Is Telemedicine Fraud in our Future?

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A bipartisan group of members of the U.S. House of Representatives introduced a bill to expand Medicare coverage of telehealth services this month. Telemedicine is expected to be the wave of the future, with the growth in home health technologies ramping up globally from 14.3 million in 2014 to 78.5 million in 2020 according to Tractica, a digital health advisory service. However, if there aren’t adequate checks and balances in the system to prevent fraud, the costs to the system could easily overwhelm any cost savings and efficiency benefits to the new method of treating patients.

Medicare currently pays for telehealth services provided by certain practitioners to individuals in certain rural areas or counties outside of a Metropolitan Statistical Area. The Medicare Telehealth Parity Act of 2015 would expand the list of eligible providers and removes geographic barriers. The bill would move the system to parity between telehealth and in-person services in three phases.

If Medicare isn’t careful, this could make committing health care fraud easier for doctors that want to game the system. How much easier would it be for doctors to claims reimbursement for services rendered if they don’t even have to have patients come into the office?

The U.S. loses billions every year to Medicare fraud already. In 2012, an FBI report estimated the amount lost at between 3 and 10 percent of all health care expenditures. Every year, the U.S. recovers a couple billion in fraudulent payments thanks to whistleblowers, their attorneys, the Department of Justice and the False Claims Act. But that’s still a drop in the bucket compared to the amount lost.

On the other hand, the recording of the telecommunication sessions could permit better review of the bills provided by health care providers. The problem is simply one of scale. There may not be a way for the government to review the sessions from every provider for fraud. Ultimately, the question is whether more providers will try to take advantage of the new system and how many will slip through the cracks.

Telemedicine is coming. There are a lot of initiatives that advance the ball on it. The 21st Century Cures Act just passed the House last week. But the version of the bill that passed only calls for Medicare to study whether care may be improved by expanding telehealth services and does not call for the expanded reimbursement of services rendered through telemedicine. Another potential bill introduced in previous sessions, the Telehealth Advancement Act, would extend Medicare coverage in remote areas and strengthen the broadband communication infrastructure there to allow the services to take place.

We should figure out how to prevent the fraud that plagues the current system from expanding to include it as well. Otherwise, we will need more whistleblowers.

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How Common is Accounting Fraud?

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Accounting irregularities have come up a fair amount recently, from the increase in SEC investigations in this area announced at the beginning of the year to the SEC fine against CSC for $190 million in June. With a wave of new stories hitting the media, it doesn’t seem like this area of securities law is going to slow down anytime soon. Here are the latest areas related to accounting fraud to be getting coverage:

MBTA

At the end of June, Harry Markopolos, the whistleblower that famously attempted to notify the U.S. Government of the Bernie Madoff ponzi scheme, warned the SEC about accounting and investment reporting issues with the MBTA pension fund. After a six month investigation, Markopolos told the SEC and other agencies that the pension fund may be overstating its books by as much as $470 million out of the $1.6 billion pension.

Among the issues noted in their study of publicly released information by the pension fund:

  • They discovered statistically improbably events, such as a return on investment two years in a row of 17.7 percent.
  • They used a different accounting approach three years in a row to calculate asset valuation.

The Massachusetts Bay Transportation Authority operates the leading share of the bus, subway, commuter rail and ferry system in greater Boston. The pension plan is funded partly by taxpayers and covers the workers and retired employees of the transit system.

Interestingly, Markopolos did not submit the tip to the SEC whistleblower program for a reward.

CalPERS

A former SEC attorney is attempting to crowdsource an investigation into CalPERS. The California Public Employees’ Retirement System is America’s largest public pension plan with over $300 billion in assets.

Earlier this year, CalPERS told its Investment Committee that it couldn’t track how much money it was spending on private equity firms. Given that the SEC has been investigating advisers and the private equity industry for problems with their fee disclosures and hidden fees, we wouldn’t be surprised if a whistleblower emerges with information about how investment banks or private equity firms were fleecing public pension funds and is able to capture a reward in the future.

Toshiba

This Japanese corporation known in America for its personal computers is expected to have to restate profits lower by more than $1 billion due to accounting irregularities. The amount is nearly double the earlier estimates as it has discovered overstated profits in its computer and semiconductor business in addition to the earlier reported problems related to its contract with Tokyo Electric Power for smart grid technology. The company has yet to file its latest annual report due to the need for the accounting restatement.

Will accounting fraud be the next big area for the government to pursue once it wraps up the smaller mortgage fraud cases?  We’ll just have to wait to find out.

If you have evidence of accounting fraud at a publicly traded company, contact one of our SEC whistleblower attorneys to discuss reporting it to the U.S. Government. An attorney can be reached by our contact form or calling 1-800-590-4116.

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VMware settles Best Price Whistleblower Suit for $75.5 Million

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The Department of Justice has settled a False Claims Act case against VMware for $75.5 million. The lawsuit, initiated by a whistleblower, contained allegations that the company concealed its commercial pricing practices and overcharged the U.S. Government on products and services sold pursuant to the GSA Multiple Award Schedule contract entered into by VMWare and Carahsoft Technology Corporation.

The U.S. Government requires contractors to disclose the prices and discounts offered to commercial customers in order to ensure that government agencies are getting the supplier’s best price. The GSA regulations specify that prospective vendors applying for a MAS contract make After negotiation of the price(s) and establishment of the government contract, contractors must subsequently inform the government of changes to their pricing practices or discounts for commercial customers.

If they do not make accurate disclosures, the submission of claims for payment under the contracts can overcharge the federal government and violate the False Claims Act. In this case, the settlement resolved the allegations without a determination of liability.

The U.S. Government spends more than $80 billion a year on information technology currently. It is divided between civilian and defense spending, with civilian agency spending accounting for approximately $48 billion a year. With growing spending in this area, it seems like there is more False Claims Act litigation as well. Last summer, the Government intervened in another best price case brought by a whistleblower against CA Technologies.

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Medicare Advantage Plan Audit Finds Medicare Paid Too Much for Nearly Half of Patients

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A 2012 audit of a Medicare Advantage plan provided by UnitedHealth Group through PacifiCare of Washington State of 201 patients found 153 erroneous diagnoses out of 786 diagnoses. In total, the Government paid too much for nearly half of the patients on the insurance plan.

Medicare should have paid less in 49 percent of bills, with higher payments 15 percent in the audit. As a result, the government asked the health insurer to pay the difference, a total penalty for UnitedHealth of only $381,000 since the audit only involved a small number of cases and the government did not seek to predict the adjustment in the other patient populations.

And yet it formed the basis of a three year legal battle that remains ongoing. UnitedHealth objected to having to collect the medical records to support the erroneous diagnoses. 64 percent of the improper payments involved insufficient documentation. For example, 38% of the objectionable records lacked a physician’s signature.

The internal estimates of CMS officials concerning Medicare Advantage fraud totaled $13.5 billion in billing errors in 2010 alone. The Center for Public Integrity had previously estimated that improper payments to Medicare Advantage plans could top $12 billion in 2014.

A recent study by the National Bureau of Economic Research suggested that $2 billion of those improper payments are the result of upcoding. The working paper estimates that patients on Medicare Advantage plans have 6% to 16% higher risk scores than they would under traditional Medicare. The paper, which stops short of calling all issues the result of intentional manipulation, also suggests that CMS hasn’t gone far enough with its 2010 decrease in risk scores.

The Department of Justice has been investigating the use of risk adjustment scores in MA plans at healthcare plans, providers and vendors. Humana, one of the largest U.S. providers, has previously disclosed a government inquiry into its practices, for example. Several health care whistleblowers have already filed lawsuits under the False Claims Act to challenge fraud in insurance plans in this area as well.

Audits like the one performed on UnitedHealth are called Risk Adjustment Data Validation. If risk scores are inaccurate, it can cause Medicare to pay higher rates for people who are not as sick as the health care provider or insurer represents. In the audit, auditors typically review medical records to confirm that patient conditions are properly documented and the facility was entitled to payment.

The Center for Public Integrity obtained the documents concerning UnitedHealth through a FOIA request.

Medicare Advantage has been a hot topic since it now treats 17 million Americans at a cost of more than $150 billion a year. It is the subject of a few different bills in Congress at the moment. A recent bill to extend the period of time for comment on rates and policy changes by 15 days just passed the House. And another to extend poorly rated drug plans set to be eliminated in 2015 to be extended until 2018 to give seniors using the Medicare plans a chance to find a different insurance plan.

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Massive Currency Manipulation Settlement Expected Wednesday

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The Justice Department is expected to announce a multi-billion dollar settlement this week (reportedly Wednesday) with five financial institutions over manipulation of the currency market. Barclays, which was not a part of the November global forex settlement, is expected to also resolve investigations by the CFTC, NY DFS and UK FCA at the same time for a sum that may be as high as $3.1 billion.

The Department of Justice has been investigating the banks for antitrust violations related to their rigging of the forex markets. Traders at the banks reportedly used electronic chat rooms to manipulate the markets and foreign exchange benchmark rates.

JPMorgan, Royal Bank of Scotland, Citigroup and UBS are expected to settle in addition to Barclays. UBS is still talking with the DOJ about possible criminal charges, but subsidiaries of the other four banks are expected to plead guilty to criminal charges. The banks are expected to pay as much as $1 billion each as part of the DOJ settlement. The media is reporting that the DOJ is pushing for a Wednesday announcement but wrapping up all of the loose ends on the agreements might take another day or two.

JPM, RBS, Citi and UBS were all part of the November settlement which resolved investigations by the CFTC, OCC and UK FCA, but not the DOJ. That deal provided them with a discount for early settlement of the charges. According to the media, Barclays backed out of the deal in November because it could not reach agreement with the New York Department of Financial Services as well. This agreement will reportedly carve out the NYDFS investigation into its use of electronic trading programs to manipulate the forex market to allow that aspect to go forward.

Citigroup also announced today that the DOJ had declined to prosecute it for LIBOR rigging. Including the Deutsche Bank fines last month, a dozen financial institutions have paid a total of about $9 billion to resolve investigations into Libor manipulation.

The deadline for submitting a whistleblower claim on most of the first set of Notices of Covered Actions has passed, with only Citibank still open for a few more days. If there was a forex whistleblower behind any of these actions, the award would likely set a record for the Dodd-Frank whistleblower programs. The highest reward handed out so far was by the SEC – $30 million to an international whistleblower last year.

For questions about this and other aspects of the CFTC whistleblower program, as well as assistance reporting violations of the Commodity Exchange Act to the U.S Government, contact one of our whistleblower attorneys via our contact form or by calling 1-800-590-4116.

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Truth in Settlements Act Pushes for Fraud Disclosures.

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Senators Elizabeth Warren and James Lankford have introduced the Truth in Settlements Act into Congress. The legislation requires companies and federal agencies to disclose additional information about settlements exceeding $1 million.

It is aimed at giving the American public a better idea of the costs businesses are paying for corporate wrongdoing and whether our regulators are effectively punishing these companies. A summary on Senator Warren’s website highlights a number of aspects of the legislation, including:

  • Federal agencies would have to explain the classification of settlement payments for tax purposes and credits for routine conduct.
  • Companies would have to disclose tax deductions from settlement payments in SEC filings.
  • Requires copies of settlements to be posted online as well as key details disclosed.
  • Explanations for confidential settlements and aggregate annual statistics on those settlements.
  • Commissions a GAO study on handling confidential settlements.

These summaries were pulled from what I imagine is the version of the legislation introduced into Congress last year.  If you agree that greater information about settlements entered into between companies and the Federal Government is a good idea, please write to your Congressional representatives!

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DOJ Fines Medical Device Companies $100 Million in 2014

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An annual report by the Departments of Justice and Health and Human Services identified more than $100 million in fines issued against medical device companies in 2014, according to FierceMedicalDevices. The total includes fines against Carefusion for off-label marketing, Boston Scientific’s Guidant for defective cardiology devices, Medtronic for kickbacks to doctors for pacemakers and Abbott Labs for encouraging the submission of false claims for surgeries to Medicare.

The False Claims Act is one of the primary tools in the government’s arsenal to fight fraud by medical device manufacturers. It has helped the government recover billions of dollars lost to fraud over the past 25 years. It also authorizes the Department of Justice to pay rewards of between 15 and 30 percent of the government’s recovery to whistleblowers who file a qui tam lawsuit and provide evidence of health care fraud.

In other news, recalls of medical devices have fallen by more than 50% in the first quarter of 2015 compared to Q4 2014, when there was a record 968, according to analysis by Regulatory Affairs Professional Society covered by FierceMedicalDevices. The 426 recalls was the second lowest total from the FDA’s data, which includes information going back to 2013. It reversed a trend of gains in three straight quarters.

The total number of devices recalled is not reflected in this information, however. It only measures the number of different models recalled. One model number recall could implicate hundreds or thousands of different devices.

The fall in recalls comes at the same time that medical device manufacturer Olympus has been caught up in the controversy over contaminated duodenoscopes leading to CRE superbug infections. The spread of deadly infections linked to the device and its decision not to seek FDA clearance when it sealed the elevator wire channel has already resulted in patient lawsuits seeking compensation for damages. Our law firm is investigating patient claims of infections caused by these devices.

IRS Releases Dirty Dozen Scams for 2015 as Tax Refund Fraud Flourishes

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The Internal Revenue Service has finished releasing its list of the top twelve tax scams for 2015. For the first time, the IRS highlighted one scam a day from January 22nd to February 6th instead of release the entire list at once. This week, it posted a summary of all of the schemes covered on the list. It is now available at: http://www.irs.gov/uac/Newsroom/IRS-Completes-the-Dirty-Dozen-Tax-Scams-for-2015.

Glancing at the list from 2014, it looks pretty similar. Phone scams, phishing and identity theft are all near the top. Taxpayers also need to guard against fraud by unscrupulous return preparers and fake charities seeking money illegitimately.

Offshore tax avoidance is still on the list, although a few years from now it may disappear once FATCA has been implemented. Over the next two years, the IRS will be examining data provided by foreign banks according to the timetables of FATCA in order to look for American taxpayers with income or assets overseas. Under the threat of large penalties, the IRS will have access to an unprecedented amount of information in order to catch offshore tax avoidance. With the possibility of a whistleblowing employee alerting the IRS to violations of FATCA, compliance should be high.

The statistics on tax-related identity theft are troubling and will probably necessitate major reform to IRS practices eventually. From 2011 through October 2014, the IRS has stopped 19 million suspicious returns seeking $63 billion in fraudulent refunds.

Despite its best efforts, the amount is growing quickly.Just two years ago, the number stood at $6.5 billion.  By 2016, it is expected to hit $21 billion a year.

Online return software TurboTax has already fallen victim to this practice, as a spike in fraudulent state tax returns from the service forced it to shut down e-filing of state returns temporarily while investigating the problem. Some taxpayers logging onto the system were told by the software that their return had already been submitted. The FBI is now looking into it after an initial investigation by TurboTax found no security breach of its system.

Amid these challenges, the IRS is also dealing with budget cuts. Congress has slashed the IRS budget by more than $1 billion since 2010. The most recent budget cuts caused the agency to hold off spending $200 million on improvements to its information technology, which surely won’t help its efforts to meet the technological demands of the FATCA data and fighting fraudulent returns.

President Obama’s budget proposal calls for an increase of $2 billion next year from its current fiscal 2015 budget of $10.9 billion. However, given the tight budget and Congressional hostility to the agency, this seems unlikely.

If you have questions about this post or have evidence of tax fraud you wish to report to the IRS whistleblower program, contact one of our tax whistleblower lawyers via our contact form or by calling 1-800-590-4116.  Our law firm offers a free, confidential initial legal consultation with a lawyer for whistleblowers.

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The $1+ Billion Settlements For Corporate Misconduct Possible in 2015

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Last post, we took a look at more than $40 billion in settlements between the government and corporations in 2014. After a year of record settlements including the largest civil settlement reached between the U.S. Government and a single entity, a decrease in the overall amount of fines should be expected. Nevertheless, it looks like there will still be multiple settlements over the next year reaching more than $1 billion.  Banks dominate the list once again as additional players will be resolving investigations into mortgage fraud and market manipulation that have been common in the financial industry over the past few years.

Here are the settlements we are currently watching for in 2015:

1. Royal Bank of Scotland – FHFA Mortgage Securities
RBS has yet to resolve the private label securities lawsuit filed by the Federal Housing Finance Agency in 2011 related to mortgage securities it sold to Fannie Mae and Freddie Mac. It is one of only two unresolved FHFA lawsuits and The Times reported that RBS may have to pay at least $7.7 billion to resolve the matter. The bank has already set aside $2.9 billion towards a settlement.

2. Standard & Poor’s – Mortgage Ratings
The subsidiary of McGraw Hill Financial faces a $5 billion lawsuit from the Department of Justice and a California lawsuit seeking $4 billion for its inflation of mortgage bond ratings. In July, the Wall Street Journal reported that S&P was open to paying more than $1 billion to resolve the charges brought by the Federal Government.  S&P may also make the news for a smaller settlement of more than $60 million to resolve an investigation into its practices governing grading of commercial real estate bonds in 2011 by the Securities & Exchange Commission, New York and Massachusetts.

3. Morgan Stanley – Mortgage Securities
Bloomberg has reported that Morgan Stanley could resolve a DOJ investigation into its mortgage-backed bond practices in the first few months of 2015.  Documents suggest that Morgan Stanley encouraged subprime lender New Century Financial to make risky loans from 2004 until 2007.  The potential settlement amount for the investigation into its due diligence practices and disclosures to purchasers has not been disclosed, but the number could be significant since New Century made more than $50 billion in mortgage loans in 2006 and was the second largest subprime mortgage lender behind Countrywide.

4. Commerzbank – Anti-Money Laundering and Sanctions
The Financial Times reported that Germany’s second largest bank could pay more than $1 billion to resolve an investigation of the Department of Justice, the New York State Department of Financial Services (NY DFS) and the Manhattan District Attorney’s office into anti-money laundering and sanctions violations. A settlement of $650 million was expected last year but delayed as authorities began investigating the bank’s role in the Olympus accounting scandal.

5. Deutsche Bank – Interest Rate Benchmark Manipulation
Deutsche Bank is under investigation by the U.S. and U.K.  for Libor manipulation between 2005 and 2011.  Settlement talks between the authorities and the European bank are still at an early stage but both UBS and Rabobank paid more than $1 billion to authorities globally to resolve similar allegations.

6. Barclays – FOREX
Barclays could be headed for a fine around $1 billion for FOREX manipulation because of its role in the same misconduct causing six banks to pay $4.4 billion to three regulators in November. Barclays reportedly pulled out of the global settlement with the Commodity Futures Trading Commission and the UK Financial Conduct Authority at the last minute because the NY DFS, where it is also under investigation, would not agree to a resolution. Citigroup and JPMorgan both paid more than $1 billion to resolve regulators’ investigations while receiving a 30% discount with the FCA for the early settlement.

7. General Motors – Ignition Switch Recall
GM discovered ignition switch problems with its vehicles more than ten years prior to its recall announcement in 2014.  It is expected to face a fine from the U.S. Government similar to the one paid by Toyota Motors.  Toyota paid $1.2 billion in March 2014 to resolve the investigation into its misleading disclosures over vehicle problems with unintended acceleration.  Arizona has already sued GM for $3 billion related to its delayed automotive recall of ignition switches. GM also faces a lawsuit from car owners seeking $10 billion for the lost value of their vehicles.

8. Wal-Mart – FCPA
Wal-Mart’s multi-year investigation into bribery allegations in Mexico and elsewhere will be moving from the investigation phase into settlement negotiations at some point over the next few years. 2015 is probably too early to expect a settlement but with spending on the internal investigation starting to slow it could be a hot topic at the end of 2015 and throughout 2016. Some have speculated that the potential resolution will require more than $1 billion, making it the largest FCPA fine ever.  Wal-Mart has already spent approximately $500 million to investigate the bribery charges.

Whistleblowers Earn $435 Million under False Claims Act in FY 2014 as DOJ Recovers $5.69 Billion

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Whistleblowers earned a record amount of money in Fiscal Year 2014 as they were paid $435 million in rewards by the Department of Justice. The $2.3 billion in health care fraud recoveries was also outpaced by $3.1 billion in federal funds recovered from housing and mortgage fraud in the financial industry. It is the first time in more than 10 years that the health care industry has not had the largest fraud settlements under the False Claims Act.

We owe a tremendous debt to whistleblowers. More than half of the money recovered by the Department of Justice was initially filed under the False Claims Act’s qui tam provisions. This trend should continue in the near future as more than 700 lawsuits were filed by whistleblowers for the second straight year.

Although the Justice Department receives fewer tips than the SEC, which has been averaging around 3000 a year, the amount recovered thanks to the False Claims Act still exceeds the Dodd-Frank law by a significant amount.

This is the first time that recoveries under the nation’s most successful law in the fight against fraud have exceeded $5 billion.

Here is a quick recap of the ten largest settlements of fiscal year 2014 highlighted by the DOJ in their press release:

Bank of America – $1.85 billion
Johnson & Johnson – $1.1 billion
JPMorgan Chase – $614 million
SunTrust Mortgage – $428 million
U.S. Bank – $200 million
Amedisys – $150 million
Omnicare – $116 million
Community Health Systems – $98.15 million
Halifax Hospital Medical Center – $85 million
BNP Paribas – $80 million

We will continue to update this blog post as we digest the information released.  Here is the link to the DOJ press release.

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