MD2U to Pay $21.5 Million to Settle Home Health Care Fraud Charges

Over the last few years, many Americans have decided against putting elderly family members in assisted living facilities or nursing homes, citing rising costs and a desire to allow their loved ones to live out their last years at home as the reasons. This shift has resulted in home care becoming one of the fastest-growing sectors in health care. Coincidentally, home health care fraud is fast becoming a common and serious issue that deserves attention.

MD2U Home Health Care Fraud ‘Extreme,’ According to DOJ 

This week, home health care firm MD2U added itself to the growing list of bad actors in the home health care industry. The Justice Department announced on Thursday that the Louisville, Kentucky-based company agreed to pay an estimated $21.5 million to resolve fraudulent billing practices that were so widespread, the government referred to MD2U as an “extreme outlier.”

MD2UAccording to government claims, MD2U violated the False Claims Act by knowingly submitting false bills for home health care to Medicare and other government health care agencies. Specifically, the government accused MD2U of altering records to support their fraudulent claims as well as providing services that were medically unnecessary.

The government complaint states that between July 1, 2007 and November 30, 2014, MD2U submitted fraudulent bills based on care for patients who were neither homebound not home-limited, billed government health care agencies for care considered to be medically unnecessary, manipulated medical records in order to justify patient visits, and billed for services using the highest possible payment codes when lower codes were more appropriate (this tactic is often referred to as ‘upcoding’).

Here’s just a few examples of how the MD2U home health care fraud scheme worked:

  • MD2U would require non-physician providers (known as NPPs) to document that certain patients were homebound or home-limited, as well as indicate in medical records that outpatient visits could jeopardize patient health, regardless of whether or not either claim was true.
  • MD2U management urged NPPs to visit patients more frequently than medically necessary in order to increase billings. The company also required NPPs to perform medically unnecessary visits in order to submit false billings.
  • A review of MD2U billings showed that between July 1, 2007 and November 30, 2014, roughly 98 percent of all Medicare claims were false.
  • NPP patient visits would for as little as 34 seconds (as demonstrated in at least one reviewed case). Often, these visits lasted less than 10 minutes. The visits were nonetheless billed as comprehensive medical visits billed at the highest possible code. Based on the code submitted, practitioners should have been spending about 60 minutes with each patient.
  • NPPs were trained to bill all encounters at the highest possible code.
  • MD2U used an electronic medical records system, which allowed NPPs to cut, copy and paste patient medical notes from prior visits. This ability to manipulate patient records created the illusion that NPPs were performing significant work on patients when, according the the Justice Department, they were not.
  • In the event that a patient’s medical documentation wasn’t sufficient enough for MD2U to bill at the highest possible code, NPPs were instructed to go back into the patient’s records and falsely claim that more work had been performed during a visit in order to justify billing at the highest code.

Details of MD2U Home Health Care Fraud Settlement 

The defendants have admitted to violating the False Claims Act by making or causing others to make false statements, and submitting or causing others to submit false claims to the U.S. government. These actions caused damages and MD2U is liable to the U.S. in the amount of $21,511,756.

Defendants J. Michael Benfield (CEO and President of MD2U), Greg Latta (CIO) and Karen Latta (COO), all owners, admit that, due in part to the actions of a former MD2U employee, they caused false claims to be submitted to the government. As such, the defendants will pay $3.3 million and a percentage of MD2U’s net income for a term of five years. Additionally, the defendants agreed to enter into a corporate integrity agreement with the Department of Health and Human Services’ Office of Inspector General for a period of five years.

Preventing Home Health Care Fraud 

The Bureau of Labor Statistics (BLS) projects that between 2012 and 2022, demand for home health care aides will increase by a whopping 48 percent. With this boom in the industry, it is all but inevitable that some companies will attempt to bilk money from the government via home health care fraud.

But home health care fraud is preventable if men and women in the industry report wrongdoing when they see it. If you have information concerning a home health care fraud scheme, consider reaching out to a whistleblower lawyer. An experienced whistleblower lawyer can help you better understand your rights and guide you through your options. For more information, contact the whistleblower law firm of Baum, Hedlund, Aristei & Goldman today.

 

Over 300 People Charged in Largest Ever Medicare Fraud Scheme

Federal authorities brought charges on Wednesday against over 300 people who were allegedly involved in a Medicare fraud scheme worth $900 million in false billings. The enforcement action is being lauded as the largest Medicare fraud takedown in the history of the country, exceeding the previous record set last year when 243 defendants faced charges for a combined $712 million in false billings.

Wednesday’s takedown was headed by the Medicare Fraud Strike Force, which conducted a nationwide sweep in 36 federal districts that resulted in civil and criminal charges against 301 individuals. Sixty-one doctors, nurses and other medical professionals were among those charged for participating in the widespread Medicare fraud scheme. Twenty-three Medicaid Fraud Control units also participated in the takedown.

Charges in the Largest Medicare Fraud Scheme in U.S. History

 Those implicated in the Medicare fraud scheme have been accused of a wide range of health care-related crimes, including aggravated identity theft, money laundering, conspiracy to commit health care fraud and violations of anti-kickback statutes. The charges stem from a number of different schemes involving various medical treatments and care, including home health care, physical and occupational therapy, psychotherapy, durable medical equipment and prescription drugs.

Court documents show that defendants submitted for Medicare and Medicaid reimbursement based on treatments that were either medically unnecessary or never provided. More than 60 of the individuals charged were arrested in connection with Medicare Part D fraud, the prescription drug program for Medicare.

In many of the cases, patient recruiters, Medicare beneficiaries and other conspirators were allegedly paid cash in exchange for patient information that health care providers could then use to submit false bills to Medicare and Medicaid. According to the Justice Department, the total amount of false bills submitted reached approximately $900 million.

Where Were the Accused Operating? 

Southern District of Florida – According to the DOJ, 100 defendants from the Southern District of Florida were charged in connection with fraud schemes worth an estimated $220 million. The schemes revolved around pharmacy fraud, home health care fraud and mental health services fraud. In one Medicare fraud scheme cited by the DOJ, nine individuals were allegedly responsible for submitting false bills to Medicare on behalf of six different Miami-area clinics providing home health care services. These bills were for services not considered medically necessary and allegedly based on kickbacks paid by the perpetrators. In total, Medicare paid out over $24 million as a result of the scheme.

Central District of California – A total of 22 defendants were charged for schemes to defraud Medicare of an estimated $162 million. In one example, a doctor allegedly submitted false claims to Medicare that resulted in the government paying nearly $12 million for medically unnecessary services.

Southern District of Texas – Authorities say 24 individuals submitted false claims worth over $146 million. One physician with the highest amount of patient referrals for home health care services in the district was charged with participating in schemes to bill Medicare for services that were often not provided.

Northern District of Texas – Eleven people were charged in cases worth over $47 million in alleged Medicare fraud. One area physician was allegedly involved in a Medicare fraud scheme where unlicensed individuals provided medical services that were billed as if the doctor had performed them himself.

Eastern District of Michigan – Authorities charged 19 people for their alleged roles in Medicare fraud schemes totaling an estimated $114 million. Defendants have been accused of fraud, paying kickbacks, drug distribution schemes and money laundering.

Eastern District of New York – Ten people were charged in six cases. Five of the defendants were allegedly involved in a health care fraud scheme worth over $86 million for false claims related to physical and occupational therapy paid by both Medicare and Medicaid.

Middle District of Florida – Authorities charged 15 people for their alleged involvement in Medicare fraud schemes that involved intravenous prescription drug fraud and pharmacy fraud. The schemes resulted in $17 million in false billing.

Northern District of Illinois – Six were charged in connection with Medicare fraud claims worth over $12 million.

Eastern District of Louisiana – Three people were charged for their roles in a Medicare fraud scheme and a wire fraud scheme involving a defunct home health care provider.

The enforcement action also involved cases brought by 26 U.S. Attorney’s General Offices in North Carolina, Georgia, Texas, West Virginia, Washington D.C., Alabama, Minnesota, and Louisiana.

Medicare Fraud Whistleblower 

Fraud accounts for an estimated 10 percent of all Medicare and Medicaid expenditures on an annual basis. Medicare fraud costs taxpayers billions and drives up the cost of health care for everyone.

As evidenced by today’s enforcement action, the government has the ability to catch criminals who seek to defraud Medicare. But resources dedicated to finding and prosecuting fraudsters are still quite limited. This is why whistleblowers are so vital in protecting the integrity of Medicare and Medicaid.

If you have knowledge of Medicare or Medicaid fraud and are wondering what your options are, consider speaking with an experienced whistleblower lawyer about your case.

How the Government is Cracking Down on Ambulance Fraud

Ambulance fraud is a serious problem that costs Medicare millions every year. In 2012, Medicare paid out over $5 billion to ambulance companies, which is more than was spent on cancer doctors. Both the Justice Department and the Centers for Medicare and Medicaid have singled out the ambulance industry as an area where Medicare fraud is rampant.

In 2011, Brotherly Love Ambulance Inc. was one of many companies shut down by the feds over allegations of ambulance fraud. When the company was forced to close its doors for good, the owner’s son, Bassem Kuran, opened another ambulance company called VIP Ambulance Inc.

The move from Brotherly Love to VIP Ambulance is not uncommon in the ambulance transportation industry. But moves like this have become a thorn in the side of regulators trying to weed out corrupt ambulance companies.  Officials liken this to playing a game of ‘wack-a-mole,’ where the feds successfully shut down a fraudulent ambulance company only to have another company—commonly started by a relative or friend of the owner/operator of the fraudulent company—open under a new name.

In the case of VIP Ambulance, Kuran picked up right where his mother left off with Brotherly Love.  But this month, he will be arraigned for making false statements in connection with a health care matter.

How has the government cracked down on perpetrators like Kuran? Officials decided to take a new approach, limiting the number of new ambulance companies in cities where ambulance fraud was running rampant, and forcing them to receive prior approval for repetitive nonemergency transport.

The New Approach to Combatting Ambulance Fraud 

Starting in 2013, federal officials decided that things had to change if they were going to stop, or even slow down ambulance fraud. With new ambulance companies like VIP Ambulance constantly popping up after investigations shut down their predecessors, the government decided to stop approving new ambulance companies in areas plagued by ambulance fraud. After the tactic was first tried in two metropolitan cities, it slowly spread to other parts of the country.

The impact of this new approach has been significant in areas like Southeastern Pennsylvania, where last year Medicare only spent $12.7 million on basic ambulance services, down from $55.4 million in 2010. In addition to restricting new ambulance companies from being paid by Medicare, officials also require all ambulance companies in Southeastern Pennsylvania to receive prior authorization on all repetitive nonemergency trips, like for dialysis treatment, for example.

According to the Pennsylvania Department of Health, 83 ambulance companies have been shut down since the beginning of 2014 – more than 25 percent of all ambulance companies operating in Southeastern Pennsylvania. The area has also seen 30 criminal convictions within the last five years, leading to restitution orders totaling $22 million and an aggregate of 82 years of jail time handed out to perpetrators.

The type of ambulance fraud that led to these criminal convictions centered on Medicare beneficiaries who needed transport for dialysis treatment three times per week. Ron Kerr, assistant special agent in charge of the HHS Office of Inspector General in Southeastern Pennsylvania, says a single patient requiring this type of transport could fetch an ambulance company $67,000 per year. These patients, according to Kerr, are viewed as assets by criminals.

Under Medicare rules, very few patients actually qualify for ambulance transport to and from dialysis treatment, as it has to be considered medically necessary (i.e. there is no other way to safely move the patient). Prior to the new tactics to combat ambulance fraud, ambulance companies would simply bill Medicare, pretending to have physicians certifying the medical necessity. Medicare contractors didn’t check to make sure these trips had proper certification until later. Some ambulance companies would go so far as to pay patients as much as $500 per month just so they could bill Medicare for transportation to dialysis treatment centers (Medicare pays up to $380 each round trip, including mileage). In reality many of the patients weren’t even transported in an ambulance – they were driven in a car or they drove themselves for treatment.

Are We Making Serious Progress Rooting Out Ambulance Fraud? 

According to the Philadelphia Inquirer, Medicare data suggests that we are making progress in slowing ambulance fraud. At present, there are three states that now require prior approval for repetitive nonemergency transport – Pennsylvania, New Jersey and South Carolina. All have seen dramatic reductions in their monthly costs for repetitive nonemergency ambulance transportation.

However, there are still a large number of ambulance companies that rely heavily on repeat Medicare business for nonemergency trips. Which begs the question: have these companies just changed their schemes enough to avoid detection? We will have to wait and see in the coming years whether the downward trend in ambulance fraud continues.

In the meantime, if you have knowledge of any ambulance companies fraudulently overbilling Medicare for transportation, it is in your best interest to speak with an experienced whistleblower attorney as soon as possible. By coming forward, you may not only be protecting the integrity of a vitally important government health care program, you may be entitled to a reward if your case is successful.

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Whistleblowers Win in Defend Trade Secrets Act

It’s not very often these days that a bill receives widespread bipartisan support in both the House and the Senate, particularly one that is favorable to whistleblowers. However, that’s what happened at the end of April when Congress passed the Defend Trade Secrets Act. The House passed the bill by a whopping 410-2 margin on April 27, and President Obama signed the bill into law today, repeating a common line he uses at bill signing ceremonies: “I’m always happy when we pass bills.”

iStock_000074771283_MediumWhistleblowers and those interested in preserving whistleblower protections also have reason to be pleased. Suing whistleblowers for allegedly “stealing” company trade secrets has become a common tactic used by employers to deter whistle blowing. Take the recent case involving J-M Manufacturing Co., Inc. and Formosa Plastics Corp. USA (J-M’s former owner) as an example:

J-M and Formosa Plastics supplied PVC pipes to the government for water and sewage systems. Former J-M employee John Hendrix filed a whistleblower lawsuit against his former employer back in 2005, claiming J-M and Formosa Plastics knew that the PVC pipes they manufactured and sold to the government did not meet the standards outlined in the contract. The companies allegedly lied about the quality of the pipes and failed to make improvements to them despite knowing that their products were below government standards. Hendrix further alleged that the defective PVC pipes were likely to rupture substantially earlier than expected due to the poor quality.

Eight years after the whistleblower lawsuit was filed, Formosa Plastics settled the suit for a reported $23 million. The same year, a California federal jury found that J-M knowingly misrepresented the quality of PVC pipes it built and sold the government.

Despite the settlement and the California jury holding J-M liable for failing to accurately represent the quality of its PVC pipes, J-M and Formosa Plastics sued Hendrix over misappropriating confidential company documents. According to the complaint against Hendrix, after he signed J-M’s Employee Secrecy Agreement, he was fully aware that his “acts of purloining J-M’s confidential and trade secret documents and information” for his case was “unlawful and in clear contravention of his ESA with J-M.”

Just a quick aside on the subject of stealing trade secrets: of course there need to be safeguards to protect businesses from individuals or other competitors trying to steal ideas for new technology, services and goods, among other things. According to the Commission on the Theft of American Intellectual Property, stolen trade secrets costs the U.S. economy more than $300 billion a year, which is comparable to our country’s annual exports to Asia.

That said, businesses shouldn’t be able to use the safeguarding of trade secrets as a means to intimidate would-be whistleblowers from coming forward if they have legitimate concerns about possible fraud. With the passing of the Defend Trade Secrets Act, the use of this tactic by J-M and many others to intimidate whistleblowers has been discouraged.

The Defend Trade Secrets Act—and specifically its whistleblower amendment—provides immunity to those who disclose trade secrets in confidence to their attorney or a government official pursuant to reporting or investigating potential fraud, provided the disclosure is made in a specific way.

According to the amendment, if a whistleblower discloses a “trade secret” in confidence to an attorney or a government official solely in the interest of reporting or investigating fraud allegations, the whistleblower can’t be held liable under any federal or state trade secret law.

Furthermore, if a whistleblower does reveal a trade secret in connection with a qui tam complaint filed under seal, the whistleblower can’t be held liable. Documents revealing trade secrets may also be used in anti-retaliation lawsuits, as long as they are filed under seal and remain undisclosed outside of the matter pursuant to court order. The Defend Trade Secrets Act also requires employers to inform their employees of the rights outlined in the whistleblower amendment.

The bill was offered by Senator Patrick Leahy (D-VT) and Senator Charles Grassley (R-IA). The National Whistleblower Center has long supported the Leahy-Grassley whistleblower amendment outlined in the Defend Trade Secrets Act. “After this bill is signed into law, corporations will not be able to hide behind the trade secrets privilege to cover-up their wrongdoing,” says Stephen M. Kohn, the executive director of the National Whistleblower Center.

“Whistleblowers who follow the clear and reasonable procedures set forth in the law will not need to fear retaliatory counter-lawsuits, which were becoming a favorite tool used by companies to silence whistleblowers.”

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Why the Universal Health Services Whistleblower Case is Such a Big Deal

This week, the U.S. Supreme Court heard oral arguments in the Universal Health Services whistleblower case, which has generated a fair amount of media attention. The implications of Universal Health Services vs. U.S. ex rel. Escobar cannot be understated, as the outcome could limit the number of cases that can be filed under the False Claims Act.

Background on Universal Health Services vs. U.S. ex rel. Escobar 

The Escobar family filed suit against United Health Services after their daughter had a seizure and died while in a counseling center owned by UHS. The teenage girl, a recipient of Massachusetts state medical benefits, was treated by mental health counselors who were not licensed in the state to provide mental health therapy, according to the United Health Services whistleblower lawsuit.

The complaint states that the UHS-owned counseling center submitted invoices for Medicaid reimbursement based on claims that the mental health councilors who were providing services were licensed to do so when, according to the lawsuit, they were not. The Universal Health Services whistleblower lawsuit further claims that the counseling center made similar fraudulent misrepresentations regarding other clinical staff members and nurse practitioners, and that the facility invoiced Medicaid for reimbursement despite its noncompliance with state staffing and supervision requirements.

The complaint was initially dismissed in district court, which found that the state regulations at issue imposed only “conditions of participation,” not “preconditions to payment” sufficient to give rise to False Claims Act liability.

The U.S. Court of Appeals for the First Circuit ended up reversing the district court decision and remanded the United Health Services whistleblower case for further proceedings. On June 30th of last year, UHS filed a petition for certiorari with the Supreme Court.

SCOTUS Hears Arguments in Universal Health Services Whistleblower Lawsuit 

In arguments heard earlier this week, attorneys for UHS asked the Supreme Court to consider that it isn’t fraud when a hospital bills Medicaid or other government health care agencies for doctor services when it knows that doctors didn’t perform the services; and that hospitals operating as government contractors should be permitted “to pick and choose which regulations they comply with.”

The UHS legal team further contended that while the company may have breached the terms of the government contract, it isn’t serious enough to be considered fraud. This question of what should be considered fraud is at the heart of this case.

After hearing their argument, Justice Sonya Sotomayor began to question UHS on why the company’s actions shouldn’t be considered fraud.

Justice Sotomayor asked if it would be a breach of contract to provide the Army with a gun that doesn’t shoot. A UHS attorney answered by saying it would depend on the facts of the case.

“What – what more facts do you need?” said Justice Sotomayor. “Government contracted for guns. All of sudden you deliver guns that don’t shoot. That – those are the facts that led to this Act.”

At another point in the transcript, Justice Sotomayor asked Mr. Englert if anybody, except himself, would ever think that it wasn’t fraud to provide guns that didn’t shoot, if that’s what the government contracted to purchase.

Justice Elena Kagan was also incredulous of UHS’s argument. When asked if UHS had satisfied the terms of their government contract, a UHS attorney said “not every jot and tittle.” Justice Kagan continued that she wasn’t concerned with every jot and tittle, only the material portions of the contract. “That – you know, that the guns shoot, that the boots can be worn, that the food can be eaten – … and a doctor’s care is a doctor’s care,” she said.

It seems clear that if a health care provider submits a claim for reimbursement to Medicare or Medicaid implying that it was in compliance with regulations and all material terms of a contract, when it knows that it wasn’t, that is fraud. As for UHS’s other argument – that government contractors should be allowed to “pick and choose which regulations they comply with” because “there’s so many and confusing” regulations to contend with – that is quite simply absurd. What would be the point of having any regulations at all if contractors could decide for themselves which they can ignore?

What Happens Next? 

Based on the transcripts from the oral argument, it seems unlikely that the Justices will strike down the FCA’s implied certification theory of legal falsity. Nonetheless, the Justices appear to be looking for a rule that would define when an implied certification claim of legal falsity can be made. What this rule would look like, or even whether a majority can reach an agreement on the rule, remains to be seen.

At any rate, the outcome of the Universal Health Services whistleblower case may very well decide how specific government contracts need to be in order to hold fraudsters accountable. It could even define what is considered a false or fraudulent claim under the False Claims Act. This case is definitely one to watch.

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SEC: Vanguard Whistleblower Deserves Protection

The Securities and Exchange Commission (SEC) has filed a brief in support of Vanguard whistleblower David Danon, who claims he was wrongfully fired after opposing the financial firm’s tax practices. The SEC filed its “friend of the court” brief on Monday, claiming Danon should qualify for whistleblower protection.

Mr. Danon worked as a tax lawyer for Vanguard Group, the largest mutual fund company in the United States. He was fired in 2013 for “not doing his job,” according to the Malvern, Pennsylvania-based financial firm.

Vanguard GroupThe Vanguard whistleblower disagrees, and claims, he was fired because he complained internally about the company underpaying federal and state income taxes. He filed a wrongful termination lawsuit in U.S. District Court for the Eastern District of Pennsylvania near the end of last year. Mr. Danon claims that Vanguard owes roughly $35 billion in federal and state taxes, interest and penalties dating back to 2007.

In response, Vanguard filed a motion to get Mr. Danon’s case tossed, arguing that whistleblower protection laws are only for individuals that come directly to the SEC with potential securities law violations before they are fired. In other words, Vanguard says Mr. Danon isn’t eligible for whistleblower protections because he voiced concerns internally to Vanguard before he ultimately brought allegations to the SEC.

The SEC’s brief to Judge C. Darnell Jones—the federal judge overseeing the Vanguard whistleblower lawsuit—maintains that the Dodd-Frank Wall Street Reform and Consumer Protection Act authorizes the agency to offer rewards to individuals who voluntarily provide the SEC with information that leads to a successful enforcement action, and prohibits employers from retaliating against whistleblowers. Dodd-Frank whistleblower rules are in place to protect individuals who report violations internally, the SEC says. If the Vanguard whistleblower lawsuit were to be dismissed, the SEC believes it would “substantially weaken” the agency’s ability to use whistleblowers as the foundation for building cases against corporations accused of wrongdoing.

The irony with this Vanguard whistleblower case is that companies have long battled with the SEC over the question of whistleblower status. When Dodd-Frank was being crafted, some companies were adamant that employees should be encouraged to report any wrongdoing internally before bringing allegations directly to the SEC. How ironic that these same companies are fighting a rule they were supporting a few years ago.

How do the courts view this question of whistleblower status when allegations are made internally before being brought to the SEC? Thus far, they haven’t been consistent. According to the Wall Street Journal, a federal appeals court ruled last September that employees who report internally before bringing allegations to the SEC’s attention are protected, but another court has ruled that they don’t enjoy whistleblower protection.

The SEC has said it is not taking a position on the specifics of Mr. Danon’s Vanguard whistleblower allegations, only on the requirements necessary for claiming whistleblower protection. The agency has issued a regulation on the question of whistleblower protection, and Monday’s brief is in defense of that regulation.

The Vanguard Whistleblower is Helping Beyond the SEC 

It is worth noting that last year, Mr. Danon received an informer’s fee of $117,000 for helping the state of Texas collect back taxes owed by Vanguard. Texas audited Vanguard on four separate occasions in 2015, finding that the company owed taxes in each audit.

Mr. Danon has made accusations to the Internal Revenue Service, California, New York and other states, claiming the firm illegally avoided paying taxes. In the California case, the state’s Franchise Tax Board recently told Mr. Danon that the claims against his former employer warranted a criminal investigation. Vanguard could be liable for up hundreds of millions of dollars in that case alone.

In addition to these Vanguard whistleblower claims, Mr. Danon has also alleged to the SEC that Vanguard underpaid its own management affiliate in an effort to minimize its income-tax obligations while the firm hid illegal cash reserves from tax authorities and the company’s investors.

For their part, Vanguard has said the company’s financial arrangements are legal.

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Pfizer Whistleblower Has History of Exposing Big Pharma

After a lengthy government investigation, drug manufacturer Pfizer agreed to pay $784 million last month to settle claims that its Wyeth unit overcharged Medicaid for the heartburn drug Protonix. The settlement agreement resolved claims filed by Pfizer whistleblower William LaCorte, who accused the drugmaker of failing to provide Medicaid with the same discounts on Protonix that it provided to other customers.

Pfizer.svgLaCorte decided to blow the whistle on Wyeth in 2009. His was one of two Pfizer whistleblower lawsuits filed at the time accusing Wyeth of failing to provide the government with accurate pricing on Protonix. Wyeth had recently been acquired by Pfizer.

The Pfizer whistleblower lawsuits claimed Wyeth failed to provide government health care agencies with the same “Best Price” discounts on Protonix that the drugmaker was offering to its other customers. According to court documents, Wyeth offered “deep discounts” on Protonix to thousands of hospitals across the country using bundled pricing, allowing the drugmaker to market these discounts to the hospitals as a way to drive “spillover” retail sales covered by Medicaid and other insurers at higher prices.

Drug manufacturers are required to provide government health care agencies with Best Price reports detailing the drug prices offered to other customers. The Pfizer whistleblower lawsuits claimed that Wyeth knowingly ignored this requirement, which resulted in Medicaid overpaying for Protonix by hundreds of millions of dollars.

Wyeth reportedly offered discounts on two Protonix products—an intravenous version and an oral version—in response to AstraZeneca’s aggressive pricing on its heartburn drugs, Prilosec and Nexium, the latter of which had only recently been introduced. Protonix sales had slowed at the time and AstraZeneca was offering its own drugs at a nominal price in an effort to build market share for Nexium.

According to court documents, the “real money” for Wyeth was in the oral version of Protonix, and the company hoped that bundling the intravenous and oral products together would bolster demand for the oral version of Protonix.

This isn’t the first time that Pfizer has found itself in hot water. In 2013, Pfizer was accused of illegally marketing its immunosuppressive drug Rapamune. The case settled for a reported $490 million. Both Pfizer and Wyeth have been at the center of about half a dozen fraud cases going back to 2002.

Pfizer Whistleblower Receives $59 Million Award 

Pfizer whistleblower William LaCorte is not your traditional whistleblower. For starters, he doesn’t work in the pharmaceutical industry—he is a doctor based in New Orleans, Louisiana—which sets him apart from a great many that blow the whistle on pharma companies. What is most interesting about Mr. LaCorte is that he is a serial whistleblower that has filed a number of lawsuits against pharmaceutical companies that have netted him millions in rewards.

Aside from the $59 million reward that he received from this Pfizer whistleblower case, Mr. LaCorte also received roughly $38 million in 2008 for blowing the whistle on Merck in connection with its heartburn medication Pepcid. The allegations in the 2008 Merck case were similar to those in this most recent Pfizer case.

In total, LaCorte has made almost $100 million in payouts stemming from fraud settlements against drug companies. The amount of money he has made has drawn ire from some who say there should be a lifetime cap on whistleblower payouts in order to avoid ‘frivolous lawsuits.’ These naysayers point to the dozens of lawsuits that LaCorte has filed over the last 20 years, a number of which were not successful.

Since 2004, Pfizer has settled three of the largest healthcare fraud cases in the history of the United States. These three cases alone—which includes the Pfizer whistleblower case above—have returned roughly $3.51 billion (which includes a $1.3 billion criminal fine as part of a landmark 2009 settlement) to the government.

If we are to be effective at rooting out serial fraudsters, we need to welcome whistleblowers like William LaCorte, not try to limit their ability to bring pharma companies to justice when they step out of line. Remember, being a whistleblower isn’t as easy as filing a lawsuit and collecting a reward—these cases can take years to build and can be stressful for the relaters and their families. We need more people like Mr. LaCorte.

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Tenet Whistleblower Lawsuit Could Produce $238 Million

One of the largest hospital chains in the United States has set aside $238 million in anticipation of a multi million dollar settlement with the government over whistleblower allegations claiming the company paid kickbacks to a chain of prenatal clinics in the Atlanta, Georgia area in return for patient referrals. Tenet Healthcare Corp. made national news on Monday when the hospital chain notified shareholders that it hasreserved significantly more than the $20 million it had previously set aside to cover liability in the Tenet whistleblower lawsuit.

Tenet Healthcare.Logo_.2015The hospitals named in the Tenet whistleblower lawsuit include four of the company’s Georgia hospitals—Georgia-Atlanta Medical Center, North Fulton Regional Hospital, Spalding Regional Medical Center and Clearview Regional Medical Center (formerly owned by Tenet)—as well as Hilton Head Hospital in South Carolina. Other defendants in the Tenet whistleblower case include Hispanic Medical Management Inc. and its affiliates, Cota Medical Management Group Inc. and International Clinical Management Services Inc.

Tenet whistleblower Ralph Williams filed the lawsuit in 2009. He was formerly the chief financial officer (CFO) of Clearview Hospital, which was owned by Tenet at the time of his employment. The U.S. Justice Department decided to intervene in Williams’ case in 2014.

Williams claims that Clearview and Tenet created false contracts in an effort to conceal kickback payments made to a prenatal clinic chain called Clinica de la Mama. The kickbacks were allegedly offered in exchange for referrals of tens of thousands of undocumented of Medicaid patients, which reportedly make up the majority of Clinica de la Mama patients.

Court pleadings in the Tenet whistleblower case show that Clinica de la Mama clinics collected as much as $20,000 a month from each hospital, allegedly given to refer pregnant women to the hospitals to deliver their babies. The Anti-Kickback Statute prohibits hospitals from paying kickbacks to clinics, doctors or anyone else in exchange for patient referrals. The Statute is intended to ensure that a doctor’s medical judgment is based on the best interests of their patients, not on improper financial incentives.

In 2014, Clearview Hospital’s former CEO, as well as the former CEO of the now-defunct Hispanic Medical Management Inc., pleaded guilty to conspiring to pay or receive kickbacks. The charges stated that Hispanic Management’s CEO and others would only allow obstetricians with delivery privileges at the hospitals that paid kickbacks to see Clinica de la Mama patients. Relatedly, the Clinica de la Mama staff allegedly directed patients to those same hospitals when they went into labor.

One of the charges from the criminal case stated that the majority of the Clinica de la Mama patients were not made aware that they had the option of delivering their child at a different hospital. If a pregnant patient asked if it was possible to deliver her child at a different hospital, the Clinica de la Mama staff were allegedly instructed to discourage them from doing so by emphasizing the high likelihood of getting Medicaid to cover the cost of their labor and delivery if they went to the directed hospital. Likewise, the Clinica staff was also allegedly instructed to inform patients that if they chose to deliver at a different hospital, Medicaid might not cover the costs.

According to the Atlanta Business Journal, Medicaid was billed for more than 30,000 births by undocumented Hispanic women in connection with the alleged kickback scheme, which carried a cost to the federal government of between $150 million and $200 million. According to the Tenet whistleblower lawsuit, this amount still doesn’t take into account an additional undetermined amount of Medicare funds parceled out to hospitals and medical centers that provide care to a disproportionate share of low income and/or indigent patients.

In a securities filing that discussed the Tenet whistleblower lawsuit, the hospital chain expressed the possibility of the Justice Department making a counterproposal to the company’s $238 million offer. “There can be no assurance that the ongoing discussions to resolve these matters will be successful,” the company wrote. The filing also said one or more of Tenet’s hospital subsidiaries could enter a guilty plea or a deferred prosecution agreement as part of a Justice Department deal.

An agreement for hundreds of millions would represent a huge False Claims Act settlement, especially for a health care provider. Many of the larger scale FCA settlements stem from pharmaceutical companies or medical device manufacturers—it is something of a surprise when a health care provider is put on the hook for such a large amount.

But maybe it isn’t all that surprising for the Tenet whistleblower case…it turns out that Tenet Healthcare was in a similar situation years ago: In 2006, the company paid $900 million to settle claims that it manipulated “outlier” payments reserved for Medicare patients considered extraordinarily costly.

The proposed settlement from Mr. Williams’s case is likely to be finalized within the next few months. The Tenet whistleblower lawsuit is captioned U.S. ex rel. Williams v. Health Management Associates Inc. et al., case number 3:09-cv-00130, in the U.S. District Court for the Middle District of Georgia.

CFTC Whistleblower Program Not Working…Will It Get Better?

Last month in the whistleblower blog, we covered a substantial award handed out to an unnamed whistleblower who brought allegations of wrongdoing to the attention of the Securities and Exchange Commission (SEC). The $700,000 whistleblower reward demonstrates the effectiveness of the SEC’s whistleblower program—lots of people from within companies and others working as industry analysts are coming forward with financial fraud tips. As it stands, the same cannot be said for the Commodity Futures Trading Commission or CFTC whistleblower program, which came into existence at the same time as the SEC whistleblower program.

What Is Wrong With the CFTC Whistleblower Program? 

According to data obtained by the Wall Street Journal (subscription required), the CFTC whistleblower program has spent more on administrative costs than it has on whistleblower awards. Since 2011, the CFTC whistleblower program has set aside hundreds of millions of dollars in an effort to attract quality information from tipsters from the commodities and futures industry—an industry worth trillions of dollars—and it simply hasn’t been effective.

CFTC ProgramFunding for the CFTC whistleblower program has come from sanctions levied by the commission. At the end of September, it held $268 million—more than the CFTC annual budget. But the CFTC whistleblower program has only paid out $530,000 in total rewards in the four years of its existence.

The data presented by the Wall Street Journal paints a grim picture of the CFTC whistleblower program, but those with ties to the commission say it is unfair to focus solely on the total rewards payouts when evaluating the program’s efficacy. Some have said the commission is bound by strict rules governing the specifications for a whistleblower reward, rules that are purportedly not as stringent for the SEC whistleblower program.

To its credit, the commission is working to improve its whistleblower program. In an effort to increase awareness, the commission launched a new whistleblower.gov site last month. The CFTC inspector general is also auditing the limited number of whistleblower rewards that have been paid out since the program’s inception.

Nonetheless, the CFTC whistleblower program has failed to even approach the level of success earned by the SEC’s program, even though both programs have been active for the same amount of time.

CFTC Whistleblower Program Not as Effective as SEC Program 

Setting up programs to draw out whistleblower tips was an integral part of the government’s response to the financial crisis. With the passage of Dodd-Frank in 2010, the CFTC and the SEC were both poised to benefit from whistleblower programs guaranteeing rewards of 10 to 30 percent of any money collected in successful enforcement actions to tipsters with important information.

Both programs started with spears aimed at combating fraud, but they ended up with drastically different results. Since its inception, the SEC whistleblower program has paid 23 whistleblowers more than $55 million, which is over 100 times more than the CFTC whistleblower program has paid during the same period. The SEC program also benefitted from a landmark case in 2014 that captured the nation’s attention with a $30 million whistleblower reward.

As for the CFTC, its administrative costs are considerably more than the amount it has disbursed in whistleblower rewards. Since 2011, the CFTC spent a reported $4 million on administrative costs for its eight-employee whistleblower unit and a smaller office that handles “consumer outreach.” How specifically that money was allocated has not been reported.

While comparisons between the two whistleblower programs are inevitable, the scrutiny placed on the smaller CFTC whistleblower program might be a bit harsh. For one thing, the SEC has a broader mandate that includes the ability to police public company malfeasance. This alone allows for more opportunity, as a wider range of individuals can come forward with information.

The numbers bear this out: Through September of last year, the SEC has reported a total of 14,116 whistleblowers, compared to only 655 tipsters for the CFTC whistleblower program.

Attorneys Believe CFTC Whistleblower Program Will Gain Traction 

With the news of bloated administrative costs, it’s hard not to be cynical about the CFTC whistleblower program. But brighter days appear to be on the horizon—an anonymous whistleblower could receive a substantial payout for providing the CFTC with tips prior to a successful enforcement action against a British trader accused of making millions by manipulating the U.S. futures markets. This has led many whistleblower attorneys to believe that the CFTC whistleblower program will hit its stride and produce more results with bigger payouts to tipsters.

It is also worth remembering that the SEC whistleblower program had its fair share of critics in the early days when we weren’t seeing a lot of successful enforcement actions. Now it is largely held up as a beacon of success.

Related Articles:

The CFTC Whistleblower Program

SEC Scores Win for Whistleblowers

SEC Whistleblower to Receive at Least $475,000 for Reporting Corporate Misconduct

SEC Whistleblower Reward Could be a Game Changer

The Securities and Exchange Commission (SEC) handed out a $700,000 whistleblower reward last week to a finance industry expert whose detailed analysis led to an enforcement action against a company. The SEC whistleblower reward represents the largest to date for independent analysis and signals a sea change for SEC reporting: no longer is the role of the SEC whistleblower exclusive to men and women within a company—industry analysts armed with publicly available data can also bring fraud allegations to the government’s attention and earn a reward.

SEC-logoThe SEC whistleblower reward announced last Friday was given to an unidentified tipster, and the company implicated by the allegations was also unidentified in court documents. The whistleblower reportedly came forward with tips prior to the establishment of the SEC whistleblower reward program, which was introduced in the Dodd-Frank Act. After the SEC whistleblower program came into effect, the whistleblower came forward with additional analysis, which eventually led to the successful enforcement action.

Most of the SEC whistleblower reward payout to date (a number of which have been discussed on this blog) have been given to corporate insiders who provided the SEC with original information that led to monetary sanctions in excess of $1 million. What you may not know is that the Dodd-Frank Act also authorizes whistleblower rewards for tips gleaned from “independent analysis,” as long as the information provided is not already known to the SEC. This rule in Dodd-Frank defines independent analysis as “your own analysis, whether done alone or in combination with others . . . your examination and evaluation of information that may be publicly available, but which reveals information that is not generally known or available to the public.”

It should be noted that the SEC wasn’t always so open to fraud allegations brought by those who weren’t corporate insiders. The SEC’s openness to whistleblower tips from analysts came in 2009 after the commission was embarrassed by Congressional testimony from Harry Markopolos, a Massachusetts-based financial analyst who said he “gift wrapped and delivered” to the SEC evidence of the Ponzi scheme orchestrated by Bernie Madoff nine years before the allegations were made public. Markopolos repeatedly implored the SEC to act, but was stonewalled.

In response to the 2009 testimony, the SEC created an office to collect whistleblower tips at Markopolos’ recommendation. And while corporate insiders still come forward with the vast majority of whistleblower tips, the most recent SEC whistleblower reward has made it clear that solid information brought by outside analysts will be taken seriously.

In the announcement of the SEC whistleblower reward on Friday, Director of the SEC’s Enforcement Division, Andrew Ceresney, said high-quality analysis by industry experts “can be every bit as valuable” as company insiders coming forward with first-hand knowledge of wrongdoing. The message seems to be clear—people that aren’t company insiders should not feel discouraged bringing valuable information to the government’s attention.

Another noteworthy aspect of this SEC whistleblower reward is that it represents the fourth consecutive instance in which the commission has issued an award. Since 2011, SEC whistleblowers have earned $55 million in total rewards.

Many expect that news of this SEC whistleblower reward will likely entice more analysts in finance to come forward with tips of wrongdoing. As evidenced by this case, any would-be tipsters can keep their identity anonymous, which would likely be an area of concern for professionals in the industry. The latest reward also demonstrates that blowing the whistle can be financially quite lucrative—$700,000 is nothing to sneeze at.

This reward also serves as a salvo to companies that were previously only focused on tips offered by current and former employees. With the SEC receiving potentially damaging tips from outside analysts, companies will have to be more vigilant with compliance programs.

Take this case, for example: if the whistleblower was a company insider, the company might’ve been able to mitigate against similar whistleblower claims in the future by simply creating a more ironclad confidentiality agreement. Because the tip came from an outside source, the company can’t just change its employee confidentiality agreement—it has to actually change its behavior to avoid another enforcement action.

What Does the SEC Whistleblower Reward Mean to Me? 

If in the course of your work you come across wrongdoing, the SEC wants you to come forward and report it, regardless of if you are a company insider or an outside analyst. Before you do, however, it is highly advisable that you speak with an experienced SEC whistleblower attorney to evaluate your claim.

Bringing fraud to the SEC’s attention is not easy—the SEC whistleblower program is filled with dense rules and regulations that may be difficult for non-lawyers to understand. The SEC whistleblower program also has a number of legal pitfalls that can hinder your eligibility to collecting a reward.

An experienced SEC whistleblower attorney can help guide you through this difficult process and provide you with all the resources you need to build a successful case. To learn more, contact the whistleblower law firm of Baum, Hedlund, Aristei & Goldman today.