Walgreens settles False Claims suits for $270 million

https://www.healthcarefinancenews.com/news/walgreens-settles-false-claims-suits-270-million?mkt_tok=eyJpIjoiT0RrNVpXSmpZV1UzTTJVdyIsInQiOiJNNFh6MElhd0lmVE5Zc09kZTl5d3BPc1h3ZkRpZGNIbWhHSE9RNVp5NkN1MFwvXC9kK3h6WHh5KzRHTWdsQTlWZ203aitRRnhUYWZ5QTVScVZcL01HaTkyUm5LNDRvanVuY0NUdVN4Y0czMzRkMzdNZzMrdVp6WjlmV2N5WHYxMEkrNCJ9

Two cases emerged from whistleblower claims about improper billing related to discounted drug prices and insulin pens.

Pharmacy giant Walgreens will pay nearly $270 million dollars as part of two major settlements, one that alleged the company had improperly billed federal healthcare programs for insulin pens it distributed to beneficiaries who didn’t need them and another that alleged Walgreens failed to disclose and charge lower drug prices offered through a discount program.

Both settlements were approved in mid-January and unsealed Tuesday. Walgreens must pay the United States and state governments a total of $269.2 million. Both cases arose from lawsuits filed by whistleblowers under the False Claims Act. Walgreens did not admit any wrongdoing as part of either settlement.

THE IMPACT

The DOJ said as a result of the conduct alleged in both cases, federal programs were inappropriately taxed. The alleged inappropriate disbursement of insulin resulted in the waste of valuable medication and created the potential for misuse “such as the improper resale of insulin pens on the Internet.” Because the company did properly disclose its discounted drug prices, federal healthcare programs paid out higher reimbursements than were actually warranted.

MORE ON THE CASES

The first settlement resolved allegations that Walgreens improperly billed Medicare and other federal healthcare programs for “hundreds of thousands” of insulin pens dispensed to beneficiaries who didn’t need them. According to a statement from the Department of Justice, it was alleged that Walgreens programmed its electronic pharmacy management system to prevent its pharmacists from dispensing less than a full box of five insulin pens, whether the patient needed that amount or not. It also said Walgreens falsely stated that they had not exceeded limits set on total days of supply in its reimbursement claims. This settlement totaled $209.2 million.

In this case, the DOJ said Walgreens admitted that when a federal health program denied a claim because the reported days of supply for a full carton of five insulin pens exceeded the federal program’s days-of-supply limit, the company dispensed and billed for the full carton and reduced the reported days of supply to conform to the program’s days-of-supply limit. Walgreens also admitted that it “repeatedly” reported days-of-supply data to federal health programs that differed from the days-of-supply calculated according to the standard pharmacy billing formula.

The company will pay $60 million as part of a second settlement to resolve allegations it overbilled Medicaid by failing to disclose and charge Medicaid the lower drug prices that it offered the public through a discount program called the Prescription Savings Club. Legally, the company must seek reimbursement only for the “the lowest of certain drug price points, including the ‘usual and customary price'” namely the price offered through such programs as the PSC. Those prices were not disclosed, causing overpayment from Medicaid to Walgreens, the DOJ said. The agency also said that Walgreens admitted it did not identify its PSC program prices as its U&C prices for the drugs on the PSC program formulary, resulting in overpayments.

ON THE RECORD

“Walgreens is pleased to have resolved these matters with the Department of Justice. The company fully cooperated with the government and has admitted no wrongdoing. Walgreens is a company of pharmacists living and working in the communities we serve, and we have always taken the safety and reliability of the medicines our patients need very seriously. We are resolving these matters because we believe it is in the best interest of our customers, patients and other stakeholders to move forward…In relation to these matters, Walgreens has entered into a Corporate Integrity Agreement (CIA) with the Office of the Inspector General of the Department of Health and Human Services. The CIA builds upon the company’s already existing comprehensive compliance program,” Walgreens said in a statement.

“In both settlements, Walgreens admitted and accepted responsibility for conduct the Government alleged in its complaints under the False Claims Act,” the DOJ said in a statement.

Feds claim Kansas physician involved in $30M billing fraud scheme

https://www.beckershospitalreview.com/legal-regulatory-issues/feds-claim-kansas-physician-involved-in-30m-billing-fraud-scheme.html

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A Kansas physician and Hutchinson (Kan.) Clinic are defendants in a False Claims Act case the federal government recently intervened in, according to the Great Bend Tribune.

The government alleges Mark Fesen, MD, and Hutchinson Clinic billed Medicare and Tricare for more than $30 million for medically unnecessary medications and treatments, including chemotherapy.

The 45-page federal complaint provides nine examples of patients who received unnecessary treatments.

“These patient examples are not isolated examples, but instead representative examples of the medically unnecessary services Fesen and Hutchinson Clinic repeatedly billed to Medicare and Tricare,” states the complaint. “This is supported by the clinic’s own internal audits that found widespread problems with Fesen’s chemotherapy regimens, and particularly his use of Rituxan.”

A clinical pharmacist who worked in Hutchinson Clinic’s oncology department from 2007-14 originally brought the allegations against Dr. Fesen and the clinic under the qui tam, or whistle-blower, provisions of the False Claims Act.

 

 

DIALYSIS GIANT DAVITA DEFENDS ITSELF IN COURT AND AT THE POLLS

https://www.healthleadersmedia.com/finance/dialysis-giant-davita-defends-itself-court-and-polls?utm_source=silverpop&utm_medium=email&utm_campaign=ENL_181029_LDR_BRIEFING_resend%20(1)&spMailingID=14518965&spUserID=MTY3ODg4NTg1MzQ4S0&spJobID=1502250658&spReportId=MTUwMjI1MDY1OAS2

Dialysis, The Courts, and The Polls

Proposition 8 would wipe out DaVita’s earnings in California, according to recent investment firm reports. Passing the initiative ‘would be so devastating,’ to the tune of $450 million a year, that DaVita ‘would likely walk away from the state altogether.’

It’s been a year of playing defense for DaVita Inc., one of the country’s largest dialysis providers.

A federal jury in Colorado this summer awarded $383.5 million to the families of three of its dialysis patients in wrongful death lawsuits. Then this month, the Denver-based company announced it would pay $270 million to settle a whistleblower’s allegation that one of its subsidiaries cheated the government on Medicare payments.

But its biggest financial threat is a ballot initiative in California that one Wall Street firm says could cost DaVita $450 million a year in business if the measure succeeds.

Despite these recent hits, the company continues to rake in profits and receive favorable ratings from stock analysts. Its shares are trading at about $65 a share, only about 19 percent below a 52-week high set in January. That’s largely because DaVita controls about one-third of a growing market, health experts say.

“They don’t really have many rivals, and they perform a necessary, lifesaving service,” said Leemore Dafny, a professor of business administration at Harvard Business School. “If you’re producing something people want to buy and you’re the only one making it, people are going to buy it.”

Patients with chronic kidney failure often need dialysis to filter the impurities from their blood when their kidneys can no longer do that job.

And as Americans live longer and get heavier, more people become diagnosed with kidney disease and possibly need dialysis. In 2015, 124,114 new patients received dialysis, up from 94,702 in 2000, a 31 percent increase, according to the U.S. Renal Data System.

DaVita is one of the largest dialysis providers in the country, operating more than 2,500 clinics nationwide. In California, the company operates 292 clinics, half of all chronic dialysis clinics in the state.

Its parent company, DaVita Inc., reported $10.9 billion in revenue last year and $1.8 billion in profits, almost all of which came from its dialysis business.

This year, company officials project the dialysis group will bring in $1.5 billion to $1.6 billion in profits. It’s a big turnaround for a corporation that could barely make payroll in 1999, when it was under review by the Securities and Exchange Commission for questionable accounting practices. Its success has largely been credited to CEO Kent Thiry, a colorful personality who has dressed up as a Musketeer and ridden a horse into corporate meetings to rally workers.

Now those big profits — generated from treating sick patients — has put a target on the company’s back, as well as that of its biggest competitor, Fresenius Kidney Care.

The Service Employees International Union succeeded this year in placing Proposition 8 on California’s Nov. 6 ballot, which would limit dialysis center commercial revenues to 115 percent of patient care costs. The ballot fight pits a well-funded industry against labor and the California Democratic Party.

DaVita declined to make anyone available for this article, but in a statement said Proposition 8 “will limit patients’ access to life-saving dialysis treatments, jeopardizing their care.”

Last year, roughly two-thirds of DaVita’s dialysis revenue came from government-based programs, such as Medicare and Medicaid. But that isn’t enough to cover its costs, according to the company’s 2017 annual report, which states that DaVita loses money on each Medicare treatment it provides. (Medicare covers dialysis for people 65 and older, and for younger patients after private insurance has provided coverage for 30 months.)

Instead, DaVita generates profits from commercial health plans, which it acknowledges pay “significantly higher” rates than government programs. The ballot measure targets those higher rates, which Dafny describes as “their bread and butter.”

The prospect of the measure passing led DaVita to delay or cancel plans to open new clinics in California despite growing patient demand, Javier Rodriguez, chief executive officer of DaVita Kidney Care, told investors on a call in May, according to the online equity research website Seeking Alpha.

A few months later, Rodriguez declined to provide a dollar amount when asked how the initiative would impact the company. Rather, he warned investors that it would become “unsustainable” for the industry to treat the estimated 66,000 dialysis patients in California, should the measure succeed.

Wall Street analysts agree that Proposition 8 would wipe out DaVita’s earnings in California, according to recent reports issued by investment firms J.P. Morgan and Baird. Passing the initiative “would be so devastating,” to the tune of $450 million a year, that DaVita “would likely walk away from the state altogether,” according to a March Baird report.

DaVita has poured $66.6 million into the opposition campaign as of Oct. 25, and rival Fresenius has contributed $33.6 million. That dwarfs $17.3 million in union contributions in support of the measure, according to campaign records filed with California’s secretary of state office.

Both Wall Street firms conclude that Proposition 8 is likely to fail, citing the industry’s massive spending and the union’s record of failure at the polls on other issues.

The company’s legal troubles don’t worry stock analysts, either; Baird’s October report on DaVita’s financial performance dedicates just two sentences to them. It notes that DaVita “is subject to numerous ongoing government investigations and inquiries, similar to most large-scale, high-profile Medicare providers.”

There are no specific references to the Colorado jury award this summer, which the company is appealing, over the death of three patients who died of cardiac arrest after treatment at DaVita clinics. Nor was there concern about this month’s $270 million settlement over Medicare billing.

That’s because those incidents are seen by investors as the cost of doing business — one-time hits that don’t affect a company’s earnings power in the future, said Matthew Gillmor, a senior research analyst at Baird.

“Almost all companies I follow, at some point, have had to pay a fine to the government,” Gillmor said.

Thiry, DaVita’s CEO, acknowledged that settlements, which aren’t good public relations, are a reality for large corporations, when The Denver Post asked him last year about the company’s previous legal battles.

“If, in a trial, you are found to be wrong on even a small part of the case, it could mean that you are excluded from Medicare, which typically would mean bankruptcy for your company,” Thiry said. “So, you are essentially forced to settle.”

 

 

Court Slaps $114M Judgment in Lab Kickback Scheme

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A U.S. District judge in South Carolina trebled the False Claims Act liability of three defendants who submitted nearly 39,000 false claims to Medicare and other government health programs.

The CEO of a medical testing lab and two affiliated sales executives have been hit with a civil judgement totaling $114 million for paying kickbacks to physicians for referrals.

The defendants are: Tonya Mallory, the former CEO of Richmond, Virginia-based Health Diagnostic Laboratory; and Floyd Calhoun Dent III, and Robert Bradford Johnson, co-owners of Alabama-based BlueWave Healthcare Consultants Inc., a third-party sales firm that contracted with HDL.

The facts:

  • The three defendants were found guilty of civil fraud in three whistleblower suits that were heard by federal jury in Charleston, South Carolina in January.
  • The defendants disguised payments to physicians as processing and handling fees of between $10 and $17 for each patient they referred to blood testing labs: HDL, and Singulex Inc., of Alameda, California.
  • Physicians referred patients to HDL and Singulex for medically unnecessary tests, which were then billed to federal healthcare programs.
  • The three defendants were found liable for submitting 35,074 false claims, worth $16.6 million submitted to Medicare and TRICARE by HDL, and 3,813 false claims, worth $467,935, submitted by Singulex.
  • Under the False Claims Act, the court trebled damages, offset settlement payments received from HDL and Singulex for the same claims, and awarded $63.8 million in penalties requested by the United States, for a total judgment of $114.1 million.

 

Why payers are flocking to the Medicare Advantage market

https://www.healthcaredive.com/news/why-payers-are-flocking-to-the-medicare-advantage-market/510589/

Medicare Advantage (MA) and the Affordable Care Act (ACA) exchanges are both federal programs, but they couldn’t be more different in payers’ eyes. Insurance companies are entering or expanding their footprints in the MA market, while simultaneously pulling back or out of the ACA exchanges. They’ve found success in MA. Not so much in the ACA exchanges.

Payers see MA as a stable market. That’s evident in the fact that MA premiums are expected to decrease by 6% next year. Insurance companies like stability. Insurers increase premiums by double digits when there isn’t stability, which is the case with the ACA exchanges.

A large part of the ACA exchanges’ problems is linked to actions and inaction in Washington, D.C. President Donald Trump’s administration stopped paying cost-sharing reduction payments to insurers, cut the exchanges’ open enrollment in half, reduced the exchanges’ advertising budget by 90%, offered proposed rules and executive orders that hurt the ACA and threatened not to enforce the individual mandate that requires almost all Americans to have health insurance.

Congress, meanwhile, has tried and failed to repeal the ACA this year. All of this created an unstable exchanges market, which resulted in payers leaving the exchanges or jacking up premiums by 20% or more for 2018.

Meanwhile, the MA market is a picture of stability and payer success.

  • There is a steady stream of new people eligible for Medicare daily, and many choose MA.
  • People usually don’t switch back from MA plans after leaving traditional Medicare.
  • Payers can easily convert members from traditional Medicare to MA via marketing campaigns.
  • The MA demographics are usually people who once had an employer-based plan, so they know insurance and how healthcare works. That also means they usually don’t have pent-up healthcare needs.
  • The CMS pays MA plans upfront for covering people with high healthcare costs and payers have enjoyed stable MA payments from the CMS.

So, MA members are easier to get and keep, they usually have fewer health needs and payers like the MA payment structure better than the exchanges, which get compensated at the end of the year. All of that equals a stable market for payers.

One-third of Medicare beneficiaries are enrolled in an MA plan this year compared to 25% just six years ago. Enrollment grew by 8% between 2016 and 2017 and the CMS recently announced that MA membership will grow by 9% to 20.4 million members in 2018.

Gretchen Jacobson, associate director with the Kaiser Family Foundation’s (KFF) Program on Medicare Policy, told Healthcare Dive that more than half of those in Medicare will have MA plans in many counties next year.

That growth isn’t expected to slow — especially with Republicans controlling both houses of Congress and the White House, according to Steve Wiggins, founder and chairman of Remedy Partners.

“With Republican control of the federal government, it is conceivable that Medicare Advantage will become a centerpiece of CMS’ strategy to control spending growth,” Wiggins told Healthcare Dive.

What more MA members and payers mean for hospitals and providers

With more MA members expected next year, the continual shift to MA will have mixed benefits for providers. Jacobson said it’s not entirely clear how more MA members will affect hospitals and providers. “One of our studies recently showed that the provider networks for Medicare Advantage plans greatly varies and these networks will become even more important as enrollment in Medicare Advantage plans grows,” she said.

Fred Bentley, vice president at Avalere Health, told Healthcare Dive that MA’s growth will present a whole new set of challenges for hospitals and health systems.

Bentley listed two issues:

  • Narrow networks
  • Tighter utilization management compared to Medicare’s fee-for-service model

recent KFF report found that 35% of MA enrollees were in narrow-network plans in 2015. Payers have increasingly turned to narrow networks to control costs and improve quality of care. To take part in the narrower networks, physicians usually have to agree to payer demands concerning cost and quality.

“Differences across plans, including provider networks, pose challenges for Medicare beneficiaries in choosing among plans and in seeking care, and raise questions for policymakers about the potential for wide variations in the healthcare experience of Medicare Advantage enrollees across the country,” KFF said.

Another issue for hospitals and providers is that more payers involved in capitated plans like MA will result in more pressure on providers and hospitals to focus on the cost of care, Michael Abrams, partner at Numerof & Associates, told Healthcare Dive.

“With Republican control of the federal government, it is conceivable that Medicare Advantage will become a centerpiece of CMS’ strategy to control spending growth.”

There’s also the issue of having too few MA payers in some regions. Aneesh Krishna, partner in McKinsey & Company’s Silicon Valley office, told Healthcare Dive the concentration of MA plans in certain markets is a worry for providers. “This concern would be magnified in markets where there is a similarly high concentration in commercial segments from the same payers, and where overall MA penetration is high,” he said.

There’s also a potential payment issue. MA generally reimburses at a slightly higher level than traditional Medicare, but utilization is managed more tightly. Krishna said providers willing and capable of sharing medical cost savings are “likely to see more benefit from the shift to Medicare Advantage plans.” However, MA networks are often narrow, which means providers will need to weigh the relative price/volume trade-offs of accepting MA.

More MA growth in the coming years

MA will have more payers and members than ever next year and the two largest payers, UnitedHealth and Humana, are expected to increase their footprint. Despite new payers showing interest in the market, Jacobson expects the market break down will look similar in 2018. She said small payers entering the market will offset the plans exiting MA next year.

The Congressional Budget Office (CBO) and HHS both project MA enrollment will continue to grow over the next decade. The CBO estimated that about 41% of Medicare beneficiaries will have an MA plan in 2027. UnitedHealth even predicted half of Medicare beneficiaries will eventually have an MA plan.

MA’s popularity with payers is easy to understand — 10,000 people turn 65 every day. The CBO expects 80 million Americans will be eligible for Medicare by 2035.

There’s also an opportunity in the MA market to sign up members quickly. Rachel Sokol, practice manager of research at Advisory Board, told Healthcare Dive that utilizing a strong marketing engine allows payers to grow MA membership. This is quite different from the employer-based market, which relies on payers working with companies.

Potential MA barriers

The MA market is largely positive for payers, but it does face challenges, including:

  • A small number of payers dominate the market
  • The CMS expects improved efficiency and savings
  • There is increased federal oversight, especially concerning possible overpayments to MA insurers

CMS is all in supporting MA plans and its marketspace. The agency last week proposed a rule with an aim toward improving quality and affordability in contract year 2019. According to the agency, the number of plans available to individuals will increase from about 2,700 to more than 3,100.

The agency is proposing to expand the definition of quality improvement activity to include fraud reduction activities, changing the medical loss ratio (MLR) requirements for Medicare Advantage plans. This change should excite payers because they can add the administrative service to the MLR ratio they are required to spend on healthcare, which is at least 85%. CMS states it believes the service will help combat fraud.

For now, the MA market is consolidated around only a handful of payers. UnitedHealth and Humana have more than 40% of the market. UnitedHealth has one-quarter on its own. KFF said UnitedHealth, Humana and Blue Cross Blue Shield affiliates make up 57% of MA enrollment and the top eight MA payers constitute three-quarters of the market.

Also, CMS is imposing improved efficiency in the traditional Medicare program. This could ultimately affect MA. Accountable care organizations (ACO) and bundled payments will “put downward pressure on the benchmarks used to set payment rates for Medicare Advantage plans,” Wiggins said.

This pressure will result in MA payers needing to either cut costs or trim benefits. “The former is difficult, except through narrow networks, and the latter will diminish the attractiveness of Medicare Advantage plans,” he said.

Then there’s the 800-pound gorilla in the market — potential overpayments. The Department of Justice (DOJ) has joined whistleblower lawsuits against UnitedHealth Group concerning MA overpayments. The lawsuits allege that UnitedHealth changed diagnosis codes to make patients seem sicker, which resulted in higher reimbursements to the insurer. A federal judge threw out one of the lawsuits in October.

The DOJ is investigating other MA payers for the same reason, and Congress is also interested. Sen. Charles Grassley (R-Iowa), chairman of the Senate Judiciary Committee, sent a letter to CMS Administrator Seema Verma in April questioning what CMS is doing to “implement safeguards to reduce score fraud, waste and abuse.” Grassley said there was about $70 billion in improper Medicare Advantage payments between 2008 and 2013 because of “risk score gaming.”

It’s understandable that investigators and Congress have grown interested in MA payers. The federal government paid $160 billion to MA payers in 2014. The CMS estimated about 9.5% of those payments were improper.

The combination of billions being paid to insurers, the potential for fraud and growing membership numbers make MA ripe for oversight. The stability of the market, particularly compared to other options for payers, however, will mean growth continues.

 

Operators of nearly 300 cancer treatment centers accused of illegally dividing up Florida market

http://www.beckershospitalreview.com/legal-regulatory-issues/operators-of-nearly-300-cancer-treatment-centers-accused-of-illegally-dividing-up-florida-market.html

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A 50-page federal whistle-blower complaint accuses Florida Cancer Specialists & Research Institute and 21st Century Oncology of illegally dividing services in southwest Florida to maintain their individual oncology care monopolies, according to the News-Press.

The lawsuit, which was filed under seal last year and recently made public, alleges the two Fort Myers, Fla.-based cancer care companies had an illegal “gentleman’s agreement” under which they provided exclusive patient referrals to each other.

The lawsuit further alleges Florida Cancer Specialists allowed unqualified medical assistants to service patients’ surgically implanted catheters.

The federal government declined to intervene in the case; therefore, the whistle-blowers will continue in the litigation.

The lawsuit was filed by Sharon Dill, who served as Florida Cancer Specialists’ vice president for human resources and chief human resources officer between 2012 and 2015, and Christina Sievert, Florida Cancer Specialists’ vice president of clinical financial services between 2013 and 2015.

Ms. Dill alleges she was fired after disclosing an unspecified disability. Ms. Sievert alleges Florida Cancer Specialists retaliated against her for waging a gender discrimination claim, according to the report.

Florida Cancer Specialists said it takes the allegations in the complaint seriously and is looking into the matter. 21st Century Oncology, which filed for Chapter 11 bankruptcy in May, told the News-Press it does not comment on pending litigation.

21st Century Oncology operates 179 cancer treatment centers across the U.S. and Latin America, and Florida Cancer Specialists has nearly 100 treatment locations.