TYLER, Texas — Five defendants have been convicted of participating in a healthcare kickback conspiracy involving a Central Texas hospital, according to the United States Attorney's Office, Eastern District of Texas, including the former CEO of the hospital.
According to the Attorney's Office, Susan L. Hertzberg, 65, of New York, New York; Matthew John Theiler, 57, of Mars, Pennsylvania; David Weldon Kraus, 65, of Loudon, Tennessee; Thomas Gray Hardaway, 51 of San Antonio, Texas; and Jeffrey Paul Madison, 48, of Georgetown, Texas, were found guilty on Nov. 30, 2023, of conspiring to violate the Anti-Kickback Statute.
Madison is the former CEO of Little River Healthcare, based in Rockdale, TX, which also has a location in Temple, TX.
The Attorney's Office stated the five defendants, along with several others, were indicted on Jan. 12, 2022, for "conspiring to commit illegal remunerations in violation of the Anti-Kickback Statute", which prohibits "offering, paying, soliciting or receiving remuneration to induce referrals of items or services covered by Medicare, Medicaid and other federal health care programs".
The defendants were allegedly charged with participating in a conspiracy in which physicians were incentivized to make referrals to rural hospitals and an affiliated lab in exchange for kickbacks disguised as investment returns. Marketers were also allegedly incentivized to arrange for or recommend the ordering of services from the hospitals and lab.
The Attorney's Office said two rural Texas hospitals, Little River Healthcare, based in Rockdale, and Stamford Memorial Hospital, based in Stamford, partnered with Boston Heart Diagnostics (BHD), a Massachusetts clinical laboratory that specialized in advanced cardiovascular lipid testing.
The U.S. Attorney's Office said BHD processed blood tests for a fee while the hospitals billed the tests to insurers as hospital outpatient services, with the hospitals charging insurers a much higher rate than BHD could receive as a clinical laboratory.
The hospitals allegedly utilized a network of marketers who in turn operated management services organizations (MSOs) that offered investment opportunities to physicians throughout the State of Texas.
The Attorney's Office claims that the MSOs were simply a means to facilitate payments to physicians in return for the physicians’ laboratory referrals.
The hospitals paid a portion of their laboratory revenues to marketers, who in turn kicked back a portion of those funds to the referring physicians who ordered BHD tests from the hospitals or from BHD directly, said the Attorney's Office.
BHD executives and sales force personnel allegedly leveraged the MSO kickbacks to gain and increase referrals and, in turn, to increase their revenues, bonuses and commissions.
“Patients should be able to trust that their physicians are ordering tests and making laboratory referrals based on what is best for the patient, and not because the physicians are looking to pad their pockets with profits from kickbacks,” said U.S. Attorney Damien M. Diggs. “For several years, these defendants utilized an elaborate marketing scheme to facilitate payments to physicians in return for the physicians’ laboratory referrals.”
Eleven other defendants pleaded guilty in the case before the trial, and two others were previously convicted of charges relating to the scheme.
In 2022, Boston Heart Diagnostics Corporation, 33 doctors and healthcare executives agreed to pay over $32 million to resolve False Claims Act allegations for their involvement in the scheme.
The defendants reportedly face up to five years in federal prison. A sentencing hearing will be scheduled after the completion of an investigation by the U.S. Probation Office.
The case was investigated by the U.S. Department of Health and Human Services, Office of Inspector General and the U.S. Department of Defense – Defense Criminal Investigative Service (DCIS) with assistance from the U.S. Secret Service and the U.S. Department of Commerce - Export Enforcement. It was prosecuted by Assistant U.S. Attorneys Adrian Garcia, Nathaniel C. Kummerfeld, Lucas Machicek, and Robert Austin Wells.
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