Why one physician took the risk of becoming an F.B.I. informant to expose alleged Medicare fraud.
According to the DOJ, this is the ninth consecutive year that the organizations’ civil healthcare fraud settlements and judgments have exceeded $2 billion.
As part of the federal government’s increasing focus on issues of healthcare fraud, particularly in the Medicare space, the U.S. Department of Justice recovered $2.5 billion in settlements and judgments from False Claims Act Cases over the past year.
According to the DOJ, this is the ninth consecutive year that the organizations’ civil health care fraud settlements and judgments have exceeded $2 billion.
While the $2.5 billion number represents federal losses, the DOJ also said it also helped recover significant funds for state Medicaid programs
“Every year, the submission of false claims to the government cheats the American taxpayer out of billions of dollars,” Principal Deputy Associate Attorney General Jesse Panuccio said in a statement.
“In some cases, unscrupulous actors undermine federal healthcare programs or circumvent safeguards meant to protect the public health … The nearly three billion dollars recovered by the Civil Division represents the Department’s continued commitment to fighting fraudsters and cheats on behalf of the American taxpayer.”
The False Claims Act has its roots in groups trying to defraud the military during and after the Civil War and was significantly strengthened since 1986 when Congress increased incentives for whistleblowers to file lawsuits alleging false claims.
In healthcare, organizations across the industry were hit with False Claims cases including drug companies, medical device manufacturers, payer organizations and healthcare providers.
The single largest recovery over the past year was a $625 million settlement paid by drug wholesaler AmerisourceBergen to resolve a number of claims including that the company illegally repackaged injectable cancer drugs into pre-filled syringes and billing multiple doctors for individual drug vials.
The DOJ also brought cases against drug companies who increased drug prices by funding Medicare co-payments meant to serve as a check on healthcare costs.
In one instance, United Therapeutics Corporation paid $210 million over allegations that it illegally used a foundation to funnel co-pay obligations for Medicare patients taking its drugs. Pfizer paid nearly $24 million in a similar case, with the government alleging that the company raised the price of a cardiac drug called Tikosy by 40 percent over three months
One major case against Massachusetts-based medical device company Alere resulted in a $33.2 million settlement over allegations that it sold unreliable diagnostic devices meant to detect acute coronary syndromes, heart failure, drug overdose and other serious conditions.
On the provider side, the DOJ recovered $270 million from DaVita subsidiary HealthCare Partners Holdings for upcoding and providing inaccurate information to inflate Medicare Advantage payments.
Another major case was against former health system Health Management Associates which allegedly engaged in major Medicare fraud including illegal kickbacks to physicians for referrals, incorrect billing for observation and outpatient services and inflated facility fees.
When it comes to health plans, the government’s case against UnitedHealth Group over allegations that it knowingly obtained inflated risk adjustment payments for its Medicare Advantage beneficiaries is still ongoing.
The Trump administration has labored zealously to cut federal regulations, but its latest move has still astonished some experts on health care: It has asked for recommendations to relax rules that prohibit kickbacks and other payments intended to influence care for people on Medicare or Medicaid.
The goal is to open pathways for doctors and hospitals to work together to improve care and save money. The challenge will be to accomplish that without also increasing the risk of fraud.
With its request for advice, the administration has touched off a lobbying frenzy. Health care providers of all types are urging officials to waive or roll back the requirements of federal fraud and abuse laws so they can join forces and coordinate care, sharing cost reductions and profits in ways that would not otherwise be allowed.
From hundreds of letters sent to the government by health care executives and lobbyists in the last few weeks, some themes emerge: Federal laws prevent insurers from rewarding Medicare patients who lose weight or take medicines as prescribed. And they create legal risks for any arrangement in which a hospital pays a bonus to doctors for cutting costs or achieving clinical goals.
The existing rules are aimed at preventing improper influence over choices of doctors, hospitals and prescription drugs for Medicare and Medicaid beneficiaries. The two programs cover more than 100 million Americans and account for more than one-third of all health spending, so even small changes in law enforcement priorities can have big implications.
Federal health officials are reviewing the proposals for what they call a “regulatory sprint to coordinated care” even as the Justice Department and other law enforcement agencies crack down on health care fraud, continually exposing schemes to bilk government health programs.
“The administration is inviting companies in the health care industry to write a ‘get out of jail free card’ for themselves, which they can use if they are investigated or prosecuted,” said James J. Pepper, a lawyer outside Philadelphia who has represented many whistle-blowers in the industry.
Federal laws make it a crime to offer or pay any “remuneration” in return for the referral of Medicare or Medicaid patients, and they limit doctors’ ability to refer patients to medical businesses in which the doctors have a financial interest, a practice known as self-referral.
These laws “impose undue burdens on physicians and serve as obstacles to coordinated care,” said Dr. James L. Madara, the chief executive of the American Medical Association. The laws, he said, were enacted decades ago “in a fee-for-service world that paid for services on a piecemeal basis.”
Melinda R. Hatton, senior vice president and general counsel of the American Hospital Association, said the laws stifle “many innocuous or beneficial arrangements” that could provide patients with better care at lower cost.
Hospitals often say they want to reward doctors who meet certain goals for improving the health of patients, reducing the length of hospital stays and preventing readmissions. But federal courts have held that the anti-kickback statute can be violated if even one purpose of the remuneration is to induce referrals or generate business for the hospital.
The premise of the kickback and self-referral laws is that health care providers should make medical decisions based on the needs of patients, not on the financial interests of doctors or other providers.
Health care providers can be fined if they offer financial incentives to Medicare or Medicaid patients to use their services or products. Drug companies have been found to violate the law when they give kickbacks to pharmacies in return for recommending their drugs to patients. Hospitals can also be fined if they make payments to a doctor “as an inducement to reduce or limit services” provided to a Medicare or Medicaid beneficiary.
Doctors, hospitals and drug companies are urging the Trump administration to provide broad legal protection — a “safe harbor” — for arrangements that promote coordinated, “value-based care.” In soliciting advice, the Trump administration said it wanted to hear about the possible need for “a new exception to the physician self-referral law” and “exceptions to the definition of remuneration.”
Almost every week the Justice Department files another case against health care providers. Many of the cases were brought to the government’s attention by people who say they saw the bad behavior while working in the industry.
“Good providers can work within the existing rules,” said Joel M. Androphy, a Houston lawyer who has handled many health care fraud cases. “The only people I ever hear complaining are people who got caught cheating or are trying to take advantage of the system. It would be disgraceful to change the rules to appease the violators.”
But the laws are complex, and the stakes are high. A health care provider who violates the anti-kickback or self-referral law may face business-crippling fines under the False Claims Act and can be excluded from Medicare and Medicaid, a penalty tantamount to a professional death sentence for some providers.
Federal law generally prevents insurers and health care providers from offering free or discounted goods and services to Medicare and Medicaid patients if the gifts are likely to influence a patient’s choice of a particular provider. Hospital executives say the law creates potential problems when they want to offer social services, free meals, transportation vouchers or housing assistance to patients in the community.
Likewise, drug companies say they want to provide financial assistance to Medicare patients who cannot afford their share of the bill for expensive medicines.
AstraZeneca, the drug company, said that older Americans with drug coverage under Part D of Medicare “often face prohibitively high cost-sharing amounts for their medicines,” but that drug manufacturers cannot help them pay these costs. For this reason, it said, the government should provide legal protection for arrangements that link the cost of a drug to its value for patients.
Even as health care providers complain about the broad reach of the anti-kickback statute, the Justice Department is aggressively pursuing violations.
A Texas hospital administrator was convicted in October for his role in submitting false claims to Medicare for the treatment of people with severe mental illness. Evidence at the trial showed that he and others had paid kickbacks to “patient recruiters” who sent Medicare patients to the hospital.
The owner of a Florida pharmacy pleaded guilty last month for his role in a scheme to pay kickbacks to Medicare beneficiaries in exchange for their promise to fill prescriptions at his pharmacy.
The Justice Department in April accused Insys Therapeutics of paying kickbacks to induce doctors to prescribe its powerful opioid painkiller for their patients. The company said in August that it had reached an agreement in principle to settle the case by paying the government $150 million.
The line between patient assistance and marketing tactics is sometimes vague.
This month, the inspector general of the Department of Health and Human Services refused to approve a proposal by a drug company to give hospitals free vials of an expensive drug to treat a disorder that causes seizures in young children. The inspector general said this arrangement could encourage doctors to continue prescribing the drug for patients outside the hospital, driving up costs for consumers, Medicare, Medicaid and commercial insurance.
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.
Healogics, Inc. will pay up to $22.51 million to settle whistleblower allegations that billed Medicare for medically unnecessary and unreasonable hyperbaric oxygen therapy, the Department of Justice said.
Jacksonville, FL-based Healogics manages nearly 700 hospital-based wound care centers across the nation.
The settlement resolves allegations that from 2010 through 2015, Healogics knowingly submitted false claims to Medicare for medically unnecessary or unreasonable HBO therapy, DOJ said.
Healogics will pay $17.5 million, plus an additional $5 million if certain financial contingencies occur within the next five years, for a total potential payment of up to $22.51 million. The company has also has entered into a five-year Corporate Integrity Agreement with the Department of Health and Human Services Office of Inspector General.
“When greed is the primary factor in performing medically unnecessary health care procedures on Medicare beneficiaries, both patient well-being and taxpayer funds are compromised,” said HHS OIG Special Agent in Charge Shimon R. Richmond.
The settlement came as the result of whistleblower lawsuits filed by a former executive at Healogics, and a separate suit filed by two doctors and a former program director who worked at Healogics-affiliated wound care centers. The four whistleblowers are expected to share $4.2 million of the settlement.
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 Department of Justice obtained $2.4 billion in fraud and false claims settlements and judgments in fiscal year 2017, marking the eighth consecutive year recoveries in the healthcare sector exceeded $2 billion.
Here are four things to know about the DOJ’s false claims and fraud recoveries.
1. The DOJ recovered more than $900 million from the drug and medical device industry in fiscal year 2017. That total includes Shire Pharmaceuticals’ $350 million settlement. The settlement resolved allegations Shire, a multinational pharmaceutical company with its U.S. headquarters in Lexington, Mass., and one of its subsidiaries paid kickbacks and used other unlawful means to induce physicians and clinics to use or overuse Dermagraft, a bioengineered human skin substitute approved by the Food and Drug Administration for the treatment of diabetic foot ulcers. The settlement was the largest False Claims Act recovery by the federal government in a kickback case involving a medical device.
2. The DOJ also reported substantial recoveries from healthcare providers, including Cleveland, Tenn.-based Life Care Centers of America, which agreed to pay $145 million to settle allegations it caused skilled nursing facilities to submit fraudulent claims to Medicare for unnecessary rehabilitation services.
3. In another substantial settlement this year, Westborough, Mass.-based eClinicalWorks, an EHR vendor, and some of its executives and employees agreed to pay $155 million to resolve false claims allegations. The government alleged eClinicalWorks falsely obtained certification for its EHR software by withholding information from its certifying entity. Due to eClinicalWorks’ alleged misrepresentations, healthcare organizations using the company’s software submitted false claims for federal incentive payments, according to the DOJ.
4. In 2017, the DOJ continued to pursue physicians and healthcare executives involved in fraud cases to hold them personally responsible. For example, in 2015, Fort Myers, Fla.-based 21st Century Oncology paid $19.75 million to settle allegations it violated the False Claims Act by billing for medically unnecessary laboratory urine tests and paid bonuses to physicians based on the number of tests they referred to its laboratory. This year, the DOJ secured separate settlements with various urologists who allegedly referred unnecessary tests to one of 21st Century Oncology’s labs.