When a nursing home receives Medicare funds, it’s supposed to use that money for patient care, and it’s actually a felony offense under the Medicare and Medicaid Patient Protection Act to use that money to pay kickbacks to physicians for referring patients. In a record settlement for this sort of case, a the operator of a network of Florida nursing homes will pay $17 million to close the books on allegations it ran this sort of kickback scheme for seven years.

In 2012, the Justice Dept. sued Miami-based Hebrew Homes Health Network Inc. (now known as Plaza Health Network), alleging in the complaint [PDF] that the company and its president had been misusing Medicare funds for several years by paying kickbacks to a number of so-called “medical directors,” who were each paid monthly stipends ranging from $1,000 to $7,500.

The DOJ contends that these doctors were not providing the services detailed in their contracts with the nursing homes, but were instead receiving kickbacks for referring patients in need of skilled nursing care.

These referrals, according to the complaint, were responsible for upwards of 71% of patient admissions during the years in which the scheme ran. At the time the lawsuit was filed, the DOJ estimated that nearly $4 million had been paid in kickbacks to these doctors.

Deliberately invoicing the federal government is a violation of the False Claims Act, leaving companies that file such claims potentially on the hook for significant damages.

Under the settlement, Hebrew Homes’ president has agreed to resign and the company has entered into a five-year integrity agreement with the Department of Health and Human Services’ Office of Inspector General.

“Illegal inducements paid to physicians in exchange for patient referrals will not be tolerated,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer in a statement. “Medicare funds should be used to provide care for our senior citizens, not as an inducement to physicians to refer business.”

The settlement announced yesterday includes a substantial $4.25 million whistleblower payout to the former Chief Financial Officer of Hebrew Homes, who was responsible for bringing these allegations to light.

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