In December 2013, we noted that the government has been increasingly using the False Claims Act (FCA) to combat fraud. The FCA imposes liability on any person who submits a claim to the federal government that he or she knows (or should know) is false. The FCA also provides strong incentives to private plaintiffs to bring cases in the name of the United States. The FCA was amended in 1986 to include non-retaliation protections for whistleblowers, and the Act protects whistleblowers who initiate, assist with, or testify for a false claim action. It has been suggested that the Sunshine Act data may also be used in FCA-related litigation.
Policy & Medicine will continue to follow FCA cases and keep you updated on the latest trends in FCA litigation. This past few months have not seen a lot of life science settlements so we thought we would highlight some other relevant cases that may be of interest to our readers:
Health Management Associates and the Medical Center of Southeastern Oklahoma
According to the Department of Justice, the Medical Center of Southeastern Oklahoma in Durant, and its parent company, Naples, Fla.-based Health Management Associates, have agreed to pay $1.5 million to settle allegations the hospital billed the Oklahoma Medicaid program for surgical procedures that were not medically necessary.
The lawsuit alleged MCSO submitted claims to SoonerCare, the Oklahoma Medicaid program, for surgeries and other medical services performed by Daniel Castro, MD, that were not medically necessary. The complaint also alleged MCSO submitted claims to the state's Medicaid program for surgeries performed by Dr. Castro, but the surgeries were never actually performed, according to the report.
The lawsuit against MCSO and HMA was originally filed by a former employee of the medical center under the qui tam, or whistle-blower provision, of the False Claims Act, according to the report. Although MCSO and HMA agreed to settle this lawsuit, there has been no determination of liability, according to the report.
Infirmary Heath System and Diagnostic Physicians Group
Alabama-based Infirmary Health System Inc. (IHS), two IHS-affiliated clinics and Diagnostic Physicians Group P.C. (DPG) have agreed to pay the United States $24.5 million to resolve a lawsuit alleging that they violated the False Claims Act by paying or receiving financial inducements in connection with claims to the Medicare program, the Justice Department announced.
The government's suit alleged that two IHS affiliated clinics -- IMC-Diagnostic and Medical Clinic, in Mobile, and IMC-Northside Clinic, in Saraland, Alabama -- had agreements with DPG to pay the group a percentage of Medicare payments for tests and procedures referred by DPG physicians, in violation of the Physician Self-Referral Law (commonly known as the Stark Law) and the Anti-Kickback Statute. Also named in the lawsuit was Infirmary Medical Clinics P.C. (IMC), an affiliate of IHS that directly owns and operates approximately 30 clinics in the Mobile area, including the two clinics involved in this lawsuit.
According to the government's complaint, in 1988, IMC purchased IMC-Diagnostic and Medical Clinic from DPG and agreed to pay DPG a share of the revenues the clinics collected, including Medicare revenues from diagnostic imaging and laboratory tests. After IMC acquired the IMC-Northside Clinic in 2008, the physicians practicing there joined DPG and entered into an agreement with the same key terms as the earlier agreement with IMC-Diagnostic and Medical Clinic. The government contended that these payments were illegal kickbacks and constituted a prohibited financial relationship under the Stark Law, and that in June 2010, an attorney for DPG warned employees of both IMC and DPG that the compensation being paid to the physicians likely violated the law. Nevertheless, the agreements allegedly were neither modified nor terminated for another 18 months.
As part of the settlement announced today, the settling defendants have also agreed to enter into a Corporate Integrity Agreement with the U.S. Department of Health and Human Services Office of Inspector General (HHS-OIG), which obligates the defendants to undertake substantial internal compliance reforms and to submit its federal health care program claims to independent review for the next five years. However, the claims settled by this agreement are allegations only, and there has been no determination of liability.
Ill Children's Hospital, Pediatric Physician Services, and All Children's Health System
Three St. Petersburg, Fla.-based organizations, have settled a whistle-blower lawsuit brought under the False Claims Act for $7 million.
The lawsuit was filed by the former Director of Operations for Pediatric Physician Services under the qui tam provision of the FCA alleging violations of Stark Law.
The lawsuit alleged Pediatric Physician Services, which is wholly-owned by All Children's, paid many physicians above market value for their services.
According to the lawsuit, in her role as the Director of Operations, the whistle-blower developed a compensation model that would guarantee physicians a base salary between the 25th and 75th percentile nationwide, which was developed from the aggregate of three salary surveys.
The board of Pediatric Physician Services approved the compensation model that also stated physicians would not be compensated below the 25th percentile or above the 75th percentile. However, Pediatric Physician Services subsequently hired several physicians and provided them with base salaries above the 90th percentile, which was not supported by any model or survey. The $7 million settlement will resolve all allegations under the lawsuit, and there has been no liability admitted by any party.
Belmont Cardiology and its president, Devender Batra
Devender Batra, M.D., and Belmont Cardiology, Inc. will pay $1 million to the United States after causing East Ohio Regional Hospital and Ohio Valley Medical Center to submit fraudulent claims to Medicare from January 2009 to August of 2010, in violation of the Federal False Claims Act. The settlement ends an investigation into improper compensation arrangements between Dr. Batra, East Ohio Regional Hospital and Ohio Valley Medical Center. The arrangements with Dr. Batra and Belmont Cardiology led the hospitals to submit false claims for prohibited referrals for various health services in violation of Federal law. The investigation arose after the U.S. Attorney's Office resolved claims against East Ohio Regional Hospital and Ohio Valley Medical Center for entering into improper compensation arrangements with Dr. Batra and others.
As we previously wrote, some analysts argue that safe harbors should be provided for companies with robust compliance programs and that whistleblower incentives should be reasonable, but scaled back. Until reforms come to fruition, it is important for healthcare companies to understand the rules that relate to the services and goods being billed. Information contained in any claim must be as accurate and complete as possible. Furthermore, making changes to prevent any potential FCA problem from continuing and/or making arrangements to repay any overpayments may avoid or limit liability.