SETTLEMENT

AGREEMENT

I. PARTIES This Settlement Agreement (Agreement) is entered into among the United States of

America, acting through the United States Department of Justice and on behalf of the Office of Inspector General of the United States Department of Health and Human Services (OIG-HHS) (collectively the "United States"); the Texas Attorney General's Office and the Texas Health and Human Services Commission (HHSC) (collectively "Texas"); Larry M. Gentilello, M.D.

(Relator); The University of Texas Southwestern Texas Southwestern

Medical Center at Dallas, The University of

Medical Center at Dallas Medical Service, Research, and Development Health Systems a/k/a UT Southwestern Health

Plan, and The University of Texas Southwestern Systems (collectively "UTSW");

and Dallas County Hospital District d/b/a Parkland Health and

Hospital System (Parkland) (UTSW and Parkland collectively referred to as "Defendants") (United States, Texas, Relator, UTSW, and Parkland hereafter referred to as "the Parties"), through their authorized representatives.

II. RECITALS As a preamble to this Agreement, the Parties agree to the following: A. At all times relevant to this Agreement, UTSW was owned, controlled, and

operated by The University of Texas System, an agency of the State of Texas and operated a fully accredited medical school. At all times relevant to this Agreement, UTSW was enrolled to participate in the Medicare and Texas Medicaid programs. At all times relevant to this

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Agreement, UTSW's principal place of business was 5253 Harry Hines Boulevard, Dallas, Texas. At all times relevant to this Agreement, UTSW's Medicare administrative TrailBlazer Health Enterprises, LLC, and its surgical Medicare provider numbers contractor was included

UTOOOCH53 and UTOOOI604. At all relevant times, UTSW's Texas Medicaid administrative contractor was Texas Medicaid & Healthcare Partnership. At all times relevant to this Agreement, UTSW furnished and submitted claims for payment for physician surgical and other services to the Medicare Program (Medicare), Title XVIII of the Social Security Act, 42 U.S.C. §§ 1395-1395Iddc-l, and Texas Medicaid Program (Texas Medicaid), Chapter 32 of the Texas

Human Resources Code. B. Parkland is owned, controlled, and operated by the Dallas County Hospital

District, a political subdivision within the State of Texas. Parkland operates a critical care facility and is charged with providing care to indigent and other residents of Dallas County, and is the primary teaching site for certain residency programs operated by UTSW. At all times relevant to this Agreement, Parkland was licensed as a hospital by Texas and certified to participate in the Medicare and Texas Medicaid programs. Agreement, Parkland's At all times relevant to this

principal place of business was 5201 Harry Hines Boulevard, Dallas,

Texas. At all times relevant to this Agreement, Parkland's Medicare fiscal intermediary was Trailblazer Health Enterprises, LLC. and its Medicare provider number was 45-0015. At all

relevant times, Parkland's Texas Medicaid fiscal intermediary was Texas Medicaid & Healthcare Partnership. At all times relevant to this Agreement, Parkland furnished and submitted claims for payment for hospital inpatient and outpatient services to Medicare and Texas Medicaid. C. Relator Larry M. Gentilello, M.D. is a resident of Texas. On June 28, 2007,

Relator filed a qui tam suit under the federal civil False Claims Act against The University of

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Texas Southwestern Medical Center at Dallas; The University of Texas Southwestern Medical Center at Dallas Medical Service, Research, and Development Plan; and The University of Texas Southwestern Health Systems a/k/a UT Southwestern Health Systems in the United States District Court for the Northern District of Texas captioned United States ex rel. Gentilello v.
University of Texas Southwestern Health Systems a/k/.a UT Southwestern Health Systems, et al. ;

No. 3:07"CV-II72-K ("Federal Action"). On June 28,2007, Relator filed a separate qui tam suit under the Texas Medicaid Fraud Prevention Act against The University of Texas Southwestern Medical Center at Dallas; and The University of Texas Southwestern Health Systems a/kJa UT Southwestern Health Systems in the District Court of Dallas County, Texas, 10I st Judicial District, captioned United States ex reI. Gentilello v. University of Texas Southwestern
Systems a/Ida UT Southwestern Health

Health Systems, et al.; No. DC-07-6167. On August 28,2008,

the state complaint was amended to add The University of Texas Southwestern Medical Center at Dallas Medical Service, Research, and Development Plan and Parkland as defendants, and, on December 30, 2010, the state case was transferred to the District Court of Dallas County, Texas, 14th Judicial District ("State Action") (The Federal Action and State Action are collectively referred to as the "Civil Action"). From approximately August 2003 through March 2007, Relator was the Chair of the Burn, Trauma, and Critical Care Division ("Division") at The University of Texas Southwestern Medical Center, Holder of the C. James Carrico Distinguished Chair in Trauma and Surgical Critical Care, and an attending surgeon at Parkland Memorial Hospital, St. Paul Hospital, Zale- Lipshy Hospital and the Veterans Administration Medical Center in Dallas, Texas. Relator is currently a Professor of Surgery with tenure at UT Southwestern Medical Center. The Civil Action alleges, inter alias, that teaching physicians within UTSW's Department of Surgery failed to adequately supervise surgical residents before,

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during and after certain surgeries performed at Parkland. Relator alleges that despite this lack of supervision, UTSW billed the Medicare and Texas Medicaid programs, beginning in 2004 to the end of 2007, as if attending teaching physicians had in fact adequately supervised or observed the care of patients before, during, and after surgery, in alleged vio lation of both programs' rules and regulations. On July 31, 2008, Relator named Parkland as a defendant in the Federal Action. The Civil Action alleges that Parkland, as the site of the questioned surgeries, knowingly caused and/or conspired with UTSW to submit fraudulent claims to the Medicare and Texas Medicaid programs relating to such surgeries. Relator contends Parkland acted unlawfully by permitting an environment of lax resident supervision as well as implemented a flawed informed consent process. The Civil Action also contends that the surgical informed consent process at Parkland violated a Medicare condition of participation and therefore contends that all reimbursement paid to Parkland related to such surgeries was unallowable. The Civil Action alleges that as a result, not only were claims submitted by UTSW for physician services improper, but also that Parkland improperly received significant patient payments. D. The United States and Texas contend that they have certain civil claims against

the Defendants for the submission or causing the submission to the Medicare and Texas Medicaid of improper claims for teaching physician-related items and services between January 1, 2004, and December 31,2007. The United States and Texas contend the Defendants failed to adequately supervise residents involved in performing certain major surgeries (as defined by Medicare and Texas Medicaid) on Medicare and Texas Medicaid patients at Parkland and failed to comply with Medicare's informed consent requirements. The Defendants as a result allegedly

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caused claims submitted to both programs to be improperly coded under modifier GC, which indicate that the service was furnished by residents under the direction of a teaching physician, that the teaching physician was present for the key portions of the service, and such claims failed to comply with Medicare's rules governing informed consent. The United States and Texas thus contend that the Defendants, between January 1, 2004, and December 31,2007, caused to be submitted for payment certain improper claims representing to Medicare and Texas Medicaid that teaching physicians within UTSW's Department of Surgery had appropriately supervised residents during the key portions of the pre-, intra-, and post-operative management of major surgeries billed as 90-day global surgical fees performed at Parkland. All of the conduct described in this Paragraph II.D. is hereinafter referred to as the "Covered Conduct." E. Defendants deny the contentions of the United States, Texas, and the Relator as

set forth in Paragraphs II.C and D above, and deny that they have any liability relating to these contentions and allegations. No provision of this Agreement or any consideration exchanged pursuant to this Agreement constitutes an admission by Defendants that they engaged in, or violated any law in connection with, the Covered Conduct, nor does it constitute a concession by the United States or Texas that the Defendants did not engage in, and violate several laws in connection with, the Covered Conduct. By entering into this Agreement, the Defendants are not waiving for purposes of any other case or controversy any defenses that may be available to them, including those under the FCA, the Eleventh Amendment to the United States Constitution, or any other statutory, common law, or equitable defense, nor is the United States or Texas waiving for the purposes of any other case or controversy any claims against the Defendants that may be available to them, including those under the FCA or any other statute or common law or equitable cause of action.

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F.

Relator claims entitlement under 31 U.S.C. § 3730(d) to a share of the proceeds of and to Relator's reasonable expenses, attorneys' fees and costs. inconvenience, and expense of protracted litigation of the

this Settlement Agreement

To avoid the delay, uncertainty,

above claims, the Parties reach a full and final settlement pursuant to the Terms and Conditions below.

III. TERMS AND CONDITIONS 1. UTSW agrees to pay to the United States and Texas $1,400,000.00 (Settlement

Amount) by electronic funds transfer pursuant to written instructions to be provided by the Office of the United States Attorney for the Northern District of Texas no later than the Effective Date of this Agreement.

2.

Conditioned

upon the United States receiving the Settlement Amount from

UTSW and as soon as feasible after receipt, the United States and Texas agree to pay $200,000.00 to Relator by electronic funds transfer.

3.

Defendants will make no payment to Relator pursuant to this Agreement, Costs).

including attorneys fees, expenses, and other costs (Relator's

4.

Subject to the exceptions

in Paragraph 9 (concerning reserved claims) below, and compliance

conditioned upon UTSW's

full payment of the Settlement Amount and Parkland's

with the obligations it has assumed under this Agreement, the United States (on behalf of itself, its officers, agents, agencies, and departments) respective physicians, employees, agrees to release UTSW and Parkland, and their monetary claim

and agents, from any civil or administrative

the United States has or may have under the False Claims Act, 31 U.S.C. §§ 3729-3733; the

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Program Fraud Civil Remedies Act, 31 U.S.C. §§ 3801-3812; the Civil Monetary Penalties Law, 42 U.S.C. § 1320a-7a, or the common law theories of recoupment, payment by mistake, unjust of Justice,

enrichment, and fraud, in equity, or any other cause of action which the Department

Civil Division has authority to assert and compromise under 20 C.F .R. Part 0 for the Covered Conduct only.

5.

Subject to the exceptions in Paragraph 9 (concerning reserved claims) below, and full payment of the Settlement Amount and Parkland's compliance

conditioned upon UTSW's with the obligations

it has assumed under this Agreement, Texas (on behalf of itself, its officers, releases UTSW and Parkland, and their respective physicians, claim, monetary or otherwise, including, physician enrollment and fees incurred by the

agents, agencies, and departments)

employees, and agents, from any civil or administrative

but not limited to, claims for suspension or revocation ofUTSW's Parkland's

provider agreement, recovery of fees, expenses, or attorney's

Texas Attorney General or the HHSC in investigating administrative

the Covered Conduct, or other

remedies Texas may have for the Covered Conduct under the Texas Medicaid

Fraud Prevention Act, Tex. Hum. Res. Code Ann. § 36.001 et seq.; or common law theories of recoupment, payment by mistake, unjust enrichment, fraud, or in equity, for the Covered Conduct.

6.

Subject to the exceptions in Paragraph 9 (concerning the United States' reserved

claims) and in this paragraph below (concerning Relator's reserved claims), and conditioned upon UTSWs' full payment of the Settlement Amount and Parkland's obligations it has assumed under this Agreement, compliance with the

Relator, for himself and for his heirs,

successors, attorneys, agents, and assigns, agrees to release UTSW, Parkland, and their

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respective physicians, employees, and agents, from any civil monetary claim Relator has or may have on behalf of the United States and Texas for the Covered Conduct under the False Claims Act, 31 U.S.C. §§ 3729-3733, and Texas Medicaid Fraud Prevention Act, Tex Hum. Res. Code Ann. § 36.001 et seq. Relator specifically reserves all rights to institute, direct, and/or to maintain his individual whistleblower cause(s) of action against the Defendants under 31 U.S.C. §3730(h) and Texas Human Resources Code §36.115, as set forth in Count 2 of the Federal Action and State Action, respectively. In addition, this Agreement in no way impacts Relator's or UTSW's rights, standing, claims, and defenses asserted in the lawsuit styled Larry M. Gentilello, MD. v. The University of Texas Southwestern Medical Center at Dallas, Cause No. 07-05765, in the 14thDistrict Court of Dallas County, Texas. 7. OIG-HHS expressly reserves all rights to institute, direct, or to maintain any

administrative action seeking exclusion against UTSW, Parkland and/or their officers, directors, and employees from Medicare, Medicaid, and all other Federal health care programs (as defined in 42 U.S.C. § 1320a-7b(f)) under 42 U.S.C. § 1320a-7(a) (mandatory exclusion), or 42 U.S.C. § 1320a-7(b) or 42 U.S.C. § 1320a-7a (permissive exclusion). 8. HHSC expressly reserves all rights, if any, to comply with any statutory obligations to

seek mandatory exclusion against UTSW, Parkland, and their respective physicians, employees, and agents from Medicaid, under Chapter 32 and/or Chapter 36 of the Texas Human Resources Code and Chapter 531 of the Texas Government Code, based upon the Covered Conduct. Nothing in this Paragraph precludes the HHSC from taking action against entities or persons, or for conduct and practices, for which claims have been reserved in Paragraph 9 below.

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9.

Notwithstanding the releases given in Paragraphs 4, 5, and 6 of this Agreement, or

any other term of this Agreement, the following claims of the United States are specifically reserved and are not released: a. b. c. Any liability arising under Title 26, U.S. Code (Internal Revenue Code); Any criminal liability; Except as explicitly stated in this Agreement, any administrative liability,

including mandatory exclusion from Federal health care programs; d. Any liability to the United States (or its agencies) for any conduct other

than the Covered Conduct; e. Agreement; f. Except as explicitly stated in this Agreement, any liability of individuals, Any liability based upon such obligations as are created by this

including officers and employees. 10. Relator and his heirs, successors, attorneys, agents, and assigns agree not to object

to this Agreement and agree and confirm that this Agreement is fair, adequate, and reasonable under the circumstances, pursuant to 31 U.S.C. § 3730(c)(2)(B) and Tex. Hum. Res. Code Ann.
§ 36.107(c).

Conditioned upon Relator's receipt of the payment described in Paragraph 2,

Relator, for himself individually, and for his heirs, successors, agents and assigns, fully and finally releases, waives, and forever discharges the United States and Texas, their officers, agents, and employees, from any claims arising from or relating to 31 U.S.C. § 3730 and Tex.

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Hum. Res. Code Ann. § 36.001 et seq., and from any claims to a share of the proceeds of this Agreement and/or Civil Action.

11.

As further consideration

for the payment to Relator described in Paragraph 2,

Relator, for himself, and his, successors, attorneys, agents, and assigns, releases UTSW and Parkland from any liability to Relator arising from the filing of the Civil Action, or under 31 U.S.C. § 3730(d) and Tex. Hum. Res. Code Ann. § 36.l10(c)-(d), and costs, conditioned releases Defendants, for expenses or attorney's fees

upon receipt of the payments described in Paragraph 2. individually

Relator further

and collectively, from liability for any claims or potential

claims whether known or unknown as of the Effective Date that Relator has, may have, could have asserted, or may assert in the future on his behalf or on behalf of the United States or Texas for violations of the False Claims Act or Texas Medicaid Fraud Prevention Act, except for those excluded and reserved claims set forth in Paragraph 6 herein.

12.

The Defendants

and their respective officers, agents, and employees waive and or administrative action

shall not assert any defense they may have to any criminal prosecution

initiated by the United States relating to the Covered Conduct to the extent that such defense may be based in whole or in part on a contention that, under the Double Jeopardy Clause in the Fifth Amendment of the Constitution, or under the Excessive Fines Clause in the Eighth Amendment or

of the Constitution, administrative

this Agreement bars a remedy sought in such criminal prosecution

action. Nothing in this Paragraph or any other provision of this Agreement of the

constitutes an agreement by the United States or Texas concerning the characterization

Settlement Amount for purposes of the Internal Revenue laws, Title 26 of the United States Code.

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13.

The Defendants and their respective officers, agents, and employees fully and

finally release the United States, Texas, and their agencies, employees, servants, and agents from any claims (including attorney's fees, costs, and expenses of every kind and however denominated) which they have asserted, could have asserted, or may assert in the future against the United States, Texas, or their agencies, employees, servants, and agents, related to the Covered Conduct and the United States' or Texas' investigation and prosecution thereof in the Civil Action. 14. The Defendants and their respective officers, agents, and employees fully and

finally release Relator and his heirs, successors, attorneys, and agents from any claims (including attorney's fees, costs, and expenses of every kind and however denominated) which they have asserted, could have asserted, or may assert in the future against Relator or his heirs, successors, attorneys, or agents, for Relator's or his attorneys' or agents' investigation and prosecution of the Covered Conduct in the Civil Action, except to the extent such claims of Defendants relate to any claims reserved by Relator as set forth in Paragraph 6, above. 15. The Settlement Amount shall not be decreased as a result of the denial of claims

for payment, if any, now being withheld from payment by any Medicare carrier or intermediary, or any state payer, related to the Covered Conduct; and UTSW agrees not to resubmit to any Medicare carrier or intermediary or contractor or any state payer any previously denied claims related to the Covered Conduct, and agrees not to appeal any such denials of claims. 16. The Defendants, respectively, agree to the following:

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a.

Unallowable Costs Defined: that all costs (as defined in the Federal

Acquisition Regulation, 48 C.F.R. § 31.205-47, and in Titles XVIII and XIX of the Social Security Act, 42 U.S.C. §§ 1395-1395hhh and 1396-1396v, and the regulations and official program directives promulgated thereunder) incurred by or on behalf of the respective Defendants in connection with the following shall be "unallowable costs" on government contracts and under the Medicare Program, Medicaid Program, Tricare Program, and FEHBP: (1) (2) the matters covered by this Agreement, the United States' or Texas' audit(s) and civil investigation(s) of

the matters covered by this Agreement, (3) The Defendants and their respective officers, agents, and

employees investigation, defense, and corrective actions undertaken in response to the United States' audit(s) and civil investigation(s) in connection with the matters covered by this Agreement (including attorney's fees), (4) (5) the negotiation and performance of this Agreement, and the payment the Defendants make to the United States or Texas

pursuant to this Agreement. All costs described or set forth in this Paragraph 14.a. are hereafter, "unallowable costs." b. Future Treatment of Unallowable Costs: These unallowable costs shall be

separately determined and accounted for in non-reimbursable cost centers by the respective Defendants and the Defendants shall not charge such unallowable costs directly or indirectly to

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any contracts with the United States, Texas or any state Medicaid program, or seek payment for such unallowable costs through any cost report, cost statement, information statement, or payment request submitted by the Defendants to the Medicare, Medicaid, Tricare, or FEHBP Programs. c. Treatment of Unallowable Costs Previously Submitted for Payment: the

Defendants further agree that within 90 days of the Effective Date of this Agreement, the Defendants shall each identify to applicable Medicare and Tricare fiscal intermediaries, carriers, and/or contractors, and Medicaid, VA, and FEHBP fiscal agents, any unallowable costs (as defined in this Paragraph) included in payments previously sought from the United States, Texas or any state Medicaid Program, including, but not limited to, payments sought in any cost reports, cost statements, information reports, or payment requests already submitted by the Defendants, and shall request, and agree, that such cost reports, cost statements, information reports, or payment requests, even if already settled, be adjusted to account for the effect ofthe inclusion of the unallowable costs. The Defendants agree that the United States and Texas, at a minimum, shall be entitled to recoup from the applicable Defendant any overpayment plus applicable interest and penalties as a result of the inclusion of such unallowable costs on previously-submitted cost reports, information reports, cost statements, or requests for payment. Any payments due after the adjustments have been made shall be paid to the United States and Texas pursuant to the direction of the Department of Justice, and/or the affected agencies. The United States and Texas reserve their right to disagree with any calculations submitted by the Defendants on the effect of inclusion of unallowable costs (as

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defined in this Paragraph) on the Defendants' respective cost reports, cost statements, or information reports. d. Nothing in this Agreement shall constitute a waiver of the rights of the

United States or Texas to audit, examine, or re-examine the Defendants' books and records to determine that no unallowable costs have been claimed in accordance with the provisions of this Paragraph. 17. This Agreement is intended to be for the benefit of the Parties, only. The Parties

do not release any claims against any other person or entity, except as expressly provided elsewhere in the Agreement and to the extent provided for in Paragraph 18 below. 18. The Defendants waive and shall not seek future or additional payment for any of

the health care billings covered by this Agreement from any health care beneficiaries or their parents, sponsors, legally responsible individuals, or third party payors based upon the claims defined as Covered Conduct. 19. Upon receipt of the payments described in Paragraph III.l., above, the United

States, Texas, and Relator shall promptly sign and file a Joint Stipulation of Dismissal with prejudice of the Civil Action in accordance with the terms of this Agreement, provided that the dismissal with prejudice shall not apply to Relator's reserved claims set forth in Paragraph 6 herein. 20. The Defendants warrant that they have reviewed their respective financial

situations and that they are currently solvent within the meaning of 11 U.S.C. §§ 547(b)(3) and 548(a)(1)(B)(ii)(I), and shall remain solvent following payment to the United States and Texas of
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the Settlement Amount. Agreement,

Further, the Parties warrant that, in evaluating whether to execute this

they: (a) have intended that the mutual promises, covenants, and obligations set exchange for new value given to the Defendants, within the

forth constitute a contemporaneous meaning of 11 U.S.C. § 547(c)(l);

and (b) conclude that these mutual promises, covenants, and exchange. Further, the Parties warrant

obligations do, in fact, constitute such a contemporaneous

that the mutual promises, covenants, and obligations set forth herein are intended to and do, in fact, represent a reasonably equivalent exchange of value which is not intended to hinder, delay, or defraud any entity to which the Defendants were or became indebted to on or after the date of this transfer, within the meaning of 11 U.S.C. § 548(a)(I).

21.

Except as expressly provided to the contrary in this Agreement,

each Party shall

bear its own legal and other costs incurred in connection with this matter, including the preparation and performance of this Agreement.

22.

Each party and signatory to this Agreement represents that this Agreement is

freely and voluntarily entered into.

23.

This Agreement

is governed by the laws of the United States. The Parties agree and venue for any dispute arising between and among the Parties

that the exclusive jurisdiction

under this Agreement shall be the United States District Court for the Northern District of Texas, Dallas Division.

24.

This Agreement

constitutes the complete agreement between the Parties. This

Agreement may not be amended except by written consent of the Parties.

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25.

The individuals signing this Agreement on behalf of the Defendants represent and

warrant that they are authorized respectively by UTSW and Parkland to execute this Agreement. The individuals signing this Agreement on behalf of Relator represent and warrant that they are authorized by Relator to execute this Agreement. The United States and Texas signatories represent that they are signing this Agreement in their official capacities and that they are authorized to execute this Agreement. 26. This Agreement may be executed in counterparts, each of which constitutes an

original and all of which constitute one and the same Agreement. 27. and assigns. 28. to the public. 29. The rights and obligations of the Defendants under this Agreement are wholly All Parties consent to the United States' and Texas' disclosure of this Agreement This Agreement is binding on the Defendants' respective successors, transferees,

independent, notwithstanding that they are sometimes referred to in the conjunctive: any action or omission under this Agreement by any Party, whether resulting in default, breach or otherwise, shall not be construed as the action or omission of any other Party. 30. This Agreement is effective on the date of signature of the last signatory to the

Agreement ("Effective Date" of this Agreement). Facsimiles of signatures shall constitute acceptable, binding signatures for purposes of this Agreement.

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ON BEHALF OF THE UNITED STAlES OF AMERICA

Ser

ASSistantUnited States ttorney Northern District of Texas

~"",,::,

, 2011

B.~~ ~~_~~ Gregory E. Demske Assistant Inspector General for Legal Affairs Office of Counsel to the Inspector General Office ofInspector General U.S. Department of Health and Human Services

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ONBEH

DATED:~20I1

Office of the Attorney General of Texas

BY

:---+/-----tL~~:::....r__o/'1 3bc....:l.J.l--'---=~ s:=------'-------~~)

Thomas M. Suehs Executive Commissioner Health and Human Services Commission

"'

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or America, State ofTeUB,

Larry M. Gentilello, M.D.,

ON BEHALF OF UTSW

BY:D~.~i~~
President The University of T'exas Southwestern Medical Center

DATED:

JiJ'i J

u.<;

19

,2011

Counsel for UTSW

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ON BEIII\I.F OF PARKLI\ND

D/\TF.D:

,2011

BY:

By:

Park ~

~ffd;-r---: _
John Dragov~tz, Chief Financial Officer

i

DATEO:._.;;:_8-t-/-i.7_: --,,201

J

RY~. RDgcrlO{Jm~n, Esq. (a.., to form only)

L:/--

Latham & Watkins LLP Counsel Ior Parkland

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UTSW. lind Pa rkland - Page 20
OMSLlllllARY01.171l7'1'l'l61

JJARRY M.._QEN'J.I~JJ~Q;>. .D.- RELAIQR M

DATED:~~ (c~_,2011

BY:~~

@.-.~<) .~df&~x -. Larry M. Gentillelo, M.D.

#Z

Relator

Counsel for Relator

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