Whistleblower Qui Tam Law Blog

The Department of Justice, along with the Department of Health and Human Services (HHS), announced that they have charged 107 physicians, nurses, and social workers in seven cities with Medicare fraud as part of a nationwide crackdown on unrelated schemes involving approximately $452 million in false billing. Last Wednesday, hundreds of Federal agents with the Medicare Fraud Strike Force raided businesses, seized documents, and charged 107 suspects in Miami, Los Angeles, Houston, Detroit, Chicago, Tampa, and Baton Rouge. This coordinated effort involved the highest amount of false Medicare billings in a single takedown in the history of the Medicare Fraud Strike Force. HHS also has suspended or taken other administrative actions against 52 healthcare providers.

The Medicare Fraud Strike Force is a multi-agency team of Federal, state, and local investigators that combat Medicare Fraud through the use of Medicare data analysis techniques. More than 500 law enforcement agents from the FBI, HHS's Office of Inspector General, multiple Medicaid Fraud Control Units, and other state and local law enforcement agencies contributed to the nationwide bust. In addition to making arrests, Federal agents executed 20 search warrants related to ongoing strike force investigations.

According to the Department of Justice press release, the defendants are charged with a number of healthcare fraud-related crimes, including conspiracy to commit healthcare fraud, healthcare fraud, violations of the Anti-Kickback Statute, and money laundering. The charges are based on a variety of schemes involving medical treatments and services such as home healthcare, mental health services, psychotherapy, physical and occupational therapy, durable medical equipment, and ambulance services. Moreover, the defendants are alleged to have participated in schemes to submit false and fraudulent claims to Medicare for treatments that were either medically unnecessary or never provided. In many instances, the defendants are alleged to have paid illegal kickbacks to facilitate the fraudulent billing schemes.

Continue reading "107 Arrested and Charged in a Nationwide Medicare Fraud Bust" »

Recently, Thomas P. Guerrieri pleaded guilty before Judge Rya W. Zobel in the United States District Court for the District of Massachusetts in Boston for violating the Anti-Kickback Statute. Under the Anti-Kickback Statute, it is unlawful to make or accept payments to furnish or arrange for the furnishing of any item or service for which payment may be made under a federal healthcare program. The Anti-Kickback statute also prohibits offering inducements or remuneration to induce healthcare providers to refer patients for services that will be reimbursed by a federal healthcare program. The purpose of the Anti-Kickback Statute arose from concerns that payoffs to those who can influence healthcare decisions will result in goods and services being provided that are medically unnecessary, substandard in quality, or harmful to patients.

Guerrieri was the former vice-president of sales at a medical device company that sold bone growth stimulators. He will be sentenced on July 11, 2012. He faces up to five years in prison, to be followed by three years of supervised release, a $250,000 fine and forfeiture. At the plea hearing, the Government informed the Court that had the case proceeded to trial, it would have proven that Guerrieri facilitated a "consulting" agreement between a New York surgeon and Guerrieri's company to induce the surgeon to prescribe the company's bone growth stimulators. The surgeon was paid tens of thousands of dollars by the company, without providing consulting services.

According to the Government, in or about Aug. 2007, the surgeon became concerned about increased government scrutiny of consulting arrangements. Even though the surgeon was paid every month, he failed to document his consulting services in required time sheets. Concerned with Government scrutiny over consulting agreements, the surgeon, Guerrieri, and a territory manager for the company falsely and fraudulently backdated time sheets going back to 2006 to make it appear as though the surgeon filled out these forms contemporaneously and performed legitimate consulting services. In addition, at the surgeon's request, Guerrieri and the territory manager obtained a letter from the company's general counsel falsely stating that the surgeon fulfilled the terms of the agreement. Guerrieri covered up this misconduct to induce the surgeon to continue to order bone growth stimulators from the company.

Continue reading "Former Vice-President of Bone Growth Companies Pleads Guilty to Fraud" »

The Department of Justice and the Securities and Exchange Commission recently announced their commitment to investigate and prosecute pharmaceutical and medical device companies that pay bribes to government physicians and hospital administrators in foreign countries to secure business.

This practice violates the Foreign Corrupt Practices Act of 1977, 15 U.S.C. § 73dd-1 et seq., which prohibits certain persons and entities from making payments to foreign government officials to assist in obtaining or retaining business. The anti-bribery provisions of the FCPA apply to all United States persons and certain foreign issuers of securities, as well as foreign firms and individuals who act in furtherance of a bribe to take place within the United States.

The FCPA also requires companies whose securities are listed in the United States to meet the accounting provisions set forth in 15 U.S.C. § 78m, which require corporations to (1) make and keep books and records that accurately and fairly reflect the transactions of the corporation and (2) devise and maintain an adequate system of internal accounting controls.

Like other types of fraud, whistleblowers play a key role in uncovering illegal bribes. Recognizing the importance of whistleblowers to government enforcement, the Securities and Exchange Commission has established a whistleblower reward program, which provides financial incentives to individuals who provide information to the government relating to violations of securities laws, including the FCPA. In cases where penalties against a corporation exceed $1 million, the SEC is required to award whistleblowers between 10% and 30% of the amounts recovered. For more information on the SEC Whistleblower Reward Program, click here.

Continue reading "U.S. Government to Scrutinize Pharmaceutical Companies that Pay Bribes to Foreign Physicians and Hospitals " »

The Third Circuit recognizes two types of false claims under the False Claims Act: a factually false claim, which occurs when the claimant misrepresents the goods and services being provided to the government, and a legally false claim, which occurs when the claimant knowingly certifies falsely that it has complied with a statute or regulation that is a precondition to payment by the government. Further, there are two types of false certifications: express false certifications (where an entity certifies that it complied with regulations that are prerequisites to government payment) and implied false certifications (the act of submitting a claim for reimbursement itself implies compliance with governing federal rules that are prerequisites to payment).

In United States ex rel. Rodney Repko v. Guthrie Clinic, P.C. et al., No. 3:04-cv-1156 (M.D. Pa. Sept. 1, 2011), Rodney Repko, the former General Counsel of Guthrie Clinic and Guthrie Healthcare System, filed a qui tam lawsuit under the False Claims Act that his former employers, as well as Robert Packer Hospital and Dr. Terrance Devine, falsely certified claims for Medicare reimbursement based on improper financial relationships between the various defendants in violation of the Stark and Anti-Kickback Acts. Specifically, Repko claimed that Guthrie Clinic accepted millions of dollars in financial benefits from the other defendants over a period of years in exchange for patient referrals.

After discovery, defendants moved to dismiss for lack of subject matter jurisdiction, arguing that Repko's claims were barred by the public disclosure provisions of the FCA, and the U.S. District Court for the Middle District of Pennsylvania granted the motion.

In determining whether the jurisdictional bar applies, the court must determine whether the relator's claims are based on publicly disclosed allegations or transactions. The FCA provides three categories of sources for such disclosure: (1) a criminal, civil, or administrative hearing, (2) a congressional, administrative, or Government Accounting Office report, hearing, audit, or investigation, or (3) the news media.

First, the court held that the information regarding defendants' "illegal financial arrangements" and "patient referrals" were publicly disclosed in litigation proceedings and a variety of publicly available websites (which the court held qualified as "news media" under the FCA).

Continue reading "Pennsylvania Court Dismisses Kickback and Stark Allegations Based on Public Disclosure Bar" »

Relator Kassie Westmoreland brought a qui tam action against Amgen, a biotechnology company, along with two of its affiliates (INN and ASD), for violations of the False Claims Act. She alleged that defendants violated the Anti-Kickback Statute by encouraging healthcare providers to submit claims for payment by Medicare for the value of the excess product, or "overfill," contained in vials of a biologic drug called Aranesp, without including it in the average sales price ("ASP") of the drug. In a previous ruling, the court upheld Westmoreland's allegations as sufficient to state a claim under the FCA.

In United States ex rel. Westmoreland v. Amgen, Inc. et al., No. 1:06-cv-10972-WGY, (D. Mass. Sept. 15, 2011), the court decided a number of other motions. First, defendants moved for partial judgment on the pleadings on Westmoreland's allegation that defendants caused providers to submit false claims to the government because such claims included a false certification of compliance with the Anti-Kickback Statute. Second, Westmoreland and Amgen both moved for partial summary judgment on the allegation that Amgen violated the FCA by artificially inflating the average sales price ("ASP") of Aranesp by failing to include the overfill as a "price concession." Third, INN and ASD moved for partial summary judgment on the theory that they are shielded from liability by the Anti-Kickback Statute's safe harbor provisions for group purchasing organizations and discounts. Westmoreland also moved for partial summary judgment, arguing that the safe harbor provisions do not apply.

False Certification Theory of Liability

Defendants' argument was twofold: first, they argued that compliance with the Anti-Kickback Statute is not a precondition of Medicare payment because it has no legal basis, express or implied, in the Medicare statutes or regulations. The court rejected this argument, agreeing with a number of other circuits and district courts that have held compliance with the Anti-Kickback Statute to be a precondition of Medicare payment, even if not expressly stated in the Medicare statutes and regulations or the Anti-Kickback Statute. To hold the opposite, according to the court, would run counter to public policy and common sense. Second, they argued the adoption of the Provider Agreement was procedurally flawed and undertaken without proper agency authority. The court rejected this argument as well, holding that the Provider Agreement, which requires providers to certify compliance with the Anti-Kickback Statute, was adopted in accordance with the PRA and represents a valid exercise of CMS's regulatory authority, which is entitled to judicial deference.

Average Sales Price Allegations

Overfill is drug product contained in vials of injectionable drugs in excess of the labeled dosage. On the parties' cross motions for summary judgment, the Court held that overfill need not be included in calculating a drug's ASP, and that Amgen consistently followed this methodology. The Court held that Amgen's failure to report the overfill could not have artificially inflated the drug's ASP because overfill is not a factor in the ASP calculation. The Court denied Westmoreland's motion for partial summary judgment on the ASP claim, and granted Amgen's.

Continue reading "Massachusetts District Court Decides Motions in Biologic "Overfill" Case" »

Congress and Abraham Lincoln enacted the False Claims Act in 1863 in response to widespread corruption and fraud by defense contractors in selling supplies and provisions to the Union Army during and after the Civil War. After being weakened by Congress during World War II, the FCA was revived in 1986 after congressional hearings and GAO reports exposed rampant fraud in the defense industry. Senator Charles Grassley and Congressman Howard Berman pushed the amendments through Congress, and Ronald Reagan signed them into law, thus enhancing the Government's ability to combat fraud and recover losses.

For the past 25 years, the False Claims Act has been the single most effective tool for combating fraud against the government. The law owes much of its success to the courage of whistleblowers, who not only alert the government to fraud, but also provide invaluable assistance by uncovering evidence and explaining highly complex fraudulent schemes. The False Claims Act's qui tam provisions allow whistleblowers with evidence of fraud against the government to sue on behalf of the government, and receive 15 to 30 percent of the amount recovered.

In Fiscal Year 2010, the government recovered over $3 billion under the False Claims Act, 80 percent of which was recovered as a direct result of whistleblower lawsuits. Since the 1986 amendments to the False Claims Act, the government has recovered over $30 billion in judgments and settlements.

Taxpayers Against Fraud, a nonprofit, public interest organization dedicated to combating fraud against government, chronicles the False Claims Act's remarkable success over the last 25 years and highlights the pivotal role of whistleblowers in The 1986 False Claims Act Amendments, A Look At Twenty-Five Years of Effective Fraud Fighting in America.

The September 2011 edition of InsideCounsel magazine highlights the significance of the First Circuit's decision in United States ex rel. Hutcheson v. Blackstone Medical, Inc., No. 10-1505, 2011 WL 2150191 (1st Cir. June 1, 2011). In that case, Hutcheson claimed that Blackstone paid kickbacks and other financial incentives to surgeons to induce them to use Blackstone's devices in spinal surgeries. The First Circuit held that an entity may be liable under the False Claims Act for knowingly causing hospitals and physicians to submit false or fraudulent claims to the government. For a more complete discussion of the First Circuit's decision, click here.

InsideCounsel's article, Decision Raises the Bar for Defending False Claims Act Cases, recognizes that the "the government has even more arrows in its quiver to attack health care fraud." In the article, Andrew M. Beato, a partner at Stein, Mitchell & Muse, L.L.P., commented that the case will force hospitals and other submitting parties to exercise greater oversight:

" 'There is no ostrich defense,' say Beato. 'Burying your head in the sand doesn't avoid FCA liability if you submit a claim for payment tainted by a kickback. Hospitals are sophisticated participants in federal payer programs. A hospital has an interested in knowing whether a doctor accepted a kickback that interferes with independent clinical judgment in treating the hospital's patient.' "

Stein, Mitchell & Muse attorneys are experts in representing whistleblowers in False Claims Act cases. Please contact Andrew M. Beato if you have information regarding fraudulent practices in government programs to understand your rights and memorialize any claim for a reward under the FCA or other whistleblower statutes.

In United States ex rel. Wilkins v. United Health Group, Inc., No. 10-2747 (3d. Cir. June 30, 2011), the Court of Appeals for the Third Circuit joined a majority of other federal courts, including those in the Second, Sixth, Ninth, Tenth, Eleventh, and the District of Columbia Circuits, by adopting the implied false certification of liability under the False Claim Act.

Courts have recognized two categories of false certification claims: express and implied. Express false certification claims include those in which an entity falsely certifies that it is in compliance with a law that is a prerequisite to Government payment of a claim. Implied false certification claims, however, are premised on the notion that the act of submitting a claim for reimbursement itself implies compliance with laws that serve as preconditions to payment. Thus, liability attaches when an entity submits a claim for payment to the Government without disclosing that it violated a law that affected its eligibility for payment.

Before Wilkins, the Third Circuit had not decided whether there could be implied false certification liability under the False Claims Act. In this case, the whistleblowers alleged, among other things, that United Health Group and AmeriChoice paid illegal kickbacks to a New Jersey medical clinic to induce the clinic to switch its patients to Medicare and Medicaid. Moreover, they allege that kickbacks were paid to physicians in return for the identity of patients eligible for Medicare and Medicaid. Defendants moved to dismiss the complaint. The district court granted the motion, holding that the whistleblowers did not include an allegation that defendants certified compliance with the Anti-Kickback Statute, 42 U.S.C. § 1320a, or that such compliance was a relevant consideration when the Government processed claims under the federal payer programs.

Continue reading "Another Federal Court Recognizes the Implied False Certification Theory of FCA Liability " »

Recently, the Court of Appeals for the First Circuit reversed the dismissal of a Relator's claims brought against a medical device manufacturer under the False Claims Act for violations of the Anti-Kickback Statute. United States ex rel. Hutcheson v. Blackstone Medical, Inc., No. 10-1505, 2011 WL 2150191 (1st Cir. June 1, 2011). This decision is significant for whistleblowers around the country insofar as the Court of Appeals broadly rejected two purported limitations on FCA liability: (1) that in absence of an express legal representation or factual misstatement, a claim can only be false or fraudulent if it fails to comply with a precondition of payment expressly stated in a statute or regulation and (2) that a submitting entity's representations about its own legal compliance cannot incorporate an implied representation concerning the behavior of non-submitting entitled.

In Hutcheson, Relator, a former employee of Blackstone Medical, argued that compliance with the AKS is a condition of receiving payment from federally-funded healthcare programs, citing the content of Provider Agreements and Hospital Cost Reports, both of which establish that claims for Medicare reimbursement may only be paid if they comply with the Anti-Kickback Statute. Relator alleged that the company paid kickbacks to doctors across the country to induce them to use its products in certain spinal surgeries. Moreover, Blackstone's management supervised the kickback scheme and "knew that Medicare, Medicaid, and other federal program beneficiaries represent a significant percentage of spine-surgery patients," and that as a result of the kickbacks, physicians throughout the country performed spinal surgeries on Medicare and Medicaid patients with Blackstone's devices. Therefore, through the kickback scheme, Blackstone caused healthcare providers to present "false or fraudulent" claims for payment to the federal healthcare programs in violation of the FCA.

Blackstone moved to dismiss, arguing, among other things, that Relator's complaint failed to state a claim under Rule 12(b)(6). The district court agreed with Blackstone and dismissed all of Relator's claims. In doing so, the district court narrowed the application of the FCA by construing the statute such that a claim is "false or fraudulent" only if it is "factually false" or "legally false." The district court further construed the statute such that a claim is legally false either under an "express certification theory" or an "implied certification theory."

The Court of Appeals went beyond merely addressing the district court's dismissal and rejected two "purported limitations on FCA liability." Indeed, the text of the FCA does not refer to "factually false" or "legally false" claims, nor does it refer to "express certification" or "implied certification." The Court of Appeals made clear that these are "[j]udicially-created categories," which are sometimes helpful in carrying out a statute's requirements, but can also "create artificial barriers that obscure and distort those requirements."

Continue reading "The First Circuit Clarifies Liability Under the FCA for Anti-Kickback Violations" »