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Pssstt. Hey, you! Come over here. You look like a discerning buyer. I’ve
got some very special Arizona property for sale. Very, very cheap. Such
a deal! Have you ever been to Arizona? You haven’t? Good. Well in
that case, I need to mention that this beautiful property sits right on
the ocean there in Arizona. A beautiful state, you know. It’s a
shame you haven’t been there yet.

My blog readers are far too smart to fall for that scam, of course. But it
turns out some very smart people are intentionally setting up schemes
where they get ripped off on office property they rent. They are manipulating
how much they pay (or charge) in order to try to do an end-run around
the Anti-Kickback Statute (AKS).

How the Rent Fraud Scheme Works

The Anti-Kickback Statute (AKS) prohibits kickbacks aimed at convincing
someone to refer healthcare business. The AKS exists because Congress
was concerned that doctors, therapists and other healthcare providers
were being paid to make healthcare decisions that were in their own best
interests – not the patient’s.
Unnecessary healthcare treatments are expensive, at a time when Medicare and Medicaid need to put every
dollar toward care that is actually needed. And on a very fundamental
level, the practice undermines the level of trust that patients have in
their doctors, which ultimately will degrade the quality of the healthcare
the patients receive.

In recent years, some hospitals have used rent payments as a proxy for
direct pay to healthcare providers. Instead of handing physicians briefcases
filled with bills, the hospitals, nursing homes, hospices, etc., have
been intentionally overpaying for office space they rent from the doctors.
Healthcare providers also may use the scheme in reverse, renting office
space to doctors at artificially low rates. Either way, the goal is to
put cash into the hands of doctors or nursing homes, etc., who then will
send patients in for treatment.

The practice is illegal, and whistleblowers can bring a lawsuit under the
False Claims Act to let the Government know when this sort of behavior
is happening. I’m in a series on settlements and verdicts, in just
2014, in legal cases filed under the False Claims Act. Two important cases
involved rent schemes.

Manipulated Rent Payments

Somerset Medical Center – $435,640

A medical center in Somerville, New Jersey, paid $435,640 to settle a False
Claims Act lawsuit against it. The suit accused Somerset Medical Center
of trying to make a end run around the Anti-Kickback statute. Two whistleblowers
— one a doctor and the other an administrator – filed the
FCA case. The whistleblowers said that Somerset was renting office space
from a cardiology group, and was intentionally paying too much in rent.
Somerset, they said, was paying more than a fair market value rental rate
in order to reward the cardiology group, which was “a significant
source of patient referrals.” The federal government wasn’t
buying the arrangement: “Making inflated rental payments to induce
referrals is no better than slipping a doctor an envelope stuffed with
cash,” U.S. Attorney Paul J. Fishman said. “Kickback arrangements
undermine the physician-patient relationship and can lead to unnecessary
treatment and higher costs.”

West Penn Allegheny Health Systems, Inc. – $1.5 million

The Government has been on the hunt for unfair rental arrangements that
are intended to mask kickback payments to physician groups. West Penn
Allegheny Health Systems, Inc., was accused of a rental scheme that was
the mirror image of what the Government said Somerset Medical Center of
New Jersey had done. The Government said that Somerset rented office space
from the physicians and paid more than it should have (above market rates).
The Government accused the Pittsburgh Hospital of renting space to physicians
and letting them pay less than they should have (below market rates.)
Either way, the Government said, the purpose of the rental arrangement
was to get physicians to refer business to the hospital. Impressively,
West Penn self-reported the violation.


Lee’s peers have named her a Georgia SuperLawyer every year for two decades.