Author Archives: Parker Eastin

The Department of Justice announced on Friday that Tri-City Medical Center, a hospital located in Oceanside, California, has agreed to pay $3,278,464 to resolve allegations that it violated the Stark Law and the False Claims Act by maintaining financial arrangements with community-based physicians and physician groups that violated the Medicare program’s prohibition on financial relationships between hospitals and referring physicians.

The Stark Law generally forbids a hospital from billing Medicare for certain services referred by physicians who have a financial relationship with the hospital unless that relationship falls within an enumerated exception.  The exceptions generally require, among other things, that the financial arrangements do not exceed fair market value, do not take into account the volume or value of any referrals and are commercially reasonable.  In addition, arrangements with physicians who are not hospital employees must be set out in writing and satisfy a number of other requirements.

“The settlement of this matter reflects not only our commitment to protect the integrity of the healthcare system through enforcement of the Stark Law, but also our willingness to work with providers who disclose their own misconduct,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division.

The settlement announced today resolves allegations that Tri-City Medical Center maintained 97 financial arrangements with physicians and physician groups that did not comply with the Stark Law.  The hospital identified five arrangements with its former chief of staff from 2008 until 2011 that, in the aggregate, appeared not to be commercially reasonable or for fair market value.  The hospital also identified 92 financial arrangements with community-based physicians and practice groups that did not satisfy an exception to the Stark Law from 2009 until 2010 because, among other things, the written agreements were expired, missing signatures or could not be located.

“Patient referrals should be based on a physician’s medical judgment and a patient’s medical needs, not on a physician’s financial interests or a hospital’s business goals,” said U. S. Attorney Laura E. Duffy of the Southern District of California.  “This settlement reinforces that hospitals will face consequences when they enter into financial arrangements with physicians that do not comply with the law. We will continue to hold health care providers accountable when they shirk their legal responsibilities to the detriment of tax payer-funded health care programs.”

“Together with our law enforcement partners, our agency’s investigators and attorneys will continue to work with health care providers who use the self-disclosure protocol to resolve their billing misconduct,” said Special Agent in Charge Chris Schrank of the U.S. Department of Health and Human Services Office of Inspector General (HHS-OIG), Los Angeles region.”

This settlement illustrates the government’s emphasis on combating health care fraud and marks another achievement for the Health Care Fraud Prevention and Enforcement Action Team (HEAT) initiative, which was announced in May 2009 by the Attorney General and the Secretary of Health and Human Services.  The partnership between the two departments has focused efforts to reduce and prevent Medicare and Medicaid financial fraud through enhanced cooperation.  One of the most powerful tools in this effort is the False Claims Act.  Since January 2009, the Justice Department has recovered a total of more than $27.1 billion through False Claims Act cases, with more than $17.1 billion of that amount recovered in cases involving fraud against federal health care programs.

This matter was handled by the U.S. Attorney’s Office of the Southern District of California, the Civil Division’s Commercial Litigation Branch and HHS-OIG.  The claims settled by this agreement are allegations only, and there has been no determination of liability.

If you know of or suspect Stark law violations, contact us now.

The Department of Justice announced yesterday that contract therapy providers RehabCare Group Inc., RehabCare Group East Inc. and their parent, Kindred Healthcare Inc., have agreed to pay $125 million to resolve a government lawsuit alleging that they violated the False Claims Act by knowingly causing skilled nursing facilities (SNFs) to submit false claims to Medicare for rehabilitation therapy services that were not reasonable, necessary and skilled, or that never occurred, the Department of Justice announced today.

RehabCare Group Inc. and RehabCare Group East Inc. were purchased by the Louisville, Kentucky-based Kindred Healthcare Inc. in 2011 and they now operate under the name RehabCare as a division of Kindred.  RehabCare is the largest provider of therapy in the nation, contracting with more than 1,000 SNFs in 44 states to provide rehabilitation therapy to their patients.

“Medicare beneficiaries are entitled to receive care that is dictated by their clinical needs rather than the fiscal interests of healthcare providers,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division.  “All providers, whether contractors or direct billers of taxpayer-funded federal healthcare programs, will be held accountable when their actions cause false claims for unnecessary services.”

The government’s complaint alleged that RehabCare’s policies and practices, including setting unrealistic financial goals and scheduling therapy to achieve the highest reimbursement level regardless of the clinical needs of its patients, resulted in Rehabcare providing unreasonable and unnecessary services to Medicare patients and led its SNF customers to submit artificially and improperly inflated bills to Medicare that included those services.  Specifically, the government’s complaint alleged that RehabCare’s schemes included the following:

• Presumptively placing patients in the highest therapy reimbursement level, rather than relying on individualized evaluations to determine the level of care most suitable for each patient’s clinical needs;
• During the period prior to Oct. 1, 2011, boosting the amount of reported therapy during “assessment reference periods,” thereby causing and enabling SNFs to bill for the care of their Medicare patients at the highest therapy reimbursement level, while providing materially less therapy to those same patients outside the assessment reference periods, when the SNFs were not required to report to Medicare the amount of therapy RehabCare was providing to their patients (a practice known as “ramping”);
• Scheduling and reporting the provision of therapy to patients even after the patients’ treating therapists had recommended that they be discharged from therapy;
• Arbitrarily shifting the number of minutes of planned therapy among different therapy disciplines (i.e., physical, occupational and speech therapy) to ensure targeted therapy reimbursement levels were achieved, regardless of the clinical need for the therapy;
• Especially after Oct. 1, 2011 and continuing through Sept. 30, 2013, providing significantly higher amounts of therapy at the very end of a therapy measurement period not due to medical necessity but rather to reach the minimum time threshold for the highest therapy reimbursement level, to enable SNFs to bill for the care of their Medicare patients accordingly, even though the patients were receiving materially less therapy on preceding days;
• Inflating initial reimbursement levels by reporting time spent on initial evaluations as therapy time rather than evaluation time;
• Reporting that skilled therapy had been provided to patients when in fact the patients were asleep or otherwise unable to undergo or benefit from skilled therapy (e.g., when a patient had been transitioned to palliative end-of-life care); and
• Reporting estimated or rounded minutes instead of reporting the actual minutes of therapy provided.

“This False Claim Act settlement addresses allegations that RehabCare and its nursing facility customers engaged in a systematic and broad-ranging scheme to increase profits by delivering, or purporting to deliver, therapy in a manner that was focused on increasing Medicare reimbursement rather than on the clinical needs of patients,” said U.S. Attorney Carmen M. Ortiz for the District of Massachusetts.  “The complaint outlines the extent and sophistication of this fraud, and the government’s continuing work to ensure that the provision of care in skilled nursing facilities is based on patients’ clinical needs.”

“Health providers seeking to increase Medicare profits, rather than providing suitable, high-quality care, will be investigated and prosecuted,” said Inspector General Daniel R. Levinson for the U.S. Department of Health and Human Services (HHS).  “Under our robust compliance agreement, an outside review organization will scrutinize a random sample of medical records annually to assess the medical necessity and reasonableness of therapy services provided by RehabCare.”

In addition to RehabCare, the Department of Justice also announced settlements today with four SNFs for their role in submitting claims to Medicare that were false because they were based in part on therapy provided by RehabCare that was not reasonable, necessary and skilled, or that did not occur.  These settlements include:  A $3.9 million settlement with Wingate Healthcare Inc. and 16 of its facilities in Massachusetts and New York; A $2.2 million settlement with THI of Pennsylvania at Broomall LLC and THI of Texas at Fort Worth LLC; A $1.375 million settlement with Essex Group Management and two of its Massachusetts facilities, Brandon Woods of Dartmouth and Blaire House of Milford and a $750,000 settlement with Frederick County, Maryland, which formerly operated the Citizens Care skilled nursing facility.  The department had previously reached settlements with a number of other SNFs for similar conduct.  Seehttp://www.justice.gov/opa/pr/two-companies-pay-375-million-allegedly-causing-submission-claims-unreasonable-or-unnecessary; http://www.justice.gov/opa/pr/episcopal-ministries-aging-inc-pay-13-million-allegedly-causing-submission-claims; http://www.justice.gov/usao-ma/pr/new-york-catholic-nursing-chain-pay-35-million-resolve-allegations-concerning-claims; http://www.justice.gov/usao-ma/pr/maine-nursing-home-pay-12-million-resolve-allegations-concerning-rehabilitation-therapy.

The settlement with RehabCare resolves allegations originally brought in a lawsuit filed under the qui tam, or whistleblower,provisions of the False Claims Act by Janet Halpin, a physical therapist and former rehabilitation manager for RehabCare and Shawn Fahey, an occupational therapist who worked for RehabCare.  The act permits private parties to sue on behalf of the government for false claims for government funds and to receive a share of any recovery.  The government may intervene and file its own complaint in such a lawsuit, as it has done in this case.  The whistleblowers will receive nearly $24 million as their share of the recovery from RehabCare.

The settlements announced today illustrate the government’s emphasis on combating health care fraud and marks another achievement for the Health Care Fraud Prevention and Enforcement Action Team (HEAT) initiative, which was announced in May 2009 by the Attorney General and the Secretary of Health and Human Services.  The partnership between the two departments has focused efforts to reduce and prevent Medicare and Medicaid financial fraud through enhanced cooperation.  One of the most powerful tools in this effort is the False Claims Act.  Since January 2009, the Justice Department has recovered a total of more than $27.1 billion through False Claims Act cases, with more than $17.1 billion of that amount recovered in cases involving fraud against federal health care programs.  Tips and complaints from all sources about potential fraud, waste, abuse, and mismanagement, including the conduct described in the United States’ complaint, can be reported to the Department of Health and Human Services, at 800-HHS-TIPS (800-447-8477).

This matter was handled by the Civil Division’s Commercial Litigation Branch; the U.S. Attorney’s Office for the District of Massachusetts; HHS Office of Inspector General and the FBI.

The case is captioned United States ex rel. Halpin and Fahey v. Kindred Healthcare, Inc., et al., Case No. 1:11cv12139-RGS (D. Mass.).

The claims settled are allegations only, and there has been no determination of liability.

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

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.

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.

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 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.

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.

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.

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.

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.