California Skilled Nursing Facilities, Owner and Management Company Agree to $45.6 Million Consent Judgment to Settle Allegations of Kickbacks to Referring Physicians

LOS ANGELES Prema Thekkek, her Vacaville-based management company, Paksn Inc., and six skilled nursing facilities (SNFs) owned by Thekkek and/or operated by Paksn have agreed to enter into a $45.6 million consent judgment to resolve allegations that they submitted or caused the submission of false claims to Medicare by paying kickbacks to physicians to induce patient referrals.

The six settling SNFs are Kayal Inc. (doing business as Bay Point Healthcare Center), Nadhi Inc. (doing business as Gateway Care & Rehabilitation Center), Oakrheem Inc. (doing business as Hayward Convalescent Hospital), Bayview Care Inc. (doing business as Hilltop Care and Rehabilitation Center), Aakash Inc. (doing business as Park Central Care & Rehabilitation Center) and Nasaky Inc. (doing business as Yuba Skilled Nursing Center) (collectively the SNF Defendants).

The Anti-Kickback Statute prohibits offering or paying remuneration to induce the referral of items or services covered by Medicare, Medicaid and other federally funded health care programs. It is intended to ensure that medical decision-making is based on the best interests of patients and not compromised by improper financial incentives to providers.

From 2009 to 2021, the SNF Defendants, under the direction and control of Thekkek and Paksn, systematically entered into medical directorship agreements with physicians that purported to provide compensation for administrative services, but in reality were vehicles for the payment of kickbacks to induce the physicians to refer patients to the six SNFs. Specifically, the defendants hired physicians who promised in advance to refer a large number of patients to the SNFs, paid physicians in proportion to the number of their expected referrals and terminated physicians who did not refer enough patients.

On one occasion, a Paksn employee told Thekkek that two physicians were being hired because “they are promising at least 10 patients for $2000 per month,” to which Thekkek responded, “good job. Make sure they give you patients everyday. [W]e can also expand to other buildings with them, if possible.” On another occasion, an employee informed Thekkek that the defendants previously had paid a certain doctor “$1500 each month and he only send [sic] us 2 patients[,] so we didn’t pay him anything from Jan[uary] onwards.” On a third occasion, Thekkek rejected a proposed stipend for a new medical director, explaining that the defendants had paid the previous medical director that amount because “we were getting admission[s] from him,” whereas she did not expect the new medical director to refer many patients. More generally, Thekkek complained that if her employees did not pay medical directors promptly every month, “[t]hese doctors will not give us patients.”

“The administrators and beneficiaries of the Medicare Program expect that providers will make decisions based on sound medical judgment, not their personal self-interest” said United States Attorney Martin Estrada. “As this case demonstrates, our office will take decisive action to address allegations that medical providers are paying or receiving improper financial benefits that could impact care provided to patients.”

“Kickbacks can impair the independence of physician decision-making and waste taxpayer dollars,” said Principal Deputy Assistant Attorney General Brian M. Boynton, head of the Justice Department’s Civil Division. “The department is committed to preventing illegal financial relationships that undermine the integrity of our public health care programs.”

“Kickbacks impose hidden costs on the health care system and compromise medical decision-making,” said Special Agent in Charge Timothy B. DeFrancesca of the Department of Health and Human Services Office of the Inspector General (HHS-OIG). “Working tirelessly with our law enforcement partners, HHS-OIG will continue to combat the waste of valuable taxpayer dollars and protect the integrity of federal health care programs.”

Under the settlement announced today, in addition to entering into a $45,645,327.25 consent judgment, the defendants will make scheduled payments to the United States of at least $385,000 over the next five years. That payment schedule was negotiated based on the defendants’ lack of ability to pay.

The settlement stems from a whistleblower complaint filed in 2015 by Paksn’s former Vice President of Operations and Chief Operating Officer, Trilochan Singh, pursuant to the qui tam provisions of the False Claims Act, which permit private persons to bring a lawsuit on behalf of the government and to share in the proceeds of the suit. The Act also permits the government to intervene and take over the lawsuit, as it did in this case as to some of Singh’s allegations.

In addition to resolving their False Claims Act liability, the defendants have entered into a five-year corporate integrity agreement with the HHS-OIG which requires, among other compliance obligations, an Independent Review Organization’s review of their physician relationships.

The United States’ intervention and settlement in this matter illustrates the government’s emphasis on combating health care fraud. One of the most powerful tools in this effort is the False Claims Act. Tips and complaints from all sources about potential fraud, waste, abuse, and mismanagement, can be reported to HHS, at 800 HHS TIPS (800-447-8477).

HHS-OIG investigated the case.

The matter was handled by Assistant United States Attorney Karen Y. Paik of the Civil Division’s Civil Fraud Section, and auditor John Powers, of the U.S. Attorney’s Office for the Central District of California, and attorneys Matthew Oster, Lindsey Roberts, Jessica Sarkis and Rohith Srinivas, and senior financial analyst Karen Sharp, of the Justice Department Civil Division’s Fraud Section.

The case is captioned United States of America ex rel. Trilochan Singh v. Paksn Inc. et al., No. 15 cv-09064 (C.D. Cal.).

The claims resolved by this settlement are allegations only. There has been no determination of liability.


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