Texas Children’s Hospital has finalized a $10 million settlement involving claims that its providers used inaccurate diagnosis codes when billing government health programs for gender-related medical care. Whistleblower nurse Vanessa Sivadge’s attorneys announced the latest terms Wednesday, August 5, in Houston.
The agreement requires the hospital system to establish a clinic for patients seeking detransition-related care, impose permanent restrictions on five physicians and introduce new billing and compliance controls. However, the signed settlement agreement says Texas Children’s does not admit liability or wrongdoing.
Settlement includes payment and reforms.
Texas Children’s will pay $10 million to resolve federal and state claims connected to its previous gender-related medical services. The settlement also requires a public statement addressing those services and earlier hospital communications.
The hospital must permanently stop providing the procedures covered by the agreement unless future law requires otherwise. It must also create stronger systems for monitoring diagnosis codes, hormone prescriptions, and claims involving government-funded health programs.
The financial agreement resolves allegations under the federal False Claims Act and the Texas Medicaid Fraud Prevention Act. The government alleged that providers submitted claims to Medicaid and other public programs using diagnosis codes that did not accurately reflect the primary purpose of the treatment.
The allegations cover claims involving Texas Medicaid, Healthy Texas Women and the Children’s Health Insurance Program. They remain allegations because the case ended through settlement rather than a trial or judicial finding.
Sivadge will receive a portion of the government’s recovery for bringing the whistleblower case. Her attorneys described the whistleblower’s legal victory as an important result for employees who report suspected misconduct involving public health programs.
Fraud allegations remain unproven.
Sivadge alleged that physicians entered false or misleading diagnoses while prescribing gender-related medications. She claimed those diagnoses allowed the services to receive coverage through Medicaid and other publicly funded programs.
Her legal team has characterized the required public statement as an admission of fraudulent conduct. The settlement documents use narrower legal language and expressly state that Texas Children’s does not admit wrongdoing.
That distinction affects how the case can be described. The hospital accepted financial penalties, operational restrictions and long-term monitoring, but no court found that it committed fraud.
The government also did not obtain a criminal conviction against the hospital. The agreement settles specific civil claims while preserving the government’s authority to investigate conduct outside the settlement’s defined scope.
Texas Children’s has maintained that it cooperated with investigators. In the hospital’s latest response, the health system said the final agreement would allow it to redirect resources toward patient care and medical research.
Five physicians face restrictions.
The settlement imposes permanent professional restrictions involving five physicians connected to the hospital system.
Three current physicians must lose their existing clinical privileges and staff appointments. Two former physicians will remain permanently ineligible to receive credentials or privileges at facilities affiliated with Texas Children’s.
The agreement therefore goes beyond a temporary suspension. The affected physicians cannot simply return after completing training or waiting for a specified period.
Texas Children’s must also strengthen its internal policies governing gender-related medical services. Staff members will receive training on billing accuracy, state restrictions, whistleblower protections, and the possible consequences of submitting false claims.
Electronic medical records must include additional controls for certain hormone prescriptions involving patients under 18. Providers will have to confirm that the medications are not being prescribed for purposes prohibited by the settlement.
The hospital must retain those confirmations and conduct periodic compliance reviews. Government authorities can seek additional penalties if Texas Children’s fails to correct a confirmed violation.
Whistleblowers brought practices to light.
The dispute began after physician Eithan Haim disclosed documents in 2023 that he said showed Texas Children’s continued providing gender-related services after publicly announcing changes to its program.
Sivadge later made separate claims involving medical coding and Medicaid billing. She filed a whistleblower lawsuit in May 2024 under laws allowing private individuals to pursue suspected fraud involving government money.
Texas Children’s fired Sivadge in 2024 after she spoke publicly about her concerns, her legal team said. She argued that the hospital retaliated against her because of her disclosures.
Federal authorities previously charged Haim over allegations involving unauthorized access to protected medical records. The government later dismissed those charges.
Sivadge also said federal agents visited her home and attempted to question her in July 2023. She has portrayed the settlement as vindication after facing professional and legal pressure connected to her disclosures.
Texas law shaped investigation
Texas enacted a law in 2023 restricting puberty blockers, hormone treatments and certain surgeries for minors when used for gender-transition purposes. The measure included limited exceptions for other medical conditions.
Families, doctors and advocacy groups challenged the restrictions. The state Supreme Court later allowed the law to remain in force after reversing a lower court’s temporary injunction.
The Texas Children’s investigation examined conduct that occurred both before and after the state restrictions took effect. Billing allegations also extended further back because government claims focused on whether providers used accurate diagnosis codes.
The settlement does not resolve the wider national disagreement over medical care for transgender patients. It addresses the conduct of one hospital system, its billing practices and its obligations under Texas and federal law.
Clinic must provide free care.
Texas Children’s must establish a multidisciplinary clinic for patients seeking to reverse or address the effects of previous gender-related treatments. The program must provide qualifying services without charge for at least five years.
The clinic will offer medical, surgical, psychological, fertility and case-management services. Texas Children’s must also create a public webpage explaining how patients can access the program.
The hospital now faces a series of implementation deadlines. It must publish the required statement, restrict the five physicians, establish the clinic and begin the compliance reforms outlined in the agreement.
Federal and state authorities will retain enforcement power throughout the monitoring period. Texas Children’s could face further financial penalties if it violates the settlement and fails to correct the breach.
