Whistleblowers Awarded $1.5 Million in Hospice Fraud Case

​Creative Hospice Care Inc. has agreed to pay $9.2 million to resolve allegations that the company and its affiliates engaged in a scheme to pay illegal kickbacks to medical directors in exchange for hospice referrals. The settlement, announced by the U.S. Department of Justice, concludes three separate whistleblower lawsuits filed under the False Claims Act.

The company’s owner allegedly directed the payment of monthly stipends, signing bonuses, and other financial incentives to medical directors who referred patients to Creative Hospice. According to federal prosecutors, these payments violated the Anti-Kickback Statute, a federal law designed to prevent corruption in medical decision-making.

Kickbacks for Patient Referrals

​At the heart of the case were allegations that Creative Hospice paid medical directors based on the number of referrals they made. As referral volumes increased, so did the medical directors’ compensation, the DOJ said. These payments were disguised as legitimate stipends for medical director services but were in fact inducements to steer patients to Creative Hospice.

Such practices violate the Anti-Kickback Statute (AKS), which prohibits offering or receiving anything of value to generate business reimbursed by federal healthcare programs like Medicare and Medicaid. The purpose of the AKS is to ensure that medical decisions are based on the best interests of patients, not financial incentives. Violations can result in criminal prosecution, hefty fines, imprisonment, and exclusion from federal healthcare programs.

Because Creative Hospice billed Medicare for patients referred through these unlawful arrangements, the scheme also triggered liability under the False Claims Act (FCA). Submitting claims to the federal government that result from illegal kickbacks is considered fraud under the FCA and can result in civil penalties and treble damages.

Whistleblowers Spark Federal Investigation

​The government’s investigation was initiated by a former employee of Creative Hospice who worked in marketing. This individual filed a whistleblower—or qui tam—lawsuit alleging the kickback scheme. Two other whistleblowers later came forward with similar complaints.

Under the qui tam provisions of the False Claims Act, private individuals can sue on behalf of the government if they have evidence of fraud involving taxpayer funds. These whistleblowers, known as "relators," are eligible to receive a portion of any funds recovered. In this case, the three whistleblowers will share more than $1.5 million of the $9.2 million settlement.

“Illegal kickbacks undermine the integrity of our healthcare system and divert resources away from patients who truly need care,” said a DOJ spokesperson. “This case demonstrates the vital role whistleblowers play in uncovering healthcare fraud and protecting public funds.”

A Warning to Healthcare Providers

​The resolution of the case sends a strong message to the hospice industry and healthcare providers nationwide. Federal authorities have increased scrutiny of hospice providers in recent years amid concerns about unnecessary services, improper billing, and fraudulent referral arrangements.

The DOJ emphasized that healthcare providers must ensure their relationships with physicians comply with both the AKS and the FCA. Business arrangements that involve payments tied to patient referrals—even if disguised as consulting fees—are likely to face serious legal consequences.

The Key Whistleblower Laws

​The Anti-Kickback Statute (42 U.S.C. § 1320a-7b(b)) makes it a criminal offense to knowingly offer, pay, solicit, or receive remuneration to induce referrals of items or services reimbursable by federal healthcare programs. Certain narrowly defined “safe harbors” exist, but arrangements must meet strict requirements to qualify.

The False Claims Act (31 U.S.C. §§ 3729 – 3733) allows the government to recover damages for false claims submitted to federal programs. Whistleblowers who file FCA suits may receive 15% to 25% of the recovery if the government intervenes in the case, and up to 30% if the government declines and the whistleblower proceeds independently.

The case against Creative Hospice is part of ongoing federal efforts to combat healthcare fraud, which costs taxpayers billions of dollars annually. It also highlights the financial and ethical importance of whistleblowers in uncovering systemic abuses.

Contact an Experienced Whistleblower Lawyer

If you have evidence of kickbacks being paid in return for patient referrals – or of any other type of Medicare or Medicaid fraud – you may be entitled to a substantial financial reward and legal protections as a whistleblower.  Call John Howley, Esq. today at 212-601-2728 to schedule a free and confidential consultation with an experienced whistleblower lawyer to learn more.