Recent Qui Tam Cases Part 1: Medicare and Medicaid

A good way to understand what may qualify as a qui tam case is to consider some recent examples. Qui tam encompasses many, many areas (think about how many things the government pays individuals and companies to “git ‘r done”). We’ll try to focus on the hot areas that are seeing the most action right now.

First in this series is the white-hot area of Medicare and Medicaid fraud. There is big money at stake in this area, and it seems that some companies just can’t stop themselves from illicitly taking a huge helping of taxpayer dollars. Here are some recent cases.

McAllen Hospitals L.P., d/b/a/ South Texas Health System, a subsidiary of Universal Health Services Inc., announced in October 2009 that it would pay $27.5 million to settle a qui tam case. The qui tam whistleblower alleged that the hospital group illegally paid kickbacks to doctors in McAllen, Texas, to get the docs to refer patients to the group’s hospitals. These payments were disguised through a variety of sham contracts. Under the federal Stark Law, physicians are prohibited from referring Medicare/Medicaid patients to an entity with which the physician has a financial relationship (subject to a few exceptions).

Also in October 2009, four pharmaceutical companies agreed to pay $124 million to settle a qui tam suit alleging Medicare fraud. The companies, including Mylan Pharmaceuticals, UDL Laboratories, AstraZeneca Pharmaceuticals, and Ortho McNeil Pharmaceutical, were accused by a whistleblower of failing to pay rebates to state Medicaid programs. According to the Medicaid Drug Rebate Program, drugmakers must enter into a national rebate agreement with the Department of Health and Human Services in order for states to get federal funding for drugs (obviously drugmakers are eager to have their products dispensed in every state, so they agree to pay these rebates). The four drugmakin’ defendants failed to honor the rebates they were required to pay to the states, and this constituted fraud.

In November 2009, the DOJ intervened in a qui tam case against Virginia Medicaid providers. The suit alleged that the providers, Universal Health Services Inc., Keystone Marion LLC, and Keystone Education and Youth Services LLC committed Medicaid fraud while they were running a mental health treatment facility for young boys. Specifically, the providers were alleged to have provided substandard care in violation of state and federal Medicaid requirements, falsified records, and filed bogus Medicaid claims.

Also in November, the largest nursing home pharmacy in the country, Omnicare Inc., of Covington, Kentucky, and a drug company, IVAX Pharmaceuticals, agreed to pay a collective $112 million to settle claims that they were involved in kickback schemes to bilk Medicare in violation of the Anti-Kickback Statute. This qui tam suit alleged that the pharmacy solicited and received kickbacks from Johnson & Johnson in return for recommending to physicians that they prescribe J & J’s now-notorious anti-psychotic drug Risperdal to nursing home patients. The suit also alleged that the pharmacy got millions in kickbacks in exchange for agreeing to buy $50 million worth of drugs from IVAX.

Unfortunately for Johnson & Johnson, its kickback scheme with Omnicare has also led to a qui tam suit being filed against J & J itself. In January 2010, the government announced that it was joining the qui tam suit against J & J for paying kickbacks to Omnicare to push Risperdal and other drugs. That case is raising some other qui tam issues, mostly about which whistleblower was the first to file (each of the two whistleblowers who filed separate claims are maintaining that they filed first).

Finally, a dental management company that runs “Small Smiles Centers” across the country is probably not smiling after it agreed to pay $24 million to settle claims that it defrauded Medicaid by performing unnecessary services on children. FORBA Holdings LLC allegedly performed many dental procedures (e.g., root canals) on low-income kids that were either not medically necessary or were performed in a sub-standard manner. FORBA then submitted claims to Medicaid for reimbursement, hence the False Claims Act violation.

For additional information about about whistleblower law or a free case evaluation, please contact one of our False Claims Act lawyers.