Whistleblower Qui Tam Law Blog

Unnecessary stenting and other cardiac procedures have become a widespread problem, with cases arising in Texas, Tennessee, Maryland and Pennsylvania. Over the past few years, whistleblowers have exposed a number of fraudulent - and harmful - schemes by physicians, clinics, and hospitals based on performing unnecessary cardiac procedures, including angioplasties and stenting, in patients with coronary artery disease. Defendants in these cases falsely overstate the extent of the disease in patients' coronary arteries to justify performing expensive and invasive cardiac procedures, which are then billed to government healthcare programs.

In 2010, St. Joseph Hospital in Towson, Maryland agreed to settle allegations of medically unnecessary stenting procedures performed on hundreds of patients by Mark Midei, M.D. In 2011, the Department of Justice announced that it would intervene in a case brought against Jackson-Medicine County General Hospital and the Regional Hospital of Jackson (both in Tennessee), along with several physicians, for claims that they performed unnecessary diagnostic and therapeutic cardiac procedures on patients.

Most recently, the United States District Court for the Western District of Pennsylvania unsealed a qui tam case brought by whistleblower Tullio Emanuele, M.D., a former cardiologist with Hamot Medical Center (now UPMC Hamot) in Erie, Pennsylvania. The complaint (which names a number of cardiologists, their clinics, and UPMC Hamot as defendants) alleges that from at least 2001 to 2005, the defendants performed unnecessary diagnostic and interventional cardiac catheterization procedures and other vascular surgical procedures, and that they improperly billed or overbilled the government for services rendered. From April 2004 through February 2005, the cath lab activity records show that the defendant cardiologists performed 4,408 catheterizations on patients, which was double the number of catheterizations performed by other members of the group.

Continue reading "Cardiologists Alleged to Have Performed Medically Unnecessary Cardiac Procedures" »

Last week, the United States Attorney for the Eastern District of New York announced a settlement involving claims against Bank of America, Countrywide Financial Corporation, as well as certain Countrywide subsidiaries and affiliates, for underwriting and origination mortgage fraud. This settlement is part of the global resolution between the United States of America and the five largest mortgage savings banks in the country.

Bank of America's fraudulent lending practices centered on a scheme in which Bank of America, through Countrywide (which Bank of America acquired in 2008), knowingly made loans insured by the Federal Housing Administration (FHA) to unqualified home buyers. As a result of Bank of America's misconduct, FHA incurred hundreds of millions of dollars in damages. Moreover, Bank of America and Countrywide defrauded the FHA insurance fund by originating mortgage loans that were based upon inflated appraisals.

As part of the settlement, Bank of America agreed to pay a total of $1 billion, including an immediate $500 million to provide a recovery for the harm done to the FHA by Countrywide's conduct and a deferred payment of $500 million to fund a loan modification program for Countrywide borrowers across the country with underwater mortgages. Bank of America is required to contact all potentially eligible borrowers and provide a loan modification to any eligible borrower who accepts the offer. Any funds not paid under the loan modification program after three years will be paid to the United States.

Continue reading "Bank of America to Pay $1 Billion in Largest False Claims Act Mortgage Fraud Settlement " »

Hospitals across the country increasingly are purchasing physician practice groups. According to the American Hospital Association, the number of physicians working for hospitals has increased 32 percent since 2000. According to a recent article, this business model is accelerating as healthcare businesses adapt to the recent changes in healthcare law. However, the acquisition of physician practices also can lead to decreased options for patients and increased opportunities for healthcare fraud.

Part of the reasoning behind this trend is that hospitals are setting up structures that can be converted to accountable care organizations. Under recent federal healthcare reform laws, these organizations seek to provide reimbursement based on positive outcomes for patients, rather than the traditional fee-for-service model.

Another motivation, according to Sal Barbera, a whistleblower and former executive of physician services at Tenet, is that hospitals want to control desirable and demanding practice groups and physicians to provide a competitive advantage to the hospital. In the past, as hospitals competed for certain physicians and practices, hospitals found that physician pay was unchecked.

The competitive landscape creates an area ripe for fraud. In the 1990s, Barbera blew the whistle to expose Tenet's practice of paying illegal kickbacks, or bribes, to physicians in exchange for patient referrals.

Continue reading "Hospital Purchases of Physician Practices Are Ripe for Fraud" »

CVS Caremark operates one of the largest pharmacy benefit management companies and retail pharmacy chains in the United States. It has agreed to pay a $5 million fine to settle charges brought by the United States government that it misrepresented the prices of various Medicare Part D covered drugs on its Medicare drug plan. The company misrepresented the prices of various drugs, including those used to treat breast cancer and epilepsy.

Click here to read the consent order.

Medicare Part D reimburses federal beneficiaries for covered drugs during the initial coverage phase. Once a beneficiary reaches a specific dollar amount of trOOP (true out-of-pocket) expenses (i.e., the amount of an initial deductible and any co-payments), the beneficiary enters the donut hole, or coverage gap. While in the coverage gap, the beneficiary is not reimbursed for drug costs.

CVS is alleged to have caused many seniors and disabled consumers on Medicare to pay up to 10 times the correct prices for their drugs during the initial coverage phase. The effect of inflating the price for the covered drugs was to push beneficiaries into the coverage gap quicker.

This is not CVS Caremark's first drug pricing problem. In 2010, CVS notified the Centers for Medicare and Medicaid Services that from October 2009 to January 2010, a computer error caused it to provide incorrect drug prices for brand name prescription drugs available through its Medicare plans.

Prescription drug plans under Part D are particularly vulnerable to pricing manipulation that can financially hurt beneficiaries and cause the United States to overpay for covered drugs. The False Claims Act provides incentives to whistleblowers who expose fraudulent schemes affecting Part D covered drugs, which are paid for the by the government. If you have information relating to a fraudulent pricing scheme by a retail pharmacy or pharmacy benefits management company, contact Andrew M. Beato, an experienced whistleblower attorney with the law firm of Stein, Mitchell & Muse in Washington, D.C.

The system of reimbursement for healthcare services relies upon healthcare professionals' identification of the proper billing codes for the services provided. Healthcare providers, physicians, and hospitals bill Medicare and Medicaid for their services and supplies using pre-established billing codes to denote the specific procedure performed or device used in treating patients. Medicare and Medicaid reimbursement is based on those codes, which are submitted for payment to the government programs.

Reimbursement for the procedure and service can be inflated if improper billing codes are used. A common fraudulent scheme, known as upcoding, involves the submission of a billing code for a more serious and expensive treatment or service than rendered or medically necessary. Upcoding can also occur when a particular procedure is billed as performed by a physician when it was actually performed by a nurse or resident. Upcoding violates the False Claims Act, as it results in overpayments by the government.

The United States District Court in Chicago recently heard a motion to dismiss in an upcoding case, and held that the Relator's claims should proceed. In United States ex rel. Baltazar v. Warden et al., No. 1:07-cv-04107 (N.D. Ill. Dec. 15, 2011), Dr. Kelly Baltazar, a chiropractor physician formerly employed at Advanced Health, blew the whistle on a scheme by Advanced Health and Dr. Baltazar's supervisor, Dr. Warden, to upcode bills submitted for payment to the United States.

During her employment with Advanced Health, Dr. Baltazar discovered that Dr. Warden was altering her fee slips so that they reflected services or treatments that were not provided. In doing so, Dr. Warden either physically altered Dr. Baltazar's chart notes, or marked a different service code on her fee slips. Dr. Baltazar also learned that the defendants provided patients with unnecessary treatment, billed for services not performed, backdated physician notes, delayed submission of bills, and routinely waived the collection of its patients' deductibles.

Continue reading "Chicago Court Allows Whistleblower's Overbilling Case to Proceed" »

Recently, the United States filed suit under the False Claims Act against Villaspring Health Care Center, a nursing home located in Kentucky, along with its Chief Executive Officer and parent company. The case arose from allegations of serious neglect of the nursing home's residents. The United States alleged that Villaspring defrauded the United States and the Commonwealth of Kentucky by seeking, and receiving, substantial reimbursement from the Medicare and Kentucky Medicaid programs for care purportedly provided to its residents despite knowing that such "care" was either non-existent or so inadequate as to be worthless.

The United States pled that the care provided to residents of Villaspring was grossly inadequate and so egregiously deficient that it had no medical value. The Complaint provided specific examples of the systemic neglect, including understaffing, failure to provide medication to residents, development of preventable pressure ulcers in residents, failing to treat residents' ulcers and wounds, failure to provide adequate nutrition, failing to send ill residents to the hospital, and overall poor care of at least 30 residents, and explained why such care was worthless. The Complaint went on to allege that Villaspring knew the care was worthless, but submitted or caused to be submitted claims for payment to the Medicare and Medicaid programs.

Villaspring moved to dismiss. In a powerful opposition, the United States took the position that where a healthcare provider abjectly fails to provide adequate care, especially in a case involving elderly and medically frail patients, and bills the government for it anyway, an actionable fraud has been committed. The government emphasized that this "is a fraud case where the services provided to Villaspring's residents fell so far below accepted standards of care that they were essentially worthless, causing very real harm to both the patients and to the government when Defendants billed it for those services." The government "did not receive fair value for the services for which it paid" and "the Defendants' claims for payments are no less fraudulent, and no less actionable under the FCA, than if they had failed to provide any services at all."

The government also argued that the agreements that Villaspring entered into with the government to participate in the Medicare program explicitly conditioned payment on its compliance with applicable laws and regulations. By providing worthless services, the government argued that Villaspring violated its duty to comply with the regulations on which Medicare conditioned payment, such that Villaspring's claims for payment for those services were false.

Click here to read the government's opposition.

Continue reading "The Eastern District of Kentucky Sends a Strong Message to Healthcare Providers who Submit Claims for Payment of Worthless Services" »

For the second straight year, the United States Department of Justice has recovered over $3 billion in settlements under the False Claims Act. Whistleblowers continue to be invaluable in assisting the government in recovering the proceeds of ill-gotten gains. In 2011, whistleblower lawsuits resulted in a bulk of the $3 billion recovered by the government. Tony West, the Assistant Attorney General of the Civil Division, stated that "We are tremendously grateful for whistleblowers who have brought fraud allegations to the government's attention and assisted us in this public-private partnership to fight fraud."

Not surprisingly, $2.4 billion of the funds recovered resulted from fraud committed against federal healthcare programs, including Medicare and Medicaid. According to the Department of Justice, the pharmaceutical industry was the source of the largest recoveries, including GlaxoSmithKline which paid $750 million to settle criminal and civil claims for systemic current Good Manufacturing Practice violations at its now-closed plant in Cidra, Puerto Rico. Settlements involving the pharmaceutical industry totaled $2.2 billion this past year.

Since the False Claims Act was amended in 1986, the government has recovered in excess of $30 billion. Senator Chuck Grassley (R-Iowa) sponsored the amendments. On December 11, 2011, Senator Grassley stated that the FCA "proves to be the most powerful tool in rooting out fraud against the federal treasury." He went on to say that "not only does the law help recover billions of taxpayer dollars, but it deters untold more, and is a real savior for taxpayers tired of Washington ways. The whistleblowers who bring these cases to light know the secrets hidden by those who are ripping off federal taxpayers."

Under the False Claims Act, whistleblowers are entitled to receive between 15 and 25 percent of the amount recovered by the government. If you have information regarding fraudulent practices affecting government programs, contact Andrew M. Beato, an experienced whistleblower attorney with the law firm of Stein, Mitchell & Muse in Washington, D.C., to memorialize your claim.

The Federal False Claims Act, formerly known as the Abraham Lincoln Act, was first passed in 1863 in response widespread corruption by defense contractors that were defrauding the Union Army. In 1987, the FCA was amended to provide financial incentives to whistleblowers who expose schemes defrauding the United States government.

Soon, states began to pass their own False Claims Acts to target healthcare fraud. The benefits of enacting state false claims statutes were the subject of a recent article. Over the last decade, more than 20 states have enacted state false claims statutes. These statutes, like the federal False Claims Act, allow states to join lawsuits filed by whistleblowers who expose fraud involving government programs.

Several states have tried - but failed - to pass such acts, including Pennsylvania, Ohio, and Kentucky. The primary criticism of the false claims statutes - on both the federal and state level - has come from the pharmaceutical and medical industries. Incidentally, of the $3 billion recovered by the government under the federal False Claims Act, $2.2 billion has come from fraudulent conduct in the pharmaceutical industry. Other opponents of state legislation fear to the cost-effectiveness of such statutes and emphasize the need to avoid litigation.

Despite these criticisms, state false claims statutes have proved to be instrumental to states in recovering moneys defrauded by unscrupulous corporations. Last May, for example, California announced a $241 million settlement of a False Claims Act lawsuit against Quest Diagnostics for alleged overcharges to the California Medicaid program. California's share of the settlement totaled $171 million.

In another example, New York, with one of the most powerful state FCAs in the country, recently intervened in a whistleblower lawsuit against the Bank of New York Mellon for defrauding investors in foreign exchange transactions. New York Attorney General Eric Schneiderman is seeking nearly $2 billion on behalf of public pension funds and other investors.

Continue reading "State Whistleblower Laws Have Huge Upside" »

The False Claims Act is a first-to-file statute. When a whistleblower brings an action under the FCA, other individuals are barred from bring a related action based on the facts underlying the previously filed lawsuit. 31 U.S.C. § 3730(b)(5).

Last month, the United States Court of Appeals for the District of Columbia upheld the dismissal of an FCA complaint under the first-to-file rule. In United States ex rel. Sheldon Batiste v. SLM Corporation, No. 10-7140 (D.C. Cir. Nov. 4, 2011), Relator Sheldon Batiste alleged that SLM, commonly known as Sallie Mae, defrauded the United States government through its administration of student loans under the Federal Family Education Loan Program ("FFELP"). Batiste alleged that from October 5, 2004 to the time of filing, SLM defrauded the government by unlawfully placing student loans in forbearance and presenting claims for funds to the government, each of which included a false certification that the data SLM submitted with the claims were correct and conformed to federal law. He filed his complaint on June 13, 2008.

Over two years before Batiste filed his complaint, Relator Michael Zahara filed an FCA lawsuit against SLM, alleging that SLM falsified loan records pertaining to delinquent FFELP loans held by Sallie Mae. His complaint focused on falsifying forbearance records and other fraudulent conduct regarding student loans.

Continue reading " U.S. Court of Appeals Dismisses Complaint Based on FCA's First-to-File Rule" »

The United States Attorneys' offices, with the Department of Justice, are responsible for enforcing and recovering civil and criminal debts owed to the United States and criminal debts owed to victims of federal crimes.

Loretta E. Lynch, the United States Attorney for the Eastern District of New York, recently announced that the office collected $75,540,770.04 in civil and criminal actions during fiscal year 2011. Of this amount, $49,418,991.52 was collected in criminal actions, and $26,121,778.52 in civil actions. The office also collected $177,959,332 in criminal and civil forfeitures.

In one case, the Eastern District of New York recovered over $50 million as part of the settlement of a civil forfeiture action involving two brokerage accounts belonging to Jacob "Kobi" Alexander, who is alleged to have orchestrated a massive stock option backdating fraud. The money collected was returned to the victim, Comverse Technology, Inc., which, in turn, used the funds to settle investor and shareholder lawsuits.

In the announcement, Lynch emphasized the importance of these collections during the economic downturn. "The U.S. Attorney's Office is dedicated to protecting the public and recovering funds for the federal treasury and for victims of federal crime. We continue to hold accountable those who seek to profit from their illegal activities."

Nationwide, the 94 U.S. Attorneys' offices collected a total of $6.5 billion in criminal and civil actions this year. Of the $6.5 billion total, $1.3 billion was collected in shared cases in which multiple U.S. Attorneys' offices or Department of Justice divisions were involved in the recovery. This marks the second straight year that over $6 billion has been collected. The $6.5 billion represents over three times the appropriated budget of the 94 U.S. Attorneys' offices for 2011.

To read the press release, click here.

Continue reading "U.S. Attorneys' Offices Nationwide Collects $6.5 Billion in Civil and Criminal Actions in 2011" »

Just over a month after agreeing to pay over $22.6 million to resolve allegations of fraud in the procurement of a government contract to provide support services for the National Center for Critical Information Processing and Storage at the Naval Oceanographic Major Shared Resource Center, Science Applications International Corporation ("SAIC") reported that its third-quarter profit has been wiped out by a $232 million charge against earnings relating to allegations of fraud in a contract with New York City.

Several years ago, the City of New York hired SAIC as the prime contractor to develop and implement a time and billing software program called CityTime to track employee time, generate payroll, and manage the City's workforce. At the end of 2005, SAIC had about 150 consultants working on the program. Two years later, that number more than doubled.

The United States Attorney's Office for the Southern District of New York and the City of New York have been investigating the program and have alleged "a massive and elaborate scheme to defraud the city" has corrupted the program. Two former SAIC employees, including the program leader, Gerard Denault, have been charged with conspiring to defraud the City of New York by receiving about $40 million dollars in illegal kickbacks; inflating hourly rates and the number of consultants without City approval; using offshore companies to receive payments as subcontractors and launder money; and delaying the implementation of the program through fraudulent means.

In October, SAIC removed three of its top executives: Deborah Alderson, president of SAIC's defense solutions group; John Lord, her deputy; and Peter Dube, general manager of the enterprise and mission solutions business. It also began an internal review of the program.

On December 6, 2011, SAIC reported a loss of $89 million (27 cents per share) in the quarter ending October 31, 2011, compared to a profit of $173 million (46 cents per share) for the same period in 2010. SAIC issued a statement in which it stated that it "believes that a loss related to the outcome of the CityTime investigations is probable and now estimates that the loss will be at least $232 million," but added that the amount could grow.

To Read the Washington Post article about the fraud, click here.

Fraud in the procurement or performance of government contracts is one of the most fertile areas for False Claims Act litigation. If you have information regarding a government contract fraud, contact Andrew M. Beato, an experienced whistleblower attorney with the law firm of Stein, Mitchell & Muse, LLP in Washington, D.C.

Recently, the U.S. Department of Health and Human Services estimated there to be $60 billion in Medicare fraud each year. According to Donald M. Berwick, the now former Administrator of the Centers for Medicare & Medicaid Services ("CMS"), 20 percent to 30 percent of healthcare spending is "waste" with no benefit to patients.

Dr. Berwick was appointed to head CMS by President Obama on July 7, 2010 through a recess appointment. In an interview he gave on December 1, 2011, one day before he left his position, Dr. Berwick stated that such an "extremely high level of waste" is caused by fraud, the overtreatment of patients, failure to coordinate care, administrative complexities, and burdensome rules. Dr. Berwick stated that "much is done that does not help patients, and many physicians know it."

According to the New York Times, Medicare and Medicaid could save $150 billion to $250 billion a year by eliminating waste.

To read the New York Times Article, click here.

The False Claims Act is a key tool in combating waste in government healthcare programs. While the government recovers billions in settlements and judgments under the FCA each year, it is only a fraction of the undetected fraudulent schemes. The government relies heavily on the assistance of whistleblowers to detect, uncover, and report fraud.

Successful whistleblowers are entitled to receive significant financial awards for their role in recovering ill-gotten gains. If you have information regarding a healthcare fraud, contact Andrew M. Beato, an experienced whistleblower attorney with Stein, Mitchell & Muse, LLP in Washington, D.C., to memorialize your claim.

Medicare fraud costs the United States government hundreds of millions of dollars each year.

For fiscal year 2011, the Centers for Medicare & Medicaid Services recently reported that it has collected a total of $797.4 million in overpayments (compared to returning $141.9 million in underpayments). According to the report, the Medicare Recovery Audit Program made payment corrections totaling $939.4 million this year - an increase of almost 10 times the total payment corrections made last year in 2010 ($92.3 million). To view the report, click here.

Whistleblowers play an essential role in uncovering and reporting fraud, thus enabling Medicare to recover the fraudulent proceeds. One common scheme is based on billing Medicare for medically unnecessary services or procedures to patients. In fact, there have been a number of recent settlements centered on billing for medically unnecessary procedures or services:

Hill-Rom Company. On September 27, 2011, Hill-Rom Company, Inc., a durable medical equipment supplier, agreed to pay the United States $41.8 million to resolve allegations that it knowingly submitted numerous false claims to the Medicare program for medically unnecessary equipment and certain specialized medical equipment for patients who did not qualify for the equipment and for patients who had died or were no longer using the equipment.

LHC Group. On September 30, 2011, LHC Group, Inc., a home health provider, agreed to pay the United States $65 million plus interest to resolve allegations that between 2006 and 2008, LHC improperly billed Medicare, TRICARE, and the Federal Employees Health Benefits program for services that were not medically necessary and for services rendered to patients who were not home bound. The whistleblower, Judy Master, will receive over $12 million for her role in uncovering and reporting the fraud.

If you have information regarding a fraud that affects the Medicare program or another federal health care program, contact Andrew M. Beato, an experienced whistleblower attorney with the law firm of Stein, Mitchell & Muse, LLP, to memorialize your claim.

The False Claims Act was enacted in 1863 by Congress and President Abraham Lincoln in response to widespread corruption and fraud by defense contractors during the Civil War. At the time of enactment, the FCA, then known as the "Lincoln Law," made it illegal to present false statements or claims to the United States government for payment to which the claimant is not entitled.

Today, the FCA continues to be an invaluable tool in combating government contractor fraud. The United States government commits billions of dollars of its discretional spending budget to defense contractors. In 2010 alone, Lockheed Martin - which recently agreed to pay $2 million to resolve bid-rigging allegations - earned over $16.7 billion in revenue from government contracts.

Procurement fraud is not limited to large defense contractors. The United States contracts with third parties in a number of areas, including historical and environmental preservation. For example, Katherine Knapp brought a qui tam lawsuit under the False Claims Act against Calibre Systems, Inc., a government contractor providing environmental and archaeological services at the Ft. Irwin National Training Center.

Knapp is a former employee of Calibre Systems and worked at the Ft. Irwin site as an Analyst member of the Environmental Program Management Directorate. She alleged FCA claims under the false certification and worthless services theories of liability.

Continue reading "Procurement Fraud Is Not Limited to Defense Contractors " »

Just over a year ago, GlaxoSmithKline paid $750 million to resolve a False Claims Act lawsuit arising out of significant violations of current Good Manufacturing Practice (cGMP) regulations at its plant located in Cidra, Puerto Rico. The adulterated drugs manufactured at that plant were sold to government healthcare programs for use by patients.

Recently, the United States Attorney's Office for the District of Maryland filed a Statement of Interest in United States ex rel. Barry Rostholder et al. v. Omnicare, Inc. et al., Civ. Action No. 1:07 cv 01283. Rostholder's complaint alleges that Omnicare violated the False Claims Act by failing to comply with the cGMP regulations prohibiting manufacturers from packaging penicillin in the same facility as non-penicillin drugs.
In its Statement of Interest, the United States took the position that violations of cGMP regulations may be material to the government decision whether to pay for the affected products, and thus are relevant in FCA cases. The government made clear that violations of cGMP regulations may be relevant in FCA cases where the violations are "significant, substantial, and give rise to actual discrepancies in the composition or functioning of the product." Such is the case when, for example, "the affected drug's strength materially differed from, or the purity or quality fell below, the strength, purity, or quality specified in the drug's FDA-approved New Drug Application, the drug's labeling, and/or the standards set forth in official compendium."

In addition, "manufacturing deficiencies may affect the strength, purity and/or quality of the affected drug such that the drug is essentially 'worthless' and not eligible for payment by the government." Submitting claims, or causing claims to be submitted, to government healthcare programs for drugs that are so deficient as to be worthless may, according to the government, give rise to FCA liability.

In rejecting Omnicare's argument that this is a false certification case, the government argued that "when a claim is false because it is for a non-reimbursable item (e.g., a tainted drug), analysis under a 'certification theory' is inapposite." The government clarified that "the core issue for 'falsity' under the FCA is whether the government received the benefit of its bargain."

Manufacturing problems result in substandard products and directly affect the health and safety of patients who use the adulterated drug or device. If you have information regarding significant and substantial cGMP violations by a drug or device manufacturer, contact Andrew M. Beato, a experienced whistleblower attorney at the law firm of Stein, Mitchell & Muse in Washington, D.C. The False Claims Act provides significant protections for employees who step forward and report fraud.