Monthly Archives: December 2013

How Hospice Companies Continue to Bleed Medicare for Billions [Part 1]

The Washington Post recently released an expose on the hospice industry which we’d like to discuss in a two-part blog. Today, we’ll look at how hospice care has changed over the years.   In Part 2, we’ll look at what these changes in hospice care have meant for patients and hospice providers, as well as what the government is doing to combat growing hospice care fraud.

Providing care for the dying has become a big business. The amount of money Medicare spends on hospice care has risen fivefold, from roughly $2.9 billion in 2000 to $15.1 billion in 2012. Government funding accounts for about 85 to 90 percent of all hospice income. More and more patients are being admitted to hospices for longer periods of time, which means larger profits for hospice companies.

The boom in hospice care spending has changed the nature of the hospice industry. In 2000, roughly 70 percent of hospice businesses were nonprofit and run mostly by religious institutions and community organizations.  Today, roughly 60 percent of hospices are for-profit and the industry as a whole is worth $17 billion.  According to data from California, the operating profit per patient in hospice care rose from $353 in 2002 to nearly $2,000 in 2012. The big money being made by many hospice companies has even drawn interest from financial institutions, a number of which have invested significant amounts in the hospice business.

What has changed and why are hospice companies making so much money? For starters, the number of “hospice survivors” in this country continues to rise. Between 2002 and 2012, the proportion of patients discharged from hospice care still alive rose to roughly 50 percent. This despite the requirement that patients admitted to hospice generally have a life expectancy of no more than six months.

Healthier hospice patients live longer and require less medical care. They stay on patient rolls longer and generate higher profits.  Medicare pays roughly $150 per day for hospice regardless of how much care is actually provided.  Dishonest for-profit hospices, therefore, have an incentive to recruit patients that are healthier and expected to live longer.  MedPAC, the government watchdog that monitors Medicare, looked at data for nonprofit vs. for-profit hospices. They found that on average, nonprofit hospices serve a patient for an average of 69 days. For-profit hospices, on the other hand, serve patients for an average of 102 days.

MedPAC has been aware of the financial incentive hospices have to enroll healthier patients.  In 2008, a MedPAC report noted that, “there appear to be financial incentives in Medicare’s hospice payment system that makes such patients attractive.” In 2009, MedPAC stated that ”Medicare’s payment system for hospice needs to be significantly revised so that hospice care … is appropriate.”

Check back later for Part 2.

HMA Inc. Named in Several Whistleblower Lawsuits Alleging False Claims Act Violations

health-management-associates-logoThe Department of Justice (DOJ) has decided to intervene in several whistleblower lawsuits against Naples, Florida-based Health Management Associates Inc., claiming the health care company engaged in a range of False Claims Act violations. HMA, which is partnered with 71 hospitals across 15 states, disclosed the lawsuits in a filing with the Securities and Exchange Commission (SEC) earlier this week. The complaints contain allegations that HMA improperly admitted patients into their hospitals then charged government health care programs for treating those patients. HMA is also accused of carrying on inappropriate relationships with doctors.

Bradley Nurkin, a former CEO of Charlotte Regional Medical Center, is one of at least eight whistleblowers to file a qui tam lawsuit against HMA. In 2011, Nurkin filed suit against HMA, claiming the company bilked between $100 and $150 million from the government by submitting false claims to Medicare and Medicaid. Specifically, Nurkin claims that HMA paid hundreds of thousands of dollars to Primary Care Associates, which is a physician group operating in North Port, Florida. According to the Tampa Bay Business Journal, HMA allegedly made payments to Primary Care Associates between 2004 and 2007 in the form of free office space, staff, equity and direct expense payments ranging between $20,000 and $40,000 a month. In return for these payments, Nurkin maintains that Primary Care Associates would refer and admit patients to Charlotte Regional Medical Center and Peace River Regional Medical Center, two HMA subsidiaries. In total, the amount of revenue generated by these patient referrals amounted to nearly $50 million per year and roughly a third of the total revenue for both hospitals.

Nurkin says he became aware of the illegal payments in 2006, only a few months after being named CEO. According to his lawsuit, Nurkin launched an investigation into the payments and was fired by HMA divisional president Joshua Putter in 2010. Putter has since been indicted under obstruction of justice allegations. If Nurkin’s case proves successful and money is returned to the government, he could see a whistleblower reward in the millions.

HMA has told media outlets that they plan to fight the whistleblower claims.

Genzyme Corp. to Pay $22 Million to Resolve Whistleblower Allegations

December 23, 2013

Genzyme Corp., a biotech company based in Massachusetts, has agreed to pay $22.28 million to resolve allegations that the company submitted false claims for reimbursement to federal and state government health care programs. The settlement, which was announced last Friday by the Justice Department, resolves the allegations initially made by three whistleblowers. The government intervened in the lawsuits and secured the settlement.

The lawsuits claim that sales representatives from Genzyme taught doctors and other medical professionals how to use a Genzyme product in a way that caused hospitals and other purchasers of the product to unknowingly submit false claims to the government. The product in question, Seprafilm, is a thin film used to reduce adhesions after surgery by forming a bio-resorbable barrier between abdominal tissue and organs. According to the claims, Genzyme reps showed doctors how to prepare a mixture using small pieces of Seprafilm and saline for use in laparoscopic surgeries. The mixture, referred to as “slurry,” was allegedly injected into the abdominal cavity using a catheter during laparoscopic surgery. Seprafilm is FDA-approved for use in open abdominal surgeries. The substance is not approved for use in laparoscopic surgeries. The lawsuits also maintain that Genzyme reps traded slurry recipes and trained each other on how to prepare it.

“The government contends that Genzyme marketed an altered, untested device,” said Inspector General of the U.S. Department of Health and Human Services Daniel R. Levinson, who added that taxpayers and patients “deserve better.” The whistleblowers that initially filed suit against Genzyme will receive an undetermined percentage of the money returned to the government. Genzyme has denied any wrongdoing in the case, and the Justice Department states that the claims settled in the case are allegations only. There has been no determination of liability.

The cases are United States ex rel. Fuentes, Russo v. Genzyme Corp., No. 09-cv-1245 (M.D. Fla.) and United States ex rel. Kelley v. Genzyme Corp., No. 10-cv-549 (M.D. Fla.).

Inside Story on Johnson & Johnson Whistleblowers

More details are beginning to emerge from the massive Johnson & Johnson settlement that was announced last month. The government’s case was nearly a decade in the making, and it culminated with a $2.2 billion settlement to resolve civil and criminal investigations into the company’s misbranding of several drugs. Eight whistleblowers that filed suit at various times saupload_johnsonandjohnsonlogoagainst J&J will all receive over $20 million each as a reward for bringing the company’s alleged fraud to the attention of lawmakers. All of the whistleblowers provided the government with thousands of pages of important documents, including training and marketing materials, which proved to be invaluable. A couple even wore recording devices to prove their claims to federal agents. Below are backstories on some of the J&J whistleblowers:

Victoria Starr

Starr, a former Oregon sales representative with J&J subsidiary Janssen, was the first of the eight to file a whistleblower lawsuit against the pharmaceutical company. She filed in April 2004, roughly three months after she had resigned. She claimed that Janssen wanted her to promote Risperdal to the elderly by convincing nursing homes to prescribe the drug. Risperdal was only FDA-approved to treat schizophrenia, but the lawsuits against J&J claim that sales reps marketed the drug to treat anxiety, depression, hostility, agitation and confusion. Starr also claimed that Johnson and Johnson promoted Risperdal to children, even though studies showed that the drug caused elevated levels of a hormone that stimulates breast development.

Total whistleblower reward: $29 million

Lynn Powell

Powell was a sales representative from North Carolina. She filed suit shortly after Starr in November 2004, also outlying J&J’s alleged off-label marketing of Risperdal. The state of New Jersey heard a case she filed in 2009, in which she claimed to have been terminated for protesting off-label marketing. The case was thrown out because Powell “failed to prove she engaged in whistle-blowing as defined by New Jersey’s Conscientious Employee Protection Act,” according to Bloomberg.

Total whistleblower reward: $29 million

Judy Doetterl

Doetterl was a J&J sales rep in North Carolina and Buffalo, where she worked in the ElderCare division of the company. She and her boss, Camille McGowan, filed suit against J&J in December 2004, one month after Lynn Powell filed her lawsuit.

Doetterl’s story is filled with intrigue. She wore a wire during a 2004 national company sales meeting, in which marketing presentations were delivered. Doetterl, who was making $150,000 a year at that time, was very concerned she’d be discovered, but she was determined to prove her claims to federal agents. Doetterl claimed that she was urged to promote Risperdal off-label to treat dementia. When she complained to a manager, she was told: “What are you saying? You can’t do your job?” She left the company in 2005.

Total whistleblower reward: $29 million

Camille McGowan

McGowan was Doetterl’s former boss, and the two filed suit in December 2004. Both complaints provided details of the Risperdal off-label marketing campaign. McGowan left the company in 2005.

Total whistleblower reward: $29 million

Kurtis J. Barry

The government’s big break in the case against J&J came when Barry filed a whistleblower lawsuit in 2010. He was a regional business director in charge of 60 sales reps and six managers. Specifically, Barry was the product director for Risperdal, and thus was able to provide the government with detailed evidence of company sales and marketing tactics.

Barry claimed that J&J actively sought FDA approval for Risperdal to treat dementia. When the FDA denied approval, the company had already invested “an enormous amount of money, time and energy” building its ElderCare sales team. J&J, according to Barry, was not willing to walk away from the elderly population, which was considered “extremely profitable.”

Barry’s in-depth knowledge of the alleged corporate misconduct proved to be “the linchpin” in the case. He also provided investigators with evidence of off-label marketing concerning Invega, a J&J antipsychotic medication.

Total whistleblower reward: $31.2 million ($29 million for Risperdal and $2.2 million for Invega)

Northrup Grumman Agrees to Pay $11.4 Million to Settle FCA Allegations

downloadAerospace and defense contractor Northrup Grumman will pay $11.4 million to settle government claims for Federal Acquisition Regulation (FAR) penalties and allegations that the corporation violated the False Claims Act (FCA). The Justice Department announced the settlement Monday, according to the Washington Post. Northrup was accused of violating the terms of a 2002 settlement agreement with the Defense Contract Management Agency (DCMA) by charging the government for costs based on deferred compensation awards to certain Northrup employees. In the 2002 settlement, Northrup promised not to bill the government for any deferred compensation in future contracts, but they allegedly did so anyway.

When the government’s contracting officer discovered that Northrup had billed for costs associated with deferred compensation, Northrup was hit with a penalty amounting to double the amount of unallowable costs. Northrup in turn challenged the government’s decision by filing a complaint in U.S. Court of Federal Claims, Washington, D.C. In response, the Department of Justice filed a lawsuit of its own against Northrup with counterclaims. In addition to the FAR penalties, the lawsuit included allegations that Northrup had violated the FCA by inserting deferred compensation costs in hundreds of government contracts. The government maintained that as a result of Northrup’s alleged contract misrepresentations, it paid out roughly $2 million in unallowable costs.

“Federal contractors must abide by the obligations they accept when contracting with the government, including compliance with federal regulations restricting the types and amount of costs they can charge to their federal contracts,” said Stuart F. Delery, Assistant Attorney General for the Department of Justice’s Civil Division. “The Department of Justice is committed to enforcing these fundamental obligations using every available tool, including FAR penalties assessed under the contract and, where appropriate, fraud-based counterclaims.” Northrup Grumman did not comment on the settlement.

Whistleblower: Government Contractor Sold Defective Bullets to Department of Homeland Security

A whistleblower lawsuit that was unsealed last month claims that a major government contractor sold defective bullets to the Department of Homeland Security in 2007. Jeffrey Campbell, a former quality inspector at the National Firearms Training and Tactical Training Unit in Altoona, Pennsylvania, filed a whistleblower lawsuit in 2010 against Alliant Techsystems Inc. (ATK) and various subsidiaries.  Alliant is a billion-dollar advanced weapon systems company that is the primary supplier of ammunition to the U.S. and its allies.

downloadATK and its subsidiaries entered into a series of contracts in January 2007 to supply the Department of Homeland Security with small caliber ammunition. According to the Pittsburgh Tribune, these contracts were worth around $90 million. As part of the deal, lots of ammunition were randomly selected and sent to NFTTU, where bullets were to be quality tested. In these quality control tests, Campbell’s role was to prepare comprehensive test results on the efficacy and safety of the ammunition. According to Campbell, it was apparent from the beginning that something wasn’t right with the ATK ammunition.

The lawsuit maintains that between 30 and 40 percent of the ammo supplied by ATK to U.S. Immigration and Customs Enforcement field offices in 2007 failed to meet government standards. However, the failed ammunition was still shipped and put into circulation around the country. Just how defective was the ammunition? According to Campbell, some of the bullets randomly tested had no gunpowder at all, and in at least one instance, the projectile part of the bullet was inserted backwards. Campbell also claims that the most common defects included gunpowder loads that were either too light or too heavy. If a load is too light, bullets can stick in gun barrels. If a load is too heavy, bullets can cause significant damage to the firearms.

In his lawsuit, Campbell said he and his fellow employees were concerned about the defective ammo being sent into the field, and his worries were warranted as operatives in the field continued to report misfires. ATK issued a recall for some of the ammunition; however, according to Campbell, the defective ammo was replaced with rounds from lots that had also failed to meet government standards.

Campbell simply could not understand how the defective ammunition continued to be put into circulation, and he refused to stay quiet about it. He claims that he was fired in 2007 under false pretenses. In 2010, he filed a whistleblower lawsuit against ATK under the False Claims Act, claiming that ATK committed fraud by certifying the ammunition they were selling met government standards. The Justice Department intervened in Campbell’s case in July, and a settlement agreement is reportedly close. At this time, the details of the agreement have not been released, but Campbell will likely receive a whistleblower reward in the millions for bringing the fraud to the government’s attention.