Whistleblower Qui Tam Law Blog

In August 2011, the United States intervened in a lawsuit brought under the federal whistleblower statute, known as the False Claims Act, against Education Management Corporation, the second-largest for-profit college chain in the United States. The case involved a scheme by EMC to fraudulently induce the Education Department to make the company eligible for more than $11 billion in federal grants and loans. A number of states joined the lawsuit. However, the United States District Court for the Western District of Pennsylvania held that the State of Kentucky could not join the lawsuit, citing its lack of a state whistleblower statute.

Now, Kentucky's House Speaker, Greg Stumbo, has introduced legislation that, if passed, will create a state whistleblower statute and provide strong financial incentives for whistleblowers to report schemes to defraud Kentucky state government programs. The proposed legislation would impose fines of up to three times the amount of actual damages against wrongdoers (plus fines and attorneys fees), and award whistleblowers between 15 and 30 percent of the money recovered. Procedurally, the legislation would call for whistleblowers to initiate actions and give the Attorney General the option to join the lawsuit on behalf of the state.

The federal False Claims Act dates back to the Civil War and was intended to deter fraud against the Union Army. The FCA was amended in 1986, and has since garnered more than $25 billion in recoveries.

States that have enacted state whistleblower laws have also been successful:

• In 2011, California recovered $241 million against Quest Diagnostics for overcharging the state Medicaid program and providing unlawful kickbacks to physicians, hospitals, and clinics.

• In 2011, Texas won a $170 million jury verdict against Actavis for falsely reporting their wholesale drug prices to the Medicaid program.

• In 2001, California recouped 43.1 million from Strategic Resource Solutions to resolve claims involving the installation and monitoring of energy-efficient heating and cooling equipment in San Francisco schools.

• In 2001, Texas recovered $14.5 million from Driscoll Children's Hospital for filing false expense reports, fraudulently inflating the amount of charity work performed, and providing illegal kickbacks.

• In 2000, California recouped $30 million from Toshiba for knowingly selling defective products to the State.

Continue reading "Kentucky Introduces State Whistleblower Legislation" »

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.