Covidien LP has agreed to pay $17,477,947 to resolve allegations that it violated the False Claims Act by providing free or discounted practice development and market development support to physicians located in California and Florida to induce purchases of Covidien’s vein ablation products, the Department of Justice announced earlier this month.  

The United States alleged that Covidien violated the Anti-Kickback Statute and, correspondingly, the False Claims Act by providing practice development and market development support to health care providers located in California and Florida, to induce those providers to purchase ClosureFAST(TM) radiofrequency ablation catheters that were billed to Medicare and to the California and Florida Medicaid programs.  ClosureFast(TM) catheters are used in procedures that treat venous reflux disease, a disease often marked by the presence of varicose veins.  The practice and market development support Covidien provided included customized marketing plans for specific vein practices; scheduling and conducting “lunch and learn” meetings and dinners with other physicians to drive referrals to specific vein practices; and providing substantial assistance to specific vein practices in connection with planning, promoting, and conducting vein screening events to cultivate new patients for those practices.

The Anti-Kickback Act prohibits the payment of remuneration to induce the referral or use of items or services paid for by federal health care programs.  Remuneration includes not only cash payments but also offers or payments made “in kind.” 

Under the settlement agreement, Covidien will pay an additional $1,474,892 to California and $1,047,160 to Florida for claims settled by these state Medicaid programs.  The Medicaid program is a jointly funded federal and state program. 

The settlement resolves allegations contained in lawsuits filed by Erin Hayes and Richard Ponder (former sales managers for Covidien) and Shawnea Howerton (a former employee of one of Covidien’s customers), which are pending in federal court in San Francisco, California.  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 United States for false claims and to share in any recovery.  Mr. Hayes and Mr. Ponder will receive $3,146,030 as their share of the federal recovery. 

The Chanler Group, in association with the Hirst Law Group, represents whistleblowers who take action under the False Claims Act to report fraud committed against the federal and state governments.  We have years of experience representing whistleblower clients who expose every kind of fraud against the government, including health care fraud, contract fraud, and tax fraud.  Read more about our expertise in False Claims Act cases and how you can take action.

Pathology laboratory company Inform Diagnostics has agreed to pay $63.5 million to settle allegations that it violated the False Claims Act by engaging in improper financial relationships with referring physicians, the Justice Department announced last month.  Inform Diagnostics, formerly known as Miraca Life Sciences Inc., is headquartered in Irving, Texas, and was a subsidiary of Miraca Holdings Inc., a Japanese company, during the period relevant to the case.  In 2017, majority ownership of the company changed, and the company was renamed. 

The settlement announced today resolves allegations that the company violated the Anti-Kickback Statute and the Stark Law by providing to referring physicians subsidies for electronic health records (EHR) systems and free or discounted technology consulting services.  The Anti-Kickback Statute and the Stark Law restrict the financial relationships that health care providers, including laboratories, may have with doctors who refer patients to them.  Although regulations adopted by the Department of Health and Human Services (HHS) in 2006 included provisions that allowed laboratories to provide EHR donations to physicians under certain conditions, the United States alleged that the defendant violated those conditions.  HHS withdrew those exemptions for laboratories in 2013. 

The allegations stem from three lawsuits that were filed under the qui tam, or whistleblower, provisions of the False Claims Act, which permit private citizens to bring suit on behalf of the United States for false claims and share in any recovery.  The whistleblowers’ share of the settlement announced today has not yet been determined.

The Chanler Group, in association with the Hirst Law Group, represents whistleblowers who take action under the False Claims Act to report fraud committed against the federal and state governments.  We have years of experience representing whistleblower clients who expose every kind of fraud against the government, including health care fraud, contract fraud, and tax fraud.  Read more about our expertise in False Claims Act cases and how you can take action.

The United States has intervened in a complaint against Sutter Health LLC, a California-based healthcare services provider, and an affiliated entity, Palo Alto Medical Foundation, (collectively “Sutter”) that alleges that Sutter violated the False Claims Act by submitting inaccurate information about the health status of beneficiaries enrolled in Medicare Advantage Plans, the Justice Department announced earlier this month.  Sutter Health is headquartered in Sacramento, California. 

Under Medicare Advantage, also known as the Medicare Part C program, Medicare beneficiaries have the option of enrolling in managed healthcare insurance plans called Medicare Advantage Plans (MA Plans) that are owned and operated by private Medicare Advantage Organizations (MAOs).  MA Plans are paid a capitated, or per-person, amount to provide Medicare-covered benefits to beneficiaries who enroll in one of their plans.  The Centers for Medicare and Medicaid Services (CMS), which oversees the Medicare program, adjusts the payments to MA Plans based on demographic information and the health status of each plan beneficiary.  The adjustments are commonly referred to as “risk scores.”  In general, a beneficiary with more severe diagnoses will have a higher risk score, and CMS will make a larger risk-adjusted payment to the MA Plan for that beneficiary.

Sutter Health, a non-profit public benefit corporation that provides healthcare services through affiliated entities, including hospitals and medical foundations, contracted with certain MAOs to provide healthcare services to California beneficiaries enrolled in the MAOs’ MA Plans.  In exchange, Sutter received a share of the payments that the MAOs received from CMS for the beneficiaries under Sutter’s care.  

Sutter submitted diagnoses to the MAOs for the MA Plan enrollees that they treated.  The MAOs, in turn, submitted the diagnosis codes to CMS from the beneficiaries’ medical encounters, such as office visits and hospital stays, and these diagnosis codes were used by CMS to calculate a risk score for each beneficiary. 

The lawsuit alleges that Sutter Health and Palo Alto Medical Foundation knowingly submitted unsupported diagnosis codes for certain patient encounters for beneficiaries under their care.  These unsupported diagnosis scores allegedly inflated the risk scores of these beneficiaries, resulting in inflated payments to Sutter.   The lawsuit further alleges that once the Sutter entities became aware of these unsupported diagnosis codes, they failed to take sufficient corrective action to identify and delete additional potentially unsupported diagnosis codes. 

The lawsuit was filed under the qui tam, or whistleblower, provisions of the False Claims Act, which permit private parties to sue on behalf of the government for false claims and to receive a share of any recovery.  The False Claims Act also permits the government to intervene in such lawsuits, as it has done in this case.  The whistleblower, Kathleen Ormsby, was a former employee of Palo Alto Medical Foundation. 

Health Management Associates, LLC (HMA), formerly a U.S. hospital chain headquartered in Naples, Florida, will pay over $260 million to resolve criminal charges and civil claims relating to a scheme to defraud the United States, the U.S. Department of Justice announced this week.  The government alleged that HMA knowingly billed government health care programs for inpatient services that should have been billed as outpatient or observation services, paid remuneration to physicians in return for patient referrals, and submitted inflated claims for emergency department facility fees. 

HMA was acquired by Community Health Systems Inc. (CHS), a major U.S. hospital chain, in January 2014, after the alleged conduct at HMA occurred.  Since July 2014, HMA has been operating under a Corporate Integrity Agreement (CIA) between CHS and the HHS-OIG.

As part of the criminal resolution, HMA entered into a three-year Non-Prosecution Agreement (NPA) with the Criminal Division’s Fraud Section in connection with a corporate-driven scheme to defraud Federal health care programs by unlawfully pressuring and inducing physicians serving HMA hospitals to increase the number of emergency department patient admissions without regard to whether the admissions were medically necessary.  The scheme involved HMA hospitals billing and obtaining reimbursement for higher-paying inpatient hospital care, as opposed to observation or outpatient care, from Federal health care programs, increasing HMA’s revenue.  Under the terms of the NPA, HMA will pay a $35 million monetary penalty.  Under the terms of the NPA, HMA and CHS, the current parent company, agreed to cooperate with the investigation, report allegations or evidence of violations of Federal health care offenses, and ensure that their compliance and ethics program satisfies the requirements of an amended and extended CIA between CHS and HHS-OIG.

In addition, an HMA subsidiary, Carlisle HMA, LLC, formerly doing business as Carlisle Regional Medical Center, has agreed to plead guilty to one count of conspiracy to commit health care fraud.  The plea agreement remains subject to acceptance by the court.  Up until 2017, Carlisle HMA, LLC owned and operated Carlisle Regional Medical Center, an acute care hospital located in Carlisle, Pennsylvania.  Carlisle HMA, LLC was charged in a criminal information filed today in the District of Columbia with conspiracy to commit health care fraud.

According to admissions made in the resolution documents, HMA instituted a formal and aggressive plan to improperly increase overall emergency department inpatient admissions at all HMA hospitals, including at Carlisle Regional Medical Center.  As part of the plan, HMA set mandatory company-wide admission rate benchmarks for patients presenting to HMA hospital emergency departments – a range of 15 to 20 percent for all patients presenting to the emergency department, depending on the HMA hospital, and 50 percent for patients 65 and older (i.e. Medicare beneficiaries) - solely to increase HMA revenue.  HMA executives and HMA hospital administrators executed the scheme by pressuring, coercing and inducing physicians and medical directors to meet the mandatory admission rate benchmarks and admit patients who did not need impatient admission through a variety of means, including by threatening to fire physicians and medical directors if they did not increase the number of patients admitted.

HMA also agreed to pay $216 million as part of a related civil settlement. The civil settlement resolves HMA’s liability for submitting false claims between 2008 and 2012 as part of its corporate-wide scheme to increase inpatient admissions of Medicare, Medicaid and the Department of Defense’s (DOD) TRICARE program beneficiaries over the age of 65.  The government alleged that the inpatient admission of these beneficiaries was not medically necessary, and that the care needed by, and provided to, these beneficiaries should have been provided in a less costly outpatient or observation setting.  HMA agreed to pay $62.5 million to resolve these allegations with $61,839,718 being paid to the United States and $706,084 being paid to participating States.

The civil settlement also resolves allegations that during the period from 2003 through 2011, two HMA hospitals in Florida, Charlotte Regional Medical Center and Peace River Medical Center, billed federal health care programs for services referred by physicians to whom HMA provided remuneration in return for patient referrals.  To induce patient referrals, Charlotte Regional provided a local physician group with free office space and staff, as well as direct payments, which purportedly covered overhead and administrative costs incurred by the group for its management of a Charlotte Regional physician.  HMA also provided another local physician with free rent and upgrades to his office space.  HMA agreed to pay $93.5 million to resolve these civil allegations, with the United States receiving $87.96 million, and the State of Florida receiving $5.54 million.

Additional allegations that are resolved by the civil settlement are that between 2009 and 2012, two former HMA hospitals, Lancaster Regional Medical Center and Heart of Lancaster Medical Center in Pennsylvania, billed federal health care programs for services referred by physicians with whom the facilities had improper financial relationships.  These relationships stemmed from HMA’s excessive payments to (1) a large physician group in return for two businesses owned by the group and for services allegedly performed by the group, and (2) a local surgeon that exceeded the value of the services provided.  The government alleged that these arrangements were structured in this manner to disguise payments intended to induce the referral of patients.  HMA agreed to pay $55 million to the United States to resolve these civil allegations.

Finally, the civil settlement will also resolve claims that Crossgates Hospital, an HMA facility in Brandon, Mississippi, leased space to a local physician from Jan. 15, 2005 through Jan. 14, 2007, but required the physician to pay rent for only half of the space he was actually occupying, in return for patient referrals to Crossgates Hospital.  HMA agreed to pay $425,000 to the United States to resolve these civil allegations.

Federal law, including the Anti-Kickback Statute and the Stark Law, prohibits hospitals from providing financial inducements to physicians for referrals.  These provisions are designed to ensure that physician decision-making is not compromised by improper financial incentives.

The government further alleged that from September 2009 through December 2011, certain HMA hospitals submitted claims to Medicare and Medicaid seeking reimbursement for falsely inflated emergency department facility charges.  HMA agreed to pay $12 million to resolve these civil allegations, with $11.028 million being paid to the United States and $972,000 being paid to participating States.

The allegations resolved by the settlement were originally brought in eight lawsuits filed under the qui tam, or whistleblower, provisions of the False Claims Act, which permit private parties to sue on behalf of the government for false claims and to receive a share of any recovery. The whistleblower in United States ex rel. Nurkin will receive approximately $15 million as a share of the recovery, and the whistleblowers in United States ex rel. Miller will receive approximately $12.4 million as their share of the recovery.  The whistleblower shares to be awarded in the remaining cases have not yet been determined.

The Chanler Group, in association with the Hirst Law Group, represents whistleblowers who take action under the False Claims Act to report fraud committed against the federal and state governments.  We have years of experience representing whistleblower clients who expose every kind of fraud against the government, including health care fraud, contract fraud, and tax fraud.  Read more about our expertise in False Claims Act cases and how you can take action.

Health Quest Systems, Inc. and certain of its subsidiaries (Health Quest) and Putnam Health Center (PHC) have agreed to pay over $14.7 million to resolve allegations of violations of the False Claims Act by submitting inflated and otherwise ineligible claims for payment, the Justice Department announced.  New-York based Health Quest is a family of integrated hospitals and healthcare providers that deliver surgical, medical and home health care services.  PHC is a Health Quest subsidiary hospital based in Carmel Hamlet, New York. 

In the settlement announced today, Health Quest and PHC admitted, acknowledged, and accepted responsibility for certain facts involving the submission of improper claims for various health-related services, including the following:  

From April 1, 2009 through June 23, 2015, Health Quest submitted claims for evaluation and management services but did not sufficiently document the services to support the level of service billed.  As a result, the services were billed two levels higher than supported by the medical record.  

From April 1, 2011 through August 2014, Health Quest submitted claims for home health services that lacked sufficient medical records to support the claim, including documentation of a face-to-face encounter with a physician.  

From March 1, 2014 through December 31, 2014, Health Quest subsidiary hospital, PHC, submitted allegedly false claims for inpatient and outpatient services referred to PHC by two orthopedic physicians, in alleged violation of the Physician Self-Referral Law.  The two physicians had a direct financial relationship with PHC for providing administrative services and received compensation from PHC.  The United States alleged their compensation exceeded the fair market value for the services, and thereby violated the Physician Self-Referral Law, which prohibits a hospital from billing Medicare for certain services referred by physicians with whom the hospital has an improper compensation arrangement. The United States further alleged that one purpose of the excessive compensation was to induce the above referrals to PHC, in violation of the Anti-Kickback Statute.

As part of the settlements announced today, Health Quest will pay an additional $895,427 to the State of New York, which jointly funds the State’s Medicaid program with the federal government. 

Contemporaneously with the False Claims Act settlement, Health Quest also agreed to enter into a Corporate Integrity Agreement (CIA) with HHS-OIG to address future compliance.

The settlement resolves three lawsuits brought by former employees of Health Quest under the qui tam, or whistleblower, provisions of the False Claims Act, which permit private citizens to bring lawsuits on behalf of the United States and obtain a portion of the government’s recovery.  Tim Cleary will receive $1,893,092, John Betaudier and Carolyn Carroll will receive, collectively, $56,266, and Gregory Folta will receive at least $875,546.  

The Chanler Group, in association with the Hirst Law Group, represents whistleblowers who take action under the False Claims Act to report fraud committed against the federal and state governments.  We have years of experience representing whistleblower clients who expose every kind of fraud against the government, including health care fraud, contract fraud, and tax fraud.  Read more about our expertise in False Claims Act cases and how you can take action.