Texas Heart Hospital: The Patient Count That Put Ownership at Stake

Texas Heart Hospital agreed to a $48 million settlement over an alleged 48-patient-contact requirement that physicians had to meet each year to keep their hospital ownership. The alleged bargain put an owner’s investment income into decisions that should turn on a patient’s care.

Texas Heart Hospital of the Southwest LLP was a partially physician-owned hospital in Plano, Texas. It and its wholly owned subsidiary, THHBP Management Company LLC, agreed to pay the United States. The Justice Department announced the settlement on December 18, 2020, after two former physician owners pursued the case. They knew the ownership arrangement from the inside.

What the Patient Contacts Counted

The alleged minimum patient contacts for physician hospital ownership measured admissions. In their amended complaint, the former owners alleged that only one contact counted per admission, connecting the ownership condition to the flow of patients into the hospital.

A physician could see a patient repeatedly during a stay, but those encounters would still produce a single qualifying contact under the alleged rule. Counting admissions gave the hospital a way to make the ownership condition depend on additional patient business. The complaint expressly connected that choice to expensive procedures.

The former owners also alleged that the CV Governance Council monitored the requirement and approved the higher threshold, which they described as often two to four times the requirements at other Baylor Scott & White affiliates.

Nor, according to the complaint, could physicians pool contacts between Heart Hospital and another hospital in the same system. Work at one did not satisfy the other’s minimum. The rule allegedly directed patient business to the particular hospital whose ownership was at stake.

What Keeping the Shares Was Worth

The complaint described an ownership interest with recurring payments. The amended complaint alleged that, as of 2014, physician investors received approximately $12,000 to $15,000 per interest unit twice a year. That gives the patient-contact requirement its financial meaning: continued ownership meant continued access to an income-producing investment.

The alleged pressure also reached beyond a year’s contact total. The whistleblowers said the defendants used the requirement to pressure high-performing specialist surgeons to contract with system hospitals and perform most of their lucrative procedures there. In that account, keeping the investment could influence where a surgeon worked and where patients received procedures.

Why the Hospital Wanted the Referrals

A physician’s work can generate revenue for several parts of a hospital. Imaging, laboratory services and surgery all sit downstream of the physician’s decisions. That referral stream helps explain why hospitals buy physician practices and employ the doctors who send them business.

Hospital payment also separates the professional work from the facility’s revenue. Medicare pays a facility fee and a reduced professional fee for a service furnished in a hospital outpatient department, compared with a single professional fee in an office. The business interest extends beyond the doctor’s own fee. That industry context gives the complaint’s allegation about directing lucrative procedures a practical meaning.

The 2013 Asian Biomedicine review, Hospital Manipulations in the DRG System: A Systematic Scoping Review, identified equity ownership among the incentives hospitals can offer physicians. Its analysis of healthcare payment incentives reached beyond billing codes to decisions made by hospital management.

The Texas Heart allegation starts with an ownership decision that could influence patient business before it reached a claim. The people who understood the investment terms could explain a part of the arrangement that a billing record alone would not show.

How the Ownership Condition Reached the Government’s Case

The government alleged that the ownership requirement violated the Stark Law and the Anti-Kickback Statute.

The hospital allegedly required patient activity as the price of continued ownership. Its health care referrals were tied to the financial stake a physician could keep. That is the connection between the financial benefit and the referrals that gives this case its significance.

The Former Owners Continued the Qui Tam Case

The Texas Heart Hospital owner contact requirement became a qui tam case under the False Claims Act brought by two former physician owners. The government declined to take over the case, and the former owners continued it.

What the Two Former Owners Received

The two former owners received $13.92 million collectively from the settlement as their whistleblower reward.

A whistleblower case under the False Claims Act can pay 15% to 30% of what the government recovers.

Flower Mound Concerned Who Could Buy the Shares

Flower Mound Hospital shows a different way hospital physician shares can be allocated by referral volume. The government alleged that Flower Mound’s older physician share buybacks moved interests from owners aged 63 or older to younger physicians. Referral volume or value allegedly influenced both the buyers selected and the number of shares each received.

The Justice Department’s December 2, 2021 announcement put that settlement at $18.2 million. Its physician-owner whistleblower received approximately $3 million. Texas Heart concerned the condition for staying an owner. Flower Mound concerned who could buy the shares and how many they could get.

The Flower Mound complaint also alleged that notices told physician investors how many qualifying contacts they had accumulated and when they had to meet the minimum. That is a concrete example of an ownership arrangement becoming an operating process. An agreement states the condition. A progress notice shows how the hospital put it in front of a physician.

Referral Benefits Beyond Hospital Shares

Hospital referral benefits can also take the form of a covered expense, an amenity or an investment payment.

Catholic Medical Center allegedly provided free call coverage for a referring cardiologist. Pacific Alliance Medical Center allegedly paid above fair market value to rent office space from physicians. Trinity Hospital’s rental arrangements with two referring physicians allegedly exceeded fair market value.

The Fresno Community Health System settlement included alleged physician lounge amenities for referring doctors. Dunes Surgical Hospital allegedly funded athletic trainers who generated referrals to a physician group and the hospital. OASIS Hospital allegedly benefited a referring physician group through interest payments on convertible bonds.

Each arrangement gives the insider a different place to recognize the connection: who received the benefit, what made it valuable and how it related to patient business. A physician owner, administrator or compliance professional who understands those connections may see the referral bargain long before an outsider sees a settlement headline.

What It Took to Keep Your Ownership

If your hospital tied ownership to patient business, talk with our whistleblower experts about what keeping that investment required. We turn your understanding of the ownership terms, contact counts and financial rewards into a focused case with whistleblower lawyers who know hospital referral arrangements. We stay on your side from that first conversation through the case’s resolution.