Monthly Archives: March 2014

Stryker and Alliant Settle Whistleblower Suit for $1 Million

Medical device makers Stryker Corporation and Alliant Enterprises LLC have agreed to pay the U.S. Justice Department $1.05 million to settle whistleblower claims that both companies conspired to hide complete sales information concerning hospital beds and other medical equipment from the Department of Veterans Affairs. The Justice Department announced the settlement earlier this week.

Alliant-Logo_SDVOSB_2The lawsuit accused Alliant of falsely claiming that the company manufactured hospital beds and other medical equipment when in fact Alliant was reselling equipment manufactured by Stryker. According to the Justice Department, this misrepresentation allowed Alliant to avoid having to submit a detailed pricing history to the Department of Veterans Affairs, the purchaser of the medical equipment. Without the pricing history, Alliant was able to inflate the costs. This combined with Alliant understating their estimated sales caused the VA to overpay for the equipment.

According to prosecutors, Stryker sold the medical equipment in question through the Federal Supply Schedule under modifications to a contract awarded to Alliant. Stryker, too, did not disclose any pricing history because Alliant was selling the equipment.

The settlement culminates a whistleblower lawsuit initially filed in 2008 by former Stryker employee Gary Gustafson, who worked for the medical device maker from 1987 to 2007. Gustafson became aware of the alleged fraud after leaving Stryker to form his own company that contracted with Stryker. He claims that Stryker knew that Alliant was representing itself as the manufacturer of Stryker-made equipment.

Stryker settled their portion of the lawsuit for $911,000 and Alliant paid $151,000.

Duke University Health System to Pay $1 Million to Settle Fraud Charges

Duke University Health System will pay $1 million to settle whistleblower allegations that it submitted false claims by unbundling cardiac services and billing for physician assistants’ time. The settlement announcement was made March 21, only a week after the U.S. Justice Department decided to intervene in the whistleblower lawsuit. Leslie Johnson, a former bill coder and quality control auditor at Duke Patient Revenue Management organization, filed the lawsuit in 2012. She claims that Duke University Health System violated the False Claims Act by intentionally submitting inflated bills for reimbursement from government health care agencies.

dukeJohnson accused Duke of billing government health care agencies for having physicians assistants present during coronary bypass surgeries when medical residents were already present, which is illegal.  She also claims that Duke “unbundled” cardiac and anesthesiology services, billing for them separately instead of including them together under a “bundled” payment. These alleged false claims caused the government to overpay for the services. According to Modern Healthcare, Johnson made other allegations against Duke, but agreed to dismiss them as part of the terms of the announced settlement.

“Healthcare fraud like this wastes tax dollars, harms patients who need care, and drives up medical costs for all of us,” said North Carolina Attorney General Roy Cooper. “We’re working closely with federal officials to root out this kind of fraud in North Carolina and make wrongdoers pay.” In a statement of their own, Duke officials said no one had any intention of violating the law and they did not admit to any wrongdoing.

The Justice Department and officials at Duke refused to release copies of the settlement. Likewise, the Justice Department declined to announce how much of the settlement Johnson will receive for blowing the whistle.

American Family Care to Pay $1.2 Million to Settle Medicare Fraud Allegations

The U.S. Justice Department announced today that American Family Care, Inc. will pay $1.2 million to settle Medicare fraud allegations. Birmingham, Alabama-based American Family Care is a network of walk-in clinics with facilities in Alabama, Georgia and Tennessee. The Justice Department accused American Family Care of knowingly submitting claims to Medicare for reimbursement on outpatient office visits billed at a higher rate than appropriate.

american-family-care-squarelogoClinics like American Family Care that provide medical services paid for by Medicare or Medicaid adhere to guidelines set by the Centers for Medicare and Medicaid Services. Clinics submit for reimbursement using code levels, which range from basic (level 1) to complex (level 5). The higher codes correspond to higher rates of reimbursement. According to government allegations, American Family Care knowingly used high billing codes that exceeded the level of care actually provided in order to artificially increase the amount of reimbursement money the company received for the care provided.

“Mischarging the government for office visits wastes the valuable government resources that could be used to care for other patient needs,” said Assistant Attorney General for the Justice Department’s Civil Division, Stuart F. Delery. “At a time of increasing concern about the cost of medical care, it is especially important to ensure that health care providers are not overbilling the government by improperly inflating their claims.”

The settlement resolves claims initially filed by whistleblower Anita C. Salters, who was a former American Family Care employee. Salters filed a qui tam lawsuit under the False Claims Act, which allows private parties to file a lawsuit on the government’s behalf. If the case results in the government recovering money, the whistleblower is typically entitled to a portion of funds recovered. According to the Justice Department press release, Salters’ share in the American Family Care settlement has not yet been determined.

The case is United States ex rel. Anita C. Salters v. American Family Care Inc. (N.D. Ala.).

Bizlink Settles Allegations That the Company Underpaid Customs Fees

A Fremont-based importer of computer cable assemblies has reached an agreement with the U.S. Department of Justice and the U.S. Attorney for the Northern District of California to settle whistleblower allegations that the company underpaid customs fees on goods imported into the U.S. The agreement between Bizlink Technology, Inc. (BTI) and the government was announced on Wednesday. BTI will pay $1.2 million to settle the underpayment allegations.

Bizlink allegedly underpaid customs fees on goods that were imported from a company factory in Shenzhen, China between 2006 and 2008. According to government allegations, Bizlink used two sets of invoices for each shipment made from Bizlink International Electronics Co., Ltd., the company’s Shenzhen factory; one was the true invoice paid by Bizlink, the other was a false invoice that deflated costs. Bizlink allegedly used the false invoices to calculate customs fees the company paid on their imported goods, which resulted in substantial underpayment on customs duties.

Wednesday’s settlement announcement resolves a recently unsealed whistleblower lawsuit filed by a former Bizlink employee on August 8, 2012. The relator, who worked as project engineer and business manager at Bizlink for over a decade, was represented in the case by Mark Schlein, whistleblower attorney at Baum, Hedlund, Aristei & Goldman. “Our client saw something that he knew wasn’t right and he had the courage to come forward and report it,” said Schlein after the agreement was announced. Under the False Claims Act, whistleblowers (or relators) that file lawsuits on the government’s behalf can receive a portion of the settlement or judgment. Tu will receive a reward of $252,000 for exposing Bizlink’s alleged fraud.

The Department of Justice, the U.S. Attorney’s Office for the Northern District of California, and the U.S. Customs and Border Protection Director of Field Operations in San Francisco investigated the case.

J.P. Morgan Whistleblower to Receive $63.9 Million

jpmorgan-logoThe Justice Department’s case against JPMorgan Chase & Co. formally came to a close last week with the announcement that whistleblower Keith Edwards will receive a reward of $63.9 million. Edwards worked for JPMorgan or its predecessors between 2003 and 2008 as an assistant vice president supervising a government insuring unit. He provided valuable tips to the U.S. Justice Department, which in turn led to the $614 million settlement between JPMorgan and the government which was announced on February 4. The settlement resolves charges that J.P. Morgan defrauded the government into insuring bad home loans.

JPMorgan admitted in the settlement that for over 10 years, the company had submitted thousands of mortgages for insurance through the Federal Housing Administration (FHA) or the Department of Veterans Affairs (VA) that were not eligible to receive government guarantees. JPMorgan also admitted in the settlement that the company did not tell either of the government agencies about internal reviews that had unearthed problems with mortgages that inevitably went sour, leaving the government to cover millions of dollars in losses at a time when thousands across the country were losing their homes through eviction and foreclosure.

Edwards initially filed suit against his former employer in 2013 under the False Claims Act. The Justice Department joined his lawsuit, and with the announcement of his reward, the case has formally come to a close. According to Reuters, roughly $56.5 million of Edwards’ whistleblower reward comes from the FHA portion of the case, and $7.4 million comes from the VA portion.

The case is U.S. ex rel. Edwards v. JPMorgan Chase Bank NA et al, U.S. District Court, Southern District of New York, No. 12-00220.

Supreme Court Extends Whistleblower Protections

u-s--supreme-court-2-1038828-mThe Supreme Court announced earlier this week that subcontractors that do business with publicly traded companies are entitled to federal whistleblower protections. Tuesday’s 6-3 decision, which was not made along ideological lines, is a serious victory for whistleblowers. Now, private contractors like law firms, accounting firms and investment advisors working for public companies will be offered the same whistleblower protections afforded employees of the public companies they are doing business with.

The decision centered on two former private employees that once advised or managed Fidelity mutual funds. Fidelity’s mutual funds are public companies that are required to submit reports to the Securities and Exchange Commission (SEC). However, private companies are under contract with the mutual funds to provide management services. Jackie Lawson and Jonathan Zang both claim to be the victims of retaliation after they called attention to alleged improper practices on the part of their employer.

Mutual funds often do not have any employees. In making their decision, the Court’s majority interpreted the Sarbanes-Oxley Act, which was enacted after the Enron scandal to extend whistleblower protections to private contractors. In the Enron scandal, officers at the company hid billions of dollars in debt from investors by using accounting loopholes that were ignored by their private accounting firm, Arthur Anderson.

“Based on the statutory text, and the mischief to which Congress was responding, we hold that (the law) shelters employees of private contractors that serve public companies,” said Justice Ginsburg when announcing her opinion. “Congress … understood that outside professionals are responsible for reporting fraud by the public companies they serve,” said Ginsburg. “Congress further learned that fear of retaliation was the primary reason why the employees of Enron’s contractors kept quiet about the fraudulent practices they witnessed.”

The three dissenting Justices said the decision could provide whistleblower protections that exceed beyond private contractors working with publicly traded companies, potentially reaching household employees like babysitters, according to Reuters. The case, Lawson v. FMR, U.S. Supreme Court, No. 12-3, will now return to lower courts for further litigation.

Patient Harm in Skilled Nursing Facilities a Growing Issue

Richard Mollot estimates that 40 percent of people over 65 will spend some time in a nursing facility. When Mollot saw the results of a new government report issued yesterday detailing a long list of skilled nursing home failures, the Executive Director of New York’s Long Term Care Community Coalition said he was “flabbergasted.”

nursing homeIssued by the Office of Inspector General (OIG), the report (Adverse Events in Skilled Nursing Facilities: National Incidence Among Medicare Beneficiaries) focused needed attention on patient harm in nursing facilities. OIG officials looked at the medical records of 653 randomly selected Medicare patients from over 600 nursing facilities. Patients that were studied received treatment over a 35-day period. According to the report, one out of every three patients in skilled nursing facilities suffer some type of harm related to their treatment. Nearly 60 percent of the mishaps or injuries reported in the study were found to be preventable, and more than half of the people that were harmed were readmitted to hospitals at an estimated cost of $208 million for the study’s duration.

Officials found that 22 percent of the patients studied “suffered events that caused lasting harm,” according to ProPublica. The report also indicated that 1.5 percent of patients who were expected to survive died due to poor care. National projections based on the study estimated that 21,777 patients were harmed and 1,538 patients lost their lives due to poor care from skilled nursing facilities. The sum total of the OIG report shows that patient harm in skilled nursing facilities is even more excessive than patient harm in hospitals, where egregious medical errors often garner a lot of media attention.

There is still hope of reversing these statistics. The report calls on both the U.S. Agency for Healthcare Research and Quality (AHRQ) and the Centers for Medicare & Medicaid Services (CMS) to “raise awareness of nursing home safety and seek to reduce resident harm through methods used to promote hospital safety efforts.” Both AHRQ and CMS agreed with the recommendations outlined in the report.

Source: Office of Inspector General – Adverse Events in Skilled Nursing Facilities: National Incidence Among Medicare Beneficiaries