Tuesday, October 20, 2015

United States Settles With South Carolina Hospital for $72.4 Million After $237 Million Judgment

October 22, 2015 — On October 4, 2005, whistleblower Dr. Michael K. Drakeford, an orthopedic surgeon, filed a False Claims Act lawsuit against Tuomey Healthcare System for violations of the Stark Laws on behalf of the United States. The government intervened and took over the action.

The case alleged that Tuomey violated the Stark Law, which prohibits health care providers from billing Medicare for certain services that have been referred by physicians with whom the hospital has an improper financial relationship. Although there are exceptions to the rule, the law requires that any payments that a hospital makes to a referring physician be at fair market value for the physician’s actual services, and not take into account the volume or value of the physician’s referrals to the hospital.

Hospital was Warned that Contracts for Kickbacks Risky 

The United States alleged that Tuomey unlawfully entered into contracts with 19 specialist physicians that required the physicians to refer their outpatient procedures to Tuomey. In exchange, the hospital paid the doctors compensation that far exceeded fair market value and included part of the money Tuomey received from Medicare for the referred procedures. Billing for services improperly procured is considered Medicare Fraud. The United States even had evidence that Tuomey’s own attorneys warned Tuomey that the physician contracts were “risky” and raised “red flags.”

Why Did the Government Settle for Less?

The case went to trial on May 8, 2013, and the trial court entered a judgment under the False Claims Act in favor of the United States for $237 million. The Court of Appeals for the Fourth Circuit affirmed the judgment on July 2, 2015. So why did the United States settle for far less than the judgment?

It is difficult to ascertain this information from the public record, but it is likely due to the defendant’s ability to pay. By entering into a settlement agreement with Tuomey, the United States has further assurances that it will obtain payment from Tuomey for Tuomey’s wrongful conduct. According to the press release issued by the Department of Justice, Tuomey will be sold to Palmetto Health, a multi-hospital healthcare system based in Columbia, South Carolina. The whistleblower-relator, Dr. Drakeford, will receive approximately $18.1 million under the settlement for coming forward and reporting the fraud.

Contact Waters & Kraus to Report False Claims and Medicare Fraud

While Waters & Kraus is not handling this particular False Claims Act case, we are representing whistleblowers in similar Medicare fraud lawsuits. If you have comparable claims against a different medical facility, contact us by email, or call our qui tam attorneys at 800.226.9880. Learn more about our practice and how we can work together to notify the government about illegal kickbacks and Medicare Fraud.

This article was contributed by Louisa Kirakosian one of the qui tam attorneys in the firm’s Los Angeles office.

Thursday, October 8, 2015

Florida Hospital Pays $69.5 Million to Settle False Claims Act Case

October 15, 2015 — North Broward Hospital District (“Broward Health”), a taxpayer financed system of hospitals and health facilities, agreed to pay $69.5 million to settle federal charges that it made illegal payments to physicians using a secret compensation system that rewarded doctors for patient referrals and penalized them for accepting low income patients. 

The False Claims Act case was filed by Dr. Michael Reilly, a Fort Lauderdale orthopedic surgeon, who was once approached by Broward Health about becoming a staff physician, which he turned down. In his whistleblower lawsuit, he said the hospital district maintained a secret compensation system for cardiologists, oncologists, and orthopedic surgeons, who collected salaries of $1 million or more. This system rewarded physicians for referrals to hospital services, such as physical therapy, and penalized doctors for taking on low-paying charity cases. Reilly claimed that tying compensation to referrals could lead to raised medical costs by generating unnecessary tests and doctor visits and could compromise patient care. 

"Broward Health's scheme to overcompensate physicians in exchange for referrals over the last eight years has been a deliberate strategic plan to boost hospital admissions and outpatient visits for all paying patients, including patients with Medicare and Medicaid coverage," the lawsuit claims. "Broward Health's financial strategists have personally profited from bonus payments based in part on hospital revenues." 

Healthcare Fraud Leads to Higher Healthcare Costs for All

Fraudulent schemes run by hospitals, such as the one discussed above, have long lasting consequences for everyday Americans. Specifically, the diversion of funds due to fraud increases the costs of other legitimate medical services and may foster mechanisms designed to recoup these losses. These mechanisms may result in reduced benefit coverage, changes in eligibility for federal programs, higher premiums for individuals and/or employers, and higher copays. Additionally, physicians performing unnecessary procedures to increase reimbursement compromises patient safety. Healthcare fraud also tarnishes the reputation of the medical community and raises concerns about the ethics governing the conduct of all physicians, not just the bad ones.  Thus, healthcare fraud is not a victimless crime and needs to be stopped.

Contact Waters & Kraus to Report Similar Fraud

While Waters & Kraus is not handling this particular qui tam case, we are well versed in the False Claims Act and have handled similar complex healthcare fraud cases. If you have comparable claims against a different healthcare provider we can help you report it. Contact us by email or call our qui tam attorneys at  800.226.9880 to learn more about our practice and how we can work together to notify the government of fraudulent abuses.

This article was contributed by Anne Izzo, one of the firm’s whistleblower attorneys.

Drug Manufacturer Coupons as Kickbacks to Medicare Beneficiaries

October 8, 2015 — On September 1, 2015, the Department of Justice announced that Kmart resolved a whistleblower’s allegations that it violated the False Claims Act by offering improper inducements to Medicare beneficiaries. The whistleblower in the case, Joshua Leighr, was a pharmacist who worked in various Springfield, MO-area Kmart pharmacies. While there, he witnessed various Kmart schemes intended to induce Medicare beneficiaries to fill prescriptions at Kmart pharmacies, including  using drug manufacturer coupons to reduce customers’ copays,  and giving gasoline discounts in exchange for filling prescriptions at Kmart pharmacies. According to his complaint, Mr. Leighr refused to engage in this conduct, and complained about it to his superiors; ultimately, when the company continued to offer these prohibited kickbacks to Medicare beneficiaries, he filed a qui tam case.

The inducements at issue in Mr. Leighr’s case are examples of remuneration that Medicare providers are prohibited from offering or paying to Medicare beneficiaries. Under a Federal law known as the Anti-Kickback Statute (the “AKS”), pharmacies and other providers may not knowingly and willfully offer or pay remuneration — including kickbacks, bribes, or rebates — to any person to induce that person to purchase or order a Medicare-covered item. In this case, Mr. Leighr alleged that Kmart intended the manufacturer coupons and gas discounts to induce and reward Medicare beneficiaries for filling their prescriptions at Kmart and for seeking expensive, name-brand drugs instead of cheaper, generic drugs. After investigating Mr. Leighr’s allegations, the government reached a settlement with the company.  

Other examples of remuneration prohibited by the AKS include 

  • Gifts;
  • Above or below-market rent or lease payments;
  • Rebates;
  • Furnishing supplies or services for free, or above or below the market rate;
  • Credit arrangements that are below or above the market rate;
  • Waivers of payments.  
Not all forms of remuneration fall within the ambit of the AKS: there are several “safe harbors” exempting certain common or low-risk arrangements from the statute.  As with other bases for liability under the False Claims Act, AKS allegations are complex, and their viability under the FCA depends on the specific circumstances of each case. When filing a False Claims Act lawsuit, it is important that you work with experienced qui tam counsel.

Contact Waters & Kraus to Report Kickbacks

While Waters & Kraus is not handling this particular qui tam case, we are well versed in the False Claims Act and the Anti-Kickback Statute. If you have comparable claims against a different pharmacy we can help you report it. Contact us by email or call our qui tam attorneys at 800.226.9880. Learn more about our practice and how we can work together to notify the government of fraudulent abuses.

This article was contributed by Caitlyn Silhan, one of the whistleblower attorneys in the firm's Dallas office.