Whistleblower Qui Tam Law Blog

Recently, McKesson Corporation agreed to pay the United States $190 million to resolve claims that it violated the False Claims Act by falsely reporting inflated Average Wholesale Prices ("AWPs") for a large number of prescription drugs, causing government to set higher reimbursement rates for those drugs. The settlement was the result of a lawsuit filed by a whistleblower under the qui tam provisions of the False Claims Act.

Fraudulent AWP schemes are not uncommon. Reimbursement rates for prescription drugs purchased by Medicaid beneficiaries generally are set using certain bench marks, such as the AWP. The AWP is the average price at which drugs are purchased at the wholesale level. In general, network pharmacies purchase prescription drugs from manufacturers or wholesalers, such as McKesson. When a Medicaid beneficiary purchases a covered drug from a network pharmacy, the pharmacy submits a claim for reimbursement to the state Medicaid agency. Although each state establishes its reimbursement formula, reimbursement generally is based on the AWP minus a certain percentage. The seller - usually the manufacturer or wholesaler - pays a rebate to Medicaid each quarter. Reporting inflated AWP data is a common fraud, as it increases payments to manufacturers and wholesalers that sell pharmaceuticals.

Here, the government alleged that McKesson, a large drug wholesaler, reported the inflated pricing data for a wide variety of brand name prescription drugs to First DataBank, a company that publishes drug prices used by most state Medicaid programs to set payment rates for pharmaceuticals, and other publishers of drug prices.

The Medicaid program is funded jointly by the Federal and state governments. The settlement resolved federal Medicaid overpayments based on McKesson's inflated pricing information. State Medicaid agencies can separately negotiate with McKesson to resolve claims based on the states' shares of the Medicaid overpayments.

According to Acting Assistant Attorney General Stuart F. Delery, "[t]his case demonstrates the Department of Justice's commitment to ensuring that Medicaid funds are expended appropriately. . . . Companies that report pricing data that affect government payment rates, whether those companies are manufacturers, wholesalers, or otherwise, are required to report that data accurately."

"This is the latest example of a corporation's intentionally manipulating the complicated system by which drug purchases are reimbursed," said U.S. Attorney Paul J. Fishman. "We have no tolerance for those who take advantage of that system to bring in more business by falsely increasing reimbursements to retailers."

"This settlement with McKesson highlights the Office of Inspector General's commitment to protecting against artificially inflated drug prices," said Inspector General Daniel R. Levinson. "Our analyses of drug price reporting practices - including the use of 'Average Wholesale Price' - have consistently identified excessive Medicare and Medicaid payments resulting from these practices."

Under the qui tam provisions of the False Claims Act, whistleblowers who report fraud and abuse in government healthcare programs, such as Medicaid, are entitled to receive a percentage of the government's recovery. Andrew M. Beato specializes in representing whistleblowers in False Claims Act litigation involving fraudulent pricing schemes by pharmaceutical manufacturers, wholesalers, and retail pharmacies, such as false AWP reporting schemes.

Recently, the Huffington Post reported that the Office of Inspector General of the United States Department of Health and Human Services (OIG) issued a report on retail pharmacies with questionable Medicare Part D billing. Medicare Part D is a voluntary prescription drug benefit available to Medicare beneficiaries that went into effect on January 1, 2006. Since that time, the OIG and others have raised concerns about Part D billing. In several reports, OIG found that the program has limited safeguards in place and is vulnerable to fraud, waste, and abuse.

Moreover, recent cases have illustrated a variety of alleged fraud schemes by pharmacies. For example, one pharmacist who owned 26 pharmacies was charged with health care fraud and drug diversion. The pharmacist allegedly paid physicians to write prescriptions that were medically unnecessary and to direct patients to fill them at his pharmacies, which purportedly billed $37.7 million to Medicare.

In this report, OIG examined the Part D billing patterns of 59,000 retail pharmacies during 2009, which amounted to nearly 1 billion prescriptions. Through the study, investigators revealed contrasts between normal pharmacy practices and potential criminal behavior. Overall, the report found a pattern of questionable claims at 2,637 pharmacies around the country, including one pharmacy in Kansas that billed Medicare for more than 1,000 prescriptions for two patients in a single year. In total, Medicare paid $5.6 billion in possible fraudulent billings that year.

Certain parts of the country had an especially high rate of questionable billing practices. In Miami, nearly 20 percent of the claims submitted by pharmacies were potentially fraudulent. In Los Angeles, where 12 percent of pharmacies had questionable billings, one suburban pharmacy billed Medicare for more than $8.4 million - nine times the national average and an average of 116 prescriptions per beneficiary.

In Baltimore, Detroit, and Tampa, powerful painkillers classified as controlled substances accounted for an abnormally high share of total prescriptions billed. No pharmacies were named in the report. New York also had a high percentage of questionable claims with 9 percent.

Continue reading "OIG Report Details Questionable Medicare Part D Billing Practices" »

Yesterday, the Department of Justice announced that Abbott Laboratories Inc. has agreed to plead guilty and pay $1.5 billion to resolve criminal and civil liability resulting from a scheme to promote its prescription drug, Depakote, for uses not approved as safe and effective by the Food and Drug Administration. The civil settlement resolves four whistleblower lawsuits filed under the qui tam provisions of the False Claims Act, which allows private citizens to file civil actions on behalf of the United States and share in any recovery. As part of yesterday's resolution, the whistleblowers, one of whom is a former Abbott sales representative in Atlanta, will share $84 million from the federal share of the settlement amount.

FDA approves drugs as safe and effective for specified uses. Under the Food, Drug and Cosmetic Act, a company in its application to the FDA must specify each intended use of a drug. After a drug is approved, the company must limit its promotional activities to only the intended uses approved by FDA. Promoting a drug for any other purposes - known as off-label promotion - renders the drug misbranded. Here, Depakote has been approved by FDA approved for the treatment of epileptic seizures, bipolar mania and the prevention of migraines. Abbott pleaded guilty to promoting the drug to control agitation and aggression in elderly dementia patients and to treat schizophrenia - neither of which are FDA-approved uses of the drug.

In the criminal plea, Abbott admitted to maintaining a specialized sales force trained to market Depakote in nursing homes for the control of agitation and aggression in elderly dementia patients from 1998 through 2006, despite the absence of credible scientific evidence that Depakote was safe and effective for that use. Moreover, from 2001 through 2006, Abbott admitted to marketing Depakote in combination with atypical antipsychotic drugs to treat schizophrenia, even after its clinical trials failed to demonstrate that adding Depakote was any more effective than an atypical antipsychotic alone for that use.

The civil settlement goes further to include the resolution of allegations that from 1998 through 2008, Abbott unlawfully promoted Depakote for unapproved uses, including behavioral disturbances in dementia patients, psychiatric conditions in children and adolescents, schizophrenia, depression, anxiety, conduct disorders, obsessive-compulsive disorder, post-traumatic stress disorder, alcohol and drug withdrawal, attention deficit disorder and autism. Abbott's scheme included making false and misleading statements about the safety, efficacy, dosing and cost-effectiveness of Depakote for some of these unapproved uses and, moreover, that the use of Depakote to control behavioral disturbances in dementia patients would help nursing homes avoid the administrative burdens and costs of complying with Omnibus Budget Reconciliation Act regulatory restrictions applicable to antipsychotics.

The civil settlement also covers allegations that Abbott violated the Anti-Kickback Statute by offering and paying illegal kickbacks to healthcare providers and long term care pharmacies to induce them to promote and prescribe Depakote and improperly and unduly influence the content of company-sponsored Continuing Medical Education programs.

Continue reading "Abbott Labs Agrees to Pay $1.5 Billion to Resolve Criminal & Civil Allegations of Off-Label Promotion of Depakote" »

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" »

Whistleblowers Lucas Matheny and Deborah Loveland brought a qui tam lawsuit against Medco Health Solutions, Inc., its subsidiaries, and several individual executives, alleging violations of the reverse false claims provision of the False Claims Act. All of the corporate and individual defendants were subject to a Corporate Integrity Agreement ("CIA"), which the parent company PolyMedica entered into with the Office of the Inspector General of the U.S. Department of Health and Human Services in November 2004. The CIA required the defendants to remit payments from the government that lacked sufficient documentation and payments received in duplicate or in error.

During their time as employees, the whistleblowers became aware of a scheme by their supervisors to conceal approximately $69 million in overpayments that, under the CIA, should have been remitted to the government. They filed their qui tam lawsuit alleging that the defendants knowingly submitted false statements in a Certificate of Compliance and in random samples of patient accounts ("Discovery Samples") to the government to conceal and avoid the obligation to remit overpayments as required by the CIA. The defendants moved to dismiss for failure to state a claim upon which relief may be granted, and the United States District Court for the Southern District of Florida granted the motion. The whistleblowers appealed.

The U.S. Court of Appeals for the Eleventh Circuit reversed. The False Claims Act imposes liability on any person who "knowingly makes, uses, or causes to be made or used, a false record or statement to conceal, avoid, or decrease an obligation to pay or transmit money or property to the Government . . . ." 31 U.S.C. s. 3729(a)(7). This is known as the "reverse false claim" provision of the False Claims Act because liability is based on avoiding the payment of money due to the government, as opposed to submitting a false claim to the government to secure payment. Moreover, like any False Claims Act case, the relator must meet the heightened pleading requirements under Rule 9(b) of the Federal Rules of Civil Procedure, which requires the whistleblower to plead fraud allegations with specificity, including the who, what, when, where, and how of the fraud.

In analyzing the whistleblowers' allegations under this law, the Court of Appeals found that the whistleblowers properly alleged an express contractual obligation on behalf of the defendants under the CIA to identify, report, and remit overpayments within 30 days of identification and defined that obligation in detail with references to particular contractual sections. The court found that the relators also sufficiently alleged that the Certification of Compliance and the Discovery Sample were knowingly false.

Next, the Court held that the allegations were sufficient to state a claim under both counts in the complaint. As to the first count, which alleged a false certification of compliance, the court found that the whistleblowers alleged with specificity the existence and submission of a Certification of Compliance by the defendants; that the defendants identified overpayments, but failed to report or remit the funds as required by the CIA; and the submission of the Certification played a material role in the concealment and avoidance of an obligation because the CIA required the defendants to provide an accurate account of any excess government property in their possession, and the Certificate of Compliance falsely stated the value of the property in their possession.

Continue reading "The Eleventh Circuit Court of Appeals Reverses Dismissal of Whistleblowers' Reverse False Claims Action" »

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 recently announced that LifeWatch Services Inc. has agreed to pay the United States $18.5 million to resolve allegations that the company submitted false claims to federal health care programs. The settlement resolves two qui tam whistleblower lawsuits filed under the False Claims Act. The two whistleblowers, Ryan Sims and Sara Collins, both of whom are former LifeWatch sales representatives, alleged that LifeWatch defrauded Medicare by submitting false diagnostic codes for payment and using illegal kickbacks. Sims filed suit in the Western District of Washington in December 2009, and Collins filed suit in the Southern District of Ohio in May 2011.

LifeWatch's fraud centered on the provision of ambulatory cardiac telemetry (ACT) services, which are a form of cardiac event monitoring that uses cell phone technology to record cardiac events in real time without patient intervention. Traditional event monitoring requires patients to press a button when they notice a cardiac event in order to record the cardiac rhythms. During the time period alleged in the two whistleblower lawsuits, Medicare reimbursed ACT services at $750 to $1,200 and traditional event monitoring services at about $250.

Both lawsuits allege a two part scheme to defraud. First, they allege that LifeWatch improperly billed Medicare for ACT services. Specifically, LifeWatch knew that ACT services were not eligible for Medicare reimbursement for patients who had experienced only mild or moderate palpitations, but nonetheless submitted false claims to Medicare for ACT series for such patients using a false diagnostic code to have the claims paid. Second, they allege that LifeWatch improperly induced Medicare claims for its monitoring services through illegal kickbacks by providing valuable services in the form of full-time employees to several hospitals and medical practices without charge.

In addition to the civil recovery, LifeWatch has entered into a comprehensive Corporate Integrity Agreement (CIA) with the Office of the Inspector General of the U.S. Department of Health and Human Services to ensure its continued compliance with federal health care program requirements. According to Daniel R. Levinson, Inspector General of the U.S. Department of Health and Human Services, "the chief executive officer at LifeWatch as well as other corporate executives will be required to personally certify compliance with our five-year CIA" which includes provisions to monitor LifeWatch's claim submission process, sales force activities and relationships with some types of business referrals." Levinson commented that "LifeWatch allegedly tried to boost profits at taxpayer expense, and, ultimately, paid $18.5 million back to the government."

For their efforts, the whistleblowers will share $3.4 million plus interest.

Continue reading "LifeWatch Agrees to Pay $18.5 Million to Settle Upcoding and Kickback Allegations" »

On March 2, 2012, the False Claims Act turns 149 years old. For the past 25 years, qui tam lawsuits brought by whistleblowers under the False Claims Act have been the single most effective tool for combating fraud against the government. The False Claims Act owes much of its success - over $30 billion recovered in judgments and settlements since 1986 - to the courage of whistleblowers who not only report fraud to the government, but also provide invaluable assistance in uncovering evidence and explaining highly complex schemes. This remains as true today as it was during post-Civil War reconstruction when the law was passed.

Recently, the Associated Press reported on the status of a new computer system that was launched last summer and is designed to stop Medicare Fraud. Congress expected the system to allow Medicare to stop losing an estimated $60 billion in fraud each year. But by Christmas, the new computer system had prevented just one suspicious payment, which saved taxpayers $7,591.

Medicare officials defended the results achieved by the computer system, stating that suspending payments is only one way of stopping fraud, and that the system has employed other methods as well, including referring cases to investigators and automatically denying suspect claims. According to Medicare, the computer system was designed to prevent Medicare from paying fraudulent claims and to avoid what is sometimes referred to as "pay and chase" - a system where Medicare pays all claims, however suspicious, and reviews its payments after the fact. According to Hank Walther, the former head of the Department of Justice's health care fraud division, "[t]he whole idea for creating this technology was they were going to be able to end pay-and-chase. . . . But we haven't yet seen evidence of its success."

Senator Tom Carper (D-Del), the chairman of a subcommittee that oversees federal financial management, is disappointed with the results of the computer system, which cost $77 million. Senator Carper has called on Medicare to "explain to us clearly that they are implementing the program, that their goals are well-established, reasonable, achievable, and they're making progress." "We're not sure that they've done those things," he added.

Medicare officials stated that screen technology is now being used to evaluate all Medicare inpatient, outpatient and medical-equipment claims before payment. But payment suspensions did not begin until December 2011 - six months after the system was launched.

The contract for the computer system was awarded to Northrup Grumman and a group of other companies, including IBM. Senator Tom Coburn (R-Okla) has questioned whether Northrup has the experience in financial services to lead the project. According to Senator Coburn, "we ought to be seeing savings of $5 billion a month," but "it will be two to three years before we get an effective predictive system."

Continue reading "Whistleblowers Remain Invaluable In The Fight Against Fraud" »

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" »

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.