Author Archives: Parker Eastin

Freedom Health Inc., a Tampa, Florida-based provider of managed care services, and its related corporate entities (collectively “Freedom Health”), agreed to pay $31,695,593 to resolve allegations that they violated the False Claims Act by engaging in illegal schemes to maximize their payment from the government in connection with their Medicare Advantage plans, the Justice Department recently announced. In addition, the former Chief Operating Officer (COO) of Freedom Health Siddhartha Pagidipati, has agreed to pay $750,000 to resolve his alleged role in one of these schemes.

“When entering into agreements with managed care providers, the government requests information from those providers to ensure that patients are afforded the appropriate level of care,” said Acting Assistant Attorney General Chad A. Readler of the Justice Department’s Civil Division. “Today’s result sends a clear message to the managed care industry that the United States will hold managed care plan providers responsible when they fail to provide truthful information.”

The government alleged that Freedom Health submitted or caused others to submit unsupported diagnosis codes to CMS, which resulted in inflated reimbursements from 2008 to 2013 in connection with two of their Medicare Advantage plans operating in Florida. It also alleged that Freedom Health made material misrepresentations to CMS regarding the scope and content of its network of providers (physicians, specialists and hospitals) in its application to CMS in 2008 to expand in 2009 into new counties in Florida and in other states. The government’s settlement with Mr. Pagidipati resolves his alleged role in this latter scheme.

“Medicare Advantage plans play an increasingly important role in our nation’s health care market,” said Acting U.S. Attorney Stephen Muldrow. “This settlement underscores our Office’s commitment to civil health care fraud enforcement.”

“Medicare Advantage insurers must play by the rules and provide Medicare with accurate information about their provider networks and their patients’ health,” said Chief Counsel to the Inspector General Gregory Demske of the Department of Health and Human Services Office of Inspector General (HHS-OIG). “OIG will investigate and hold managed care organizations accountable for fraud. Moving forward, the innovative CIA reduces the risks to patients and taxpayers by focusing on compliance issues unique to Medicare Advantage plans.”

The allegations resolved by these settlements were brought in a lawsuit under the qui tam, or whistleblower, provisions of the Federal False Claims Act and the Florida False Claims Act. These statutes permit private parties to sue on behalf of the government for false claims and to receive a share of any recovery. The whistleblower in this action is Darren D. Sewell, who was a former employee of Freedom Health. The whistleblower’s share in this case has not yet been determined.

The corporate entities related to Freedom and which were part of today’s settlements are: Optimum HealthCare Inc., America’s 1st Choice Holdings of Florida LLC, Liberty Acquisition Group LLC, Health Management Services of USA LLC, Global TPA LLC, America’s 1st Choice Holdings of North Carolina LLC, America’s 1st Choice Holdings of South Carolina LLC, America’s 1st Choice Insurance Company of North Carolina Inc. and America’s 1st Choice Health Plans Inc.

The settlements were the result of a coordinated effort by the Civil Division’s Commercial Litigation Branch, The U.S. Attorneys’ Office for the Middle District of Florida, HHS-OIG and the Florida Office of the Attorney General.

The claims resolved by the settlements are allegations only, and there has been no determination of liability. The case is captioned United States ex rel. Sewell v. Freedom Health, Inc., et al., Case No. 8:09-cv-1625 (M.D. Fla.).

For the second time in two weeks, the United States has filed a complaint against UnitedHealth Group Inc. (UHG) that alleges UHG knowingly obtained inflated risk adjustment payments based on untruthful and inaccurate information about the health status of beneficiaries enrolled in UHG’s Medicare Advantage Plans throughout the United States, the Justice Department announced yesterday.   This action follows the government’s filing of a complaint earlier this month in United States ex rel. Swoben v. Secure Horizons, a related action that also alleges that UHG submitted false claims for payment to the Medicare Program.

“The Department of Justice’s pursuit of this matter illustrates its firm commitment to ensure the integrity of the Medicare Program, including those parts of the program that rely on the services of Medicare Advantage Organizations,” said Acting Assistant Attorney General Chad A. Readler of the Justice Department’s Civil Division.

UHG is the nation’s largest Medicare Advantage Organization, with more than 50 Medicare Advantage and Drug Prescription plans providing healthcare services and prescription drug benefits to millions of Medicare beneficiaries throughout the United States. receives a monthly “risk adjustment” payment from Medicare for each enrolled beneficiary. The risk adjustment payments are based, in significant part, on the health status of the beneficiary, which are reflected by diagnosis that receives from treating physicians and subsequently submits to Medicare for each beneficiary.

The complaint filed today by the United States alleges that UHG knowingly disregarded information about beneficiaries’ medical conditions, which increased the risk adjustment payments UHG received from Medicare. In particular, the lawsuit contends that, for many years, UHG conducted a national Chart Review Program designed to identify additional diagnoses not reported by treating physicians that would increase UHG’s risk adjustment payments. However, UHG allegedly ignored information from these chart reviews showing that hundreds of thousands of diagnoses provided by treating physicians and submitted by it to Medicare were invalid and did not support the Medicare payments it had previously requested and obtained. By ignoring this information, UHG avoided repaying Medicare monies to which it was not entitled.

The complaint also alleges that UHG ignored information about invalid diagnoses from health care providers with financial incentives to furnish such diagnoses. These providers received payments from UHG tied to the amount of payments that UHG received from Medicare, and thus benefitted financially from any increase in Medicare payments resulting from the diagnoses they provided. UHG allegedly knew that its financial arrangements with these providers created a strong incentive for and increased the risk of these providers to report invalid diagnoses. UHG’s own reviews of these providers’ medical records confirmed that the providers were reporting invalid diagnoses. But upon obtaining such evidence, UHG knowingly avoided further efforts to identify invalid diagnoses from these providers and repay Medicare monies to which neither it nor these providers were entitled.

“To ensure that the program remains viable for all beneficiaries, the Justice Department remains tireless in its pursuit of Medicare fraud perpetrated by healthcare providers and insurers,” said Acting U.S. Attorney Sandra R. Brown for the Central District of California. “The primary goal of publicly funded healthcare programs like Medicare is to provide high-quality medical services to those in need – not to line the pockets of participants willing to abuse the system.”

“As the nation’s largest Medicare Advantage Organization, UHG received substantial overpayments based upon untruthful and inaccurate information about the health status of those enrolled in its plans,” said Acting U.S. Attorney James P. Kennedy Jr. for the Western District of New York. “Such fraudulent spending of taxpayer’s dollars will not be tolerated.”

“With approximately one third of Medicare beneficiaries enrolled in Medicare Advantage plans, careful investigation of charges is more important than ever,” said Special Agent in Charge Scott J. Lampert of the U.S. Department of Health and Human Services, Office of Inspector General (HHS-OIG). “People receiving health care through these programs and taxpayers deserve nothing less.”

The lawsuit was filed by Benjamin Poehling, the former finance director for the UHG group that managed UHG’s Medicare Advantage Plans. The lawsuit was filed under the qui tam provisions of the False Claims Act, which permit private parties to sue on behalf of the United States for false claims for government funds, and to receive a share of any recovery. The False Claims Act permits the government to intervene in such a lawsuit, as it has done, in part, in this case.

The government’s intervention in this matter illustrates the government’s emphasis on combating healthcare fraud. One of the most powerful tools in this effort is the False Claims Act. Tips and complaints from all sources about potential fraud, waste, abuse, and mismanagement, can be reported to the Department of Health and Human Services, at 800-HHS-TIPS (800-447-8477).

This matter was investigated by the Civil Division’s Commercial Litigation Branch, the U.S. Attorneys’ Offices for the Western District of New York and the Central District of California and HHS-OIG.

The claims asserted against UHG are allegations only, and there has been no determination of liability.

NEWARK, N.J. – The U.S. Attorney’s Office of the District of New Jersey, the U.S. Department of Justice and 28 states have reached an $8 million settlement with Omnicare Inc. resolving allegations arising from a whistle-blower suit filed under the False Claims Act.  The agreement was announced yesterday by Acting U.S. Attorney William E. Fitzpatrick.

The settlement follows an investigation by the U.S. Attorney’s Office of the District of New Jersey and the Commercial Litigation Branch of the Justice Department’s Civil Division. The United States alleged that Omnicare, in an effort to increase business efficiency and profit, designed and implemented an automated label verification system at certain locations that utilized a less specific drug code – known as “MEDID” – during its automated Stage II pharmacist verification process, instead of the more specific National Drug Code (NDC).

This system resulted in the submission by Omnicare of claims for generic drugs different from those actually dispensed to Medicare and Medicaid beneficiaries. It also resulted in the dispensing of drugs with patient-specific labels displaying the incorrect manufacturer or NDC.  The government alleged that the false manufacturer and NDC information on the labels, and within Omnicare’s electronic dispensing information, affected Omnicare’s ability to properly track and, if necessary, conduct patient-level recalls of such drugs.

“Ensuring accuracy in the dispensing of and billing for medication in the Medicare Part D and Medicaid Programs, especially to long-term care patients, is vital to public safety,” Acting U.S. Attorney Fitzpatrick said.

The relators, or whistler-blowers, in the underlying qui tam will receive more than $2 million as their statutory share of the recovery and to resolve their employment based claims in accordance with the False Claims Act. The civil lawsuit was filed in the District of New Jersey and is captioned U.S. et al. ex rel. Elizabeth Corsi and Christopher Ezzie v. Omnicare Inc.

Acting U.S. Attorney Fitzpatrick credited special agents of the FBI, under the direction of Special Agent in Charge Timothy Gallagher in Newark, and special agents from the Department of Health and Human Services, Office of Inspector General, under the direction of Special Agent in Charge Scott J. Lampert, for the investigation leading to the settlement.

The government is represented by the U.S. Attorney’s Office District of New Jersey, Deputy Chief, Civil Division, David Dauenheimer and Assistant U.S. Attorney Bernard Cooney of the Office’s Health Care and Government Fraud Unit, and the Department of Justice’s Civil Division, Senior Litigation Counsel Laurie A. Oberembt. The Office of Inspector General and the Office of the General Counsel for the Centers for Medicare and Medicaid Services of the Department of Health and Human Services also participated in the investigation and settlement.

The U.S. Attorney’s Office reorganized its health care practice in 2010 and created a stand-alone Health Care and Government Fraud Unit to handle both criminal and civil investigations and prosecutions of health care fraud offenses. Since that time, the office has recovered more than $1.33 billion in health care and government fraud settlements, judgments, fines, restitution and forfeiture under the False Claims Act, the Food, Drug and Cosmetic Act, and other statutes.

Counsel for relators: Charles C. Goetsch Esq., New Haven, Connecticut.
Counsel for defendant: Michael Martinez Esq., New York

Attorney General Eric T. Schneiderman recently announced that New York, along with 20 other states, has reached an agreement in principle to join the federal government in a settlement with CareCore National LLC (CareCore), now part of eviCore healthcare that was unsealed today. CareCore provides utilization management services including determinations of medical necessity to New York Medicaid Managed Care Organizations (MCOs).  The agreement settles allegations that CareCore instituted a scheme to auto-approve or “Process As Directed” (“PAD”) hundreds of radiology service requests on a daily basis, deeming those diagnostic services as reasonable and medically necessary, even though there had been no evaluation of those cases by the appropriate medical personnel. CareCore will pay the federal government $54 million, of which $18 million will go to the state Medicaid programs, to resolve allegations that CareCore’s fraudulent “PAD” program caused false claims to be submitted to government health care programs. Of the $18 million, New York’s Medicaid Program will recover over $7.6 million.

“Companies that overbill Medicaid are undermining efforts to help some of our neediest citizens. Since 2011, my office has secured over $1 billion in restitution for Medicaid, and we will continue to vigorously safeguard the integrity of this incredibly vital program,” said Attorney General Schneiderman.

Specifically, the agreement in principle resolves allegations that from January 1, 2005 through June 13, 2013, CareCore developed and implemented the “PAD” program through which CareCore improperly approved over 200,000 prior authorization requests which CareCore initially determined could not be approved based on the information provided.  The states’ settlement in principle mirrors the federal settlement agreement regarding CareCore’s conduct that is the subject of the settlement. The federal settlement agreement was filed in federal court and contained CareCore’s admissions and acceptance of responsibility for conduct including:

• Starting in at least 2007 through June 13, 2013, CareCore developed the “PAD” program, and thereafter the “PAD” Program consisted of its Clinical Reviewers improperly approving certain prior authorization requests awaiting physician review on the Medical Queue without having obtained any new objective medical information about the requests, and without a Medical Director having independently reviewed the prior authorization requests.
• From 2007 through June 13, 2013, these “padded”requests were then transmitted to CareCore’s client insurers, including MCOs, as preauthorized requests.
• From 2007 through June 13, 2013, when CareCore approved these padded requests, CareCore made a representation that it had appropriately reviewed the requests when it knew it had not. Thus, those padded requests incorporated CareCore’s false representation that it had approved a case after completing the required review process.

The settlement in principle resolves claims that CareCore auto-approved the requests in an effort to keep up with the volume of preauthorization requests for diagnostic radiology services and to avoid a contractual monetary penalty per case for untimely reviews.  The settlement in principle also resolves claims that this practice caused false or fraudulent claims to be submitted to and reimbursed by the State’s Medicaid program, including through its contracted MCOs, for diagnostic procedures that were not properly authorized as medically reasonable or necessary in a manner consistent with the policies and procedures set forth by New York’s Medicaid program and its contracted MCOs, using federal and state funds provided through Medicaid Managed Care.

The settlement in principle resolves allegations asserted in a qui tam action brought by a whistleblower in the United States District Court for the Southern District of New York. A multi-state team, which included New York’s Medicaid Fraud Control Unit, participated in the investigation and conducted the settlement negotiations with CareCore on behalf of the states. The team also included representatives of the Florida, Georgia and Ohio Medicaid Fraud Control Units. The states coordinated their investigation in conjunction with the U.S. Attorney’s Office for the Southern District of New York.

The Department of Justice announced yesterday that Braden Partners, L.P., doing business as Pacific Pulmonary Services, has agreed to pay $11.4 million to resolve allegations against it and its general partner, Teijin Pharma USA LLC, for violating the False Claims Act by submitting claims for reimbursement to Medicare and other federal healthcare programs for oxygen and related equipment supplied in violation of program rules, and for sleep therapy equipment supplied as part of a cross-referral kickback scheme with sleep clinics.

“This settlement demonstrates our continued pursuit of health care providers who take advantage of federal healthcare programs,” said Acting Assistant Attorney General Chad A. Readler of the Justice Department’s Civil Division. “We will investigate and take action against providers who cut corners and pay kickbacks.”

California-based Pacific Pulmonary Services furnishes stationary and portable oxygen tanks and related supplies, and sleep therapy equipment, such as Continuous Positive Airway Pressure, Bi-level Positive Airway Pressure masks and related supplies, to patients’ homes in California and other states. The government alleged that, beginning in about 2004, Pacific Pulmonary Services began submitting claims to the Medicare, TRICARE and Federal Employee Health Benefits programs for home oxygen and oxygen equipment without obtaining a physician authorization, as required by program rules.

Beginning in 2006, certain of the company’s patient care coordinators also allegedly agreed to make patient referrals to sleep testing clinics in exchange for those clinics’ agreement to refer patients to Pacific Pulmonary Services for sleep therapy equipment. The government alleged that this conduct violated the Anti-Kickback Act, which prohibits offering, paying, soliciting or receiving remuneration to induce referrals of items or services covered by Medicare, Medicaid and/or other federally funded programs.

“The U.S. Attorney’s Office is committed to taking all appropriate action against companies that disregard patients’ medical needs in pursuit of company profits,” said U.S. Attorney Brian J. Stretch for the Northern District of California. “Patients in federal health care programs expect and deserve medical care that is free from any undue influence and complies with the program safeguards that are in place to protect patients.”

“Home oxygen equipment and related supplies are some of the most fraudulently billed items of durable medical equipment,” said Special Agent in Charge Steven J. Ryan of the Office of Inspector General for the U.S. Department of Health and Human Services. “Medicare suppliers more concerned with profits than compliance will be met with investigation and enforcement.”

This settlement resolves allegations filed in a lawsuit by a former sales representative of Pacific Pulmonary Services, in federal court in San Francisco, California. The lawsuit was filed by Manuel Alcaine under the qui tam, or whistleblower, provisions of the False Claims Act, which permit private individuals to sue on behalf of the government for false claims and to share in any recovery. The Act also allows the government to intervene and take over the action, as it did in this case. Mr. Alcaine will receive $1.824 million of the recovered funds.

The settlement was the result of a coordinated effort by the U.S. Attorney’s Office of the Northern District of California, the Civil Division’s Commercial Litigation Branch, the U.S. Department of Health and Human Services Office of Inspector General, and the various other agencies that administer the federal health care plans at issue.

The case is captioned United States ex rel. Alcaine v. Braden Partners, L.P., dba Pacific Pulmonary Services, et al., Case No. 10-cv-4597 (N.D. Cal.). The claims resolved by the settlements are allegations only; there has been no determination of liability.

The owner of The Skin Cancer Medical Center in Encino has paid the United States nearly $2.7 million to resolve allegations that he submitted bills to Medicare for Mohs micrographic surgeries for skin cancers that were medically unnecessary.

Dr. Norman A. Brooks, M.D., a dermatologist and surgeon, paid the $2,681,400 settlement on April 10.

The settlement, which was finalized on March 31, resolved allegations in a lawsuit brought by a former employee of The Skin Cancer Medical Center. The settlement was announced today when prosecutors learned that United States District Judge Philip S. Gutierrez had unsealed and dismissed the complaint that was filed under the False Claims Act.

The lawsuit alleged that Brooks falsely diagnosed skin cancer in some of his patients so that he could perform, and bill for, Mohs surgeries.

Mohs surgery is a specialized surgical procedure for removing certain types of skin cancers in specific areas of the body, including the face. The surgery is performed in stages during which the surgeon removes a single layer of tissue which undergoes a microscopic evaluation. The surgeon performs additional stages, if necessary, until all of the cancer is removed.

Given the complexity and time required to perform the procedure, Mohs yields a higher Medicare reimbursement than other procedures used to remove skin lesions.

As part of the settlement, Brooks entered into a three-year Integrity Agreement with the U.S. Department of Health and Human Services, Office of Inspector General. Under the Integrity Agreement, Brooks will establish and maintain a compliance program that includes, among other things, mandated training for Brooks and his employees and review procedures for claims submitted to Medicare and Medicaid programs.

The settlement resolves allegations made in a lawsuit filed by former Brooks employee Janet Burke under the qui tam, or “whistleblower,” provisions of the False Claims Act, which permit private parties to sue on behalf of the government and receive a share of any recovery. For her role in the case, Ms. Burke will receive $482,652.

In settling the case, Brooks did not admit liability in the matter.

The matter was investigated by the United States Attorney’s Office and the U.S. Department of Health and Human Services, Office of Inspector General. The settlement was negotiated by Assistant United States Attorney Donald W. Yoo of the Civil Fraud Section.

The settlement resolved United States ex rel. Burke v. Norman A. Brooks, M.D., Inc. et al., CV14-6735.

U.S. Attorney John Parker of the Northern District of Texas announced Tuesday that International Tutoring Services, LLC, f/k/a International Tutoring Services, Inc., and d/b/a Hospice Plus; Goodwin Hospice, LLC; Phoenix Hospice, LP; Hospice Plus, L.P.; and Curo Health Services, LLC f/k/a Curo Health Services, Inc. have agreed to pay $12.21 million to resolve allegations that they violated the False Claims Act by paying kickbacks in exchange for patient referrals.  Curo Health Services is headquartered in Mooresville, North Carolina and operates eight hospice affiliates across 18 states. In September 2010, Curo Health Services purchased Hospice Plus, Goodwin Hospice, and Phoenix Hospice, and consolidated the hospice companies under the Hospice Plus brand, which operates primarily in and around Dallas, Texas.

The settlement resolves allegations brought by several whistleblowers that Hospice Plus, Phoenix Hospice, and Goodwin Hospice submitted claims to Medicare and Texas Medicaid that were rendered false as a result of the payment of kickbacks by the hospices, its owners and employees, and others. There were two alleged kickback schemes. First, from 2007 through 2012, kickbacks were allegedly paid to American Physician Housecalls, a physician housecall company, in exchange for patient referrals to these hospice companies. The alleged kickbacks took the form of sham loans, a free equity interest in another entity, stock dividends, and free rental space. Second, from 2007 through 2014, kickbacks were allegedly paid to medical providers, including doctors and nurses as well as hospitals and long-term care facilities, in exchange for patient referrals to these hospice companies. The alleged kickbacks took the form of cash, gift cards, and other valuable items.

“We will not tolerate the payment of illegal kickbacks, which unjustly drive up the cost of health care,” said U.S. Attorney Parker. “Any health care provider who seeks to profit illegally at the expense of federal beneficiaries and taxpayers will face consequences.”

The allegations resolved by this settlement were raised in two consolidated whistleblower lawsuits in Dallas, Texas. The lawsuits were filed under the qui tam provisions of the False Claims Act, which permit private individuals to sue on behalf of the government for false claims and to share in any recovery. In settling this matter, Curo Health Services did not admit any wrongdoing or liability.

In addition to reaching a settlement with these defendants, the United States also requested that the Court permit the United States to intervene in and prosecute the fraud claims against two former executives, Dr. Bryan White and Suresh Kumar. The case is captioned United States ex rel. Christopher Sean Capshaw, et al. v. Bryan K. White, et al.; Civil Action No. 3:12-cv-4457 (N.D. Tex.).

The Office of Inspector General of the U.S. Department of Health and Human Services and the FBI assisted in the investigation of this matter. The case is being handled by Assistant U.S. Attorneys Lindsey Beran and Kenneth Coffin.

CA Inc. (CA) has agreed to pay $45 million to resolve allegations under the False Claims Act that it made false statements and claims in the negotiation and administration of a General Services Administration (GSA) contract, the Department of Justice recently announced.  CA is an information technology management software and services company headquartered in New York, New York.

“Today’s settlement demonstrates our continuing vigilance to ensure that contractors deal forthrightly with federal agencies when seeking taxpayer funds,” said Acting Assistant Attorney General Chad A. Readler of the Justice Department’s Civil Division.  “We will take action against contractors who withhold information and cause the government to pay more than it should for commercially available items.”

The settlement resolves allegations related to a GSA contract awarded to CA for software licenses and maintenance services.  Under Multiple Award Schedule (MAS) contracts like this one, GSA pre-negotiates prices and contract terms for subsequent orders by federal agencies.  At the time of CA’s contract, contractors were required to fully and accurately disclose to GSA how they conducted business in the commercial marketplace so that GSA could use that information to negotiate a fair price for government agencies using the GSA contract to purchase CA products and services.  The contract also contained a price reduction clause that set forth when the contractor had to reduce the prices it charged to the government if its prices to commercial customers improved.

This settlement resolves allegations that CA did not fully and accurately disclose its discounting practices to GSA contracting officers.  Specifically, the agreement resolves claims that CA provided false information about the discounts it gave commercial customers for its software licenses and maintenance services at the time the contract was negotiated in 2002 and was extended in 2007 and 2009. Additionally, the settlement resolves claims that CA violated the price reduction clause in the contract by not providing government customers with additional discounts when commercial discounts improved.

“This case illustrates that we will vigorously pursue federal contractors who fail to negotiate and perform their obligations with transparency and fairness,” said U.S. Attorney Channing D. Phillips for the District of Columbia.  “Together with our federal partners, we will zealously press such claims in court to recover what is owed to the American taxpayer.”

“GSA contractors must be honest and forthcoming when doing business with the federal government,” said GSA Inspector General Carol Fortine Ochoa.  “American taxpayers deserve a fair deal.”

The allegations against CA were first made in a whistleblower lawsuit filed under the False Claims Act by Dani Shemesh, a former employee of CA Software Israel LTD.  Under the False Claims Act, private individuals can sue on behalf of the government and share in any recovery.  The False Claims Act also allows the government to intervene and take over the action, as it did, in part, in this case.  Shemesh’s share of the settlement is $10.195 million.

This case was handled by the Civil Division’s Commercial Litigation Branch, the U.S. Attorney’s Office for the District of Columbia, and the GSA Office of Inspector General.

The lawsuit is captioned United States ex rel. Shemesh v. CA, Inc., No. 09-1600 (D.D.C.) The claims resolved by the settlement are allegations only; there has been no determination of liability.

Sierra Nevada Corporation (SNC) has paid $14.9 million to resolve allegations that it violated the federal False Claims Act when it knowingly misclassified certain costs, resulting in inflated overhead rates paid to SNC pursuant to various government contracts, U.S. Attorney Phillip A. Talbert announced on Wednesday.

SNC is a Nevada corporation that provides services to agencies of the United States pursuant to various defense and space contracts. The improper charges resolved here resulted from SNC misclassifying certain direct contract costs and Manufacturing and Production Engineering costs as Independent Research and Development (IR&D) costs, and charging certain IR&D costs in the wrong cost accounting period. This improper characterization of costs artificially inflated General & Administrative overhead rates paid to SNC across its federal contracts and resulted in overcharging federal agencies. The government relies on contractors to accurately classify both the nature and timing of contract costs in order to properly calculate overhead rates and appropriately pay for work on government programs.

“This settlement illustrates our commitment to protect the integrity of federal procurement contracting,” said U.S. Attorney Phillip A. Talbert. “We will hold federal contractors to the highest standards of accuracy to ensure that federal agencies are not overcharged for products and services.”

“The integrity of our procurement systems is required by the American public, who demand that tax dollars are used responsibly,” said Chris Hendrickson, Special Agent in Charge, Defense Criminal Investigative Service (DCIS), Western Field Office. “DCIS and our law enforcement partners are committed to protecting precious resources needed to support our soldiers, sailors, airmen and Marines.”

This case was handled by Assistant U.S. Attorney Catherine J. Swann, with assistance from the Defense Contract Management Agency, the Defense Contract Audit Agency, the National Aeronautics and Space Administration, and DCIS. The claims settled by this agreement are allegations only, and there has been no determination of liability.

A major U.S. hospital service provider, TeamHealth Holdings, as successor in interest to IPC Healthcare Inc., f/k/a IPC The Hospitalists Inc. (IPC), has agreed to resolve allegations that IPC violated the False Claims Act by billing Medicare, Medicaid, the Defense Health Agency and the Federal Employees Health Benefits Program for higher and more expensive levels of medical service than were actually performed (a practice known as “up-coding”), the Department of Justice announced on Monday. Under the settlement agreement, TeamHealth has agreed to pay $60 million, plus interest.

“This settlement reflects our ongoing commitment to ensure that health care providers appropriately bill government programs vital to patient health care,” said Acting Assistant Attorney General Chad A. Readler of the Justice Department’s Civil Division.

The government contended that IPC knowingly and systematically encouraged false billings by its hospitalists, who are medical professionals whose primary focus is the medical care of hospitalized patients. Specifically, the government alleged that IPC encouraged its hospitalists to bill for a higher level of service than actually provided. IPC’s scheme to improperly maximize billings allegedly included corporate pressure on hospitalists with lower billing levels to “catch up” to their peers.

“Medical providers who fraudulently seek payments to which they are not entitled will be held accountable,” said U.S. Attorney Zachary T. Fardon for the Northern District of Illinois. “False documentation of treatment is not just flawed patient care; it is illegal.”

As part of the settlement, TeamHealth entered into a five-year Corporate Integrity Agreement (CIA) with the U.S. Department of Health and Human Services Office of Inspector General (HHS-OIG) covering the company’s hospital medicine division. This CIA is designed to increase TeamHealth’s accountability and transparency so that the company will avoid or promptly detect future fraud and abuse.

“When health care companies boost their profits by misrepresenting the services they bill to taxpayer-funded health care programs, our office will make sure they are held accountable for their deceptive schemes and that they make changes to bill these programs appropriately,” said Special Agent in Charge Lamont Pugh of HHS-OIG.

The settlement resolves allegations filed in a lawsuit by Dr. Bijan Oughatiyan, a physician formerly employed by IPC as a hospitalist. The lawsuit was filed in a federal court in Chicago, Illinois, under the qui tam, or whistleblower, provisions of the False Claims Act, which permit private individuals to sue on behalf of the government for false claims and to share in any recovery. The Act also allows the government to intervene and take over the action, as it did in this case. Mr. Oughatiyan will receive approximately $11.4 million.

The government’s intervention in this matter illustrates the government’s emphasis on combating health care fraud. One of the most powerful tools in this effort is the False Claims Act. Tips and complaints from all sources about potential fraud, waste, abuse, and mismanagement, can be reported to the Department of Health and Human Services, at 800-HHS-TIPS (800-447-8477).

The settlement was the result of a coordinated effort by the Civil Division’s Commercial Litigation Branch, the U.S. Attorney’s Office for the Northern District of Illinois, and HHS-OIG.

The case is captioned United States ex rel. Oughatiyan v. IPC The Hospitalist, Inc., et al., Case No. 09-C-5418 (N.D. Ill.). The claims resolved by the settlements are allegations only and there has been no determination of liability.