On September 28, 2020, the U.S. Department of Justice (DOJ) announced that Lakeway Regional Medical Center LLC (LRMC) in Texas agreed to pay $13,580,822.79, and Surgical Development Partners LLC, Surgical Development Partners of Austin Enterprises LLC, and several individuals collectively agreed to pay $1.8 million, to resolve allegations they violated the False Claims Act and other statutes in connection with the development and operation of a hospital in Lakeway, Texas.[1] The other settling parties supported the development of the hospital and provided management and operational services to LRMC.
This settlement resolves allegations that the defendants made numerous false statements and material omissions when they applied for a mortgage insured by the Federal Housing Administration (FHA) to fund construction of the hospital. The FHA insures loans used to build hospitals in underserved and rural areas. The fraudulent statements allegedly overstated physician support for the hospital while understating key credit risks. The DOJ alleged the defendants delayed refunds to investors who had cancelled their investments in order to create the appearance that the project satisfied mortgage covenants requiring sufficient cash-on-hand to close the loan. After receiving the loan for LRMC, the defendants allegedly distributed project funds in breach of FHA’s requirements. The U.S. Department of Housing and Urban Development (HUD) purchased the mortgage note, suffered a loss, and then LRMC defaulted on the loan.
In a separate qui tam lawsuit, LRMC agreed to pay a $1.1 million settlement related to it allegedly submitting false claims to Medicare and Medicaid. LRMC was accused of inducing physicians to refer patients to the hospital by offering them a low-risk investment in a joint venture. The joint venture was formed to purchase and then lease the hospital back to LRMC. The DOJ contends the reimbursement claims under the Medicare and Medicaid programs during the period between March 2015 and August 2016 were based on unlawful referrals under the federal Anti-Kickback Statute. These allegations were initially brought by whistleblowers Robert Van Boven, M.D, and Sharon Van Boven.
These two settlements are a reminder that the DOJ “will continue to vigorously enforce the False Claims Act, which protects taxpayers and helps ensure that federal programs operate as Congress intended,” as stated by U.S. Attorney John Bash of the Western District of Texas. Because the health care industry generally, and hospitals specifically, often rely upon federal funds (e.g., Medicare and Medicaid reimbursements) and loan programs from multiple federal agencies and programs, it is especially important to ensure health care compliance by all participants.
- The lawsuit resolved by this settlement is captioned United States v. Lakeway Regional Medical Center, LLC, Case No. A-19-CV-945 (W.D. Tex.).
