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Former Little River Healthcare CEO charged with fraud

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072822 little river fraud

By Jan White
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TYLER – Jeffrey Paul Madison, former CEO of Little River Healthcare, was among 21 people recently charged in connection to alleged medical fraud schemes worth $1.2 billion.

Thirty-six defendants are facing criminal charges in 13 federal districts in the United States for alleged fraudulent telemedicine, cardiovascular and cancer genetic testing, and durable medical equipment schemes, according to prosecutors for the U.S. Attorney’s Office for the Eastern District of Texas.

As part of this case, the U.S. Attorney’s Office for the Eastern District of Texas has charged 21 people with healthcare kickback, and they are accused of money laundering crimes. Those charged include doctors, hospital executives, laboratory executives and marketers.

Former True Health Diagnostics LLC CEO Christopher Grottenthaler, Susan L. Hertzberg who was formerly with Boston Heart Diagnostics Corporation, former Rockdale Hospital d/b/a Little River Healthcare CEO Jeffrey Paul Madison, and others are defendants in a False Claims Act civil lawsuit titled United States ex rel.

STF, LLC v. True Health Diagnostics, LLC, et al., No. 4:16-cv-547 (E.D. Tex.).

According to the criminal and civil cases, the defendants are accused of breaking the law and making money by paying and receiving illegal kickbacks for referring people to laboratories. The United States filed an amended complaint in May 2022.

The Anti-Kickback Statute does not allow offering, paying, soliciting, or receiving remuneration for referrals of items or services covered by Medicare, Medicaid, and other federal health care programs.

Prosecutors said that “The defendants were charged for their roles in a conspiracy through which physicians were incentivized to make referrals to critical access hospitals and an affiliated lab in exchange for kickbacks which were disguised as investment returns; and in which marketers were incentivized to order, arrange for, or recommend the ordering of services from critical access hospitals and an affiliated lab in violation of the Anti-Kickback Statute.

Two Texas critical access hospitals, Little River Healthcare (LRH) in Rockdale and Stamford Memorial Hospital based in Stamford, worked with Boston Heart Diagnostics (BHD), a clinical laboratory based in Framingham, Massachusetts, that focused on blood testing.

BHD allegedly helped the hospitals bill their blood tests to insurers to appear as hospital outpatient services. Officials said the hospitals charged insurers more money than BHD could obtain as a laboratory.

“Pursuant to the alleged kickback scheme, the hospitals paid a portion of their laboratory revenues to marketers, who in turn kicked back a portion of those funds to the referring physicians who ordered BHD tests from the hospitals or from BHD directly. BHD executives and sales force personnel leveraged the MSO kickbacks to gain and increase referrals and, in turn, to increase their revenues, bonuses, and commissions,” said prosecutors.

From July 1, 2015, to January 9, 2018, at least $11,256,241.68 in illegal kickback payments were exchanged by the defendants during the alleged scheme.

Crockett residents will recall that the Houston County Hospital District’s brief association with Little River Healthcare resulted in the hospital’s closure and the loss of over two hundred jobs and millions of dollars, greatly impacting the local economy. Employees of the hospital during that time were quick to defend the Crockett hospital, stating that the failure was due to incompetence at the management level.

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