Do You Know What Your Hospital Board Members Are Doing?

David Chandler was appointed to serve as chairman of Tri-Lakes Medical Center (TLMC), a community hospital in Panola County, Mississippi. As chairman, Chandler set board meeting agendas, regularly dealt with the administrator and communicated with department heads to obtain various reports. Chandler also arranged for the hospital's administrator to meet with a nurse staffing company. Shortly after this meeting, Chandler requested the staffing company pay him $5.00 for each hour it billed to TLMC for nurse services. The fee, according to Chandler, was in return for ensuring that TLMC used the staffing company.

After the hospital entered into a signed agreement with the nurse staffing company, Chandler authorized a $50,000 raise for the administrator, whom he lobbied to use the staffing company on a monthly basis. To that end, the company received 40 percent of the hospital's nurse staffing business and typically was the first vendor TLMC paid each month. In total, approximately $2.3 million was paid by TLMC for nursing services from the staffing company, which earned Chandler $268,000.

Knowing it could not pay kickbacks, the staffing company instructed Chandler to create invoices for payment that did not directly correlate to billed hours but rather looked as if they were for consulting or tax services. The memo "accounting fees" or "accounting services" appeared on the checks from the staffing company.

Just prior to the sale of the hospital, the administrator was invited to a meeting by Chandler with the staffing company's president. The administrator and the president chatted privately after Chandler was excused from the meeting by the staffing company's president. The administrator later alleged he was promised $25,000 by the staffing company to maintain the flow of nurse staffing hours following the sale of TLMC.

This amount was later disputed by the staffing company. To keep the peace, Chandler agreed to pay the administrator $2,000 per month out of his payments from the staffing company. When the FBI began its investigation, Chandler and the administrator agreed to treat these payments as a loan, despite the administrator's initial denial to the FBI that he was receiving money from Chandler. After Chandler began cooperating with the FBI, the administrator and staffing company president were indicted and convicted by a jury of federal program bribery and paying and receiving kickbacks under the Medicare anti-kickback statute (AKS).

The...