The Forest Park Medical Center federal bribery and kickback trial in Dallas resulted in landmark convictions against the hospital’s managers and doctors. It also exposed Texas’ longstanding failure to police medical kickbacks under state law.
Texas authorities have never enforced the state’s version of the federal anti-kickback law, according to testimony in the trial. And when faced with a key opportunity to do so — against those same doctors and owners at a different hospital — state investigators came up empty.
Vista Hospital in Garland was considered a precursor to Forest Park — a training ground where the conspirators learned how to pull off their own kickback and bribery scheme beginning in 2009, prosecutors said.
“They saw this, and they wanted a piece of the action,” Assistant U.S. Attorney Andrew Wirmani told the Forest Park jury.
Specifically, they learned how to hide behind “marketing” contracts at Vista to illegally pay doctors and others for surgeries, prosecutors said.
Vista, which the feds called an “old, beaten-down former psychiatric hospital,” closed its doors in 2011 due to competition from the newer, state-of-the-art Forest Park, according to lawsuits between the two companies.
Experts say health care kickbacks can result in expensive and unnecessary procedures that drive up everyone’s costs and can harm patients. They say doctors should always act in their patient’s best interests, without concern for their own financial well-being.
Six of the defendants convicted in the Forest Park case admitted that they perfected the use of marketing agreements or other methods to cover up kickbacks at Vista. That included Alan Beauchamp, the acknowledged mastermind of the Forest Park conspiracy, who ran Vista from about 2005 to 2008.
The Texas attorney general’s office apparently took notice. The state was investigating kickbacks at Vista’s parent company, Dynacq Healthcare, back in 2004, according to disclosures by the publicly traded Houston company.
But Texas’ case went nowhere. And the kickbacks continued until the 2016 federal indictment.
Texas law enforcement had jurisdiction over both Vista and Forest Park because the surgical hospitals billed private insurance.
Some of the needed evidence was there for the taking.
State investigators could have looked at Dynacq lawsuits in which the company and its related entities admitted to illegally paying for patients — usually in an attempt to invalidate contracts it didn’t like.
The state says it doesn’t have any records left that might shed light on why its Vista investigation went nowhere or when it even ended.
Marc Rylander, spokesman for the attorney general’s office, said the Dynacq file “didn’t exist when Attorney General [Ken] Paxton assumed office in 2015.”
“The file was disposed of in 2013 in accordance with the Office of the Attorney General’s records retention schedule, as required by Texas law,” he said in a written statement. “As a result, our office has no basis to comment on the investigation and we have no historical knowledge as to why the case from 15 years ago was closed.”
A Dynacq lawyer said the company had no comment.
Federal officials typically take the lead on such complex, financial fraud cases because state investigators either lack the expertise or the resources.
But some states, such as New Jersey and California, have invested heavily in enforcement efforts using state laws to crack down on health care fraud. New Jersey’s attorney general has a commercial bribery task force formed in 2016 that goes after doctors, pharmacists and others for paying and receiving kickbacks.
A federal jury this month agreed with prosecutors that Forest Park used the marketing contracts to try to hide $40 million worth of bribes and kickbacks to doctors and others from 2009 to 2012. So far, 17 people have been convicted in the case.
Many Forest Park defendants also had received marketing payments from Vista, according to trial testimony as well as state and federal court records.
Vista paid kickbacks to doctors through a company called Medical Multimedia Advertising, or MMA, according to federal prosecutors.
Beauchamp testified during the Dallas trial that he used Medical Multimedia marketing contracts as a template for Forest Park. Beauchamp told jurors he changed only the names.
Dynacq paid Medical Multimedia Advertising about $25 million between 2003 and 2010 for “marketing services,” according to documents in a Harris County contract lawsuit between the companies.
Alan Beauchamp was considered the mastermind of Forest Park’s bribery and kickback conspiracy.
Alan Beauchamp was considered the mastermind of Forest Park’s bribery and kickback conspiracy.
Dynacq’s former lawyer, Eric G. Carter, owned Medical Multimedia Advertising. He said in an interview with The Dallas Morning News that the firm never paid kickbacks and that there’s been no proof of any wrongdoing by his company.
Doctors who received marketing money were not required to bring their patients to Vista, Carter said. He said he was never questioned about the matter by state or federal authorities.
“If they [the government] wanted to know, they would have asked me,” he said.
Chiu M. Chan, the former CEO of Dynacq, disclosed in a 2004 securities filing that the Texas attorney general’s office had notified the company that it was investigating possible violations of state law governing the solicitation of patients. The attorney general’s office had requested Dynacq documents and communications with company representatives, the filing said.
The attorney general’s office elaborated when it denied a media request for records on Dynacq in 2004. The agency said its Civil Medicaid Fraud Division was investigating the company for “improper solicitation of patients” under the state anti-kickback law.
The state agency withheld the records due to “anticipated litigation” in the Dynacq case.
Dynacq was open about how it got patients.
In its 2004 annual report, Dynacq said it received patient referrals from multiple sources and paid those companies a total of $6 million the prior year.
“Our marketing efforts are directed primarily at physicians and other healthcare professionals, who are principally responsible for referring patients to our facilities,” the Dynacq 10K report said. “We have a variety of financial relationships with physicians who refer patients to our hospitals.”
Dynacq also disclosed to investors that year that while it believed it was following federal law, the company could “provide no assurances” that its activities wouldn’t run afoul of the state’s anti-kickback law.
Carter said if there was any evidence of kickbacks at Vista, insurance companies and their lawyers would have raised concerns.
“Everybody complied with the law,” Carter said. “That was important to us.”
Paying for patients
Dynacq hired Beauchamp in 2005, not long after it learned that the attorney general was investigating it for improper patient solicitation.
By 2006, Beauchamp was turning Vista around.
It was his responsibility to grow Vista’s business by convincing doctors to treat their patients at the small, stand-alone hospital in an already saturated market, according to lawsuits. And he was very successful.
But Beauchamp’s methods did not avoid scrutiny.
Vista in 2006 signed a marketing agreement with Surgical Program Development that was designed to steer patients to Vista, according to court records.
Under the arrangement, the company would find patients for Vista and one of its surgeons. In exchange, Vista would assign to Surgical Program Development whatever money it received from insurance companies for those patients.
Dr. Richard Toussaint, a founder of Forest Park Medical Center, has admitted to paying bribes to doctors to bring their surgeries to the now-defunct hospital. Dr. Richard Toussaint, a founder of Forest Park Medical Center, has admitted to paying bribes to doctors to bring their surgeries to the now-defunct hospital.
However, a contract dispute arose between the two companies that led to a federal lawsuit. Vista’s argument was that the contract was illegal because it violated Texas’ anti-kickback law.
U.S. District Judge David Godbey agreed. He ruled that Vista paid Surgical Program Development for patients operated on by Dr. Wade Barker, who was later convicted of conspiring to pay health care kickbacks and bribes in the Forest Park case.
Carter said the contract was executed without Dynacq board approval, and he blamed Beauchamp. “We did everything we could to disengage from it,” he said.
Surgical Program Development could not be reached for comment.
Theft of trade secrets
Not long before Vista closed in 2011, Dynacq sued Forest Park’s founders, claiming they were to blame for the hospital’s demise.
Philip Chan, a former Dynacq executive, said during a 2012 deposition that Forest Park was “a duplicate of us.” Dynacq’s lawsuit accused Beauchamp and Barker of stealing Vista’s patient referral system and “marketing referral spreadsheet.”
“It’s the system that we … created to perfection to help us to have a stable source of patients that come to the hospital to generate income,” Chan said.
Chan said in the lawsuit that Beauchamp learned the doctor marketing system from Dynacq. He also accused Beauchamp of taking Vista doctors and staff with him to Forest Park. One of those people was Andrew Hillman, who pleaded guilty last year in the Forest Park kickback case.
“Andrew Hillman was one of the main marketing guys … that was to work on our referral,” Chan said in the lawsuit.
Both parties later settled the lawsuit.
Texas authorities had another example of Vista paying for patients, and this time the allegations came from Dynacq itself.
When Dynacq’s new CEO took over in 2012, he found problems with the company’s business practices and fired Carter and others, according to the lawsuit.
Carter’s company, Medical Multimedia Advertising, sued Dynacq and a related management entity in 2013, saying they owed more than $1 million for marketing services.
For its defense, Dynacq paid a fraud examiner to come up with a detailed report on Medical Multimedia Advertising’s finances.
Joseph Wilkerson said in his report that he reviewed the company’s bank records and other documents from 2003 to 2012 and found evidence that it paid for patient referrals. Dynacq used the report for its defense: that its longstanding contract with Medical Multimedia Advertising was illegal.
During a trial in the case, a Dynacq executive at the time testified that “MMA wrote checks with the intent of increasing the referrals to the hospital [Vista] from those physicians.”
But Carter noted that the jury and judge both ruled in Medical Multimedia Advertising’s favor after hearing all of the evidence. The ruling centered on the question of whether the company was owed money.
Carter blamed Beauchamp for dragging Vista and Medical Multimedia into the Forest Park case. He said Beauchamp once told him he was going to get very rich and have his own hospital.
“He didn’t care how he got there,” Carter said.
As you can see there was quite a scheme going on with an extraordinary scale. You have to be aware of fraud all throughout your office but let us help add an extra layer of security. Call Patient Options today!