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The Department of Justice (DOJ) recently announced that it recovered over $2.8 billion from False Claims Act (FCA) cases in Fiscal Year 2018 (FY 2018).  Of the $2.8 billion DOJ recovered in FY 2018, $2.5 billion involved health care related false claims.  The DOJ noted that civil health care fraud settlements and judgments have exceeded $2 billion for the last nine years.  The $2.5 billion in federal losses does not include state Medicaid program funds that the DOJ was instrumental in recovering.

The DOJ highlighted the following trends in the FY 2018 health care related FCA claims:

Actions Against Pharmaceutical and Medical Device Companies:

  • The DOJ gained its largest recoveries from FCA claims brought against the drug and medical device industry. For example, the DOJ and state Medicaid programs recovered $625 million in a settlement with AmeriSource Corporation (AmeriSource) and some of its subsidiaries.  AmeriSource paid the settlement amount to resolve allegations that it circumvented national drug supply chain safeguards and profited from repackaging drugs supplied to cancer patients.
  • Alere, a life sciences company, paid $33.2 million to the DOJ and state Medicaid programs to resolve claims that it sold materially unreliable testing devices. The devices were intended to help clinicians with diagnosing drug overdoses, acute coronary syndrome, and other serious medical conditions.
  • The DOJ also brought FCA claims against pharmaceutical companies that improperly used charities to pay pharmaceutical co-pays. Both United Therapeutics Corporation and Pfizer settled with the DOJ for allegedly using foundations to funnel improper payments of co-pays, which allowed the pharmaceutical companies to raise the prices of their drugs.  United Therapeutics Corporation paid $210 million to settle the allegations and Pfizer paid $23.85 million to resolve the claims against the company.

Cracking Down on Inflated Risk Adjustments:

  • In 2018, another DOJ focus area was to bring actions against providers and plans that allegedly caused inflated risk adjustments. For example, HealthCare Partners Holdings, LLC (HCP), which was acquired by and was doing business as DaVita Medical Holdings, LLC, paid $270 million to resolve liability under the FCA.  DaVita, upon acquiring HCP, voluntarily disclosed to the government that HCP had provided inaccurate information to Medicare Advantage Organizations that resulted in inflated Medicare payments, and other improper practices conducted by HCP.  The settlement also resolved whistleblower claims alleging that HCP had been conducting “one-way” chart reviews.  “One-way” chart reviews can result in providers finding additional diagnosis in a patient record and reporting these newly found diagnoses to a managed care plan, which in turn allows the plan to receive greater revenue from the Medicare program.
  • Similarly, UnitedHealth Group, Inc. (UnitedHealth) allegedly knowingly obtained inflated risk adjustment payments from Medicare. The government argues that the payments were inflated because UnitedHealth allegedly provided untruthful and inaccurate information about the health status of beneficiaries enrolled in its Medicare Advantage Plans.  The DOJ and UnitedHealth are currently litigating the case.
  • The DOJ also noted allegations against Health Management Associates. The provider allegedly billed for inpatient services when the services provided were observational and out-patient services.  Health Management Associates paid $216 million to settle the allegations.

Anti-Kickback Statute Violations can lead to FCA Liability:

  • The DOJ emphasized the following: Congress takes the position that claims resulting from federal Anti-Kickback Statute (AKS) violations, and subsequently submitted to federal health care programs, are false claims under the FCA. For example, William Beaumont Hospital paid $84.5 million to resolve both AKS and resulting FCA violations.  William Beaumont Hospital allegedly had improper relationships with eight referring physicians that were intended to induce referrals.

The DOJ Continues to Focus on Individual Liability:

  • In addition to large pharmaceutical companies, health plans, and hospital systems, the DOJ also focused on individual liability in 2018. For example, a two-week jury trial ended in judgements against three individuals who paid physicians illegal cash remunerations of $10-17 per referral.  The kickbacks were disguised as “handling fees” for referrals to two blood testing labs.  The DOJ also introduced evidence that the kickback scheme resulted in the referral of patients for medically unnecessary tests.  The judgement totaled more than $114 million.
  • In another FCA and AKS action, a jury found for the United States in a case against Dr. Sonjay Fonn, Ms. Deborah Seeger, and their corporations DS Medical and Midwest Neurosurgeons. Fonn performed spinal fusion surgeries and used implants for which Ms. Seeger, his fiancé, received a commission.  The court awarded a $5.5 million judgment for the government.
  • Prime Healthcare Services Inc., Prime Healthcare Foundation Inc., and Prime Healthcare Management Inc. (collectively “Prime”) and its Chief Executive Officer Dr. Prem Reddy paid $65 million to settle FCA claims against the hospital system. Fourteen Prime hospitals allegedly were knowingly submitting false claims to Medicare.  According to the government, Prime knowingly submitted false claims for more expensive services associated with an admitted patient, when in most cases it was only medically necessary to provide the patients with less expensive outpatient care.  Reddy personally paid $3.25 million as part of the settlement.
  • Arthur S. Portnow, the owner and operator of a medical and cardiovascular group paid $1.95 million to settle FCA allegations against his practice. Dr. Portnow and the practice allegedly knowing sought reimbursement from Medicare for medically unnecessary ultrasounds.
  • Similarly, Dr. Michael Frey paid $2.8 million as one of the principle owners of Advanced Pain Management Specialists, P.A. to settle FCA claims that he and the practice allegedly received illegal kickbacks and ordered medically unnecessary laboratory tests.

Whistleblower Suits:

  • Although qui tam suits were slightly down in FY 2018, they made up the overwhelming majority of FCA suits initiated in FY 2018. There were 645 qui tam suits filed and 446 resulted in monetary settlements or awards in FY 2018; this contrasts with the 60 non-qui tam related FCA suits brought in FY 2018.  Of the over $2.5 billion recovered from health care related FCA claims in FY 2018, over $1.9 billion were the result of qui tam-initiated actions.
  • Additionally, the number of non-qui tam cases increased by only five cases between FY 2017 and FY 2018, but the amount recovered in FY 2018 was almost 18 times the amount recovered in FY 2017. In FY 2017, non-qui tam cases resulted in over $32.5 million in recovery and in FY 2018, cases resulted in over $568 million in recovery.

The DOJ press release is available at:

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