Healthcare fraud enforcement continues to be a top priority for federal authorities, with Stark Law violations remaining under particular scrutiny.
The complex nature of physician self-referral regulations, combined with Texas's large healthcare market, has led to several significant settlements that underscore the importance of a robust compliance program.
Recent enforcement actions in Texas highlight both the U.S. Department of Justice's (DOJ) commitment to pursuing Stark Law violations and the substantial financial risks healthcare providers face when failing to maintain appropriate safeguards around physician relationships and referral patterns.
Here are three recent cases against Texas healthcare providers or practices, totaling $21.3 million in settlements:
Outpatient Surgery Centers In Dallas County Self-Disclose Stark Law Violations
In November 2024, Horizon Medical Center paid $14.2 million to settle allegations of violating the Stark Law.
Horizon Medical Center of Denton voluntarily self-disclosed potential Medicare violations involving:
- Failure to properly identify services at off-campus facilities in Dallas, Richardson, and Coppell using required "PN" modifiers. The use of modifier “PN” triggers a payment rate under the Medicare Physician Fee Schedule. The Centers for Medicare & Medicaid Services (CMS) expects the “PN” modifier to be reported with each non-excepted line item and service.
- Problematic financial relationships through management agreements and equipment lease agreements with companies directly or indirectly owned by a physician performing procedures at the surgery centers.
Horizon voluntarily self-disclosed these potential Stark Law violations to the DOJ.
“This office will continue to make sure that companies follow the rules of the road when submitting claims to federal healthcare programs,” said U.S. Attorney Leigha Simonton. “And while we will never condone unlawful conduct, we will continue to credit companies that voluntarily self-disclose misconduct prior to the government initiating an investigation.”
This settlement was the result of a coordinated effort between the U.S. Attorney’s Office for the Northern District of Texas and the U.S. Department of Health & Human Services’ Office of Inspector General (HHS-OIG)
Rockdale, Texas Clinic CEO Excluded From Medicare, TRICARE for 25 Years
In October 2024, Little River Healthcare paid $5.3 million to settle allegations of illegal kickbacks.
Jeffrey Madison, former CEO of Little River Healthcare in Rockdale, Texas, agreed to pay $5.3 million to settle False Claims Act allegations. Madison is also excluded from billing federal healthcare programs for 25 years.
The allegations involve two main kickback schemes from 2015-2018:
- Madison caused Little River Healthcare to pay commissions to recruiters who used management service organizations (MSOs) to pay doctors for laboratory testing referrals
- Madison arranged $2,000 monthly "medical director fees" to Dr. Doyce Cartrett Jr. for lab referrals, though no actual medical director services were provided
This settlement is part of a larger enforcement effort related to MSO kickbacks. The United States has recovered more than $52 million from healthcare providers, including 46 physicians, in recent years.
The case demonstrates DOJ's commitment to pursuing healthcare fraud, including at the executive level.
“The Justice Department will continue to pursue individuals — including C-suite executives — who commit health care fraud,” said Principal Deputy Assistant Attorney General Brian M. Boynton, head of the Justice Department’s Civil Division. “Kickbacks to physicians from laboratories or other healthcare providers can undermine healthcare decision-making, subject patients to unnecessary medical services and waste taxpayer funds.”
The DOJ Civil Division’s Commercial Litigation Branch, Fraud Section, and the U.S. Attorney’s Office for the Eastern District of Texas conducted the investigation with assistance from the HHS-OIG and the U.S. Department of Defense’s Defense Criminal Investigative Service.
Houston Physician Refers Patients To His Own Diagnostic Centers In Violation Of Stark Law
In March 2024, a Houston physician paid $1.8 million to settle allegations of violating the Stark Law.
Dr. Mohammad Athari, 80, of Houston and his practice United Neurology P.A. were implicated for a pattern of referring patients to his own diagnostic centers (Universal MRI locations in Baytown, Humble, and Conroe) between 2014 and 2021.
Stark Law prohibits physicians from referring patients to entities where they have financial interests.
U.S. Attorney Alamdar S. Hamdani emphasized that the Stark Law exists to prevent physician judgment from being corrupted by financial incentives. “Similarly, physicians that bill government healthcare programs must ensure they are billing for medically necessary services and not just maximizing their own income.”
The U.S. Attorney's Office for the Southern District of Texas and the Texas Attorney General's Office-Civil Medicaid Fraud Division conducted the investigation.
The case originated from a qui tam (whistleblower) complaint.
