Articles Posted in Health Care Fraud

The office of New York State’s Attorney General, Eric Schneiderman, has announced a $13.4 million settlement with New York Downtown Hospital to resolve all claims against the hospital related to an alleged illegal scheme to defraud the state’s Medicaid program. The AG’s Office alleged that the hospital entered in an arrangement with SpecialCare Hospital Management Corp., an out-of-state vendor not licensed by the State of New York, whereby the hospital would refer Medicaid patients in exchange for a $38,500 monthly fee, violating both New York State and federal anti-kickback statutes. The nexus between the two companies was disguised as a contract for administrative services. In addition to the alleged unlawful kickbacks, the hospital’s drug treatment wing also violates state regulations prohibiting hospitals from operating discrete dependency services or treatment units without obtaining a license from the New York Office of Alcohol and Substance Abuse Services. Schneiderman furthermore alleged that the hospital’s detoxification services failed to meet minimum standards of care in the profession and were medically unnecessary. The federal and state Medicaid programs do not reimburse for medically unnecessary services, or services that wholly fail to meet basic professional standards of quality.

The claims against the hospital came to light after two whistleblowers filed a civil complaint under the qui tam (whistleblower) provisions of the New York False Claims Act. Like the federal False Claims Act (“FCA”), the New York State statute permits whistleblowers to sue on behalf of the state government for fraud perpetrated against the state. New York is one of thirty states in the U.S.with a state FCA statute on the books. Schneiderman’s Medicaid Fraud Control Unit and the United States Attorney’s Office of False Claims Act investigated the allegations after the whistleblower complaint was filed, culminating in the recently-announced settlement between the hospital and Schneiderman’s office. Under the terms of the settlement, the hospital will return more than $12.6 million to the state’s Medicaid program and $800,000 to the federal Medicare program.

When health care providers participate in federal health programs such as Medicare and Medicaid, they expressly and impliedly certify compliance with various federal and state statutes and regulations, and non-compliance may lead to liability under the FCA. Under the qui tam provisions of the FCA, private whistleblowers (relators) may file suit on behalf of the government. While the government may elect to intervene in a whistleblower complaint, it does not always do so, and relators may proceed with their claims regardless of whether or not there is government intervention. Individuals and contractors face liability under the FCA and its state analogs for the submission of false claims for payment to the government, or failure to return over-payments to the government. Victorious relators stand to recover between 15% and 30%of any final judgment or settlement. Fraud and abuse in the Medicare and Medicaid programs frequently give rise to claims under the FCA.

After discovering erroneous billing practices for ambulance services, Maury Regional Hospital (“MRH”), located in Columbia, TN, made a voluntary self-disclosure to federal investigators.  The hospital’s self-disclosure led to a swift resolution of allegations that the false claims for payment for ambulance services violated the federal False Claims Act (“FCA”). MRH will pay $3.59 million to dispose of all legal claims in the matter. Such self-disclosures are encouraged by the federal government to help avoid the high costs of an investigation and litigation; MRH disclosed its knowledge of the billing issues to the U.S. Attorney’s Office and the Office of Inspector General for the Department of Health and Human Services (“OIG-HHS”). According to the internal audit conducted by the hospital, the government claimed that MRH submitted claims for payment and was compensated for ambulance services that weren’t medically necessary or for which medical necessity was not documented, for which Physician Certification Statements weren’t obtained, that were assigned incorrect transport levels (descriptions of the level of care provided on ambulances), for which the proper signatures were not obtained, and that were billed with inaccurate mileage measurements. The $3.59 million settlement agreement resolves allegations of conduct that took place between January 1st, 2004 and December 31st, 2009.

Although MRH’s self-disclosure brought about a timely conclusion to the claims against it, such a course of events is unusual for government investigations of fraud and abuse. Under the qui tam (whistleblower) provisions of the FCA, private citizens with knowledge of fraud may file suit on behalf of the government, bringing the matter to the attention of federal investigators. The FCA imposes liability for submission of false claims for payment, as well as failure to return over-payments from the government. Upon reviewing the allegations in a qui tam complaint, the government may elect to intervene in the litigation, but it does not always do so. Private relators (whistleblowers) may proceed with their legal claims regardless of whether or not the government intervenes, and stand to recover between 15% and 30% of any final judgment or settlement if they prevail. The length and complexity of FCA cases requires that relators carefully select seasoned counsel with the resources and experience to successfully navigate through the process.

Numerous amendments to the FCA, particularly in the wake of passage of the Fraud Enforcement and Recovery Act (“FERA”) in 2009, as well as the Dodd-Frank Act and the Patient Protection and Affordable Care Act (“PPACA”) in 2010, have increased whistleblower protections and strengthened the law’s protections against employer retaliation. The PPACA, in particular, has clarified the time frame in which health care entities must return over-reimbursements for services from federal health programs upon identifying the mistake. Under the updated anti-retaliation provisions, any contractor, agent, or employee who makes lawful efforts to stop a violation of the FCA may invoke the statute’s protection, even if the individual did not file a qui tam complaint.

An audit of the claims processing practices of Caremark, a company that merged with CVS to form CVS Caremark in 2007, has led to a whistleblower complaint under the False Claims Act (FCA) alleging potentially billions of dollars in fraud under the Medicare Part D program.

The complaint was filed by Anthony Spay, a former pharmacist whose company, Pharm/DUR, was hired by the Puerto Rico-based health insurance company Medical Card System (MCS) to audit Part D prescription claims processed by Caremark, an MCS subcontractor. According to the complaint, Caremark’s complicated corporate structure enabled it to play at least two roles in the Part D program at once, both as a sponsor and pharmacy benefit manager (PBM). PBMs determine whether or not a particular drug is covered under the plan and whether or not the beneficiary is eligible for the prescription benefits for pharmacies at each point of sale; as a Part D sponsor, the company had a strong economic incentive to approve claims in order to receive reimbursement for administrative fees, dispensing fees, and pharmacy charges that would only be collected if claims were approved. Spay’s audit revealed that Caremark dispensed gender-specific drugs to patients of the opposite gender, failed to apply “maximum allowable cost” pricing to drugs, billed for drugs that had expired National Drug Code identifiers, billed for prescriptions with false physician identifiers, dispensed drugs without prior authorization, and billed for quantities of drugs over approved limits. Spay furthermore contends that these practices were company practice in its Part D plans nationwide, potentially implicating billions of dollars’ worth of false claims submitted to Medicare. Given that Part D is the only government program that depends entirely on private companies, detection of fraud and abuse is more difficult for the Centers for Medicare and Medicaid Services (CMS), and reliance on whistleblowers may be critical to recovering funds for payments obtained by fraudulent means. The government has declined to intervene in the lawsuit at this juncture.

Under the qui tam provisions of the federal FCA, whistleblowers (called relators) may sue on behalf of the government for fraud in connection with payment from the government. Typically, complaints filed under the FCA are predicated upon the submission of a false claim for payment.  There is also liability under the statute for so-called “reverse false claims,” which involve false claims submitted in order to reduce or avoid liability owed to the government. Dating back to 1863, the law has undergone many amendments, particularly since 1986, to expand whistleblower protections and increase the number of cases of fraud with coverage under the statute. Thirty states have their own analogs to the FCA; twenty states currently have FCAs designed largely to model the federal law, while ten states have FCAs which only cover cases of Medicaid fraud. Although the government may elect to intervene in a qui tam suit filed under the FCA, it does not always do so, as was the case with Spay’s lawsuit. Even if the government does not elect to intervene, however, many whistleblowers nonetheless proceed privately with meritorious claims. Whistleblowers stand to recover between 15% and 30% of any settlement or final judgment.

Two former employees of Florida-based Liberty Medical Supply, a supplier of diabetes medication and equipment and a subsidiary of Medco Health Solutions Inc. and Polymedica Corp., have filed a lawsuit against the company and several related subsidiaries under the False Claims Act (“FCA”).

The whistleblowers, both of whom held a variety of positions with the company, allege that Liberty engaged in a fraudulent scheme to conceal $69 million in overpayments from the Medicare and Medicaid programs by tampering with data and in violation of the conditions of a “corporate integrity agreement” that Liberty signed with the Office of the Inspector General of the Department of Health and Human Services.  The overpayments included $62 million from payments with inadequate or no supporting documentation, and $7 million from erroneous billing. The defendants in the suit have denied all of the allegations in the complaint. The whistleblowers further allege that company executives Carl Dolan and Arlene Perazella intentionally devised a scheme to create false records in order to erase the cash overpayments. The whistleblowers’ allegations are not the first instance in which Liberty has confronted accusations of misfeasance. In 2004, the company agreed to a $30 million settlement with the Justice Department to resolve an unrelated investigation of Medicare fraud.

Under the FCA, whistleblowers (also known as relators) may sue those who have allegedly defrauded the federal government under the statute’s qui tam provisions. The FCA holds individuals and contractors liable for false claims knowingly or recklessly made in connection with payment from the government or  to curtail a liability owed to the government. A frequent source of fraud and abuse against the federal government stems from reimbursements for health care services through the Medicare and Medicaid programs. Although the government may elect to participate in a False Claims litigation, it does not always do so, and relators may move forward with their claims even if the government does not intervene in the suit. Relators may recover 15% to 30% of any settlement or final judgment. False claims suits involving fraud in the health care sector or pharmaceutical fraud are frequently brought in federal court in Boston, which is a hub for many major healthcare providers.

St. Jude Medical, a Canadian medical device manufacturer, announced on Thursday that it would pay $3.65 million as an offer of settlement to dispose of allegations that it was overcharging buyers to replace the company’s pacemakers and defibrillators that were under warranty.

The allegations were initially brought by two whistleblowers in federal district court in Boston under the False Claims Act. The False Claims Act is a federal qui-tam law that permits private whistleblowers (also known as qui-tam relators) to sue contractors that have allegedly engaged in fraudulent practices in connection with payment for goods or services by the government. The Act also covers claims against individuals who engage in fraudulent practices in order to evade payment of liabilities owed to the federal government.  In the St. Jude case, the company was accused of submitting invoices to facilities run by the Department of Veterans Affairs and the Department of  Defense that overcharged for replacement pacemakers and defibrillators.

While the government has 60 days after relators file a claim under the Act to investigate the allegations and determine whether or not it will intervene in the litigation, private False Claims whistleblowers may move forward with their claims even if the government chooses not to intervene. Relators who prevail may receive between 15% and 30% of a final judgment or settlement. The government investigates cases that range widely in terms of the amount in controversy; the two St. Jude whistleblowers will receive $730,000 from the settlement for coming forward.

The Center for Diagnostic Imaging, Inc., a radiology and diagnostic company based in X and operating facilities in seven states, has agreed to pay $1.5 million to resolve False Claims Act charges against the company.  The charges were brought by two whistleblowers, a former executive of the company and a founding partner of one of the company’s outpatient servicers, under the qui tam provisions of the False Claims Act.  Under those provisions of the False Claims Act, private citizens with knowledge of fraud may file a lawsuit on behalf of the United States for recovery of treble damages and civil monterary penalties ranging from $5,500 to $11,000 per individual violation.

Prior to the settlement announced on Monday, CDI had agreed to pay $1.3 million to resolve claims brought by the whistleblowers concerning the company’s practice of “upcoding” claims to seek higher reimbursement rates than allowed under federal health programs for covered services.  Although the government chose to intervene in pursuing the upcoding charges, it declined to do so over the whistleblower’s remaining claims.

Nonetheless, the whistleblower exercised their right under the law to pursue meritorious False Claims Act allegations even after the government declines intervention.  The allegations in this case, concerning unlawful billing practices and the arrangement of lease agreements issued to physicians as illegal kickbacks for the purpose of increasing business with CDI, resulted in the whistleblowers sharing in 30 percent of the $1.5 million recovery.  The False Claims Act enables whistleblowers to share in up to 30 percent of the government’s recovery in order to incentivize and compensate whistleblowers for their efforts investigating and reporting fraud on the government.

Tenet Healthcare has agreed to pay $42.75 million to resolve claims that facilities owned by the corporation billed Medicare for medically unnecessary rehabilitation services.  The False Claims Act prohibits submission of a false claim or actions which cause a false claim to be submitted for money or property in control of the federal government.  Tenet sought reimbursement for services rendered to patients at intensive rehabilitation facilities (IRFs) owned by the company where such patients did not qualify for the highly-specialized and expensive type of care provided at IRFs.

The settlement follows a landmark agreement reached in 2006 between Tenet and the federal government over similar, but unrelated, False Claims Act violations.  In that settlement Tenet paid over $900 million to settle allegations under the False Claims Act concerning falsification of patient costs in order to receive lucrative Medicare reimbursements, illegal kickbacks and incentives to referring physicians, and systematic “upcoding” of patient diagnoses to falsely inflate reimbursable expenses.

As part of the 2006 settlement, Tenet agreed to enter into a five-year corporate integrity agreement imposing numerous reporting and restructuring requirements to ensure full compliance with federal and state law.  Among other things, the agreement required Tenet to implement a comprehensive compliance program complete with employee protections for reporting fraud and obligations on the company to review allegations of improper activity and disclose fraudulent activity to the government.