Texas hospital, managers pay $16M to settle 2 false claims suits

Lakeway (Texas) Regional Medical Center and its former managers agreed to pay more than $16.4 million to resolve two separate False Claims Act lawsuits, the U.S. Justice Department said Sept. 28

The medical center will pay $13.6 million and co-defendants will pay $1.8 million to resolve allegations of fraudulently obtaining and misusing federal loans. The co-defendants, Surgical Development Partners, Surgical Development Partners of Austin Enterprises, and G. Edward Alexander, Frank Sossi and John Prater, assisted in the development and management of the hospital.

In the case involving fraudulent loans, the Justice Department alleged that when applying for a mortgage loan from the Federal Housing Administration, the defendants made false statements and omissions to overstate physician support and understate other credit risks. Due to those statements, the hospital received the loan under false pretenses, prosecutors said. 

In particular, the Justice Department alleged the defendants delayed refunds to investors who pulled out their funding to make it appear as if the hospital had enough cash on hand to meet mortgage covenants and close the loan. 

The settlement also resolves allegations that the defendants misused project funds in violation of the Federal Housing Administration's requirements. 

In a separate civil case, the medical center agreed to pay a $1.1 million settlement over allegedly submitting false claims to Medicare and Medicaid, the Justice Department said. 

The $1.1 million settlement resolves allegations that the medical center between March 2015 and August 2016 induced physicians to refer patients to the hospital by offering them an investment in a joint venture. The Justice Department alleges that claims submitted by the medical center to government insurance were unlawful under the federal Anti-Kickback Statute.

Baylor Scott & White acquired the hospital in late 2016 and was not part of the investigation.

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