrals.

The direction of the benefit changed. In the Beaumont allegations, the hospital supplied benefits to physicians who sent it business. In the Houston allegations, the hospitals received benefits from ambulance companies to which they sent business. Both accounts turn on an expense someone else absorbed in exchange for referrals. That is why the person who understands a discount, staffing subsidy or transport agreement can see something the final bill leaves out.

The Bargain Behind the Transport Price

If you know which ambulance discounts depended on a hospital’s referrals, talk with our whistleblower experts about the deal behind the rides. We work with you to build your strongest hospital kickback whistleblower case around that exchange and bring in whistleblower lawyers who know ambulance and healthcare kickback cases. We stay beside you from the first account of the bargain through the pursuit of a recovery.