False Claims Act 60 Day Clock on Retained Overpayments Begins on Initial Notice

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The Southern District of New York has put healthcare providers under the gun to act quickly when confronted with information that they may have received overpayments from Medicare and Medicaid or else have liability and treble damages imposed on them by the False Claims Act. In a decision in early August, the Court rejected Defendants theory that the 60 day clock set forth by the Patient Protection and Affordable Care Act of 2010 for a reverse false claim started when the Defendants were certain that an overpayment occurred.

The SDNY decision is the first in a case involving the question of retained overpayments. The complaint was filed in April 2011 and both the United States and the State of New York intervened in the litigation.

The United States’ Complaint-in-Intervention sets forth the operative facts. A software glitch beginning in 2009 and patched at the end of 2010 led the Defendant hospitals to mistakenly bill secondary payers for services covered by other insurance. After New York questioned its bills in September 2010, one of the Defendants tasked the Relator with creating a compressive list of potential claims for payment made in error. In early 2011, the Relator identified more than 900 claims totaling over $1 million. Approximately half of the claims listed did not actually involve overpayments by the government, but the vast majority of those listed did involve erroneous billing. Ultimately, the payments for those false claims identified did not conclude until March 2013.

The question on the motion to dismiss was whether the Relator identified the overpayments when including them on the 2011 list of possible errors or did the 60 day clock in the law start running when they were conclusively ascertained. The Court held that the U.S. had sufficiently alleged a viable complaint under the law that the claims were identified in 2011 and that the Defendants had the requisite scienter to warrant proceeding with the case.

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Record Breaking Settlement of Declined False Claims Act Lawsuit


DaVita Healthcare Partners agreed to pay up to $495 million to settle a False Claims Act lawsuit brought by two whistleblowers, a doctor and a nurse, that worked at DaVita. It is the largest settlement ever in a case where the Department of Justice chose to decline intervention. The company has now agreed to pay nearly $1 billion to settle allegations of Medicare and Medicaid fraud since 2012.

DaVita provides dialysis services to patients with chronic kidney failure and end stage renal disease.  The lawsuit concerned allegations that DaVita wasted medicine in vials and billed Medicare for it. The CDC since 2002 has allowed the reuse of single-use vials in the drugs at issue if proper procedures are followed. The company billed Medicare for the unused portions of the drugs which it discarded.

What is a declined case? The government, after conducting an investigation on the merits of the litigation, generally intervenes and takes over prosecution of the civil claims in around 20 percent of cases brought under the False Claims Act. The rest of the whistleblowers receive a declination letter from the Department of Justice which informs the relator (as a whistleblower under the FCA is known) that they may continue the lawsuit on the government’s behalf (this is what is meant by qui tam, which you may often see in this context).

There have only been five years in the history of the False Claims Act where non-intervened cases reached settlements or judgments exceeding $100 million. Looking at the statistics since 1987, none of the annual totals of these cases exceeded $200 million.

In the past, relatively few non-intervened cases reached a successful settlement or judgment. Some whistleblowers evaluate the situation and decide that they are not interested in prosecuting it themselves if the government isn’t interested in vindicating the fraud against them. However, the success ratio may be improving as more law firms have decided to take these cases and run with them against the large corporations that they challenge.

When False Claims Act cases like these settle, the whistleblowers who file them typically get between 15 and 30 percent of the settlement. The law mandates these percentages, but there are few situations where the amount paid could be less than the minimum award. However, the Department of Justice, on behalf of the U.S. Government, investigated the relator’s claims and declined to intervene in it. In a declined case, the mandated percentage by the law is between 25 and 30 percent.

If you have additional questions about how these lawsuits worker, or have evidence of misconduct by a company which you wish to report, contact one of our Philadelphia FCA attorneys.

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The Latest on Olympus

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It turns out the superbug lawsuits aren’t the only legal problems for the manufacturer of duodenoscopes. Olympus has now reserved almost $450 million to settle claims of illegal marketing of its products from 2006 to 2011. These allegations involve the payment of kickback to doctors in violation of the False Claims Act, which is among the type of cases that our whistleblower attorneys handle.

The investigation may not be confined to the US. It looks like Olympus has also reported problems to the DOJ with payments to doctors in Brazil for travel, meals and entertainment. I haven’t done any research into the Brazil health care system, but if these doctors work for state-owned enterprises, I suspect the investigation is into potential FCPA violations.

Olympus has also been sued in Pennsylvania state court by two women accusing the company of spreading cancer with their device for laparoscopic power morcellation. The lawsuits accuse the company of failing to design the PKS PlasmaSORD Bipolar Morcellator to reduce the risk and argues that the company should have known about the problem.

Also in the news from Olympus, but related to its scopes and superbug contamination:

A two day advisory committee meeting declared duodenoscopes unsafe but did not instruct the FDA to stop their use by doctors. Instead, the 16 member panel of doctors, health experts and consumer representatives recommended that the FDA require the devices be redesigned.

Olympus and the two other scope manufacturers declined to participate in the two-day FDA panel. They haven’t released safety data about the effectiveness of their new, revised cleaning instructions, either.

Yet, Olympus is now claiming that human errors in the reprocessing of duodenoscopes may be at least partially to blame for the superbug infections. Physicians have contended that a design flaw in the devices makes them difficult to clean.

In early May, the FDA disclosed that it has received 142 reports of contaminated devices and possible patient infections since 2010. Approximately 50% of those came in 2013 and 2014.

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The Explosion of Hospice Fraud and the False Claims Act

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One area of health care where there have been a handful of whistleblowers recently is hospice fraud. Hospice spending has exploded from nearly $3 billion in 2000 to over $15 billion in 2012, according to a Pittsburgh Post-Gazette article on hospice fraud published yesterday.

Medicare Payment Guidelines Driving Therapy Decisions

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There was an article in the Wall Street Journal today about the increasing percentage of patients on ultra high therapy in nursing homes. Over the past twelve years, the percentage of patients receiving the highest level of federal payments for nursing care has skyrocketed from under 10% in 2002 to more than 50% in 2013.

Although not conclusive, this sort of increase seems characteristic of a system fraught with Medicare fraud. With numbers like these, we expect to see more whistleblowers filing False Claims Act lawsuits (or presently filed cases becoming unsealed). There have already been at least three filed against HCR ManorCare. In April, the Justice Department announced it would intervene in the lawsuits and pursue an enforcement action against the skilled nursing facility operator.

The complaints that we have seen in cases like this one are generally pretty horrific. They recount stories of nursing homes providing lengthy therapy sessions to deteriorating patients incentivized by the Medicare billing guidelines. Nursing homes which provide more than 720 minutes of therapy per week could bill the U.S. Government’s Medicare program for an average of $559 per day.

The article also draws attention to the number of patients getting the highest level of therapy in nursing homes and then going into hospice care. Hospice payments have been made for those patients who are dying and seems a bit contradictory for the facilities to be using high levels of rehab on patients who are about to be declared beyond hope for treatment.

This is not the only area where newspapers have noted problems among health care providers. This article follows one published in the Wall Street Journal at the beginning of June noting the large percentage of long term care patients discharged by hospitals around the time of maximum earnings. The study of ventilator patients published by Health Affairs concluded that decisions are not being driven by patient need.

Instead, the even distribution of discharges before the prospective payment system was implemented soon led to a large and noticeable grouping of patients discharged on or immediately after the highest level of Medicare payments kicked in. This suggests either that patients were kept longer than medically necessary in order to fraudulently obtain additional government payments or they were released earlier than warranted to put their health at risk.

In April, President Obama signed a bill passed by Congress that would stop Medicare payment reductions to doctors and focus more on the quality of care they provide. This legislation followed up on an earlier initiative under the Affordable Care Act to reward doctors with more pay when they provide high quality care at lower cost. Until initiatives like these begin solving the problems identified in these two areas, we will have to depend on whistleblowers to inform the government about fraudulent billing practices.

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Don’t Allow Companies To Buy Their Way Out of Fraud Investigations Today


For many, today is the day to exercise their right to participate in a representative democracy established more than 200 years ago by the founders of the United States of America. For others, it is the time to change a political climate hostile to their business and put a friendlier face in office in case their corporation needs a political ally in the future.

Today’s midterm election has been the most expensive in U.S. history. A non-partisan group tracking political spending has projected $4 billion in spending by politicians and interest groups. Approximately 25% of the money spent, or roughly $1 billion, came from interest groups not formally tied to a party or candidate.

What did their $1 billion buy? At best, the opportunity to promote a candidate with a more favorable platform to a win at the election. At worst, they urged Americans to vote for a sympathetic ear to their cause gained through past political donations or other connections.

Corporations have been using using their money and connections to attempt to influence elections for years. As a New York Times op-ed last week pointed out, the SEC does not even require companies to disclose to shareholders their political spending. The fact that many of the organizations they donate to are created for the sole purpose of supporting the election of candidates with particular beliefs and obfuscate the identity of supporters poses additional concerns.

Even Christian pastors are stepping into the game, flouting IRS rules requiring tax-exempt 501(c)(3) organizations to steer clear of endorsing or funding political candidates. Instead, thousands are now endorsing candidates in Sunday sermons to help elect politicians who will create rules that support their beliefs.

Improper influence is not limited to elections, either. Last week, the New York Times had an extensive article about corporate lobbying of State Attorneys General in order to avoid litigation or minimize the cost of settling charges of misconduct.

This is an issue that hits home here. We are frequently called on to convince state attorneys in the 29 states with a version of the False Claims Act to take the information our clients give them and use their resources to prosecute the company. Their decision to intervene should be based on the quality of the information provided, the merits of the legal arguments and the resources required of the state. It should not be a political decision dependent on the quality of the corporation’s lobbying efforts.

Lobbying is not limited to the states, unfortunately. Healthcare companies, the industry most targeted by the False Claims Act in the past ten years, have spent millions lobbying the Senate and House for regulatory approvals and favorable CMS reimbursements. According to Modern Healthcare, which tracks healthcare lobbying, organizations representing health professionals spent $85 million on lobbying last year alone.

Although we recognize that many individuals are dedicated public servants who work hard to protect their citizens, the anecdotal evidence is still alarming. The power of elected officials to exercise their discretion or change the rules of the game in order to help their friends and contacts is too great.

If an individual stands for issues that you care about, then by all means vote for them in the election today. But do not be swayed by the marketing machine of corporations that spend their money to ensure career politicians will help them avoid the consequences of their actions when they are later caught breaking the law.

OIG Report: Ambulance Fraud of $50 Million in Six Months of 2012

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An investigation by the Inspector General’s office detected Medicare payments for potentially fraudulent ambulance rides of $54 million in the first half of 2012. During the year, Medicare Part B paid $5.8 billion for ambulance transportation, double what it paid ten years earlier.

The investigators found approximately $24 million in payments by Medicare were not for rides valid under the program requirements. Additionally, Medicare paid $30 million for transportation where there is no evidence that services were provided for the patient at either the pick-up or drop-off location. If the amounts are extrapolated out to a full year, that would be more than $100 million lost to Medicare fraud in this area alone.

The problem was not limited to one company or geography. Approximately one in five suppliers had questionable billing and four metropolitan areas accounted for half of the questionable transports. One of the areas was Philadelphia, with Los Angeles, New York and Houston also causing problems.

The report details a number of the various fraudulent schemes uncovered as background. These include unnecessarily transported patients, upcoding claims from basic to advanced life support transportation, and transporting patients to and from home when that level of service is limited to emergencies. Other claims involved the falsification of transport documents, transporting patients together but submitting claims for reimbursement of individual transports, and the illegal payment of kickbacks to patients.

There were also a number of unusual scenarios, such as urban ambulance services requesting reimbursement for rides with an average distance of more than 100 miles per ride when the national average is just 10 miles. Additionally, 46 ambulance companies were paid for transportation where there is no evidence of medical services provided in 9 out of the 10 rides.

The results of the OIG were shared with Medicare last year and they have already started taking action upon them. One way that individuals can assist Medicare is by bringing cases of ambulance fraud to the attention of the Justice Department through a False Claims Act lawsuit. This law provides whistleblowers (known as relators under the law) with rewards of between 15 and 30 percent of money recovered by the federal government due to fraudulent claims for Medicare and Medicaid payments.

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Wyeth Rebate Case to Join Ten Largest False Claims Act Settlements


Pfizer announced an agreement in principle to resolve a long running False Claims Act lawsuit against its subsidiary Wyeth for $785 million a few weeks ahead of trial. Wyeth engaged in the conduct at issue from 2001 to 2006 according to the amended complaint. Wyeth was acquired by Pfizer in 2009.

Kickbacks between Insurers and Labs Raise Anti-Fraud Ire


Recently, United States Senators Max Baucus and Charles Grassley, known standard-bearers in the fight against fraud, opened an investigation into the Medicare practices between certain health insurers and clinical laboratories. The point of conflict revolves around the practice referred to as “pulling through,” which means that health insurers steer tests to certain labs in exchange for discounts or payments from these labs. In particular, the parties that the Senators are interested in are the clinical labs Quest Diagnostics and Laboratory Corp. of America and the health insurers Cigna, Aetna and UnitedHealth Group. Pull through arrangements would violate federal anti-kickback laws, which prohibit anyone from “knowingly and willfully receiving anything of value to influence the referral of federal health care program business, including Medicare and Medicaid.” If it is proven true that these companies participated in fraudulent and corrupt practices, then they should face severe repercussions from the government.

This is not the first time that one of the labs, Quest Diagnostics, has been involved in a kickback controversy. The company agreed to pay $241 million in May of this year to settle a whistle-blower lawsuit that claimed they overcharged the state’s Medicaid program and gave illegal kickbacks of discounted and free testing to doctors, hospitals, and clinics. In August, LabCorp and UnitedHealth Group were charged in another whistle-blower lawsuit that dealt with the same pull-through scheme. Clearly Quest, LabCorp, and UnitedHealth have not learned from their past transgressions if the companies are again embroiled in allegations of kickbacks and fraud.

Looking at this situation, it isn’t surprising that these health insurance companies continually attempt to game the system by looking for kickbacks and taking advantage of the Medicare and Medicaid system. These programs were created with the intention of providing healthcare to ordinary Americans that may not have access to private insurance. Instead of facilitating a public service, many of these insurance companies are aiming to boost only their bottom-line. The labs and the insurance companies in this case have not yet been found to have violated federal law outright, but given their past transgressions, Baucus and Grassley are doing the right thing by investigating their practices. The Senators have said that recent litigation and whistle-blower lawsuits caused them to start the investigation and inquiry into these business practices. This shows the important role that whistleblowers play in holding people accountable for their fraudulent actions. Health care whistleblowers need to be protected and allowed every possible opportunity to help expose corrupt and illegal behavior.

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Young Law Group, P.C., Attorneys-at-Law, are Philadelphia False Claims Act lawyers represents whistleblowers nationwide. For a free confidential consultation, please call Eric L. Young, Esquire at 1-800-590-4116 or email to eyoung@young-lawgroup.com.


Medtronic Shelling out the Big Bucks


Medical device manufacturer Medtronic has voluntarily disclosed that it paid almost $16 million in royalties and consulting fees in the first quarter of 2010.  Of this amount, the vast majority–$14.2 million–went to orthopaedic specialists or surgeons, with $13.9 million of that in the form of royalties for surgical inventions. More than 200 doctors were the beneficiaries of Medtronic’s largess, including 13 in Medtronic’s squeaky-clean home state of Minnesota. One orthopaedic surgeon in Tenessee received almost $4 million in royalties!

Investigators with Senate Finance Committee under  Senator Chuck Grassley have been investigating Medtronic’s relationship with several orthopaedic surgeons for years. In 2006, Medtronic agreed to pay the government $40 million to settle allegations that the company paid kickbacks to surgeons to get them to buy Medtronic products. The DOJ described Medtronic’s relationships with doctors as “sham consulting agreements, sham royalty agreements and lavish trips to desirable locations” which the company offered to doctors between 1998 to 2003.

Medtronic makes big money off of the products it allegedly pays doctors to endorse. For example, Medtronic made $815 million in 2007 alone off of Infuse, a spinal product, which was the subject of a whistleblower lawsuit. With such enormous profits at stake, it is not surprising that device manufacturers like Medtronic pay fees to doctors and sponsor junkets.

Once again, all of this goes back to the ever-increasing role drug and medical device companies play in our lives. Health care is such a big business (emphasis on business) that the major players like Medtronic will keep shelling out what seems like big bucks for serious ROI. As more Americans become insured under the new health care bill and a whole new market opens for drugs and devices, the pecuniary carrot will be all the more enticing to these companies.

This article is brought to you by the QTT, the epicenter for whistleblowers and people interested in the False Claims Act, Qui Tam Provisions, and Medicare and Medicaid fraud. To discuss a potential case, please call Eric Young at 1 (800) 590-4116.

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