whistleblower

DaVita Healthcare Partners, Inc. has agreed to pay $350 million to settle allegations that the company knowingly submitted or caused the submission of false claims to federal health care programs by paying kickbacks to induce the referral of patients to its dialysis clinics, the U.S. Department of Justice announced earlier this week.

The settlement today resolves allegations that DaVita identified physicians or physician groups that had significant patient populations suffering renal disease and offered them lucrative opportunities to partner with DaVita by acquiring and/or selling an interest in dialysis clinics to which their patients would be referred for dialysis treatment. DaVita further ensured referrals of these patients to the clinics through a series of secondary agreements with the physicians, including entering into agreements in which the physician agreed not to compete with the DaVita clinic and non-disparagement agreements that would have prevented the physicians from referring their patients to other dialysis providers. 

The government alleged that DaVita used a three part joint venture business model to induce patient referrals.  First, using information gathered from numerous sources, DaVita identified physicians or physician groups that had significant patient populations suffering renal disease within a specific geographic area. DaVita would then gather specific information about the physicians or physician group to determine if they would be a “winning practice.” In one transaction, a physician’s group was considered a “winning practice” because the physicians were “young and in debt.”  Based on this careful vetting process, DaVita knew and expected that many, if not most, of the physicians’ patients would be referred to the joint venture dialysis clinics.

Next, DaVita would offer the targeted physician or physician group a lucrative opportunity to enter into a joint venture involving DaVita’s acquisition of an interest in dialysis clinics owned by the physicians, and/or DaVita’s sale of an interest in its dialysis clinics to the physicians. To make the transaction financially attractive to potential physician partners, DaVita would manipulate the financial models used to value the transaction.  For example, to decrease the apparent value of clinics it was selling, DaVita would employ an assumption it referred to as the “HIPPER compression,” which was based on a speculative and arbitrary projection that future payments for dialysis treatments by commercial insurance companies would be cut by as much as half in future years. These manipulations resulted in physicians paying less for their interest in the joint ventures and realizing returns on investment which were extraordinarily high, with pre-tax annual returns exceeding 100 percent in some instances. 

Last, DaVita ensured future patient referrals through a series of secondary agreements with their physician partners. These included paying the physicians to serve as medical directors of the joint venture clinics, and entering into agreements in which the physicians agreed not to compete with the clinic. The non-compete agreements were structured so that they bound all physicians in a practice group, even if some of the physicians were not part of the joint venture arrangements. These agreements also included provisions prohibiting the physician partners from inducing or advising a patient to seek treatment at a competing dialysis clinic. These agreements were of such importance to DaVita that it would not conclude a joint venture transaction without them.

As part of the settlement announced today, DaVita has also agreed to a Civil Forfeiture in the amount of $39 million based upon conduct related to two specific joint venture transactions entered into in Denver, Colorado.   Additionally, DaVita has entered into a Corporate Integrity Agreement with the Office of Counsel to the Inspector General of the Department of Health and Human Services which requires it to unwind some of its business arrangements and restructure others, and includes the appointment of an Independent Monitor to prospectively review DaVita’s arrangements with nephrologists and other health care providers for compliance with the Anti-Kickback Statute.

The settlement resolves allegations originally brought in a lawsuit filed under the whistleblower provisions of the False Claims Act, which allow private parties to bring suit on behalf of the government and share in any recovery.  The suit was filed by David Barbetta, who was previously employed by DaVita as a Senior Financial Analyst in DaVita’s Mergers and Acquisitions Department. Mr. Barbetta’s share of the recovery has yet to be 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 federal government has elected to intervene in a False Claims Act lawsuit against Sikorsky Aircraft Corporation and two of its subsidiaries, Sikorsky Support Services and Derco Aerospace Inc., the U.S. Department of Justice announced last week.  Sikorsky Aircraft Corporation is a wholly owned subsidiary of United Technologies Corporation.

The government’s complaint alleges that Sikorsky Aircraft Corporation approved an illegal cost-plus-a-percentage-of-cost subcontract between Sikorsky Support Services Inc., and Derco Aerospace.  A cost-plus-a-percentage-of-cost contract is one where the cost of performance is unknown in advance and compensation is determined based on the cost of performance plus an agreed-to percentage of such costs.  Such contracts are prohibited because they give contractors no incentive to control the cost of performance.  The complaint further alleges the defendants used this illegal subcontract to overcharge the Navy on parts and materials that were used to maintain Navy aircraft.

The lawsuit was originally filed by Mary J. Patzer, a former employee of Derco, under the whistleblower provision of the False Claims Act.  The Act allows private parties with knowledge of fraud against the government to sue on behalf of the government and share in the recovery.  The government may also intervene in the case, as it has elected to do here.

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.

Extendicare Health Services has agreed to pay $38 million to the federal government and eight state governments to resolve allegations that the company knowingly submitted or caused the submission of false claims to Medicare and Medicaid for worthless nursing services and medically unreasonable and unnecessary rehabilitation therapy services, the U.S. Department of Justice announced today.  Extendicare, through its subsidiaries, operates 146 skilled nursing facilities in 11 states.  Its subsidiary ProStep provides physical, speech, and occupational rehabilitation services. 

This settlement resolves allegations that Extendicare billed Medicare and Medicaid for materially substandard skilled nursing services and failed to provide care to its residents that met federal and state standards of care and regulatory requirements.  The government alleges, for example, that Extendicare failed to have a sufficient number of skilled nurses to adequately care for its skilled nursing residents; failed to provide adequate catheter care to some of the residents, and failed to follow the appropriate protocols to prevent pressure ulcers or falls.  The eight states involved in this component of the settlement are Indiana, Kentucky, Michigan, Minnesota, Ohio, Pennsylvania, Washington and Wisconsin.   

Additionally, this settlement resolves allegations that Extendicare provided medically unreasonable and unnecessary rehabilitation therapy services to its Medicare Part A beneficiaries, particularly during the patients’ assessment reference periods, so that it could bill Medicare for those patients at the highest per diem rate possible. 

As a result of today’s settlement, the federal government will receive $32.3 million and the eight state Medicaid programs will receive $5.7 million.  In addition, as part of this resolution, Extendicare and ProStep are required to enter into a five year chain-wide Corporate Integrity Agreement under which Extendicare must have a comprehensive compliance program with systems to address the quality of resident care.  Extendicare’s compliance program must include, among other things, corporate-level committees to address compliance and quality, including a committee to assess staffing, and an internal audit program to assess the quality of care provided to its residents.  Extendicare must retain an independent monitor, selected by the OIG, who will regularly visit Extendicare’s facilities and report to the OIG.  In addition, an independent review organization will perform annual reviews of Extendicare’s claims to Medicare. 

The two lawsuits, filed separately, were originally brought by Tracy Lovvron and Donald Galick, both former employees of Extendicare.  The False Claims Act allows private parties with knowledge of fraud against the government to sue on the government’s behalf and share in the recovery.  Lovvron will receive $1.8 million as her portion of the settlement, while Galick will receive over $250,000.

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.

Caremark L.L.C., operated by CVS Caremark Corporation, has agreed to pay the U.S. federal government $6 million to settle allegations that the company knowingly submitted or caused the submission of false claims to Medicaid for prescription drug beneficiaries who were eligible for drug benefits under Medicaid-administered private health plans, the U.S. Department of Justice announced today.

When an individual is covered by both Medicaid and a private health plan, the individual is called a “dual eligible.”  Under the law, the private insurer, rather than the government, must assume the costs of health care for dual eligibles.  If Medicaid erroneously pays for the prescription claim of a dual eligible, Medicaid is entitled to seek reimbursement from the private insurer or its pharmacy benefit management company (PBM).  A PBM administers and manages the drug benefits for clients who offer drug benefits under a health insurance plan. 

Caremark served as the PBM for private health plans who insured a number of individuals receiving prescription drug benefits under both a Caremark-administered plan and Medicaid.  According to the government, Caremark’s RxCLAIM computer platform allegedly failed to pay the full amount due on certain claims because it improperly deducted certain co-payment or deductible amounts when calculating payments.  The government alleged that Caremark’s actions caused Medicaid to incur prescription drug costs for dual eligibles that should have been paid for by the Caremark-administered private health plans rather than Medicaid.     

The lawsuit was originally filed by Donald Well, a former Caremark employee, under the whistleblower provision of the False Claims Act.  The Act allows private parties with knowledge of fraud against the government to sue on behalf of the government and share in the recovery. Well will receive $1.02 million plus interest as his portion of the settlement.

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.

M.K. Battery and its parent company, East Penn Manufacturing, have agreed to pay $5.5 million to resolve allegations that the company knowingly submitted or caused the submission of false claims to the Department of Defense, the Minneapolis Star Tribune reported earlier this week.

M.K. Battery produced backup batteries that operate Humvee turrets in the event that the engine gives out.  The lawsuit alleged that the manufacturing process was changed and cut the battery’s lifespan in half by nearly 50 percent, so that it no longer met contract specifications and, in a worst case scenario, endangered the lives of American soldiers.

The lawsuit was filed by David McIntosh, a former employee for M.K. Battery, under the whistleblower provision of the False Claims Act.  The Act allows private parties with knowledge of fraud against the government to sue on behalf of the government and share in the recovery.  McIntosh will receive $990,000 as his portion of the settlement.

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.