Forest Park Medical Center Indictments:
Why You Need a Healthcare Attorney to Review Your Contracts
The recent indictments of 21 healthcare and related professionals associated with Forest Park Medical Center, offer an opportunity for all healthcare providers and executives to stop, and assess the status of their healthcare contracts, especially if they have carved out Medicare and Medicaid from their business model.

Many healthcare business models are designed to avoid federal and healthcare insurance problems, by carving out lower-paying Medicare, Medicaid, or in some cases, "in-network" managed care insurance plan participation. Absent federal or government dollars, this structure would typically allow for such incentives as physician ownership, freedom from Stark law, and freedom from a whole host of federal regulations.   

Although powerful, the Department of Justice in its Press Release is dead wrong to complain, "Forest Park Medical Center's strategy was to maximize profit for physician investors by refusing to join the networks of insurance plans for a period of time after its formation, allowing its owners and managers to enrich themselves through out-of-network billing and reimbursement."

Even if proven, this would not be illegal. Sure, this "out of network" model ruffles the feathers of insurance payors, but it isn't actually illegal. No one can be forced to join an insurance network, including Medicare or Medicaid. The Association of American Physicians and Surgeons has made it a mission to encourage physicians to do just that - drop out of Medicare and "in network" PPO's. Why? Because they don't pay well and take all the power away from doctors.

Nevertheless, a major component of this lawful "out of network" model is critical. Providers can easily and accidentally let slip through any large number of federal or government payor cases, which are not Medicare cases.

Although the typical arrangement in Texas would call for the carve-out of Medicare and Medicaid programs, (the intent being to avoid the possibility of running afoul of the federal Department of Health and Human Services Office of Inspector General, ("HHS OIG")), what many fail to appreciate, is the manifold number of federal healthcare programs which could be implicated.

This is because the federal Anti-kickback Statute ("AKS") definition covers any "federal healthcare program" many of you may not know exists: Railroad Employees National Health and Welfare Plan, Federal Employees Health Benefits Program (FEHB) U.S. Public Health Service, Indian Health Service, Federal Health Program for Alaska Natives, State Children's Health Program (CHIP or SCHIP), Military Health System including Civilian Health and Medical Program for the Uniformed Services (TRICARE), Veterans Health Care (VA), Office of Workers' Compensation Program, federal prison hospitals, federal black lung benefits, state legal immigrant impact assistance grants, federal pre-existing condition insurance plans, Federal Reimbursement of Emergency Health Services to Undocumented Aliens, Ryan White AIDS/HIV Program, Health Services Corps, Health Systems for Peace Corps Volunteers, and U.S. Merchant Marine Health Services.

While it is usually easy to avoid Medicare, simply don't enroll or opt out of Medicare. With other programs, it is more difficult to tell. Many of the insurance cards carried by non-Medicare federally insured patients look exactly the same as private or commercial insurance cards. So, what can you do if you have a Medicare and federal carve-out business model?

First, carefully screen patients. Is the patient over 65? Are they in the military? Does the patient or a family member work for the government? Are they retired from the government? Do they deliver mail for a living? Then there is a good chance they are covered by a federal healthcare program and the AKS applies to any referral.

Second, an experienced healthcare lawyer should review all your contracts and relationships to ensure that any applicable safe harbor elements are in fact met. If so, then the arrangement is immune from prosecution under the AKS and protected from civil monetary penalties.

Martin Merritt is the Executive Director of the Texas Health Lawyers Association and serves on the board of directors of the Health Law Section of the Dallas Bar Association. His monthly column in Physicians Practice reaches 222,000 physicians nationwide. His third book, entitled Texas Healthcare Fraud, Waste and Abuse is due out in 2017.

5301 Spring Valley Rd.

Suite 200

Dallas, Texas 75254





Martin R. Merritt practices in the area of Health Law and Healthcare Litigation. He represents clients in "Stark Law,"  The False Claims Act, The Anti-Kickback statute, recoupment audits, actions before the  medical board and other state and federal health law matters. He received a B.B.A. from Delta State University in 1984, and his J.D. from Ole Miss in 1986. He has been licensed to practice in the State of Texas since 1989, first having been licensed in Mississippi in 1987.


He is admitted to practice before the United States District Courts for the Northern and Eastern Districts of Texas and all Texas State Courts. He is a member of the Health Law Section of the Dallas Bar Association, the Health Law Section of the State Bar of Texas, the American Health Lawyers Association, and the North Texas Healthcare Compliance Professionals Association.



Health Law, Healthcare Litigation