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BU009443Tenet Healthcare has agreed to pay $42.75 million to resolve claims that facilities owned by the corporation billed Medicare for medically unnecessary rehabilitation services.  The False Claims Act prohibits submission of a false claim or actions which cause a false claim to be submitted for money or property in control of the federal government.  Tenet sought reimbursement for services rendered to patients at intensive rehabilitation facilities (IRFs) owned by the company where such patients did not qualify for the highly-specialized and expensive type of care provided at IRFs.

The settlement follows a landmark agreement reached in 2006 between Tenet and the federal government over similar, but unrelated, False Claims Act violations.  In that settlement Tenet paid over $900 million to settle allegations under the False Claims Act concerning falsification of patient costs in order to receive lucrative Medicare reimbursements, illegal kickbacks and incentives to referring physicians, and systematic “upcoding” of patient diagnoses to falsely inflate reimbursable expenses.

As part of the 2006 settlement, Tenet agreed to enter into a five-year corporate integrity agreement imposing numerous reporting and restructuring requirements to ensure full compliance with federal and state law.  Among other things, the agreement required Tenet to implement a comprehensive compliance program complete with employee protections for reporting fraud and obligations on the company to review allegations of improper activity and disclose fraudulent activity to the government.

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Supreme Court Pillars

WellCare Health Plans, Inc. reached a settlement with the federal government this week over allegations that the company to Medicare, Medicaid, and other government health programs, all in violation of the False Claims Act.  The Tampa-based health insurer will pay $137.5 million to the United States, nine individual states, and four qui tam lawsuits filed by former employees with knowledge of fraud at the company.  Under the False Claims Act, an employee or any other private citizen may bring a lawsuit on behalf of the United States for violations of the False Claims Act.

In addition to resolving civil claims under the False Claims Act, the Department of Justice has agreed to release WellCare from a three-year Deferred Prosecution Agreement (DPA) originally entered into in May of 2o09 after agreeing to pay $80 million to resolve a criminal investigation which had resulted in one guilty plea and criminal charges against five additional WellCare executives.  Under the DPA, WellCare was guaranteed immunity from further criminal charges in exchange for demonstrated remedial efforts and compliance with federal and state health care laws.

Many states have enacted state False Claims Acts in order to share in recoveries obtained in multi-state and federal prosecutions and to further encourage reporting of fraud by state residents.  Indeed, of the nine individual states involved in the WellCare settlement, Connecticut, Florida, Georgia, Hawaii, Illinois, Indiana, Missouri, and New York all currently have state False Claims Acts.  Although Ohio does not have a state False Claims Act, residents of the state may still bring a qui tam action under the federal False Claims Act.

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United States Agency for International DevelopmentHarbert Corporation and its affiliated entities reached an agreement with the United States Department of Justice to settle long-standing False Claims Act allegations.  According to the settlement, the international construction company had conspired to rig the bidding process for government contracts in order to maximize private profits at the expense of the government and taxpayers.  The settlement will recover $47 million on behalf of American taxpayers.

Harbert and its affiliated entities engaged in the bidding process for a construction contract to build a sewer system in Egypt, a project funded with taxpayer dollars by the United States Agency for International Development (“USAID”).  Based upon information provided by a whistleblower, who first brought allegations of wrongdoing to light in a lawsuit filed under the qui tam provisions of the False Claims Act, the Government suspected Harbert of collusion through paying off other companies to submit intentionally high bids or withholding bids.

The False Claims Act prohibits an individual or organization from making false claims, or causing a false claim to be made, to the federal government.  To aid in prosecuting instances of False Claims Act violations, the government encourages potential whistleblowers to report violations by coming to the government with information and by filing a suit on behalf of the federal government.  Whistleblowers may receive up to 30 percent of the recovery obtained by the government as a reward.

 

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Cayuga Medical Center, located in Ithica, New York, recently settled False Claims Act allegations that the medical center submitted false claims for payment under Medicare and Medicaid.  The government’s investigation was initiated and aided by Daniel S. Jorgenson, a physician practicing in the Ithica area who came forward as a whistleblower under the “qui tam” provision of the False Claims Act.

The settlement resolves allegations that Cayuga violated the Stark law, which prohibits physicians from referring patients to certain providers in which the physician has a financial interest.  The False Claims Act requires that all claims for payment under Medicare, Medicaid, and other federal health programs comply with all federal laws and regulations, including the Stark Law.  Because Cayuga’s recruiting agreements and payments to physicians violated the Stark Law, the organization was subject to civil liability under the False Claims Act.

Under the settlement, Cayuga will pay over $3.5 million to resolve pending False Claims Act allegations and engage in corrective action.  Under New York’s state False Claims Act, the state will be able to recover a share of $426,305 for false claims implicating state funds through the state’s Medicaid program.

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Hedge Fund Office BuildingThird party litigation has recently been a hot topic in the U.S., spurring speculation as to whether hedge funds will similarly begin funding whistleblower cases. A recent article on Pharmalot suggests that this leap may be likely and points out that whistleblower cases may be prime targets for investors, because they often suffer financing problems during long periods of litigation but may also result in nine figure settlements. Continue reading ›

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Food SafetyWith a 215 to 144 vote, the U.S. House of Representatives passed the Food Safety Modernization Act, with only minor changes to the Senate’s version of the bill.  With President Obama expected to sign off, the Act will soon become law.  The chief purpose of the Act is to vest the Food and Drug Administration (FDA) with increased authority to monitor food safety.  Until the law is enacted, the FDA does not have direct authority to order food recalls; typically, the agency negotiates terms of voluntary recalls.  In the wake of massive health scares over lettuce, peanut, and spinach in the last few years, the FDA will have increased authority to intervene.

The Act protects whistleblowers employed by companies “engaged in the manufacture, processing, packing, transportation, distribution, reception, holding or importation of food.” Continue reading ›

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hospital2A new trend in healthcare fraud enforcement reflects a willingness by hospitals to be more forthcoming. Detroit Medical and St. Mary’s Medical Center in Pennsylvania recently reported improper financial relationships with physicians — voluntarily. Detroit Medical entered into a $30 million settlement agreement with the U.S. government stemming from violations of the False Claims Act, the Anti-Kickback Statute, and the Stark Statute. The violations were discovered while Vanguard, in preparation for its acquisition of DMC, was investigating DMC’s potential liabilities. Continue reading ›

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The Justice Department recently announced the $280 million settlement of a False Claims Act case against Dey Pharmaceuticals, of which $67.2 million will be awarded to whistleblower Ven-A-Care.

Yellow and Red PillsThe case accused Dey of reporting false and inflated prices for four drugs used to treat asthma and respiratory conditions. Federal health care programs rely on drug companies to report the “Average Wholesale Price” of a drug in order to set reimbursement rates. Dey allegedly inflated these prices so that physicians and pharmacists could obtain reimbursement rates higher than the initial purchase price of the drugs. Essentially functioning as a form of kickback, Tony West, Assistant Attorney General for the Civil Division of the Department of Justice, warns of the danger of this practice, stating “Taxpayer-funded kickback schemes like this not only cost the federal health care programs millions of dollars, they threaten to undermine the integrity of the choices health care providers make for their patients.”

For former Florida home-infusion company-turned professional whistleblower, this represents one of many successful health care fraud cases settled this month. The organization also settled with Abbott Laboratories, Roxane Laboratories, and B. Braun Medical for over $2 billion dollars, and earning a reward of $88.4 million.

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Wall_Street_SignWhen the SEC released proposed whistleblower regulations required under Dodd-Frank, they requested comments from the public.  In response, Arent Fox, a law firm that represents Wal-Mart and drugmakers Elan and Genzyme, recently sent a letter to the SEC. In it, the firm advocated that the SEC first require employees to explore internal corporate compliance procedures before turning to the SEC. Additionally, the letter also requested a “no-bite” strategy in which the SEC refuses to accept tips from those with a fiduciary responsibility to the company, including top officers and directors. Continue reading ›

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Allergan recently brought an injunctive action against the FDA asserting the unconstitutionality of several of its provisions regulating off-label promotion. Advancing their First Amendment argument, Allergan employs many of the same arguments put forth in Caronia (for more information on this topic, see here).  However, a primary difference distinguishing Allergan from Caronia lies within Allergan’s Risk Evaluation and Mitigation Strategy. As Allergan argues, providing warnings in compliance with the FDA’s requests constitutes government-compelled speech (warranting strict scrutiny). Continue reading ›

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