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Lucrative Kickback Scheme Earns Hospital Administrators Decades Long Prison Sentences

on Friday, 10 July 2015 in Health Law Advisory: Zachary J. Buxton, Editor

Twelve Presidential elections will have come and gone if Earnest Gibson III, a longtime hospital CEO, serves his entire prison sentence for violations of the Medicare anti-kickback statute.

Gibson III, the longtime CEO of Houston-based Riverside General Hospital, was sentenced in June 2015 by the United States District Court for the Southern District of Texas to a prison term of 45 years for his role in a $160 million multiyear Medicare fraud scheme. The CEO’s son and another co-conspirator were sentenced to 20- and 12-year terms, respectively. The triumvirate join a former assistant administrator of the hospital who pleaded guilty to multiple counts of Medicare fraud and was sentenced to 40 years in prison in May 2015.

In 2012, the Government alleged the group was unlawfully enriched by both paying and receiving kickbacks and soliciting bribes in exchange for the referral of Medicare beneficiaries to receive hospital services in violation of the anti-kickback statute. Specifically the indictment alleged that Mohammad Khan, the 65-year-old former assistant administrator, who was sentenced to 40 years after pleading guilty to five counts of paying illegal kickbacks, paid cash to recruiters and group homes for referrals.

Khan’s indictment spells out four instances in mid-2011 in which he paid $5,000 to a recruiter on two separate occasions in exchange for referring Medicare beneficiaries to the hospital for treatment under Medicare Part B’s partial hospitalization program (PHP) for mental health services (reimbursed under 42 USC §§ 1395n(a)(2)(f) and 1395x(ff)). Later that same year, he paid nearly $4,000 to a group home and $300 per referral to a separate recruiter for the same arrangement.

The Government alleged that the PHP services were either not medically necessary or not provided to the beneficiaries referred under the kickback scheme. PHP services can include individual and group therapy services, family counseling, patient training and education, and occupational therapy. In some instances, Khan and others showed movies to groups of PHP-beneficiaries and later submitted claims for reimbursement of PHP services to TrailBlazer Health Enterprises, LLC, the Hospital’s Medicare Administrative Contractor.

Both Gibson III and his son, Earnest Gibson IV, were ordered to pay restitution of nearly $47 million and $7.5 million , respectively. Regina Askew, the owner of one of the group homes involved in the kickback scheme, was ordered to pay over $46,000,000 in restitution. In addition, the $160 million ruse netted guilty pleas from five other participants including the administrator of a Riverside satellite location, and individuals who either paid or received kickbacks—Leslie Clark, Robert Ferguson, Waddie McDuffie, and Sharonda Holmes.

The case was brought as part of the U.S. Department of Justice’s Medicare Fraud Strike Force, which has charged over 2,000 defendants since its creation in 2007, and is a significant indication of the Department’s willingness to impose substantial prison sentences. Gibson III’s defense team, which was led by defense attorney Dick DeGuerin of the Houston-based firm of DeGuerin Dickson Hennessy & Ward, vows to appeal the District Court’s decision.

Zachary J. Buxton

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