Author Archives: Parker Eastin

Nashville Pharmacy Services Settles False Claims Act Lawsuit

Yesterday the Department of Justice announced that Nashville Pharmacy Services, LLC, and its majority owner, Kevin Hartman, have agreed to pay up to $7.8 million to settle allegations that they overbilled Medicare and TennCare for pharmacy services, announced David Rivera, U.S. Attorney for the Middle District of Tennessee.  Nashville Pharmacy Services’ primary location is at 100 Oaks in Nashville, Tenn. and it specializes in dispensing HIV and AIDS-related medications.

“Pursuing individuals and corporations who engage in healthcare fraud remains a top priority of the U.S. Attorney’s Office,” said U.S. Attorney David Rivera.  “We remain committed to working with our state and federal partners to hold those accountable who attempt to profit at the expense of taxpayers and compromise the integrity of our healthcare programs.”

The settlement resolves the government’s allegations that Nashville Pharmacy Services submitted false claims to TennCare and Medicare primarily during the period from February 2011 through May 2012.  The government’s lawsuit alleged that Nashville Pharmacy Services engaged in the following conduct:

  • automatically refilled medications without a request from the beneficiary, their physician, or a person acting as the beneficiary’s agent, in violation of TennCare’s contractual requirements;
  • routinely and improperly waived TennCare and Medicare co-payments without an individualized assessment of those beneficiaries’ inability to pay;
  • improperly used pharmaceutical manufacturers’ co-payment cards to pay the co-payments of certain Medicare recipients for thirteen Medicare beneficiaries;
  • billed Medicare and TennCare for certain medications that were dispensed after the dates of death of 15 beneficiaries with either Medicare or TennCare coverage; and
  • billed Medicare or TennCare for medications that lacked a valid prescription from a licensed provider for 22 beneficiaries with either Medicare or TennCare coverage.

“This is a great example of the U.S. Attorney’s Office and our office working together to address fraud in our government healthcare programs,” said Tennessee Attorney General Herbert H. Slatery III.  “Pursuing those who knowingly take advantage of the system serves as a deterrent and helps protect funding for our most vulnerable citizens.”

Under the settlement agreement, Nashville Pharmacy Services has already paid $500,000 to the government and will make additional contingency payments to the government for the next five years.  The total payments will depend on Nashville Pharmacy Services’ revenue for each year during that period and could ultimately amount to $7.8 million.  Of that amount, the United States will receive roughly 49 percent of the recovery, and the State of Tennessee will receive roughly 33 percent of the recovery.

The allegations resolved by today’s settlement were originally raised in a lawsuit filed against Nashville Pharmacy Services by Marsha McCullough, a former order entry technician who worked for Nashville Pharmacy Services from May 2011 through July 2012.  She brought her claims under the qui tam, or whistleblower, provisions of the False Claims Act, which allow private citizens with knowledge of false claims to bring civil suits on behalf of the government and to share in any recovery.  McCullough could receive up to $1.4 million as her share of the settlement.

The case was handled by the United States’ Attorney’s Office for the Middle District of Tennessee and the Tennessee Attorney General’s Office and investigated by U.S. Department of Health & Human Services Office of Inspector General and the Tennessee Bureau of Investigation Medicaid Fraud Control Unit.  Assistant U.S. Attorney Ellen Bowden McIntyre represented the United States.  Assistant Attorney General Mary McCullohs represented Tennessee.

The case is docketed as United States ex rel. McCullough v. Nashville Pharmacy Services, LLC, No. 3:12-cv-0823 (M.D. Tenn.).  The claims settled by this agreement are allegations only, and there has been no determination of liability.

Government Settles FCA Case Based on Stark Violations

The Department of Justice announced today that Memorial Health, Inc., Memorial Health University Medical Center, Inc., Provident Health Services, Inc., and MPPG, Inc. d/b/a Memorial Health University Physicians have agreed to pay $9,895,043.04 to resolve allegations that they violated the False Claims Act by submitting claims to the Government in violation of the Stark Law.  The settlement is the largest civil health care fraud recovery in the history of the United States Attorney’s Office for the Southern District of Georgia.

United States Attorney Edward J. Tarver said, “This settlement demonstrates the U.S. Attorney’s Office’s continued commitment to ensure that health care providers do not violate the Stark Law and all medical decisions are based strictly on the best interests of patients, not the financial interests of providers.”

“Let this settlement act as a reminder to health care providers, large and small, that the Office of Inspector General is committed to pursuing allegations of Stark Law violations,” said Derrick L. Jackson, Special Agent in Charge of the U.S. Department of Health and Human Services, Office of Inspector General in Atlanta. “Financial incentives for referrals should never come into play for health care providers when they are determining the best course of care for our nation’s citizens.”

The settlement resolves allegations that were originally part of a federal lawsuit filed under the whistleblower provisions of the False Claims Act, which allow private citizens with knowledge of false claims to file suit on behalf of the Government and to share in the recovery. As part of this settlement, Memorial entered into a five-year corporate integrity agreement with the Office of Inspector General, Department of Health and Human Services.

If you are aware of or suspect Stark law violations or health care fraud, contact us now.

Manhattan U.S. Attorney Announces $39 Million Civil Fraud Settlement Against Qualitest Pharmaceuticals for Selling Half-Strength Fluoride Supplements

Yesterday, Preet Bharara, the United States Attorney for the Southern District of New York, Scott J. Lampert, Special Agent in Charge of the New York Regional Office for the Office of Inspector General for the Department of Health and Human Services (“HHS-OIG”), and Diego Rodriguez, the Assistant Director-in-Charge of the New York Office of the Federal Bureau of Investigation (“FBI”), and Patrick E. McFarland, the Inspector General for the U.S. Office of Personnel Management (“OPM”) announced a $39 million settlement against Vintage Pharmaceuticals, LLC, d/b/a  QUALITEST PHARMACEUTICALS; Vintage’S corporate parent Endo Pharmaceuticals, Inc.; and seven of their corporate subsidiaries or affiliates (collectively, “QUALITEST”) in a civil fraud lawsuit.  This global settlement resolves federal claims under the False Claims Act, 31 U.S.C. § 3729 et seq., that allege QUALITEST sold chewable fluoride tablets that contained less than half the amount of fluoride ion indicated on the drug label and caused federal healthcare programs to be fraudulently billed for these tablets, and also will resolve numerous state law civil fraud claims.

The Government simultaneously intervened in and settled this lawsuit, which was initially filed by a whistleblower.  As alleged in the Government’s intervention papers, QUALITEST violated the False Claims Act by knowingly manufacturing and selling understrength chewable fluoride tablets that were prescribed to children living in communities without fluoridated water supply to prevent tooth decay, and causing Medicaid and the Federal Employees Health Benefits Program to pay millions of dollars for these understrength tablets.  Today, U.S. District Judge Denise Cote approved a settlement stipulation to resolve the Government’s claims against QUALITEST.  Under that settlement, QUALITEST agrees to pay $22.44 million to the Government to resolve the federal civil fraud claims and make extensive admissions.  Further, as part of the global settlement, QUALITEST will pay approximately $16.56 million to the settling states to resolve state law civil fraud claims.

As part of the settlement, QUALITEST admitted that they manufactured and sold chewable fluoride tablets from 2007 to July 2013 and that they knew federal healthcare programs, including Medicaid, were a significant source of coverage of QUALITEST’s fluoride tablets.  QUALITEST also admitted that, since at least 1994, guidelines issued by the American Dental Association and the American Academy of Pediatrics recommended that, to prevent tooth decay, fluoride supplements be prescribed to children living in communities without fluoridated water supply in doses of 1.0 mg, 0.5 mg, or 0.25 mg of fluoride ion per day, depending on a child’s age and the local water fluoridation level.  Further, QUALITEST admitted that the drug labeling for their chewable fluoride tablets stated that those tablets contained 1.0 mg, 0.5 mg, and 0.25 mg of fluoride and the drug labeling specifically referenced the guidelines from the American Dental Association and the American Academy of Pediatrics.

The allegations of fraud stated in the Complaint were first brought to the attention of the Government by Dr. Stephan Porter, who filed a lawsuit in early 2013 under the qui tam provisions of the False Claims Act.  In August 2013, and after the Government began its investigation into the whistleblower’s allegations, QUALITEST stopped making and selling their chewable fluoride tablets.  Under the settlement approved earlier today, the Government agreed to pay Dr. Porter approximately $4.71 million pursuant to the False Claims Act’s qui tam provisions.

If you know of or suspect health care fraud, contact us now.

DOJ Announces Over $3.5 Billion in Fraud Recoveries in 2015

DOJ recently announced that it recovered over $3.5 billion in settlements and judgments from civil fraud cases in the fiscal year ending September 30, 2015.  That recovery falls short of the $5.69 billion that DOJ recovered in FY 2014.

The majority of the total came from the health care industry, which accounted for $1.9 billion of the settlements and judgments;  the next most significant sectors were government contracting and federal procurement at $1.1 billion and housing and mortgage fraud at $365 million.  The health care total, which only includes federal losses, included $330 million from cases involving hospitals and $96 million from the pharmaceutical industry. FY 2015 ended a five-year streak in which the government had recovered at least $2 billion from the health care industry annually, though this is likely an anomaly and should not suggest that enforcement in the healthcare sector is waning.

Over two-thirds of the year’s recovery – $2.8 billion – came from whistleblower qui tam suits, including from some of the 638 such suits filed in FY 2015.  Relator awards in that period totaled $598 million, the highest ever.  Further, over $300 million of that total relator award derived from suits in which DOJ did not intervene; the previous record for highest annual total relator award when DOJ declined to intervene was $49 million in FY 2011.

If you have a potential whistleblower matter and would like to speak to an attorney, contact us now.

Pharmasan Labs and NeuroScience, Inc., Settle False Claims Act Allegations

Yesterday, John W. Vaudreuil, United States Attorney for the Western District of Wisconsin, announced that Pharmasan Labs, Inc. and NeuroScience, Inc., and Gottfried Kellermann, 74, and Mieke Kellermann, 68, both of Osceola, Wis., have agreed to pay $8.5 million to the United States to resolve False Claims Act allegations.

The settlement resolves allegations that Pharmasan submitted false information for laboratory services billed to Medicare, and allegations that it violated Medicare rules pertaining to services referred by non-physician practitioners. Pharmasan is a laboratory located in Osceola, and NeuroScience is a related corporation that bills Medicare for Pharmasan’s services. The Kellermanns founded both corporations.

As part of the agreement, Pharmasan agreed that the United States could prove that: Pharmasan falsely billed Medicare for ineligible food sensitivity testing for nearly five years; Pharmasan employees knew that Medicare prohibited payment for food sensitivity testing; and Pharmasan employees submitted false information to Medicare disguising the type of test that Pharmasan was performing so that Medicare would pay for the services.

Pharmasan also agreed that the United States could prove that it knowingly submitted claims for laboratory services that violated Medicare billing rules. Pharmasan knew that Medicare billing rules prohibit payment for laboratory services referred to a laboratory by non-physician practitioners, with few exceptions for mid-level practitioners. A large portion of Pharmasan’s referrals for laboratory services came from non-physician practitioners that were not eligible to refer Medicare paid services. Pharmasan employees nevertheless billed Medicare for these services for nearly five years.

Under the terms of the agreement, Pharmasan, NeuroScience, and the Kellermanns agreed to the forfeiture of $2,852,015.81 seized by federal agents on March 12, 2014. They also agreed to pay an additional $5,669,837.58 to the United States.

You can read the FBI’s entire press release here.

If you are aware of or suspect Medicare billing fraud, contact us now.

University of Florida Agrees to Pay $19.875 Million to Settle False Claims Act Allegations

According to a DOJ press release, the University of Florida (UF) has agreed to pay the United States $19.875 million to settle allegations that the university improperly charged the U.S. Department of Health and Human Services (HHS) for salary and administrative costs on hundreds of federal grants, the Department of Justice announced today.  The grants in question were administered from the UF campuses in Gainesville and Jacksonville, Florida.

“The monies utilized by HHS to fund important medical research and clinical programs across the nation are both precious and limited,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division.  “Today’s settlement demonstrates that the Department of Justice will pursue grantees that knowingly divert those funds from the projects for which they were provided.”

“As the U.S. Department of Health and Human Services (HHS) awards more grant dollars than any other government agency, prudent oversight of those funds is absolutely essential,” said HHS Regional Inspector General for Audit Lori S. Pilcher.  “Grantees must have internal controls promoting accountability and transparency,” she said.  “Taxpayers should expect nothing less.”

The University of Florida receives millions of dollars in grant funding from HHS on hundreds of grants each year.  The settlement announced today resolves the alleged misuse of grant funds awarded by HHS to UF between 2005 and December 2010.  The United States contended that the university overcharged hundreds of grants for the salary costs of its employees, where it did not have documentation to support the level of effort claimed on the grants for those employees.  The government also contended that UF charged some of these grants for administrative costs for equipment and supplies when those items should not have been directly charged to the grants under federal regulations.  Lastly, UF allegedly inflated costs charged to HHS grants awarded at its Jacksonville campus for services performed by an affiliated entity, Jacksonville Healthcare Inc.

The full press release is available here.

If you are aware of or suspect grant fraud, contact us now.

California Federal Judge Tosses Claims Predicated On Star Ratings But Allows Kickback Claims To Proceed

In U.S. ex rel. Orten v. North Amer. Health Care, Inc., No. 14-cv-02401 (N.D. Cal. Nov. 9, 2015), a California district court recently denied a relator’s efforts to predicate the alleged manipulation of skilled nursing facility (“SNF”) CMS Star Ratings into a cognizable claim under the FCA, but allowed the relator to proceed with allegations that the CEO of the company directed a kickback scheme designed to create business.   The case reinforces established precedent that FCA suits cannot be based on regulatory violations that are not also conditions of payment.

More specifically, the Orten court concluded that the regulations governing star ratings do not require compliance as a condition for payment.  Instead, they are merely a system for state agencies “to determine whether [SNFs] are compliant or non-compliant with Medicare and Medicaid requirements.”  Important to the court’s ruling was that non-compliance with these regulations could lead to a variety of alternative remedies in place of a discretionary denial of payment.  Therefore, the court found, the relator had “at most” alleged fraud connected to participation in the FHCPs, “depending on the remedy the government decides on to address instances of non-compliance.”

A copy of the court’s opinion can be found here and a copy of the government’s statement of interest can be found here.

Department of Justice Follows Through on Threat of Individual Prosecution

Only weeks after Deputy Attorney General Sally Yates announced that the government was going to take a harder line against individuals in corporate fraud cases, the government has charged the former CEO of Warner Chilcott.

Carl Reichel was arrested in connection with a health care fraud, false claims and kickback investigation that has also lead to criminal and civil charges against the company. Mr. Reichel has been charged with conspiracy to pay kickbacks to physicians in connection with the promotion of Warner Chilcott drugs. The company has agreed to plead guilty to similar charges, as well as settle a related civil False Claims Act case, paying a total of $125 million in fines and penalties.

In a related action, the government obtained an indictment against a Massachusetts doctor for accepting kickbacks from Warner Chilcott in the form of speaker fees and free meals. The physician was also charged with allowing drug reps to view HIPAA protected patient information in connection with the marketing efforts, as well as lying to investigators.

Budget Bill “Catch-Up” Provision To Increase FCA Fraud Penalties

Historically, in 1986, the False Claims Act (“FCA”) was amended so that the penalties increased from $2,000 to between $5,000 and $10,000 per false claim. In 1999, the penalties were elevated to their present level of between $5,500 and $11,000 per false claims.  Now they are slated to become even higher.

More specifically, Congress recently passed the “Bipartisan Budget Act of 2015,” which will require federal agencies to impose significant increases in civil monetary penalties, including the statutory penalties mandated by the FCA, the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (“FIRREA”), and the Program Fraud Civil Remedies Act (“PFCRA”).  Tied to adjustments to the Consumer Price Index (“CPI”) (i.e., inflation), the amendment’s potential impact on FCA defendants is considerable.  See H.R. 1314, 114th Cong. § 701 (amending the Federal Civil Penalties Inflation Adjustment Act of 1990).  The “catch up adjustment” – which applies a cost-of-living adjustment percentage derived from the amount by which the CPI in October 2015 exceeds the CPI in October of the year in which the penalty amount was established or adjusted – would be implemented through “interim final rulemaking” that must take effect no later than August 1, 2016.  After that, it appears the penalties will be automatically adjusted on an annual basis.

Given that False Claims Act penalties are assessed on a per claim basis, and given that this aspect of False Claims Act liability can be astronomical in cases involving the submissions of large numbers of false claims, this is a significant development in False Claims Act jurisprudence.   In fact, it is likely that FCA defendants will redouble their efforts to declare the penalties as excessive and unconstitutional in violation of the Eighth Amendment, which they have to date occasionally argued with limited success.

Nearly 500 Hospitals Pay United States More Than $250 Million To Resolve False Claims Act Allegations Related To Implantation Of Cardiac Devices

The Department of Justice announced today that it has reached 70 settlements involving 457 hospitals in 43 states for more than $250 million related to cardiac devices that were implanted in Medicare patients in violation of Medicare coverage requirements.

“The settlements announced today demonstrate the Department of Justice’s commitment to protect Medicare dollars and federal health benefits,” said U.S. Attorney Wifredo A. Ferrer of the Southern District of Florida.  “Guided by a panel of leading cardiologists and the review of thousands of patients’ charts, the extensive investigation behind the settlements was heavily influenced by evidence-based medicine.  In terms of the number of defendants, this is one of the largest whistleblower lawsuits in the United States and represents one of this office’s most significant recoveries to date.  Our office will continue to vigilantly protect the Medicare program from potential false billing claims.”

“While recognizing and respecting physician judgment, the department will hold accountable hospitals and health systems for procedures performed by physicians at their facilities that fail to comply with Medicare billing rules,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division.  “We are confident that the settlements announced today will lead to increased compliance and result in significant savings to the Medicare program while protecting patient health.”

An implantable cardioverter defibrillator, or ICD, is an electronic device that is implanted near and connected to the heart.  It detects and treats chaotic, extremely fast, life-threatening heart rhythms, called fibrillations, by delivering a shock to the heart, restoring the heart’s normal rhythm.  It is similar in function to an external defibrillator (often found in offices and other buildings) except that it is small enough to be implanted in a patient’s chest.  Only patients with certain clinical characteristics and risk factors qualify for an ICD covered by Medicare.

The DOJ press release is available at

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