Novartis Settles Whistleblower Lawsuit for $390 Million

Novartis has agreed to pay $390 million to settle whistleblower allegations claiming the pharmaceutical company paid kickbacks to specialty pharmacies in an effort to induce patients into refilling company medications. Novartis, a multinational pharmaceutical company based in Basel, Switzerland, grossed more drug sales in 2013 than any other pharmaceutical company in the world.

The case began after a former Novartis sales manager filed a whistleblower lawsuit under the False Claims Act, which allows non-government employees to file claims on the government’s behalf and receive a share of any money recovered. The settlement agreement is between the U.S. division of Novartis and the federal government, as well as more than 40 states that joined the whistleblower lawsuit.
According to Reuters, Novartis offered deals to specialty pharmacies between 2007 and 2012. Specialty pharmacies typically dispense costly medications. In order to increase prescriptions of Novartis drugs like Myfortic (a transplant drug) and Exjade (an iron chelation drug), the pharma giant offered the specialty pharmacies rebates and referrals.

One of the specialty pharmacies implicated in the scheme was BioScrip. Last year, BioScrip gave the government information on the company’s financial relationship with Novartis, presumably to avoid facing stiffer penalties for accepting kickbacks from the drug maker (in the end, BioScrip agreed to pay $15 million and disclose information to the DOJ).

BioScrip officials told the Justice Department that it pushed patients to get Exjade refills at Novartis’ behest. Novartis admitted to the allegations, saying that BioScrip was one of three specialty pharmacies that the drug maker incentivized to increase drug prescription refills. One of the other specialty pharmacies-Accredo Health Group Inc., a unit of Medco Health Solutions-ended up settling kickback charges for roughly $60 million.iStock_000001746475_Large2

These incentives included the allocation of more patients to the specialty pharmacies based on the number of refills the participating pharmacies pushed on patients. In addition to asking the specialty pharmacies to push their medications, Novartis also asked that the pharmacies downplay any risks and side effects associated with the company’s drugs.

Novartis offered additional drug rebates to the participating specialty pharmacies when they met quarterly shipment goals based on the drug maker’s sales targets. According to the whistleblower lawsuit, Novartis used ‘score cards,’ detailing which pharmacies kept patients on Novartis drugs for the longest periods of time. According to a company statement issued by Novartis in the wake of the settlement announcement, these arrangements remained in place until around March of 2012.

The whistleblower lawsuit claims that a total of six different Novartis medications were involved in the scheme. The whistleblower, former Novartis sales manager David Kester, will receive a portion of the amount recovered in the settlement.

It should be noted that this and other recent cases have brought serious scrutiny to the specialized pharmacy industry. Prior to the Novartis settlement, drug maker Valeant Pharmaceuticals International Inc., came under fire for similar behavior. In the Valeant case, the company was forced to sever a business relationship with Philidor, another specialty pharmacy, over shady billing practices.

Novartis CEO Says Practice Cited in Whistleblower Suit is ‘Quite Common’

The Wall Street Journal wrote an article about the Novartis settlement in which Novartis CEO Joseph Jimenez said the rebates that Novartis offered to specialty pharmacies are designed to make sure that patients finish their course of medication. While in theory that may be true, when it came time to put into practice, Novartis demonstrated that the rebates and everything that went with them amounted to kickbacks.

Jimenez was quoted as saying the practice is actually “quite common” in the industry, adding that Novartis is still using the practice, even though the company had to pay $390 million to settle claims alleging that the company was, in fact, offering illegal kickbacks.

Jimenez also had this to say:

“We continue to maintain that specialty pharmacies must continue to play a role in ensuring patient adherence. How that is going to play out as to whether we change our behavior or not remains to be seen.”

Maybe you didn’t catch that last bit…”how that is going to play out as to whether we change our behavior or not remains to be seen.” A lot can be inferred by this comment, namely that Jimenez and the company he sits at the helm of, don’t seem to have any intention of changing the corporate culture that got Novartis into this hot water in the first place.

The sentiment from the quote may likely be shared by many other drug industry CEO’s that Jimenez rubs shoulders with. How, you ask, could a major drug company CEO feel so comfortable with taking such a stance?

Well, let’s look at some numbers:

According to Novartis’s 2014 annual report, the drug maker took in a reported $58 billion in net sales with $10.8 billion in free cash flow. With that much money sitting in the war chest, do you think Jimenez is sweating this $390 million whistleblower settlement? I suggest the answer is no.

After the WSJ piece went to press, Novartis issued a statement that, without specifically citing Jimenez’s comments, said the media’s coverage of his comments didn’t reflect Novartis’ position.

Until companies like Novartis (which has been the subject of a number of fraud allegations in recent years) are persuaded to change their ways, they will continue to engage in the same kind of fraudulent behavior, chalking up these huge payments to the government from fraud cases as the cost of doing business.

There are a number of things that can be done to stem the tide of corporate crime:

  • Put those with knowledge of egregious fraud in prison. When executives feel like they can cut corners in the name of profit, knowing full well that they will land on their feet when their tenure is over, they are more likely to bend the rules. Put these same executives behind bars when they knowingly break the law and they will surely think twice about the consequences of their actions.
  • Make the punishment match the crime. To you and me, $390 million sounds like a huge amount of money. To Novartis, with $10.8 billion in reserves, it’s a drop in the bucket. Will they think twice about engaging in the same behavior? If the company was worried about it, do you think Jimenez would’ve said what he said?
  • Blow the whistle. See corporate crime yourself? Come forward and report it. Retain a solid whistleblower attorney to help you file a claim. It can save taxpayer funds and you could see a sizable whistleblower reward for exposing the fraud.


Medicare Cuts Back Auditors Program Probing Hospital Overcharging

At a time of rampant health care fraud, Medicare has decided to slash the workload of auditors whose job is to scour hospital claims for reimbursement, looking for instances of fraud or overpayments. The news comes courtesy of a Medicare “technical direction letter” reviewed last week by the Wall Street Journal.

The auditors, known as recovery audit contractors, or RAC’s, review potentially inappropriate Medicare payments after the agency has already paid providers. Four companies—Performant Recovery, CGI Federal, Connolly and HealthDataInsights—are contracted as Medicare RAC’s.

Medicare Auditors ProgramIn 2013, RAC’s recouped $3.7 billion in Medicare overpayments. This was before the federal agency took steps to scale back other hospital audit activities and even temporarily suspended the audit program for a few months. The result: a year later in 2014, auditors were only able to recoup $2.4 billion in improper payments from hospitals overcharging Medicare.

Now here’s the rub: the funds returned only represent a small fraction of the total amount Medicare estimates it pays for improper bills on an annual basis. In 2014, Medicare paid out roughly $58 billion in improper payments to health care providers and health plans, this according to, a government website tracking the waste in federal agencies.

Beginning in January, RAC’s will only be able to review about 0.5 percent of the claims that Medicare pays out to hospitals or providers every 45 days, according to a Medicare release. That amounts to roughly a quarter of the prior threshold, and a meager 2 percent of all claims.

The move will undoubtedly make it more difficult for the auditors to return stolen funds to the government health care program. Medicare and Congress have already curbed the auditors’ abilities to go after certain commonly scrutinized payment claims involving short hospital stays, among others.

This is probably the time many of you are saying to yourself, ‘why is the government scaling back this program instead of doubling or tripling the efforts to return stolen taxpayer funds?’ A good question…

Couple of things:

–     Medicare has what you might call an alphabet soup of auditors: along with the RAC’s, you have the Medicare administrative contractors (MAC’s), comprehensive error rate testing (CERT’s) and zone program    integrity contractor (ZPIC’s). MAC’s are the intermediaries that actually process and pay out Medicare claims to health care providers. ZPIC’s and CERT’s investigate any Medicare payments that could be fraudulent and conduct other payment reviews.

–     In 2014, the Government Accountability Office (GAO) issued a report that said Medicare contract auditors may overlap duties and cause hospitals to have to deal with redundant reviews for payment claims.

–     The American Hospital Association (AHA) unsurprisingly cheered the GAO report. The AHA has long had it in for auditors—specifically RAC’s—because, according to the Association, they saddle hospitals with higher administrative costs and specifically go after high-priced inpatient claims.

That last bit is important for a couple of reasons:

1)      If RAC’s can only go after a small percentage of improper Medicare waste, it stands to reason that they should go after the most egregious of those improper payments.

2)      RAC’s are paid between 9 percent and 12.5 percent of identified overpayments and underpayments for all general claims. They receive between 14 percent and 17.5 percent for claims involving durable medical equipment.

These complaints by the AHA are unfortunate but predictable. Applauding the newly imposed restrictions on Medicare overpayment auditors sounds a bit like the town burglars applauding manpower cuts on the police force. But it is clear that the GAO report gave the AHA a serious talking point to bring up with friends in Congress.

Is the Medicare Auditors Program Effective?

Some might wonder whether the program is good for taxpayers. A common question: does the program cost taxpayers more to run than the program obtains in returned overpayments?


Medicare only pays the auditors if they produce results—they get a percentage of the fraudulent funds recovered something akin to how the government pays whistleblowers for bringing fraud to the attention of the Justice Department.

In other words, the Medicare auditing program pays for itself and then some.

According to the Council for Medicare Integrity, RAC’s produce results. Since the RAC program’s inception in 2005, more than $8.9 billion in fraudulent payments have been returned to the Medicare Trust Fund—in other words, it’s a vital program that helps ensure the solvency of a hugely important government program. Furthermore, recovery auditors have demonstrated an accuracy rate of more than 95 percent since the program began.

Recovery auditors are also the most highly regulated Medicare contractor. According to the GAO, recovery auditors are “subject to more rules and regulations than any other post-payment audit contractor.” An example: RAC’s are not permitted to act outside of the scope of work assigned by Centers for Medicare and Medicaid Services.

Let’s not forget that Congress mandated the creation of the RAC program because of rampant waste in the Medicare program…surely no one believes that the waste and abuse problem with Medicare has disappeared.

How Did We Get Here? 

The simple answer is that the hospital lobby has for years spent millions and millions of dollars to lobby Congress in an effort to restrict the abilities of recovery auditors to do their jobs. In 2014 alone, the hospital industry spent a reported $20 million in lobbying efforts.

And the lobbying is clearly working. Both Democrats and Republicans alike have proposed and backed legislation aimed at limiting the ability of auditors to sniff out waste and abuse.

Congressman Sam Graves (R-MO) introduced legislation that would block audits of Medicare providers unless the estimated error rate exceeds 40 percent of total billing. Think about that—almost one half of all bills to Medicare would have fraudulent before auditors could even begin to do their job.

What Can You Do?

If you see instances of Medicare overpayment in your hospital, consider becoming a whistleblower. If the government is going to cave to hospital industry lobbying efforts and not allow auditors to do their jobs—returning stolen funds back to taxpayers—the next best weapon at combating fraud is from whistleblowers.

By becoming a health care fraud whistleblower, you are helping to preserve the integrity of Medicare and saving people’s hard-earned tax dollars. That includes yours. It could also mean a reward for you. A whistleblower is typically eligible to receive a whistleblower reward of between 15 and 25 percent of any monies recovered by the government in a health care fraud case.

Medicare is a $600 billion per year program…can we really afford to see a significant portion of that total end up in the pockets of criminals?

Have first-hand knowledge of fraud in your hospital? Contact an experienced whistleblower law firm today to discuss your options.

Why U.S. Health Care Is So Expensive (and What You Can Do About It)

If you live in the United States and you don’t live under a rock, you know that the cost of health care in this country is expensive—very expensive. Health care in the U.S. costs roughly twice as much as it does in the rest of the developed world. Some perspective: if our country’s $3 trillion health care industry was its own country, it would be the world’s fifth-largest economy.

And for those of you thinking, ‘I have health insurance so someone else is paying these high costs,’ you’re wrong. Health care costs that are so high means we are all paying too much for health insurance.

iStock_000001746475_Large2Health care coverage comes down to pooling risk, which is a good thing on one hand because it protects us against the unexpected very high costs that can come with getting sick or injured. The downside to pooling risk when health care costs are expensive, however, is that insurers are compelled to ask everyone to pay bigger premiums to cover these high costs.

Our Healthcare System is Expensive Because it’s the Best in the World…Right?

Wrong. The care that we spend so much may not be as good as you think.

In 2000, the World Health Organization (WHO) issued a now infamous report ranking the world’s best health care systems. The U.S. did come in first in something—first in overall health care expenditure, per capita. Our health care system came in 15th in overall performance, even though we spend the most. Shockingly, America’s overall ranking was 37th, behind countries like Costa Rica, Chile, Finland, Morocco, Singapore, Oman, etc.

A 2013 Commonwealth Fund study looked at the health care systems of 11 developed countries. In that study, the U.S. came in fifth in overall quality and was at the bottom of the list for infant mortality. Our country was also the worst at preventing deaths stemming from treatable conditions, including certain treatable cancers, diabetes, strokes and high blood pressure.

The Cost of Prescription Drugs

One of the biggest contributors to the expensive prices we pay for health care comes from pharmaceutical companies. In the U.S., we leave drug pricing up to market competition, and as a result pay higher prices for drugs than other countries where medicine costs are either directly or indirectly controlled by governments.

Our country is by far the most profitable market for drug makers (a dubious distinction). According to Express Scripts, the largest manager of drug plans in the U.S., prices for the top brand-name drugs in this country jumped 127 percent between 2008 and 2014. During the same period, the costs of common household goods only increased 11 percent. It demonstrates that despite the outrage from the Turing Pharmaceuticals debacle, huge price increases are not an isolated incident. Unfortunately, pharmaceutical drug price gouging is actually quite commonplace in America.

(NOTE: This is not to say that Turing and it’s boss Martin Shkrelli are without fault; quite the opposite. Shkrelli is absolutely deserving of the title given to him by the Daily Beast as the “most-hated man in America,” even surpassing the dentist who killed Cecil the Lion)

Reuters came out with an analysis this week looking at the prices of 20 of the world’s best-selling medicines. Conducted by researchers from Britain’s University of Liverpool, the study found that, on average, the world’s best selling medications are three-times more expensive in the U.S. than they are in the United Kingdom. The study also found that U.S. prices were consistently more expensive than in other European markets.

U.S. drug prices were found to be six-times higher than Brazil and 16-times higher than the lowest-price country, which was frequently India.

While the Reuters review is thorough and provides valuable data, it asks more questions than it answers. Why are health care costs so high? Simple: we have a political system dependent on pharmaceutical company campaign contributions, and we have law firms, lobbyists, and print and broadcast journalists dependent on pharmaceutical company clients and advertising.

If you drop enough money, the simplest questions become very complex, requiring decades of debate and study. Rather than address the problem, we get paralysis by analysis, and the whole problem is compounded by a weak regulatory structure and an underfunded U.S. Department of Justice.

What Can be Done to Make Health Care Less Expensive?

See something wrong? Report it – Health care fraud costs our country tens of billions of dollars on an annual basis and puts patient health in jeopardy. On a national level, fraud results in higher insurance premiums for all of us while also compromising the quality of care we receive. Recent cases show that greedy medical professionals are frequently willing to risk patient harm in furtherance of making money via fraud schemes.

So if you suspect that health care fraud being committed, please consider reporting it to a whistleblower attorney who can help you file a claim. It can have a domino effect of saving taxpayer money, cutting health care costs and improving the quality of care we all receive. You may also be eligible for a reward.

Find out what your actual cost of care is – Many insurance companies will disclose at least some negotiated prices to those on their rolls. If your health insurance plan offers this information (especially for things you can plan in advance like imaging tests), take advantage of this benefit. A real world example: people who were scheduled for CT scans or MRIs were called and told about cheaper alternatives of equal quality. Just by questioning the costs associated with their care, these people ended up saving hundreds per scan. More importantly, the move toward cheaper alternatives forced the more expensive providers to reduce their prices.

Look for a smaller insurance network – According to Consumer Reports, signing up with an insurance plan that has fewer providers can save you about 20 percent on premiums. This is because providers give the insurance company price breaks in exchange for fewer competitors. Before you sign up for this type of network, however, make sure that the plan includes all of the doctors, hospitals, labs, etc. that you require, and that all are within a reasonable distance from your residence. Also be sure to ask if they will accept new patients.

Whistleblower News This Week: PharMerica Resolves Kickbacks Claims

PharMerica Corp., the second-largest nursing home in the United States has agreed to pay the government $9.25 million to resolve claims that the company solicited and received kickbacks from a major drug company in exchange for promoting a prescription drug to nursing home patients.

PharMerica, headquartered in Louisville, Kentucky, is accused of accepting the kickbacks from Abbott Laboratories in exchange for promoting Depakote, an Abbott drug used to treat epileptic seizures, manic or mixed episodes associated with bipolar disorder (manic-depressive disorder) and to prevent migraine headaches.

PharMerica In May of 2012, the Justice Department announced a settlement agreement with Abbott for an astounding $1.5 billion, resolving global civil and criminal allegations that the drug maker violated the False Claims Act by handing out kickbacks to nursing home pharmacies like PharMerica. Today’s settlement agreement resolves allegations over PharMerica’s role in accepting kickbacks.

Nursing homes rely on consultant pharmacists—like those employed at PharMerica—to review patient medical charts at least monthly so recommendations can be made to doctors about the drugs patients are taking. According to the Justice Department, PharMerica solicited and received kickbacks from Abbott in exchange for the pharmacy company’s recommendation that doctors at nursing homes prescribe Depakote to their patients.

The government claims that the alleged kickbacks were disguised as educational grants, rebates and other forms of financial compensation. This is an oft-used tactic by fraudsters attempting to cover their tracks disguising the true intent of these ‘financial transactions’ (which basically amounts to bribes).

Today’s settlement resolves whistleblower allegations from two lawsuits filed in the Western District of Virginia by former Abbott employees Richard Spetter and Meredith McCoyd. Both filed qui tam lawsuits, which allow private citizens to sue on behalf of the government for false claims. The whistleblower, or whistleblowers, and the government share in any recovery.

The amount of money a whistleblower receives as a reward varies and is usually based on a number of factors, such as the contribution of the relator to the investigation and the government’s involvement. For example, if the government decides to intervene in a case, the reward will normally be  between 15 and 25 percent. If the government does not intervene in the case and the whistleblower and his or her whistleblower attorney is forced to handle the case independently, the reward could be as high as 30 percent of any recovered sum.

In the PharMerica case, the government intervened. As part of the resolution, Meredith McCoyd will receive approximately $1 million for filing the whistleblower lawsuit.

According to a Justice Department press release, roughly $6.75 million of the settlement will go to the U.S. government and approximately $2.5 million will be allocated to cover Medicaid program claims in states that decide to participate in the settlement (Medicaid is jointly funded by the federal and state governments). New Hampshire Attorney General Joseph Foster has said his state will receive roughly $160,000 from the multistate settlement.

Why is the PharMerica Whistleblower Lawsuit Important?

As you’ve frequently seen on this blog, these cases of kickbacks and health care fraud unfortunately happen all too frequently. A couple of things set this one apart from some of the others that get the attention from the news media:

For starters, elderly patients in nursing homes who suffer from dementia don’t have a lot of control over the drugs they are given. It is for this reason that they deserve (and depend on) unbiased judgment from the healthcare professionals that are treating them on a daily basis.

When financial incentives are presented to doctors treating our most vulnerable citizens, it muddies the waters, and that is putting it gently. They are no longer thinking about what is in the best interest of the patient, but instead what kind of money they can make by prescribing a drug.

It goes without saying that anytime a medical professional’s judgment is clouded by money instead of a patient’s health and wellbeing it is terrible. But there is something way more unnerving about kickbacks and bribes clouding the judgment of doctors in nursing homes. Our most vulnerable elders deserve far better.

The only way this kind of fraud is going to stop is if more whistleblowers come forward and expose those seeking to bilk money from the government at the expense of elderly folks trying to live out their last days in peace. We need more people like Richard Spetter and Meredith McCoyd to stand up and say this kind of behavior isn’t going to happen on my watch.

Another reason that this case is so important is that Abbott Laboratories is a repeat offender—the company has paid doctors a number of times and been caught, and yet it still continues to pay kickbacks (how many big pharma companies can say they’ve paid out over $1.5 billion in civil and criminal allegations?).

July 2015: Omnicare and the government laid out a plan to settle claims that Omnicare accepted millions of dollars in kickbacks from Abbott Laboratories in an effort to have company doctors prescribe Depakote (yes, the same Depakote named in the PharMerica case). Covington, Kentucky-based Omnicare is the country’s largest supplier of pharmaceutical drugs to nursing homes.

Omnicare accepted the kickbacks, which were handed out with the expectation that Omnicare doctors would buy and recommend Depakote to treat behavioral disturbances in dementia patients, an indication for which the drug isn’t approved by the Food and Drug Administration. The kickbacks were hidden to appear as grants or educational funding (sound familiar?). Omnicare also accepted tickets to sporting events and let Abbott pay for lavish meetings in Florida.

December, 2013: Abbott agreed to pay the government $5.475 million to resolve claims that it violated the FCA by paying kickbacks in an effort to get doctors to implant the company’s carotid, biliary and peripheral vascular products.

Carotid products treat circulatory disorders by increasing blood flow to the head. Vascular products are also treat circulatory disorders but for parts of the body. Biliary products treat obstructions that occur in bile ducts.

The allegations, made by two whistleblowers, claim Abbott knowingly paid prominent doctors kickbacks in the form of speaking engagements, teaching assignments and vacation conferences in an effort to get the doctors to convince the hospitals they worked in to purchase Abbott products.

One last thing: this case is also a reminder that companies accepting kickbacks are as guilty as those making the illegal payments.

If you have firsthand knowledge of kickbacks being paid and received in an effort to influence care, it is in your best interest to contact an experienced whistleblower attorney to discuss your case. Speaking up about this fraudulent conduct helps protect the integrity of government health care programs and could result in a whistleblower reward for you.

If you’d like more information on becoming a whistleblower, contact the law firm of Baum, Hedlund, Aristei & Goldman today.

Strata Resolves Whistleblower Lawsuit, Hundreds of Hospitals Involved in Fraud Case

Two interesting and important health care fraud news stories this week…

implantable cardioverter defibrillators On Monday, it was reported that hundreds of hospitals throughout the country have reached a settlement agreement with the Justice Department regarding a lengthy, nationwide investigation into the alleged overuse of implantable cardioverter defibrillators (known as ICDs).

Little information on the case has been made public, presumably because there are still details for both sides to come together on, but based on the number of those named in the allegations, this could go down as one of the largest health care fraud settlements the nation has ever seen. At this point, no one has speculated on the amount of money that will be returned to the government, but Modern Healthcare is reporting that the amount is likely to be very large.

The speculation on the recovery amount is based on regulatory filings that several health systems have made in recent months. For example, HCA said in an August filing with the Securities and Exchanges Commission (SEC) that it had agreed to pay the government nearly $16 million. Also in August, Tenet Healthcare Corporation said it would pay just over $12 million in an SEC filing.

Other companies like Catholic Health Initiatives, Iasis Healthcare, St. Joseph Health and MedCath Corporation (chain of heart hospitals that have since gone out of business) have also entered SEC filings stating an intent to pay the government. Not one of the companies admitted to any wrongdoing as part of their settlement agreements.

ICD’s cost around $25,000 to $40,000 each, and are wired to the heart in order to deliver an electric shock if the device detects any abnormal rhythm. Medicare changed its rules in January of 2005 and began allowing implantable cardiac devices for primary prevention of arrhythmia. The only catch is that ICD’s cannot be implanted within 40 days of a heart attack or within 90 days of angioplasty or bypass surgery. Regardless of the rules, more and more doctors still chose to implant the devices under these circumstances anyway. With so much money changing hands and the health issues involved in each ICD procedure, the Justice Department felt it needed to investigate. The ICD investigation started about four years ago.

Why is this investigation important?

–    Since the Justice Department began investigating these allegations, hospitals nationwide have essentially been put on notice about Medicare’s national coverage for ICD’s, which has resulted in a decrease in the number of the devices implanted in recent years.

–    This case has interesting implications for future health care fraud claims. This landmark case involving hundreds of hospitals represents what is likely the largest investigation of its kind with the goal of holding each hospital accountable for the medical decisions made by physicians. The government believes that when hospitals bill for services performed by physicians on site, it is the responsibility of the hospitals to make sure that the service, treatment, procedure or device is in compliance with Medicare’s regulations. If hospitals fail to perform due diligence and make sure they are in compliance, they are exposed to liability under the False Claims Act.

–    Lastly, this case highlights the importance of data analysis as a tool for bringing False Claims Act cases. By looking for aberrations in hospital billing, the government can identify and investigate likely fraud.

Strata Pathology Reaches Agreement to Resolve Kickback Allegations 

In other health care fraud news this week, Lexington, Massachusetts-based Strata Pathology Laboratory, Inc. has agreed to pay $558,793 to resolve whistleblower allegations that it paid kickbacks to doctors in order to entice patient referrals. The settlement resolves a whistleblower complaint initially filed by an unidentified former Strata employee. Strata is described on its website as a leading anatomic pathology laboratory providing patients, physicians and hospitals with diagnostic services.

Capture4According to the U.S. Attorney’s Office for the District of Massachusetts, Strata paid a number of doctors kickbacks in the form of sham consulting fees and provided unlawful discounts to doctors as a means to earn Medicare and Medicaid patient referrals. The pathology lab acknowledged that it paid consulting fees to two referring physician practices even though the physicians never actually provided consulting services.

The company further acknowledged that it entered into “account billing” arrangements with seven referring physician practices that facilitated fee-splitting between the parties. Under these arrangements, the whistleblower complaint claims that Strata allowed these physician practices to bill patients’ private insurers directly for pathology services actually performed by Strata. The pathology lab then charged the practices for its services at deeply discounted rates, which allowed the physician practices to profit the difference between the discounted price Strata offered and the full reimbursement amount from patients’ private insurance companies. The allegations further state that all of the physician practices referred Medicare and Medicaid beneficiaries to Strata, which then billed those programs at full price.

The whistleblower lawsuit claimed that Strata submitted false claims for reimbursement from Medicare and Medicaid because the claims were based on kickbacks that Strata provided referring physicians. The Anti-Kickback Statute prohibits offering, paying, soliciting, or receiving remuneration to induce referrals of services or items covered by government health care programs like Medicare or Medicaid.

Strata’s account billing arrangements with physician practices didn’t explicitly condition discounted prices upon patient referrals, but the U.S. claims that the pathology lab offered the discounts based on the understanding that these practices who chose to enter into account billing arrangements with Strata would refer virtually all of their patients.

The settlement will be shared between the U.S., the unidentified whistleblower and the state of Massachusetts.

This case and the resulting settlement show how a whistleblower can protect the integrity of federal and state health care programs. When laboratories, hospitals or other health care companies offer kickbacks to referring doctors, the integrity of the system is corrupted. In such cases, Physicians may have their health care decisions influenced by the money to be made, rather than the health care needs of their patients.

The whistleblower law firm of Baum, Hedlund, Aristei & Goldman applauds the government’s efforts in both of these cases, as well as those of the whistleblowers. We need more people to come forward and expose wrongdoing whenever possible to protect the integrity of Medicare and Medicaid, stop rising health care costs, and maintain quality of care based on patient need rather than financial reward.

If you have firsthand information of health care fraud, consider speaking with an experienced whistleblower attorney, who can walk you through your options. For more information on becoming a whistleblower, contact us anytime.

Related Articles:

If I Decide to Become a Whistleblower, Will I be Protected From Retaliation?

Whistleblowers in Action

Whistleblower News: Health Care Fraud and Defense Contractor Fraud Cases Settle

As we’ve seen countless times in this whistleblower blog, fraud schemes come in many different shapes and sizes. Some involve a number of co-conspirators while others are the handiwork of just one person putting greed ahead of all else. But no matter how many moving parts there are, they all have the same intent: to steal money from the American tax payer for personal gain.

In recent days, we have seen two different fraud cases come to a close. The first news story reported this week involved defense company employees who allegedly set up an illegal bid-rigging scheme designed to falsely bill the U.S government for supplies intended for the Afghan National Army. The other case involved a Florida hospital district that was allegedly engaged in improper financial relationships with referring physicians.

PAE Government Services, Inc. and R.M. Asia Ltd. Settle Whistleblower Lawsuit for $1.45 Million

Last Friday, PAE Government Services, Inc. and R.M. Asia Ltd. agreed to settle a whistleblower lawsuit for $1.45 million. Defense contractor PAE offers support in aviation, capacity building and stabilization, critical infrastructure, expeditionary logistics, identity and information management solutions, integrated security solutions, test and training ranges, and training solutions, mostly to U.S. government customers. R.M. Asia Ltd. is a Hong Kong company that wholesales and distributes industrial vehicles and parts.

PAE_logoWhistleblower Steven Walker, a former project manager who worked for defense contractor PAE in Afghanistan, filed a claim against his former employer after learning about the alleged scheme, which involved company employees creating fictitious entities in order to fraudulently bill the U.S. for supplies that were supposed to be given to the Afghan Army.

In 2007, the U.S. Army awarded a defense contract to PAE, which required the company to provide the Afghan Army with an apprenticeship program, vehicle-fleet maintenance, as well as order vehicle parts and perform supply-chain management. According to the whistleblower lawsuit, defense contractor PAE turned around and awarded a subcontract to R.M. Asia Ltd. to perform the supply-chain management and provide warehousing services for vehicle parts.

Walker claims in his whistleblower lawsuit that between 2007 and 2010, PAE and R.M. Asia Ltd. both submitted false claims due to a bid-rigging scheme designed to steer subcontracts to companies owned by a PAE manager and an R.M. Asia manager. The whistleblower complaint also claimed that PAE and R.M. Asia knew or should have known about the alleged fraud and didn’t to take any action to stop or report it.

Walker’s whistleblower allegations of bid-rigging kickstarted a lengthy criminal investigation against the defendants named in the case, which resulted in guilty pleas, convictions and prison sentences for those involved. But Walker’s own investigative pluck is what really led to Monday’s settlement.

According to a Justice Department press release, defense contractor PAE initially hired Walker as a training manager. He quickly moved up the ranks to program manager while in Afghanistan. Walker, who was an engineering and diesel mechanics professor at Oklahoma State University before taking the PAE job, learned of the alleged fraud while in Afghanistan. He ended up traveling throughout some of the country’s most dangerous areas without military escorts to inspect warehouses to confirm his suspicions. When he eventually returned to the U.S., he drove from his home in Oklahoma all the way to Nashville, Tennessee to inspect marriage records to be sure of the suspected family ties that would eventually make their way into his whistleblower lawsuit.

In the related criminal investigation, the U.S. Attorney’s Office of the Eastern District of Virginia obtained guilty pleas from former PAE program manager Keith Johnson and his wife, Angela Gregory Johnson, along with RM Asia’s former project manager, John Eisner, and deputy project manager, Jerry Kieffer, for their participation in the scheme.

For his role in exposing the alleged defense contractor fraud, Walker will receive a whistleblower reward of $261,000. Defense contractor whistleblowers like Steven Walker who go the extra mile to protect the integrity of government resources should be applauded. It is very likely that if he hadn’t stood up and exposed the alleged fraud, the wrongdoers would never have been brought to justice, nor would the stolen funds have been returned.

The lawsuit is captioned U.S. ex rel. Walker v. PAE, et al., 1:11CV382-LO/TCB (E.D. Va.). The claims that were resolved in this settlement are allegations only; there has not been any determination of liability.

Florida Hospital District to Settle Health Care Fraud Allegations for $69.5 Million

The North Broward Hospital District has agreed to pay the U.S. $69.5 Million to settle whistleblower claims that it had improper financial relationships with referring physicians.

The North Broward Hospital District (NBHD) is a special taxing district of the state of Florida that operates hospitals and other health care facilities in the Broward County area.

BH_StackedThe whistleblower who initially came forward with allegations in this case, Dr. Michael Reilly, claims that the NBHD paid nine employed doctors in excess of the fair market value for their services. These payments, the lawsuit contends, were in effect kickbacks. Rather than being paid for providing quality care, the doctors in question were paid as a reward for the referral of business to the NBHD.

These payments, according to the Justice Department, violated the Stark Statute and the False Claims Act. The Stark Statute restricts financial relationships that health care providers may have with doctors who refer patients to them. The Justice Department has long been concerned about improper financial relationships between health care providers and their referral sources. These relationships, which are predicated on money, can alter a doctor’s judgment about the patient’s health care needs and drive up health care costs for us all.

As a reward for bringing this alleged fraud to the government’s attention, Dr. Michael Reilly will receive a whistleblower reward of $12,045,655.51.

The case captioned U.S. ex rel. Reilly v. North Broward Hospital District, et al., Case No. 10-60590 (S.D. Fla.) was handled by the Civil Division’s Commercial Litigation Branch, the U.S. Attorney’s Office of the Southern District of Florida and the U.S. Department of Health and Human Services Office of Inspector General (HHS-OIG). The claims settled by the agreement are allegations only, as there hasn’t been determination of liability.

Filing a Whistleblower Lawsuit

Estimates have indicated that as much as 10% of government health care spending is lost to fraud and abuse. This is why we need brave men and women to come forward and expose fraud and protect the integrity of government programs.

If you have witnessed or have information concerning fraudulent behavior that could be costing the government money, you have the right and duty to become a whistleblower. Whether you are a high ranking official within a company, an employee or even a bystander with information concerning misconduct, filing a whistleblower lawsuit will require the assistance of an experienced whistleblower attorney.

The whistleblower attorneys at Baum, Hedlund, Aristei & Goldman have been dedicated to public safety and public health advocacy for over 20 years. If you are aware of corporate wrongdoing or possible fraud, it is in your best interest to contact a Baum Hedlund whistleblower attorney today to discuss your case and protect your rights.

Three Health Care Fraud Cases That Will Make You Cringe

It’s a given: all health care fraud and abuse is bad. But some health care fraud is beyond bad and gets your blood boiling. These cringe-worthy health care fraud cases often involve a greedy, reckless and corrupt doctor that puts patients at risk simply because he or she wants to bill the government for more money by providing medically unnecessary care. Sadly, patients are being harmed in the name of greed.

Below are three health care fraud stories that are sure to raise your blood pressure:

Florida Dentist Needlessly Pulls Children’s Teeth to Bilk Money From Medicaid

medical fraudIf the title didn’t get you upset, just give it a second…this one gets a whole lot worse. Earlier this week (Sept. 1), Dr. Howard Schneider of Jacksonville, Florida was served with over 50 notices of intent to sue by patients who accuse the 78-year-old dentist of performing unnecessary tooth extractions, many of which were performed on children. Worse yet, the dentist reportedly preyed on poor families.

Medicaid paid Schneider for extraction procedures on a “per tooth” basis. The dentist allegedly took this to the extreme by needlessly performing these extractions again and again on children and adults alike.

An investigation into the alleged fraud began shortly after Brandi Mosley posted pictures of her six-year-old daughter on Facebook after the little girl underwent dental surgery in May at Schneider’s practice. He removed seven of the little girl’s teeth. You read that right…seven teeth removed at one time from the mouth of a six-year-old.

Now, you might think that surely there has to be an explanation for this. According to Mosley, Schneider’s nurse told her before the extraction that kids typically behave better during the procedure if parents leave the room. ‘We don’t like parents back here for the procedures,’ Mosley was told.

When the procedure was over, the nurse told Mosley that her young daughter had been involved in an ‘incident.’ She took the gauze out of her daughter’s mouth and saw just how many teeth were missing.

Once other people got wind of Mosley’s story, protestors began to rally outside of Dr. Schneider’s Jacksonville practice for weeks. Finally, the Florida Attorney General’s Office decided to open a case against the dentist, alleging that he has been committing health care fraud for many years.

Over the last five years, Dr. Schneider has received roughly $4 million in Medicaid payments for his handiwork. According to Raw Story, Schneider maintains that he is innocent, though the evidence at present speaks to the contrary.

Detroit Doctor Gets 45 Years in Prison For Treating Cancer Patients With Needless Chemotherapy

This isn’t the first time that Dr. Farid Fata has been discussed in this blog. His story caught the public’s attention when the media reported that he had received over $17 million from bogus health care billings while running his Oakland, Michigan-based oncology practice. But nothing could have prepared us for the stories some of his patients would tell at Fata’s sentencing hearing.

One patient, Robert Sobieray, said he came to see Dr. Fata because he was experiencing lower back pain. After examining Sobieray and administering a series of tests, the doctor told him that he had metastatic bone cancer. The patient was given a chemotherapy drug called Zometa and radiation treatment. But tests showed that Sobieray didn’t actually have cancer, and now Zometa has a serious side effect of bone death, specifically in the jaw.

It’s pretty easy to feel sick about this case and even worse because the Michigan doctor had over 500 other victims.

Dr. David Steensma, an associate professor at Harvard Medical School, as well as a cancer physician at Dana-Farber Cancer Institute in Boston, provided expert testimony for the prosecution. Dr. Steensma reviewed the medical records of over 100 of Fata’s patients. In them, he found 2,770 incidents of unnecessary chemotherapy along with hundreds of other dangerous treatments. He told the court that he’d never seen anything like this before.

Steensma told the court that five of Dr. Fata’s patients were treated unnecessarily with Velcade, a drug with the dangerous side effect of permanent peripheral neuropathy—numbness and/or pain in the hands or feet. Dr. Fata reportedly told one of his patients who were experiencing numbness that moving their feet and toes would make the numbness better.

“I think he’s guilty of the most cruel thing a human being can do to another human being,” said Dr. Soe Maunglay, who was actually the person that exposed Dr. Fata’s highly-questionable practice. Maunglay brought the practice to the attention of a superior and Fata was arrested days later.

In the end, Fata was sentenced to 45 years in prison for health care fraud (among other crimes), which some of his patients felt simply wasn’t enough. The federal prosecutor on the case asked for 175 years.

Kentucky Hospital Settles Whistleblower Lawsuit Claiming Doctors Cracked Chests in Unnecessary Heart Surgeries

That case also sounds unbelievably painful and shocking. Chests cracked unnecessarily.

Sadly, this story from 2014 is all too true. Saint Joseph Health System of Louisville, Kentucky agreed to pay state and federal governments $16.5 million to settle health care fraud allegations claiming it paid kickbacks to cardiologists for patient referrals for unnecessary chest-cracking bypass surgeries and other procedures.

According to the whistleblower lawsuit originally filed in 2011, three cardiologists falsified medical records in order to justify sending patients to Saint Joseph facilities for bypass surgeries and stent procedures. The cardiologists—Satyabrata Chatterjee, Ashwini Anand, and Sandesh Patil—allegedly received kickbacks via medical companies and partnerships. None of the aforementioned doctors was a party in this particular health care fraud settlement, though a spokesperson for the U.S. Attorney’s Office in Kentucky said other defendants in the case are still the subject of investigation.

Bloomberg Business reported that at least eight unnecessary bypass surgeries were conducted. In these procedures, a patient’s rib cage is forcibly cracked open, which often results in a very lengthy recovery process.

The three whistleblowers—cardiologists Paula Hollingsworth, Michael Jones and Michael Rukavina—came to learn about the alleged Saint Joseph fraud after treating several patients who had been the victims of these unnecessary procedures. They ended up sharing a whistleblower reward of $2.5 million.

Aside from the whistleblower settlement, Saint Joseph remains in the process of defending around 250 civil health care fraud cases filed by patients claiming to have had unnecessary stents or other cardiac procedures. Many of the patients in these cases name Anand, Chatterjee or Patil as defendants.


Quest Diagnostics Whistleblower Receives Reward for Exposing Alleged Fraud

The last few days have seen several companies resolve fraud allegations, resulting in millions of dollars being returned to the government. Three of these cases involve major corporations that have found themselves in this position before. Lockheed Martin has paid millions in fines and penalties stemming from whistleblower lawsuits or fraud allegations every year since 2012. Quest Diagnostics settled a whistleblower lawsuit in 2011 for over $240 million. Amgen paid $762 million in 2012.

Apparently the adage that crime doesn’t pay doesn’t apply to these companies. Instead, it demonstrates how much they make from fraud, since these enormous penalties are merely treated as the cost of doing business. As the penalties get larger and larger, however, whistleblower lawsuits will gradually change things for the better by holding even the largest corporations accountable.

Quest Diagnostics to Pay $1.79 Million to Settle Whistleblower Allegations of Health Care Fraud

Quest DiagnosticsQuest Diagnostics Inc. is an international leader in laboratory testing with headquarters in New Jersey. Quest Diagnostics claims to have the largest clinical testing network in the U.S. and reported that its 2014 annual revenue topped $7 billion.

But this isn’t to say that Quest Diagnostics hasn’t been the subject of government scrutiny. In 2009, the company paid over $300 million to resolve whistleblower allegations that it marketed and sold misbranded lab test kits. Quest Diagnostics allegedly knew that these kits were faulty, but the company continued to market and sell them even though they caused lab results to be materially inaccurate and unreliable.

In 2011, Quest Diagnostics was the subject of another whistleblower lawsuit that claimed the company overcharged Medi-Cal, California’s healthcare program for the poor. The whistleblower lawsuit claimed that Quest Diagnostics charged Medi-Cal up to six times more for laboratory testing than it charged other customers, a violation of the California False Claims Act.

This brings us up to today’s Quest Diagnostics whistleblower news…

On August 25, Quest Diagnostics agreed to settle allegations brought forth by yet another whistleblower claiming the company performed duplicate laboratory testing, and then billed Medicare for the repeated procedure. The testing that Quest Diagnostics performed included procedures like blood draws and panel testing.

This whistleblower lawsuit was filed four years ago by a former Quest Diagnostics employee who claimed that she witnessed the alleged fraud while working in the company’s patient service centers. Whistleblower Eliza Martinez claims that Quest Diagnostics was performing tests on the same patients twice in the same day. The company would then submit requests for Medicare reimbursement based on performing two tests instead of only the one necessary test.

According to several news sources, Martinez will receive a whistleblower reward of $358,000 for her role in exposing the lab testing company’s alleged health care fraud.

Unit of Lockheed Martin Settles False Claims Allegations for $4.7 Million

Lockheed MartinLockheed Martin is one of the country’s largest benefactors of defense contracts, with a great majority of its revenue generated from military sales. Just like Quest Diagnostics, Lockheed has frequently been the subject of whistleblower lawsuits and allegations of defense contractor fraud.

These allegations could fill an entire article themselves, here are some of the most recent Lockheed Martin fraud claims:

–    In 2012, Lockheed paid $15.8 million to resolve claims that a subcontractor overcharged the company for perishable tools used to work on planes. Lockheed then passed on this cost to the government.

–    In 2013, the defense contractor settled a securities fraud lawsuit claiming the company lied to investors about the prospects for its information technology division. Lockheed paid nearly $20 million to settle the allegations.

–    In December of 2014, Lockheed paid $27.5 million to resolve allegations that one of its subsidiaries violated the False Claims Act by overcharging the government for work performed by employees that lacked required job qualifications.

Last week, the news media reported that Lockheed agreed to pay $4,790,042 to resolve allegations that a subsidiary (Sandia Corporation) violated the False Claims Act and the Byrd Amendment by appropriating federal funds for lobbying purposes. Sandia allegedly used government money in an effort to renew a Management and Operating (M&O) contract with the Department of Energy’s National Nuclear Security Administration (NNSA).

For over 20 years, Congress has allocated funding for Sandia National Laboratories, a government-owned laboratory operated by Sandia as part of the NNSA’s nuclear weapons complex. According to the Justice Department, Sandia allegedly used federal funding between 2008 and 2012 to lobby Congress and other government officials to obtain a noncompetitive extension on its NNSA contract. The Byrd Amendment prohibits the use of government money for lobbying purposes.

Department of Energy Inspector General Gregory H. Friedman said he applauded the Justice Department’s work last week, saying in a statement that the use of public funds for lobbying is “simply unacceptable.”

Amgen Settles State Attorney General Fraud Charges for $71 Million

diversity-ssrp-amgen_logoAmgen claims on its website that it is the world’s largest independent biopharmaceutical company. The company generated over $20 billion in revenue in 2014, largely on the backs of a several key products.

Two of these products—Aranesp and Enbrel—have been the subject of a number of fraud allegations, specifically dealing with how Amgen marketed both drugs. Aranesp is an anemia drug that increases red blood cell counts. Enbrel is a drug used to treat a number of conditions, including rheumatoid arthritis and other autoimmune disorders.

These drugs were the centerpiece of a 2012 whistleblower lawsuit that claimed Amgen engaged in off label marketing of both Aranesp and Enbrel, all while paying kickbacks and engaging in price gauging. Whistleblower Jill Osiecki, a former Amgen employee, wore a wire more than a dozen times in an effort to expose the alleged fraud.

Basically, the allegations claimed that Amgen sales associates marketed Aranesp to physicians as a treatment option for cancer patients that weren’t undergoing chemotherapy. The drug was not approved by the FDA for this purpose. To make matters worse, a study later showed that the use of Aranesp by non-chemo patients actually increased their chance of death.

Other drugs mentioned in the whistleblower claims were Enbrel, Epogen, Neulasta, Neupogen, and Sensipar. The case ended up settling for $762 million.

Osiecki told the news media she didn’t believe the fraud allegations were a mistake…in fact, these people knew exactly what they were doing. She had this to say about her experience watching what went down at Amgen:

“The Amgen people who engaged in these criminal activities were no less mindful they were engaging in illegal behavior than muggers or bank robbers. They were smart, mature adults, who made conscious decisions to disobey the law to personally profit from highly incentivized pay, bonuses, awards, and international travel.”

Despite putting patient health in danger and striking a criminal plea deal that cost the company hundreds of millions of dollars, not one person at Amgen went to jail. No one paid a personal fine. Nonetheless, you might think that a drug manufacturer hit with such a huge settlement might stay on the straight and narrow. You’d be wrong.

Various news agencies reported last week that Amgen agreed to pay $71 million to settle fraud allegations connected with the illegal marketing of (surprise, surprise) Aranesp and Enbrel. The agreement settles claims brought by Massachusetts Attorney General Maura Healey and 48 attorneys general who say Amgen violated state consumer protection laws by promoting Aranesp for the treatment of anemia among cancer patients even though the application hasn’t been approved by the FDA. Additionally, Amgen allegedly promoted Enbrel for mild plaque psoriasis even though the drug has only been approved by the FDA to treat chronic moderate to severe plaque psoriasis.

As is standard in these settlement agreements, Amgen didn’t admit to any wrongdoing. Aside from the $71 million, Amgen agreed to reform its promotion and marketing practices. Not very likely!

Nursing Home Overpayments From Medicare Reaching New Heights

Jack Furumura was dehydrated and disoriented when he left his nursing home for a hospital in 2013. The 96-year-old lost five pounds during his nursing home stay, in large part because the nursing home failed to follow his nutrition plans, or the home’s very own policies for that matter.

2Mr. Furumura wasn’t able to recover from his ailments and weeks after being checked into a hospital he died at his daughter’s home. In the wake of her father’s death, Katherine Kiang was shocked to discover that Furumura was receiving over two hours of physical and occupational therapy from the nursing home before he was hospitalized.

Kiang said she couldn’t imagine why a 96-year-old dementia patient would receive that much therapy. Why would this nursing home put this man through that much therapy at that stage in his life, and in his condition?

Medicare Incentivizes ‘Ultra High’ Billing Levels

Unfortunately, there are many stories similar to Mr. Furumura’s. Worse yet, Medicare’s own rules are responsible for incentivizing nursing home facilities to bill at “ultra high” levels for services, even when it is wasteful, unnecessary, and, in some cases, harmful for patients. At first glance, the case laid out above seems like Medicare fraud, but unfortunately it appears to be business as usual for a system rife with problems.

At present, Medicare will pay for up to 100 days of a patient’s nursing home care in the aftermath of a hospital stay (in some cases, the patient pays for a portion of the care). Medicare pays nursing home facilities a daily rate for each patient, which is largely based on the duration of a patient’s therapy for a given week. For example, Medicare spent $13,468.19 on Mr. Furumura’s therapy and care. Even as he was deteriorating physically and mentally, the nursing home billed Medicare for his care at the highest possible rate.

Patients that are receiving therapy at the highest billing level generate the biggest payments that nursing homes receive from Medicare. What exactly is Medicare paying for? At least 720 minutes a week of physical therapy (helps with tasks like walking, avoiding falls), occupational therapy (helps with dressing and bathing) and speech therapy (helps patients who have had a stroke, for example, overcome language difficulties).

The ultra high rate, according to a Wall Street Journal news article, averaged out to around $560 per patient, per day in 2013. A “very high” day (between 500 and 719 minutes of therapy) averaged out to roughly $445 per patient. The “low” category (between 45 and 149 minutes of therapy) costs on average $325 per patient, per day.

The current Medicare payment rules were devised in 1998 and then fully-implemented in 2002. Since the day these new rules took effect, nursing homes have continued to bill at increasingly higher therapy levels. Reports indicate that nursing homes billed at the highest rates for patients on roughly 7 percent of days in 2002. Fast forward 11 years to 2013 and the rate for ultra high billing days increased to 53 percent, nearly eight times higher than 2002 standards.

To put this into a dollars and cents, according to data compiled by the Journal, Medicare paid out roughly $28 billion to nursing homes in 2013. That total is 10% more than Medicare would have paid if the proportion of days billed at each therapy level was at 2008 billing standards and 24% more than 2002 levels.

Does More Therapy Translate to Healthier Patients? 

The short answer to this question is there simply isn’t data out there to know for certain. According to Dr. Vincent Mor, there is “clear evidence” that therapy works, but one patient receiving more services than another doesn’t guarantee that the outcomes for one will be any different than the other. “We just don’t know,” says Dr. Mor, who is a health-services professor at Brown University as well chairman of the independent quality committee at HCR ManorCare Inc., which is one of the nation’s largest nursing home operators.

But despite having no evidence to suggest that more care translates to healthier patients, providers have continued to overwhelmingly bill at the highest possible levels. More than 20 current and former rehabilitation therapists interviewed for the Wall Street Journal news piece said they felt pressure from their bosses at nursing home facilities to reach the 720-minute therapy mark for the week in order to bill at the highest level.

According to these therapists, this care was delivered even when patients were unresponsive, weren’t likely to gain anything from the services, or outright declined the services. In some cases, patients became more agitated as a result of having gone through the therapy.

Harvard professor David Grabowski studies nursing home spending. He believes that there are patients that simply aren’t being treated appropriately because the system “rewards high-intensity care.”

Nursing Homes: The Business of Caring, but Still a Business 

Billing at the highest levels is not something restricted to larger nursing facilities—from the looks of the data, nursing homes of all sizes are billing Medicare at ultra high rates.

Genesis HealthCare Corp. is one of the largest nursing home providers in the country. In 2002, it billed Medicare at the ultra high rate in 8.1 percent of days. That number skyrocketed to 58 percent of days in 2013. Kindred Healthcare Inc., which operates nursing home facilities that contract with rehabilitation clinics, billed Medicare at the ultra high rate 7.6 percent of days in 2002. This increased to 58 percent in 2013. HCR ManorCare Inc. billed at the highest rate 8.8 percent of the time in 2002. By 2013, it was billing at the highest rate 68 percent of the time…you get the idea.

HCR is the subject of a whistleblower lawsuit which claims the company committed fraud by putting pressure on employees to perform unnecessary therapy so it could bill Medicare at the highest level. HCR wouldn’t comment on the whistleblower lawsuit, but the company refuted the basic claims on its website.

Nursing Home Medicare Fraud Whistleblower 

Allegations of nursing home facilities committing Medicare fraud is nothing new. This sector of health care has been rife with fraud and abuse for decades. But as we’ve seen in the many aforementioned examples, we have reached a tipping point where it has become business as usual for corrupt nursing homes to bill Medicare for care that is medically unnecessary, unwanted, and in some cases, harmful.

We need to tip the scales back in our favor and make it more difficult for nursing home facilities to commit fraud. A whistleblower case like the HCR lawsuit discussed above is one of the best weapons available to combat Medicare fraud committed by nursing home facilities. A successful whistleblower lawsuit not only returns taxpayer dollars to Medicare, it protects the program’s integrity and ensures that our elderly citizens are receiving appropriate care.

If you work at a nursing home facility and are being asked to perform medically unnecessary services, it is in your best interest to discuss the matter with an experienced whistleblower attorney. If your whistleblower lawsuit proves successful, it could help reduce waste and fraud and earn you a sizable whistleblower reward.

Contact a whistleblower attorney today for a free consultation.

CenseoHealth Employee Alleges Medicare Advantage Fraud

A whistleblower in Texas has filed a false claims lawsuit accusing a medical consulting business and over two dozen health plans for seniors of bilking money from government health care agencies. Whistleblower Becky Ramsey-Ledesma, a medical billing coder, claims that CenseoHealth LLC. performed in-home patient exams that allegedly overstated how much health plans should be paid.

Medicare Advantage FraudCenseoHealth is a Dallas, Texas-based firm that contracts with thousands of doctors that make in-home visits for seniors and evaluate their health for Medicare Advantage plans. CenseoHealth was founded in 2009. In only four years of business, its workforce grew from four in 2009 to over 300 in 2013, with projected revenue for that year estimated to reach $120 million. Doctors under contract with the company have reportedly made over a million in-home patient visits.

Ramsey-Ledesma once worked for CenseoHealth. She claims that she was fired in 2013 for objecting to the alleged fraudulent practices. Her lawsuit represents the latest in a string of whistleblower claims filed within the last few years alleging billing fraud in connection with Medicare Advantage.

What is Medicare Advantage and How Does it Work?

Medicare Advantage has become increasingly popular among the elderly. The latest statistics indicate that it now covers over 17 million Americans. Since the 1980’s, those eligible for Medicare have been able to choose between a regular fee-for-service plan (what we think of as ‘traditional Medicare’), in which the government pays an agreed-to fee to health care providers for each service provided, and a Medicare Advantage plan, where the government pays private insurers a flat fee per month for any individual enrolled.

The flat fee is based on what is called a risk score.

Here’s how risk scores are tabulated:

  • A doctor reviews a patient’s chart.
  • The doctor records any complaints and documents diseases.
  • That information is handed over to a private insurer, which then submits the diagnoses to Medicare.
  • Medicare boils down the diagnoses and predicts how much the cost of care will be for the patient.
  • After a complex process, Medicare pays the private insurer a set monthly fee per patient. If patients are sicker, the insurance company makes more because they require more care. If patients are healthier, the company makes less because they require less care.
  • The insurers can further analyze diagnoses and sponsor further checkups to see if the first doctor missed anything, then increase the patient’s risk score if necessary.

CenseoHealth Whistleblower Lawsuit

Ramsey-Ledesma claims that CenseoHealth used a complex algorithm in an attempt to find patients with undetected medical issues that could be used to boost their risk score and collect more money. CenseoHealth allegedly employed marketers to reach out to patients and schedule in-home patient visits. During these visits, doctors allegedly collected patient data, which could then be used to increase a risk score.

According to the CenseoHealth whistleblower lawsuit, the doctors never actually provided any medical treatment during these visits. Instead, physicians would test vitals, reflexes and listen to patients’ hearts and lungs. No physical was ever provided, nor was any blood work done.

The CenseoHealth whistleblower suit further claims that doctors often didn’t have medical licenses. Others were allegedly scheduled with as many as 10 home visits in a day and were paid a flat fee of $100 per visit. Some doctors simply made up test results, according to whistleblower allegations.

In one example cited in a story by NPR, patients were asked to draw the hands on a clock to show what time of day it was. The whistleblower allegations state that in some cases it was “obvious” that the same person was drawing the hands on the clocks for multiple forms.

The diagnoses, according to whistleblower claims, weren’t obtained from a medical examination, rather, they were self-reported from the patients themselves. Some simply couldn’t have been made in an in-home examination. Others were made based on what medications a patient was taken, though this didn’t take into account that medications can be prescribed for a wide variety of different treatments.

The false claims, according to the whistleblower lawsuit, inflated the cost Medicare paid for patient care. In total, 30 Medicare Advantage plans across 15 states are named, including Blue Cross, Humana, and a number of other significant industry names.

Ramsey-Ledesma’s whistleblower lawsuit is one of many targeting Medicare Advantage home home visits. Another was filed last year by a former compliance officer for Santa Ana, California-based Mobile Medical Examination Services Inc. Other Medicare Advantage whistleblower  lawsuits within the last five years have been filed in Florida and South Carolina.

In addition to the false billing accusations, all of the aforementioned whistleblower lawsuits claim that poor government oversight of Medicare Advantage has contributed to millions lost due to fraudulent charges.

What Are the Downsides?

The government trusts firms like CenseoHealth to report their own risk scores based on the honor system. When you factor in the last step listed above—the home patient visits—these checkups can (and according to the latest whistleblower allegations, do) result in providers jacking up the risk scores for patients, simply because there is no oversight.

According to the Center for Public Integrity, Medicare made nearly $70 billion in “improper” payments to Medicare Advantage plans between 2008 and 2013. According to government estimates, these payments were for the most part the result of overbilling based on inflated risk scores.

The Centers for Medicare and Medicaid Services (CMS) has said in-home health exams can have “significant value,” an opinion shared by America’s Health Insurance Plans, the health insurance industry trade group, which has said home visits are “an important component of disease management activities.”

At this moment, Medicare Advantage is in the midst of strong growth and continues to receive widespread political support from Congress. The House of Representatives recently passed a bill that appears to prevent federal officials from putting an end to in-home health assessments.

At the same time, CMS is drawing scrutiny because its head Andy Slavitt has ties to UnitedHealth Group, which runs the nation’s biggest Medicare Advantage plan. Senator Orrin Hatch (R-UT) was critical of Slavitt’s “conflicted history” after he was nominated for the top CMS job in July.

In other words, the fox is guarding the henhouse.

Make no mistake, these private health firms are in the business of making money. Take CenseoHealth as an example: one of the company’s largest investors is private equity firm Health Evolution Partners, which is headed by David Brailer, a former “health information czar” under President George W. Bush. Brailer was named chairman of CenseoHealth’s board of directors in March.

If companies like CenseoHealth don’t make profit for investors like Health Evolution Partners, investment firms simply take their business elsewhere, and you can bet that until there is reform in the system, there will always be companies that are willing to bend the rules to make more money.

Become a Medicare Advantage Whistleblower

Now more than ever, we need whistleblowers with knowledge of Medicare Advantage fraud to come forward. The CMS study, along with everything mentioned above, is a clear indication that fraud in the system isn’t going to go away on its own. The companies responsible for stealing money from the government need to be held accountable. That justice can start with you.