Company Received Federal Grant Money Bailout Five Days Before Paying a Large Government Lawsuit Settlement

Many observers and taxpayers have been concerned that there has been almost a complete lack of oversight of the spending under the CARES Act. Distributing $2 trillion in such a short time would be a difficult task under any circumstances. However, the public has almost no idea where the money is going, and Treasury Secretary Steve Mnuchin refuses to divulge much of the spending. As a result, stories of federal grant money going perhaps where it should not have are beginning to emerge and will continue to do so over the coming months. One particular story involves a health care company that received a grant from the federal government five days before the company reached a settlement with the Department of Justice over fraudulent billing practices.

Surgery Partners is a Florida healthcare company that owns both a lab and a pain relief center. According to the press release, these companies engaged in fraudulent billing. They requested that patients take urine tests that were completely unnecessary so that they could bill Medicare and Medicaid and seek reimbursements. The two subsidiaries and two of the executives agreed to pay the federal government $45 million to settle the allegations of fraud.

Previous Lawsuits Alleged Fraudulent Billing Practices

The cases were initially filed as a whistleblower lawsuit under the False Claims Act. The government exercised its right under the law to take over the lawsuit. The claims were initially brought by former doctors associated with the company who claimed that it was a corporate practice to make every patient who was treated receive a urine test whether they need it or not. The whistleblowers actually received part of the settlement as their compensation for coming forward.

Companies almost never settle allegations of fraud within days after the government enforcement action begins. The process often takes years from the time that DOJ begins an investigation until the case reaches a settlement. Oftentimes, there are many months of dialogue between the two sides' lawyers before the two sides agree. In other words, the government would have known for years that there was an issue with Surgery Partners' billing practices. However, the different government entities either did not communicate before writing the check or consciously ignored the corporate integrity issues that Surgery Partners was facing. This means that there was no scrutiny before the government wrote the check.

This is far from the only instance in which companies that have a history of fraudulent billing practices received federal money under the CARES Act. A government watchdog compared the list of companies that have settled with the federal government over fraudulent billing practices over the last decade with those who they were aware received bailout money under the CARES Act. They found that roughly 200 companies that settled for improper billing were able to access bailout money. While some companies were the target of enforcement action years ago and legitimately needed the money, the example of Surgery Partners is a particularly egregious one.

Here, the issue was that the Department of Health and Human Services, which was responsible for screening the recipients of bailout money, adapted criteria that did not filter companies with prior fraudulent billing issues. HHS claims that it did search for providers that no longer have Medicare billing privileges or were no longer allowed to participate in federal healthcare programs. However, HHS acknowledged that these were the only measures that it took to give scrutiny to participants.

The Settlement Agreement Specifically Allowed the Company to Receive Federal Bailout Money

What is difficult to stomach about this particular situation is that Surgery Partners' settlement agreement contained specific language that permitted it to receive this grant funding even in light of the penalties that it was facing for its behavior. The company was already on the decline prior to the COVID-19 pandemic, but the federal government threw it a very large lifeline. The company not only received a $45 million bailout but also was given $120 million in loans. Before receiving the federal grants and loans, Surgery Partners hired a high-powered Washington lobbying firm to represent its interests in front of Congress and seek bailout money.

It is likely that the stories of federal grant monies going to actors with a less than sterling record of corporate integrity will continue to emerge over the coming months if the public is able to learn more about CARES Act expenditures.

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