Reno Geothermal Power Plant Operator Enters Into $5.5 Million Settlement With DOJ Over Grant Fraud Allegations

Several Reno companies that operate geothermal power plants in Nevada, California, Hawaii and elsewhere, have agreed to pay the United States $5.5 million to resolve civil fraud allegations that they unlawfully applied for and received millions in federal clean energy grants, announced U.S. Attorney Daniel G. Bogden for the District of Nevada.

Ormat Technologies, Inc., Ormat Nevada, Inc., Puna Geothermal Venture II, L.P., ORNI 18, LLC, and Puna Geothermal Venture, G.P. (hereinafter referred to as Ormat), and the United States entered into the agreement to avoid the delay and uncertainty and expense of protracted litigation.  The agreement states that it is neither an admission of liability by the defendants nor a concession by the United States that its claims are not well founded.

“The False Claims Act is an effective civil tool to ferret out fraud in federal taxpayer-funded programs,” said U.S. Attorney Bogden.  “The settlement monies announced today will be deposited into a federal fund used to help crime victims and for a variety of other law enforcement purposes.”

The settlement agreement, effective this week, arises out of a civil lawsuit filed on Feb. 4, 2013 by Tina Calilung and Jamie Kell against Ormat alleging that they violated the civil False Claims Act by submitting false applications for federal clean energy grants to which they were not entitled. The defendant companies are based in Reno, Nev. Calilung and Kell are former employees of Ormat Technologies.

The lawsuit alleged that the federal government had claims against the defendant arising from the submission of applications for and receipt of grants under the American Recovery and Reinvestment Tax Act of 2009, related to the 8MW Puna Geothermal Power Plant and Puna KS-14 Well, both on the island of Hawaii, and the North Brawley Geothermal Power Plant in Imperial County, Calif.

Since January 2009 and through the end of federal fiscal year 2015, the Justice Department has recovered a total of more than $26.4 billion from cases involving fraud and false claims against the government. The False Claims Act is the government’s primary civil remedy to redress false claims for government funds and property under government contracts, including national security and defense contracts, as well as under government programs as varied as Medicare, veterans’ benefits, federally insured loans and mortgages, highway funds, research grants, agricultural supports, school lunches, and disaster assistance.  In 1986, Congress strengthened the Act by amending it to increase incentives for whistleblowers to file lawsuits on behalf of the government.

Most false claims actions are filed under the Act’s whistleblower, or qui tam, provisions that allow individuals to file lawsuits alleging false claims on behalf of the government.  If the government prevails in the action, the whistleblower, also known as the relator, receives up to 30 percent of the recovery.  Whistleblowers filed 638 qui tam suits in fiscal year 2015 and the department recovered $2.8 billion in these and earlier filed suits this past year.  Whistleblower awards during the same period totaled $597 million.  https://www.justice.gov/opa/pr/justice-department-recovers-over-35-billion-false-claims-act-cases-fiscal-year-2015.

Assistant United States Attorney Roger Wenthe handled the case on behalf of the U.S. Attorney’s Office for the District of Nevada.

Omnicare to Pay Over $28 Million to Settle Kickback Allegations

The nation’s largest nursing home pharmacy, Omnicare Inc., has agreed to pay $28.125 million to resolve allegations that it solicited and received kickbacks from pharmaceutical manufacturer Abbott Laboratories in exchange for promoting the prescription drug, Depakote, for nursing home patients.  CVS Health Corporation, which is headquartered in Rhode Island, acquired Ohio-based Omnicare in 2015, approximately six years after Omnicare ended the conduct that gave rise to the settlement.

“Every day, elderly nursing home residents suffering from dementia rely on the independent judgment of our nation’s healthcare professionals for their personal care and their medical treatment,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Department of Justice’s Civil Division.  “Kickbacks to entities making drug recommendations compromise their independence and undermine their role in protecting nursing home residents from the use of unnecessary drugs.”

Nursing homes rely on consultant pharmacists, such as those employed by Omnicare, to review their residents’ medical charts at least monthly and make recommendations to their physicians about what drugs should be prescribed for those residents.  The settlement announced today resolves allegations that Omnicare solicited and received kickbacks from Abbott in exchange for recommending that physicians prescribe Depakote, an anti-epileptic drug manufactured by Abbott, to elderly nursing home residents.

According to the government’s complaint, Omnicare disguised the kickbacks it received from Abbott in a variety of ways.  Abbott allegedly made payments to Omnicare described as “grants” and “educational funding,” even though their true purpose was to induce Omnicare to recommend Depakote.  For example, Omnicare allegedly solicited substantial contributions from Abbott and other pharmaceutical manufacturers to its “Re*View” program.  Although Omnicare claimed that Re*View was a “health management” and “educational” program, the complaint alleges that it was simply a means by which Omnicare solicited kickbacks from pharmaceutical manufacturers in exchange for increasing the utilization of their drugs on elderly nursing home residents.  In internal documents, Omnicare allegedly referred to Re*View as its “one extra script per patient” program.  The complaint also alleges that Omnicare entered into agreements with Abbott by which Omnicare was entitled to increasing levels of rebates from Abbott based on the number of nursing home residents serviced and the amount of Depakote prescribed per resident.  Finally, the complaint alleges that Abbott funded Omnicare management meetings on Amelia Island, Florida, offered tickets to sporting events to Omnicare management and made other payments to local Omnicare pharmacies.

In May 2012, the United States, numerous states and Abbott entered into a $1.5 billion global civil and criminal resolution that, among other things, resolved Abbott’s liability under the False Claims Act for alleged kickbacks to nursing home pharmacies, including Omnicare and PharMerica Corp.  In October 2015, PharMerica agreed to pay $9.25 million to the United States and numerous states to resolve civil liability under the False Claims Act for the alleged kickbacks from Abbott.  The settlement announced today resolves Omnicare’s role in that alleged kickback scheme.

“This settlement ensures that some of the most vulnerable amongst us, those suffering from dementia, are provided with the level of care they deserve,” said U.S. Attorney John P. Fishwick Jr. for the Western District of Virginia.  “Families and loved ones who make the difficult decision to place those they care about into a nursing home must do so with the confidence that medical decisions are being made with the interests of the patient in mind, not big drug companies.”

Approximately $20.3 million of the settlement will go to the United States, while $7.8 million has been allocated to cover Medicaid program claims by states that elect to participate in the settlement.  The Medicaid program is jointly funded by the federal and state governments.

“It is disturbing that any health care corporation would pay kickbacks that corrupt the professional medical decision making process in order to pad their profits,” said Special Agent in Charge Nicholas DiGiulio of the Department of Health and Human Services Office of Inspector General (HHS OIG).  “These practices are unacceptable and will not be tolerated.”

The settlement with Omnicare announced today, together with the prior settlements with Abbott and PharMerica, resolves allegations in two lawsuits filed in federal court in the Western District of Virginia by Richard Spetter and Meredith McCoyd, former Abbott employees.  The lawsuits were filed 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 part in this case in May 2014.  The United States filed a complaint-in-intervention against Omnicare in December 2014.  As part of today’s resolution, McCoyd will receive $3 million from the federal share of the settlement amount.

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 $31.6 billion through False Claims Act cases, with more than $19.2 billion of that amount recovered in cases involving fraud against federal health care programs.”

This matter was jointly handled by the Civil Division’s Commercial Litigation Branch, the U.S. Attorney’s Office for the Western District of Virginia, HHS-OIG, the Office of the Attorney General for the Commonwealth of Virginia and the National Association of Medicaid Fraud Control Units.

The cases are captioned United States ex rel. Spetter v. Abbott Labs., et al., Case No. 10-cv-00006 (W.D. Va.) and United States ex rel. McCoyd v. Abbott Labs., et al., Case No. 07-cv-00081 (W.D. Va.).  The claims resolved by the settlement are allegations only, and there has been no determination of liability.

Hospital Chain Will Pay over $513 Million for Defrauding the United States and Making Illegal Payments in Exchange for Patient Referrals; Two Subsidiaries Agree to Plead Guilty

A major U.S. hospital chain, Tenet Healthcare Corporation, and two of its Atlanta-area subsidiaries will pay over $513 million to resolve criminal charges and civil claims relating to a scheme to defraud the United States and to pay kickbacks in exchange for patient referrals.

Principal Deputy Assistant Attorney General David Bitkower of the Justice Department’s Criminal Division; U.S. Attorney John Horn of the Northern District of Georgia; Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division; U.S. Attorney G.F. Peterman III of the Middle District of Georgia; Georgia Attorney General Samuel S. Olens; Acting Special Agent in Charge George Crouch of the FBI’s Atlanta Field Office; and Special Agent in Charge Derrick L. Jackson of the U.S. Department of Health and Human Services-Office of Inspector General (HHS-OIG) in Atlanta made the announcement.

In addition, two Tenet subsidiaries, Atlanta Medical Center Inc. and North Fulton Medical Center Inc., have agreed to plead guilty to conspiracy to defraud the United States and to pay health care kickbacks and bribes in violation of the Anti-Kickback Statute (AKS).  The plea agreements remain subject to acceptance by the court.  Up until April 2016, Atlanta Medical Center Inc. and North Fulton Medical Center Inc. owned and operated acute-care hospitals located in the greater Atlanta metropolitan area.

Atlanta Medical Center Inc. and North Fulton Medical Center Inc. were charged in a criminal information filed today in federal court in Atlanta with conspiracy to defraud the United States by obstructing the lawful government functions of HHS and to violate the AKS, which, among other things, prohibits payments to induce the referral of patients for services paid for by federal health care programs.  The two Tenet subsidiaries have agreed to plead guilty to the charges alleged in the criminal information and will forfeit over $145 million to the United States – which represents the amount paid to Atlanta Medical Center Inc. and North Fulton Medical Center Inc. by the Medicare and Georgia Medicaid programs for services provided to patients referred as part of the scheme.

Tenet HealthSystem Medical Inc. and its subsidiaries (collectively THSM) entered into a non-prosecution agreement (NPA) with the Criminal Division’s Fraud Section and the U.S. Attorney’s Office of the Northern District of Georgia related to the charges in the criminal information.  THSM is the parent company of Atlanta Medical Center Inc., North Fulton Medical Center Inc., Spalding Regional Medical Center Inc. and Hilton Head Hospital, and employed their executives.  THSM is a subsidiary of Tenet Healthcare Corporation.  Under the terms of the NPA, THSM and Tenet will avoid prosecution if they, among other requirements, cooperate with the government’s ongoing investigation and enhance their compliance and ethics program and internal controls.  Tenet has also agreed to retain an independent compliance monitor to address and reduce the risk of any recurrence of violations of the AKS by any entity owned in whole, or in part, by Tenet.  The term of THSM’s and Tenet’s obligations under the NPA is three years, but the NPA may be extended for up to one year.

In the civil settlement, Tenet agreed to pay $368 million to the federal government, the state of Georgia and the state of South Carolina to resolve claims asserted in United States ex rel. Williams v. Health Mgmt. Assocs., Tenet Healthcare, et al.,a lawsuit filed by Ralph D. Williams, a Georgia resident, in the Middle District of Georgia, under the federal and Georgia False Claims Acts.  The acts permit whistleblowers to file suit for false claims against the government entities and to share in any recovery.  The federal share of the civil settlement is $244,227,535.30, the state of Georgia will recover $122,880,339.70 and the state of South Carolina will recover $892,125.  Mr. Williams’ share of the combined civil settlement amount is approximately $84.43 million.

“When pregnant women seek medical advice, they deserve to receive care untainted by bribes and illegal kickbacks,” said Principal Deputy Assistant Attorney General Bitkower.  “The Tenet case is the first brought through the assistance of the Criminal Division’s corporate health care fraud strike force.  This is one of more than a dozen active corporate investigations by the strike force, and we are committed to following evidence of health care fraud wherever it leads – whether it be individual physicians, pharmacy owners or corporate boardrooms.”

“Our Medicaid system is premised on a patient’s ability to make an informed choice about where to seek care without undue interference from those seeking to make a profit,” said U.S. Attorney Horn.  “Tenet cheated the Medicaid system by paying bribes and kickbacks to a pre-natal clinic to unlawfully refer over 20,000 Medicaid patients to the hospitals.  In so doing, they exploited some of the most vulnerable members of our community and took advantage of a payment system designed to ensure that underprivileged patients have choices in receiving care.”

“The Department of Justice continues to devote enormous resources to exposing and pursuing alleged misconduct of improper financial relationships between hospitals and referral sources,” said Principal Deputy Assistant Attorney General Mizer.  “Such relationships exploit vulnerable populations and threaten to drive up the cost of healthcare for everyone.  In addition to yielding a substantial recovery for taxpayers, this settlement reflects the department’s lack of tolerance for these types of abusive arrangements, and the negative effects they can have on our health care system.”

“The global resolution of this complex and sophisticated fraud scheme exemplifies what can be accomplished through the cooperation of federal and state investigative and prosecutorial authorities,” said U.S. Attorney Peterman.  “I am particularly proud of the civil attorneys in the U.S. Attorney’s Office for the Middle District of Georgia, working hand in hand with investigators of the U.S. Department of Health and Human Services and attorneys in the Civil Division and the Medicaid Fraud Control Unit of the Office of the Attorney General of Georgia, whose combined efforts greatly contributed to this outstanding result on behalf of the American taxpayers.”

“Tenet took advantage of vulnerable pregnant women in clear violation of the law by paying kickbacks in order to bring their referrals to Tenet hospitals,” said Georgia Attorney General Olens.  “Through this scheme, Tenet defrauded the Georgia Medicaid program, and reaped hundreds of millions of dollars.  This is an unprecedented settlement for the state of Georgia, and reflects my office’s commitment to protecting Georgia taxpayers by uncovering Medicaid fraud and abuse.”

“The FBI continues to play a significant role in ensuring that federal laws related to the healthcare industry, to include the federally funded Medicare and Medicaid programs, are enforced,” said Acting Special Agent in Charge Crouch.  “The settlement agreements announced today involving Tenet Healthcare Corporation, as well as related guilty pleas by two of its Atlanta-based hospitals, Atlanta Medical Center Inc., and North Fulton Medical Center Inc., are a clear example of those efforts.  In addition, the FBI’s Major Provider Response Team (MPRT) assisted the Atlanta Field Office in the civil and criminal investigation of Tenet.  The MPRT was created in 2011 in response to numerous healthcare related corporate-level schemes resulting in billions in losses to healthcare plans.  The FBI, along with its MPRT, will continue to aggressively address the threat of large-scale corporate healthcare schemes significantly impacting both private and government healthcare benefit plans.”

“OIG continues to emphasize investigation of improper financial relationships between health care providers,” said Special Agent in Charge Jackson.  “Using their positions of trust, health providers – after receiving payments from Tenet – sent expectant women specifically to Tenet hospitals.  Patients were often directed to Tenet facilities miles and miles from their homes and on their journeys passed other hospitals that could have provided needed care.  These women were thereby placed at increased risk during one of the most vulnerable points in their lives.  HHS-OIG will continue to protect patients by exposing such illegal arrangements.”

As alleged in the criminal information as well as civil complaints filed by the department and the state of Georgia in 2014 and 2013, Atlanta Medical Center Inc., North Fulton Medical Center Inc., Spalding Regional Medical Center Inc. and Hilton Head Hospital paid bribes and kickbacks to the owners and operators of prenatal care clinics serving primarily undocumented Hispanic women in return for the referral of those patients for labor and delivery medical services at Tenet hospitals.  These kickbacks and bribes allegedly helped Tenet obtain more than $145 million in Medicaid and Medicare funds based on the resulting patient referrals.

According to the criminal information, as part of the scheme, expectant mothers were in some cases told at the prenatal care clinics that Medicaid would cover the costs associated with their childbirth and the care of their newborn only if they delivered at one of the Tenet hospitals, and in other cases were simply told that they were required to deliver at one of the Tenet hospitals, leaving them with the false belief that they could not select the hospital of their choice.  The criminal information alleges that as a result of these false and misleading statements and representations, many expectant mothers traveled long distances from their homes to deliver at the Tenet hospitals, placing their health and safety, and that of their newborn babies, at risk.

The criminal information also charges Atlanta Medical Center Inc. and North Fulton Medical Center Inc. with conspiring to defraud HHS in its administration and oversight of the Medicare and Medicaid Programs, including HHS-OIG’s enforcement of Tenet’s September 2006 corporate integrity agreement (the CIA).  The criminal information and the civil complaint allege that many of the unlawful payments happened while Tenet was under the CIA.  The criminal information further alleges that certain executives of Atlanta Medical Center Inc., North Fulton Medical Center Inc. and others concealed these unlawful payments from HHS-OIG during the pendency of the CIA by, among other things, falsely certifying compliance with the requirements of the CIA and failing to disclose reportable events relating to the unlawful relationship under the CIA.

Branch Banking & Trust Company Agrees to Pay $83 Million to Resolve Alleged False Claims Act Liability Arising from FHA-Insured Mortgage Lending

The Department of Justice announced last week that Branch Banking & Trust Company (BB&T) has agreed to pay the United States $83 million to resolve allegations that it violated the False Claims Act by knowingly originating and underwriting mortgage loans insured by the U.S. Department of Housing and Urban Development’s (HUD) Federal Housing Administration (FHA) that did not meet applicable requirements.  BB&T is headquartered in Winston-Salem, North Carolina.

“The FHA program depends on Direct Endorsement Lenders endorsing only eligible loans for FHA mortgage insurance, and complying with HUD’s quality control requirements,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division.  “Lenders like BB&T that participate in the FHA program must make adherence to the FHA program rules a priority.  The Department has and will continue to hold accountable those lenders that prioritize profits over program compliance.”

“While profiting from the FHA program, BB&T exposed the taxpayers to losses by failing to comply with HUD guidelines, and then took the additional step of falsely certifying that it had complied with such guidelines,” said U.S. Attorney John Horn of the Northern District of Georgia. “This settlement recovers substantial losses caused by BB&T’s decision to place its own profits above its commitment to adhere to HUD underwriting and quality control requirements.”

Since at least January 2006, BB&T has participated as a Direct Endorsement lender (DEL) in the FHA insurance program.  A DEL has the authority to originate, underwrite, and endorse mortgages for FHA insurance.  If a DEL approves a mortgage loan for FHA insurance and the loan later defaults, the holder of the loan may submit an insurance claim to HUD, FHA’s parent agency, for the losses resulting from the defaulted loan.  Under the DEL program, the FHA does not review a loan before it is endorsed for FHA insurance for compliance with FHA’s credit and eligibility standards, but instead relies on the efforts of the DEL to verify compliance.  DELs are therefore required to follow program rules designed to ensure that they are properly underwriting and certifying mortgages for FHA insurance.

The settlement announced today resolves allegations that BB&T failed to comply with certain FHA origination, underwriting and quality control requirements.  As part of the settlement, BB&T admitted to the following facts: Between Jan. 1, 2006 and Sept. 30, 2014, it certified for FHA insurance mortgage loans that did not meet HUD underwriting requirements and did not adhere to FHA’s quality control requirements.  BB&T significantly increased its loan volume between 2006 and 2009—more than doubling all loan originations, while increasing the number of FHA insured loans six fold.  This increase in volume was accompanied by an increase in the number of loans internally rated “Serious-Marketability” by BB&T’s quality control department —the most significant quality control defect rating and a defect that rendered a loan ineligible for FHA insurance.  Between 2007 and 2011, the percentage of loans underwritten by BB&T each year that were rated Serious-Marketability by its quality control department always exceeded 30 percent, and exceeded as much as 50 percent in 2010 and 2011.  BB&T nevertheless endorsed many of these loans for FHA insurance and, if they defaulted, sought payment from HUD for the insured loans.

The monthly reviews and reports that BB&T’s quality control department shared with management alerted BB&T to deficiencies in many of its FHA loans.  A 2010 internal memorandum at BB&T stated that “increased volume of FHA requests and changes to regulatory requirements have resulted in origination, processing and underwriting errors.  Some employees are not applying current and accurate FHA guidelines.”  A proposal to improve BB&T’s underwriting of FHA loans with additional training as well as a testing and certification process for underwriters was prepared in 2010, but neither recommendation was implemented until after 2014.

Additionally, between 2006 and 2014, BB&T’s quality control process did not satisfy certain FHA requirements.  Although loan volume more than doubled from 2006 to 2009, the number of quality control employees remained the same.  The quality control department requested additional employees in 2009, yet new employees were not added until 2013.  Because BB&T’s quality control department did not have adequate staff, it instituted a cap on the number of loans it reviewed.  As a result, between 2009 and 2014, the quality control department did not always review the number of loans necessary to comply with HUD’s loan review sampling requirements.  Additionally, BB&T did not perform reviews of its lender branch offices, as required by HUD, before beginning the reviews again in late 2014.

Finally, since at least 2006, HUD has required self-reporting.  However, despite internal ratings showing that 30 percent or more of the loans underwritten by BB&T between 2007 and 2011 had Serious-Marketability findings, and were thus ineligible for FHA insurance, BB&T did not self-report any loans containing material underwriting defects until 2013.

As a result of BB&T’s conduct and omissions, HUD insured loans endorsed by BB&T that were not eligible for FHA mortgage insurance under the DEL program, and that HUD would not otherwise have insured.  HUD subsequently incurred substantial losses when it paid insurance claims on those loans.

“Lenders are required to apply FHA’s standards to each mortgage loan we insure and to honestly certify to us that they’ve done so,” said Associate General Counsel Dane M. Narode for HUD’s Program Enforcement.  “Today’s settlement reminds all lenders that sound underwriting is the bedrock of a healthy housing market and the financial futures of homeowners we support.”

“Today’s settlement agreement resolves allegations that BB&T, entrusted by American taxpayers to comply with FHA regulations, failed to conform with certain FHA origination, underwriting and quality control requirements,” said Inspector General David A. Montoya for HUD.  “This settlement demonstrates a continued commitment to address the failures and halt the business practices that potentially harm the FHA program and its participants.”

The settlement was the result of a joint investigation conducted by HUD, the HUD Office of Inspector General, the Civil Division’s Commercial Litigation Branch and the U.S. Attorney’s Office for the Northern District of Georgia.  The claims asserted against BB&T are allegations only, and there has been no determination of liability.

Vibra Healthcare to Pay $32.7 Million to Resolve Claims for Medically Unnecessary Services

The Department of Justice announced yesterday that Vibra Healthcare LLC (Vibra), a national hospital chain headquartered in Mechanicsburg, Pennsylvania, has agreed to $32.7 million, plus interest, to resolve claims that Vibra violated the False Claims Act by billing Medicare for medically unnecessary services.

“Medicare beneficiaries are entitled to receive care that is determined by their clinical needs and not the financial interests of healthcare providers,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division.  “All providers of taxpayer-funded federal healthcare services, whether contractors or direct billers, will be held accountable when their actions cause false claims for medically unnecessary services to be submitted.”

Vibra operates approximately 36 freestanding long term care hospitals (LTCHs) and inpatient rehabilitation facilities (IRFs) in 18 states.  LTCHs provide inpatient hospital services for patients whose medically complex conditions require long hospital stays and programs of care.  IRFs are intended for patients needing rehabilitative services that require hospital-level care.  The government alleged that between 2006 and 2013, Vibra admitted numerous patients to five of its LTCHs and to one of its IRFs who did not demonstrate signs or symptoms that would qualify them for admission.  Moreover, Vibra allegedly extended the stays of its LTCH patients without regard to medical necessity, qualification and/or quality of care.  In some instances, Vibra allegedly ignored the recommendations of its own clinicians, who deemed these patients ready for discharge.

“Pursuing and recovering fraudulent billing for unnecessary services is a priority of my office,” stated U.S. Attorney John E. Kuhn Jr. for the Western District of Kentucky.  “This significant case against Vibra Healthcare and today’s settlement agreement is but one example of the vigorous work against healthcare fraud taking place in the Western District of Kentucky and across the nation.”

As part of the settlement, Vibra also agreed to enter into a chain-wide corporate integrity agreement with the Inspector General of the U.S. Department of Health and Human Services.

“Medical necessity is fundamental if health providers wish to claim taxpayer funds for medical care,” said Special Agent in Charge C.J. Porter of the U.S. Department of Health and Human Services’ Office of Inspector General (HHS-OIG).  “OIG is committed to protecting precious Medicare dollars and ensuring that beneficiaries receive quality, necessary long term care.”

Part of the allegations resolved by this settlement were originally filed under the qui tam or whistleblower provisions of the False Claims Act by Sylvia Daniel, a former health information coder at Vibra Hospital of Southeastern Michigan.  Daniel filed her suit in the Southern District of Texas, where one of Vibra’s LTCHs was located.  Under the False Claims Act, a private party, known as a relator, can file an action on behalf of the United States and receive a portion of the recovery.  Daniel will receive at least $4 million.

This settlement illustrates the government’s emphasis on combating healthcare fraud and marks another achievement for the Health Care Fraud Prevention and Enforcement Action Team 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 $30.7 billion through False Claims Act cases, with more than $18.5 billion of that amount recovered in cases involving fraud against federal healthcare programs.

This matter was handled by the Civil Division’s Commercial Litigation Branch; the U.S. Attorneys’ Offices for the Southern District of Texas in Houston and for the Western District of Kentucky; and the HHS-OIG.  The qui tam case is captioned United States ex rel. Daniel v. Vibra Healthcare, LLC, Civil Action No. 10-5099 (S.D. Tex.).

The claims resolved by the settlements are allegations only and there has been no determination of liability.

North American Health Care Inc. to Pay $28.5 Million to Settle Claims for Medically Unnecessary Rehabilitation Therapy Services

On Monday, the Department of Justice announced that North American Health Care Inc. (NAHC), its chairman of the board, John Sorenson, and its senior vice president of Reimbursement Analysis, Margaret Gelvezon, have agreed to pay a total of $30 million to resolve allegations that they violated the False Claims Act by causing the submission of false claims to government health care programs for medically unnecessary rehabilitation therapy services provided to residents at NAHC’s skilled nursing facilities (SNFs).  Under the settlement agreement, NAHC has agreed to pay $28.5 million. Mr. Sorensen has agreed to pay $1 million and Ms. Gelvezon has agreed to pay $500,000.

“Medicare patients and those insured by TRICARE are entitled to receive care necessary for their clinical needs and not the financial needs of their health providers,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division.  “Health care providers will be held accountable if they bill for unnecessary services or treatment.”

NAHC is a private, for-profit company headquartered in Orange County, California, that has service agreements to operate 35 SNFs, most of them in California.  The SNFs provide inpatient rehabilitation services, including physical, occupational, and speech therapy, to patients.  The United States contends that NAHC caused false claims to be submitted to Medicare and TRICARE, seeking payment for medically unnecessary rehabilitation therapy services provided to residents at the NAHC facilities.

The United States further contends that Gelvezon, in her capacity as an officer of NAHC, contributed to this conduct by creating the improper billing scheme.  The government also contends that Sorensen, in his capacity as chairman of the board of NAHC, reinforced this scheme at the NAHC facilities.  The United States contends that this conduct occurred during the period from Jan. 21, 2005, to Oct. 31, 2009, for all of the NAHC SNFs and continued during the period of Nov. 1, 2009, to Dec. 3, 2011, for three of the SNFs in the Northern District of California area.

“This office is committed to safeguarding the federal health care programs and the patients who are enrolled in them,” said U.S. Attorney Brian J. Stretch for the Northern District of California.  “Skilled nursing facilities such as NAHC treat some of the most vulnerable patients in the health care system.  These facilities, and the individuals who run them, will be held accountable when they provide treatment based on financial motivations instead of the patients’ needs.”

“Providing medically unnecessary services to this fragile population can be taxing both for the patient and the program,” said Department of Health and Human Services-Office of the Inspector General (HHS-OIG) Special Agent in Charge Steven Ryan.  “Today’s settlement should send a message to others who may be engaging in these schemes that we will pursue justice for our beneficiaries and the programs.”

As part of this settlement, NAHC has also entered into a five-year Corporate Integrity Agreement (CIA) with the HHS-OIG.  The CIA applies to all facilities managed by NAHC and requires an independent review organization to annually review therapy services billed to Medicare.

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 $30.6 billion through False Claims Act cases, with more than $18.5 billion of that amount recovered in cases involving fraud against federal health care programs.

This matter was handled by the Civil Division’s Commercial Litigation Branch, the U.S. Attorney’s Office for the Northern District of California, HHS-OIG and the FBI.

The claims resolved by the settlements are allegations only and there has been no determination of liability.

United States Settles False Claims Act Allegations Against Coastal Spine And Pain For $7.4 Million

United States Attorney A. Lee Bentley, III announced yesterday that Physicians Group Services, P.A., doing business as Coastal Spine and Pain (“Coastal”), has agreed to pay $7.4 million to the government to resolve allegations that Coastal violated the False Claims Act by performing medically unnecessary drug screening procedures.

The settlement relates to Coastal’s use of “Quantitative Drug Tests,” or tests that identify and count particles of illicit drugs in patients’ urine. The use of quantitative drug tests – tests that are very specific and also very expensive – is appropriate only if there is reason to doubt the more general and cheaper qualitative drug test screens.  The government contends that Coastal appropriately performed qualitative drug tests for its patients.  However, the United States contends that, regardless of the result of the less expense qualitative test, Coastal performed and billed for quantitative drug tests for all patients. The government contends this was medically unnecessary, as there was no reason to question or further confirm previous qualitative urine drug testing screens.

“The United States Attorney’s Office is committed to taking the steps necessary to protect Medicare, TRICARE, and other federal health care programs from fraud,” said U.S. Attorney Bentley.  “When health care practitioners conduct medical tests, they must only bill for them when it is appropriate and medically necessary.  We will vigorously pursue providers that perform tests indiscriminately, regardless of need.”

This case was developed through the proactive review of claims data. Coastal was a statistical outlier in terms of billing for quantitative drug test screens.  In fact, in each and every instance that Coastal billed for a qualitative drug test screen, it also billed for a quantitative drug test screen. This statistical outlier prompted questioning and investigation by the Department of Justice.

“New and expanded uses of data analytics to identify suspicious billing patterns, such as in this case, are providing law enforcement agencies with powerful investigative tools to combat fraud and abuse in federal health care programs,” said HHS OIG SAC Shimon Richmond.  “Medicare should only be paying for medical tests to improve the health of beneficiaries, not the profit margins of unscrupulous physicians.  Today’s settlement should serve as notice to others that fraud will be vigorously pursued.”

This civil 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 more than $30 billion through False Claims Act cases, with more than $18.3 billion of that amount recovered in cases involving fraud against federal health care programs.

“We appreciate the support from the Department of Justice in protecting the TRICARE benefit from fraud and helping to ensure the benefit continues to exist for our service members, families, and retirees,” said Vice Admiral R. Bono, Director, Defense Health Agency.

This matter was investigated with assistance from the Department of Health and Human Services Office of Inspector General (HHS/OIG) and the Defense Criminal Investigative Service (DCIS).  It was prosecuted by Assistant United States Attorney Jason Mehta.

The claims resolved by this settlement are allegations only, and there has been no determination of liability.

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

Three Mount Sinai Health System hospitals to pay $2.95 million to settle False Claims Act suit

Three hospitals in the Mount Sinai Health System will pay a total of $2.95 million after allegations of violating the federal and New York False Claims Acts, New York Attorney General Eric T. Schneiderman has announced.

The entities involved are Mount Sinai Beth Israel (formerly Beth Israel Medical Center), Mount Sinai St. Luke’s (formerly St. Luke’s Hospital) and Mount Sinai Roosevelt (formerly Roosevelt Hospital) (together, the “Hospitals”) – and the Hospitals’ former partnership group, Continuum Health Partners Inc. (“Continuum,” and together with the Hospitals, “Defendants”).

According to allegations, the hospitals knowingly kept more than $844,000 in Medicaid overpayments that should have gone back to the government.

“Repaying Medicaid for false claims is not only vital to the integrity of the program, but it is also the law,” Schneiderman said. “We will not allow hospitals to drain important resources from the system, and will continue to ensure that the program is properly reimbursed for the funds that it is owed.”

The case occurred due to a whistleblower lawsuit. The whistleblower will receive $354,000 from the state as a reward.

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

The Estate of Dr. Kenneth Michael Rice and UMC Physicians Pay a Total of $3,280,000 to Resolve False Claims Act Allegations

The Estate of Dr. Kenneth Michael Rice and UMC Physicians (UMCP) have agreed to pay a total of $3,280,000.00 to the United States and the State of Texas to settle allegations that Dr. Rice and UMCP violated the False Claims Act, announced U.S. Attorney John Parker of the Northern District of Texas.

Specifically, the United States alleged that Dr. Rice, by and through UMCP, submitted false claims for payment to Medicaid and Medicare related to in-person evaluation and management services, as well as critical care services.  The Estate of Dr. Rice agreed to pay the United States and the State of Texas $2,000,000, collectively, to settle the allegations.  UMCP agreed to pay $1,280,000 to settle the matter.  Both the Estate of Dr. Rice and UMCP fully cooperated with the investigation and, by settling, did not admit any wrongdoing or liability.

UMCP, a physician practice management group located in Lubbock, Texas, employs healthcare providers for its sole managing member, the Lubbock County Hospital District d/b/a UMC Health System (UMC).  UMCP employed Dr. Kenneth Michael Rice as a healthcare provider at UMC from February 12, 1996 through his death on February 4, 2015.  The settlement resolves allegations that from January 2008 through February 2015, Dr. Rice, by and through UMCP, billed Medicare and Medicaid for in-person evaluation and management services at the higher physician fee rate, even though the services were often provided by non­physician providers.  Dr. Rice and UMCP are also alleged to have billed normal evaluation and management services to Medicare at the higher critical-care rate.  The Estate and UMCP deny the allegations.

“Health care providers, like all those that choose to do business with the government, must turn square corners when billing Medicare and Medicaid for services provided to patients,” U.S. Attorney Parker said.  “As this settlement demonstrates, we will continue to work to ensure that providers bill for and are paid for the services they provide – but no more.”

The Texas Medicaid Fraud Control Unit and the Civil Medical Fraud Division of the Office of the Attorney General for the State of Texas participated in the resolution of this matter.  The case was handled by Assistant U.S. Attorney Kenneth G. Coffin.

Johnson & Johnson Subsidiary Acclarent Inc. Pays Government $18 Million to Settle False Claims Act Allegations

Last Friday, the Department of Justice announced that California-based medical device manufacturer Acclarent Inc., a subsidiary of Johnson & Johnson, has agreed to pay $18 million to resolve allegations that the company caused health care providers to submit false claims to Medicare and other federal health care programs by marketing and distributing its sinus spacer product for use as a drug delivery device without U.S. Food and Drug Administration (FDA) approval of that use.

“The FDA approval process serves an important role in ensuring that federal health care participants receive devices that are safe, effective and medically appropriate,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division.  “We will not permit companies to circumvent that process and put profits over patient safety.”

“The FDA plays a fundamental role in ensuring the safety and efficacy of medical devices and drugs in this country,” said U.S. Attorney Carmen M. Ortiz.  “Every time that patients receive a medical device or fill a prescription they should be able to take for granted that the FDA’s requirements have been met.  We will vigorously pursue those who ignore or seek to circumvent these important patient protections.”

“It is imperative that medical device companies adhere to FDA approval requirements so that patients are not subject to questionable medical treatments at taxpayer expense,” said Special Agent in Charge Phillip M. Coyne of the Department of Health and Human Services Office of Inspector General.  “Our investigators, working closely with our law enforcement partners, will continue to pursue allegations of such misconduct to hold fraudsters accountable and deter those tempted to launch such illegal scams.”

Acclarent sold a variety of medical devices used in sinus surgeries, including a device known as the Relieva Stratus MicroFlow Spacer (Stratus).  In 2006, Acclarent received FDA clearance to market the Stratus as a spacer to be used only with saline to maintain sinus openings following surgery.  The government alleged that Acclarent intended for the Stratus to be used instead as a drug-delivery device for prescription corticosteroids, including Kenalog-40, and that the device was specifically designed and engineered for this use.

The government further alleged that Acclarent marketed the Stratus as a drug delivery device even after the FDA rejected the company’s 2007 request to expand the approved uses for the Stratus.  For example, Acclarent employees trained physicians using a video that demonstrated the Stratus being used with prescription corticosteroid Kenalog-40 and also used a white, milky substance resembling Kenalog-40 when demonstrating the Stratus.

In 2010, Acclarent added a warning to its label regarding use of active drug substances in the Stratus; however, the government alleged that Acclarent nonetheless continued to market the Stratus for drug delivery.  By May 2013, Acclarent discontinued all sales of the Stratus and the company agreed to withdraw all FDA marketing clearances for the device, which is no longer commercially available in the United States.

On Wednesday, July 20th, Acclarent’s former Chief Executive Officer, William Facteau, 47, of Atherton, California and former Vice President of Sales, Patrick Fabian, 49, of Lake Elmo, Minnesota were convicted following a six-week jury trial of 10 misdemeanor counts of introducing adulterated and misbranded medical devices into interstate commerce.

The civil settlement with Acclarent resolves a lawsuit filed under the whistleblower provision of the False Claims Act, which permits private parties to file suit on behalf of the United States for false claims and share in a portion of the government’s recovery.  The civil lawsuit was filed in the District of Massachusetts and is captioned United States ex rel. Melayna Lokosky v. Acclarent, Inc.  As part of today’s resolution, Lokosky will receive approximately $3.5 million from the settlement.

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 $30 billion through False Claims Act cases, with more than $18.3 billion of that amount recovered in cases involving fraud against federal health care programs.

The settlement with Acclarent was the result of a coordinated effort among the U.S. Attorney’s Office for the District of Massachusetts and the Civil Division’s Commercial Litigation Branch, with assistance from the FDA’s Office of Chief Counsel and HHS’ Office of Counsel to the Inspector General.  The investigation was conducted by the FBI’s Boston Field Office, HHS-OIG, the Defense Health Agency, FDA’s Office of Criminal Investigations, the Department of Veterans Affairs Office of Inspector General and the U.S. Department of Defense, Office of Inspector General, Defense Criminal Investigative Service.

The claims resolved by this settlement are allegations only, and there has been no determination of liability.

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