Last week, Husch Blackwell partner Jonathan Porter posted an article titled – Forget the False Claims Act – How a Virginia Hospital Got Criminally Charged.

“On January 8, 2025, a federal grand jury in Virginia returned an indictment against a hospital,” Porter reports. “This rare criminal event in healthcare alleges that Chesapeake Regional Medical Center conspired to defraud the United States and committed healthcare fraud. Hospitals are almost never criminally charged, as federal investigations into hospitals are nearly always civil proceedings under the False Claims Act.”

“You don’t see hospitals getting criminally charged every day,” Porter told Corporate Crime Reporter in an interview last week. “It just does not happen very often. And so when this case came on my radar, I was instantly hooked on what happened.”

“It starts with an obstetrician gynecologist who was indicted years ago, went to trial and was convicted, and ended up being sentenced to 59 years in prison. For a physician in the federal system, that’s among the highest terms I’ve ever heard of. Even the Michigan oncologist who was fooling people into thinking they had cancer and doing chemo on hundreds of people, I think he only got 45 years.” 

“So this is among the worst that I’ve ever heard of. What he was doing was essentially fooling patients into getting hysterectomies. And a lot of these were Medicaid patients, people with low income. He was tricking patients into getting hysterectomies, elective sterilization, really sad stuff.”

“He was also inducing early delivery of babies, and in order to get those past Medicaid scrutiny, he would allegedly be backdating or faking documents showing when the patient’s due date was. Healthcare payers like Medicaid won’t pay for early deliveries, unless something happens – like you go into labor early, then they’ll cover that. But other than that, you need some sort of a reason to be delivering early.”

“So what he was doing was delivering two sets of documents to the hospital, one showing the real due date and the other showing a fabricated due date in order to support him in doing what he was doing.” 

“And that’s where the hospital got in trouble. There were two sets of documents and there were people within the hospital who received those documents and were in a position to stop this early delivery of babies. And based on the allegations made in the indictment, they continued to allow this doctor to perform early deliveries based on these false medical records.”

“It’s unusual for a hospital to be criminally charged, and we don’t know a whole lot right now about what exactly the hospital knew. Putting on my Department of Justice lens, I would think that in order to determine that a criminal charge against the hospital was in the interest of justice, some senior people at the hospital must have known what was going on and were okay with it.”

“If this is something where just low level people knew what this doctor was doing, I wouldn’t think that would be enough for the Justice Department to insist on criminal charges.” 

“I would think that this would have to be something that went up to pretty senior people. I have no information to suggest that that actually happened, but that’s the kind of evidence that the Justice Department would have to have – knowledge from senior people that a doctor was doing something based on false records.” 

“This seems such a major hammer to bring out of the Department of Justice toolkit.”

In the middle of the article, you write this: “The hospital was not charged until January 2025. While it is unclear what transpired in the nearly four years between [the doctor’s] conviction and the hospital’s indictment, it is not unreasonable to conclude that resolution discussions did not go well.”

“Criminally charging a company is a big deal,” Porter said. “Normally when it’s a company, the stakes are just different from an individual. Normally, there’s a way to work it out. How do we fix this? How do we punish the conduct? How do we punish historic conduct?” 

“But also to make sure this won’t happen going forward. It’s usually resolved with fines or forfeiture, maybe a monitorship or a corporate integrity agreement. You just don’t know what’s going to happen if you don’t agree to some sort of a deal with the Justice Department.” 

“You don’t know what a judge is going to impose on the company. So it’s a really interesting development when you’re not able to work out something in advance. Most of the time, you can agree to something. You can agree on – okay, this is what the fine is going to look like, and this is what the monitorship is going to look like or the corporate integrity agreement.”

“That’s usually something you can work out. And so it’s surprising that this wasn’t worked out. I would assume that the two sides just had very, very different ideas on what this looked like.”

Last week, we ran an interview with Andrew Jennings, a professor of law at Emory Law School. And Jennings came up with an acronym – subsidiary only conviction (SOC). That’s where the parent gets a deferred or non prosecution agreement and some unit of the company pleads guilty, thus avoiding the corporate death penalty. 

“Sometimes when it’s healthcare fraud, the OIG doesn’t have discretion,” Porter said. “It might be a mandatory exclusion situation. So I was a little surprised. I would think that if the Justice Department really is going to insist on a criminal plea, I think there are other potential charges they could work out that wouldn’t involve mandatory exclusion. And then you just work with HHS OIG on a creative resolution that allows the hospital to continue to serve their community. But maybe none of that is possible. Maybe that’s not going to happen.”

But OIG has never excluded a major healthcare facility, have they? That would be like the corporate death penalty.

“Just thinking about the largest hospital based enforcement actions of the last twenty years, I can’t think of a major healthcare provider that’s been excluded from Medicare.” 

“They’ve had corporate integrity agreements left and right. But I can’t think of a major healthcare provider, a major health system, major hospital, that’s been excluded from Medicare. That would be extremely rare.”

Doesn’t the fact that the corporate death penalty has never been used in a major healthcare case – doesn’t that undermine deterrence? If corporations know that all they will have to do is pay a fine and enter into a compliance agreement, why would they care?

“If you talk to people who have been a part of an organization that was under a corporate integrity agreement, they’ll tell you – I never want to do that again. I’ve got a client right now under the federal investigation. And they are telling me – if this ends in a corporate integrity agreement, we’re out of here. There’s no chance that we’re going through that level of scrutiny again.” 

“It’s a tremendous disincentive for healthcare providers to do anything wrong, because those integrity agreements are the real deal. Those are major deterrents. Exclusion is one thing.”

“If you talk to people who are actually running large health systems, they want no part of corporate integrity agreements. 

Why don’t corporations like them?

“It’s similar to a monitorship, in that pretty much every part of your business is going to have to make regular reports to the government in some form or fashion. The company is constantly consulting with the government to get the go ahead on business matters. You are essentially partnering with the government on the running of your organization for however long the agreement is in place.”

How do they differ from monitorships?

“Monitorships are more common outside of healthcare. Corporate integrity agreements came about as a sort of a healthcare specific creation. It’s meant for healthcare providers or life sciences and other healthcare companies. It’s sort of standardized. The monitorships are much more common outside of healthcare, and I think they have similar functions and purposes. The big difference is that monitors are at least supposed to be someone independent, whereas with integrity agreements, there’s a lot more direct government involvement.” 

In monitorships, the company recommends a list of monitors. The government picks one. The company pays for the monitor. For corporate integrity agreements, it’s just the company filing reports with the government. There is no outside person like a monitor?

“Yes, but it’s a tremendous burden to essentially co-run your organization with regulators, because they’re going to have opinions on what you’re doing, making judgments on whether whatever you’re doing meets the requirements of the agreement. With these agreements, you are dealing directly with the regulators,” Porter said.

[For the complete q/a format Interview with Jonathan Porter, see 39 Corporate Crime Reporter 3 (12), January 20, 2025, print edition only.]