Feds Two-Step on Texas Sovereignty has Far-Reaching Compliance Implications

by Polsinelli
Contact

Polsinelli

The recent federal grand jury indictment of 21 health care executives, investors, and physicians in connection with the now defunct Dallas-based Forest Park Medical Center effectively turned the Texas health care compliance environment on its head. The individuals were allegedly involved in what federal prosecutors described as a "massive, multi-faced bribe and kickback scheme."

The charges prompt the following business action items and considerations:

  • Texas health care business owners and providers with an investment interest in a provider entity that carves-out federal health care program business will need to reassess any potential kickback arrangement in light of the federal government's enforcement action in Forest Park.
  • A business arrangement that was previously considered "low-risk" under the Texas anti-kickback or bribery statutes—due to a lack of state government enforcement action—may now be exposed to a risk that the federal government may use the Travel Act to enforce previously unenforced state law against the arrangement.
  • As Texas sovereignty wanes, business owners, investors, and providers will need to reassess business arrangements that could potentially expose them to the risk of criminal enforcement under the federal Travel Act.

Background

The charges brought by the US Attorney's Office for the Northern District of Texas (NDTX) in Forest Park under the Travel Act (18 U.S.C. § 1952) are novel and unprecedented, as:

  • The charges require that federal prosecutors demonstrate that the defendants violated federal law by failing to comply with a state law that Texas has chosen not to enforce;
  • NDTX's use of federal authority to enforce a previously unenforced criminal statute will create significant investment insecurity among Texas health care business owners, investors, and providers; and
  • The enforcement of a state law by a federal authority effectively strips the Texas Attorney General of its discretionary enforcement authority which, to date, the Texas Attorney General has not exercised.

According to the indictment and DOJ press release, Forest Park paid approximately $40 million in bribes and kickbacks to physicians, surgeons, and others in exchange for patient referrals to the physician-owned, out-of-network hospital. Among other charges, NDTX alleges that the kickback scheme violated the Travel Act (18 U.S.C. § 1952), a statute that can transform certain state statute violations into federal crimes when completed in conjunction with interstate travel or use of the mail. In this case, NDTX said the kickbacks constituted illegal bribes under Texas' commercial bribery statute, which criminalizes a fiduciary's solicitation or acceptance of any benefit "on agreement or understanding that the benefit will influence the conduct of the fiduciary in relation to the affairs of his beneficiary." Unlike Texas' bribery provision, commercial bribery does not necessarily involve government officials.

Implications

This prosecution is significant for multiple reasons:

  1. First, NDTX effectively used the Travel Act to federalize the Texas commercial bribery statute, which has no analogous provision at the federal level, and which Texas law enforcement agencies have never enforced on their own. As described in a federal district court rejection of the use of the Travel Act, "it is the state, not the federal government, that must make the initial prosecutorial policy decision." A federal court actively prosecuting a state statute that Texas has chosen not to enforce raises significant concerns regarding principles of federalism and deference to Texas's sovereignty. NDTX's action also may raise questions regarding the impact on state sovereignty and the potential for inconsistent federal enforcement across state lines, particularly when many states do not have a commercial bribery statute on the books.
  2. Second, the use of the Travel Act in a health care enforcement prosecution is a rather novel concept that — while used in a handful of other indictments in other states to induce guilty pleas — has yet to be ruled upon in federal court. This should be particularly concerning to health care practitioners in Texas who have relied on safe harbor provisions to the Texas Patient Solicitation Act (which mirror the safe harbors of the federal anti-kickback statute) when making decisions as to the propriety of their referrals. Notably, the Texas commercial bribery statute has no such safe harbors.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Polsinelli | Attorney Advertising

Written by:

Polsinelli
Contact
more
less

Polsinelli on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
Privacy Policy (Updated: October 8, 2015):
hide

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.

Security

JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at info@jdsupra.com. In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at: info@jdsupra.com.

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.