4 Settlements for Alleged Improper Payments for Lease Arrangements and Medical Director Services

Four home healthcare settlements related to improper payments to physicians have been announced by the Department of Justice (“DOJ”). Specifically, Village Home Care LLC (VHC), located in Ocala, Florida, has agreed to pay $225,000 to resolve allegations that it violated the False Claims Act (FCA) by paying kickbacks for the patient referrals of two physicians in the form of 1) a sham medical director arrangement and 2) a sham sublease agreement. Additionally, in a separate settlement, VHC’s CEO and majority owner, Joy Rodak (“Rodak”), has agreed separately to pay $105,000. The United States has also reached agreements with Dr. Vishnu Reddy and Dr. Kuchakulla Reddy to pay $100,000 and $61,943.44, respectively, to resolve allegations that each accepted kickbacks from VHC. Multiple former employees of VHC filed whistleblower complaints, leading to two lawsuits that were intervened by the United States in 2021.

The United States filed complaints under the False Claims Act against VHC and Rodak, alleging unlawful billing of Medicare for home health services for patients referred to VHC by Dr. Vishnu Reddy from Nov. 15, 2012, through Nov. 14, 2014, while Dr. V. Reddy was paid under sham medical director agreements. Although Dr. V. Reddy allegedly did not perform any medical director services, VHC paid him $50,000 during the time he was referring patients to VHC. The United States further alleged that VHC and Rodak knowingly billed Medicare for home health services for patients referred to VHC by Dr. Kuchakulla Reddy from Dec. 1, 2012, through March 5, 2014. VHC paid Dr. K. Reddy through his medical practice under sham sublease agreements. Although VHC did not use the leased space, VHC paid Dr. K. Reddy approximately $31,000 to induce his patient referrals. The claims resolved by the settlements are allegations only, and there has been no determination of liability.

Fair Market Value Takeaway

These settlements serve to remind us once again of the scrutiny of the home health industry and underscore the importance of ensuring that compensation paid to physicians is commercially reasonable, fair market value, and entirely free from any expectation of referrals. It’s important to monitor and examine arrangements to ensure that physician services are only purchased when a legitimate business purpose, not related to referrals, exists for buying them. There is substantial risk to both buyers and sellers, i.e., those who may be perceived as either offering or receiving kickbacks.

BFMV is experienced in reviewing and designing fair market value and commercially reasonable service and lease arrangements between home health agencies and physicians that meet the volume or value standard. Contact us for assistance in structuring fair market value compensation for physicians in the home health setting.