Life Science Compliance Update

November 22, 2016

Tenet Healthcare to Pay $514 Million to Settle Kickback Allegations


The Department of Justice (DOJ) recently announced a settlement with Tenet Healthcare Corporation and several subsidiaries, resolving criminal charges and civil claims relating to a scheme to defraud the United States and to pay kickbacks in exchange for patient referrals.

Criminal Charges

Two of the subsidiaries, Atlanta Medical Center Inc. and North Fulton Medical Center Inc., agreed to plead guilty to conspiracy to defraud the United States and to violate the Anti-Kickback statute by paying health care kickbacks and bribes.

Atlanta Medical Center Inc. and North Fulton Medical Center Inc. were charged in a criminal information in federal court in Atlanta with conspiracy to defraud the United States by obstructing the lawful government functions of the Department of Health and Human Services (HHS) and to violate the AKS. The information alleges that the subsidiaries paid bribes and kickbacks to the owners and operators of prenatal care clinics serving primarily undocumented Hispanic women, in return for the referral of those patients for labor and delivery medical services at Tenet hospitals. These kickbacks and bribes allegedly helped Tenet obtain more than $145 million in Medicare and Medicaid funds based on the resulting patient referrals.

Some of the pregnant women were told at the prenatal clinics that Medicaid would cover the costs associated with their childbirth and the care of their newborn only if they delivered at one of the Tenet hospitals, and in other cases were told that they were required to deliver at one of the Tenet hospitals, leaving them with the false belief that they could not select a hospital of their choice. The information alleges that as a result of these false and misleading statements and representations, many expecting mothers were forced to travel long distances from their homes to deliver their babies, placing their health and safety, and that of their babies, at risk. 

According to Special Agent in Charge Jackson,

OIG continues to emphasize investigation of improper financial relationships between health care providers. Using their positions of trust, health providers – after receiving payments from Tenet – sent expectant women specifically to Tenet hospitals. Patients were often directed to Tenet facilities miles and miles from their homes and on their journeys passed other hospitals that could have provided needed care. These women were thereby placed at increased risk during one of the most vulnerable points in their lives. HHS-OIG will continue to protect patients by exposing such illegal arrangements.

In addition to pleading guilty to the allegations in the information filed, the subsidiaries will forfeit over $145 million to the United States – the amount paid to the subsidiaries by the Medicare and Georgia Medicaid programs for services provided to patients referred as part of the scheme.

Non-Prosecution Agreement

Tenet and the subsidiaries entered into a non-prosecution agreement (NPA) with the Criminal Division’s Fraud Section and the United States Attorney’s Office of the Northern District of Georgia as to the charges in the criminal information. Under the NPA, Tenet and its subsidiaries will avoid prosecution if they, among other requirements, cooperate with the government’s ongoing investigation and work to enhance their compliance and ethics program, as well as internal controls. Tenet also agreed to retain an independent compliance monitor to address and reduce the risk of any additional violations of the AKS by any entity owned in whole, or in part, by Tenet. The NPA is for a term of three years, but may be extended for up to one year.

Civil Settlement

In the civil settlement, Tenet agrees to pay $368 million to the federal government, the state of Georgia, and the state of South Carolina to resolve claims asserted in United States ex rel. Williams v. Health Mgmt. Assocs., Tenet Healthcare, et al., a lawsuit filed under the federal and Georgia False Claims Acts by Ralph D. Williams, a whistleblower. The federal share of the settlement is $244,227,535.30, Georgia will receive $122,880,339.70, and South Carolina will recover $892,125. Mr. Williams will receive roughly $84.43 million as his whistleblower share.

According to Tenet CEO Trevor Fetter,

The conduct in this matter was unacceptable and failed to live up to our high expectations for integrity. The relationships between the four hospitals and Clinica de la Mama violated the explicit requirements of our own compliance program and were inconsistent with the strong culture of compliance we’ve worked hard to establish at Tenet. We take seriously our responsibility to operate our business in accordance with the highest ethical standards, every day and in every interaction.

While the DOJ and the parties have reached agreements, the agreements remain subject to court acceptance. Also important to note, Tenet previously sold both Georgia hospitals that were at the heart of the investigation and one of the South Carolina hospitals.

The breakdown in Tenet’s compliance program reiterates how critical it is to develop clear, comprehensive, and understandable protocols regarding referral and marketing relationships in the health care industry. It also underscores the importance of building a culture of transparency, including with legal counsel.

October 18, 2016

Omnicare Inc. to Pay Over $28 Million to Settle Kickback Allegations


As announced on Monday, October 17, 2016, by the United States Department of Justice (“DOJ”), the nation’s largest nursing home pharmacy, Omnicare Inc. (a CVS Health company), has agreed to pay $28.125 million to resolve allegations that it solicited and received kickbacks from pharmaceutical manufacturer Abbott Laboratories in exchange for promoting Depakote for nursing home patients.

According to the government’s complaint, Omnicare disguised the kickbacks it received from Abbott in a variety of ways. Abbott allegedly made payments to Omnicare under the guise of “grants” and “educational funding,” even though their true purpose was to induce Omnicare to recommend Depakote. The complaint provided an example revolving around its “Re*View” program in which Abbott funded with a $50,000 grant. While Omnicare claimed that Re*View was a “health management” and “educational” program, the complaint alleges that it was simply a means by which Omnicare solicited kickbacks from pharmaceutical manufacturers in exchange for increasing the utilization of their drugs on elderly nursing home residents. In internal documents, Omnicare allegedly referred to Re*View as its “one extra script per patient” program.  

The complaint also alleged that Omnicare entered into agreements with Abbott by which Omnicare was entitled to increasing levels of rebates from Abbott based on the number of nursing home residents serviced, and the amount of Depakote prescribed per resident. Abbott allegedly funded Omnicare management meetings on Amelia Island in Florida, offered free tickets to sporting events to Omnicare management, and made other payments to local Omnicare pharmacies.

Of the settlement amount, approximately $20.3 million will go to the United States, with $7.8 million allocated to cover Medicaid program claims by states that elect to participate in the settlement.

Benjamin C. Mizer, Principal Deputy Assistant Attorney General and head of the DOJ Civil Division, stated,

Every day, elderly nursing home residents suffering from dementia rely on the independent judgment of our nation’s healthcare professionals for their personal care and their medical treatment. Kickbacks to entities making drug recommendations compromise their independence and undermine their role in protecting nursing home residents from the use of unnecessary drugs.

Special Agent in Charge Nicholas DiGiulio of the Department of Health and Human Services Office of Inspector General (HHS OIG), said, “it is disturbing that any health care corporation would pay kickbacks that corrupt the professional medical decision making process in order to pad their profits. These practices are unacceptable and will not be tolerated.”

This settlement, together with prior settlements with Abbott and PharMerica, resolves allegations in two federal court lawsuits pending in the Western District of Virginia, filed by Richard Spetter and Meredith McCoyd, former Abbott employees. The United States filed a complaint-in-intervention against Omnicare in December 2014 and as part of today’s resolution, McCoyd will receive $3 million from the federal share of the settlement.

Omnicare is a Repeat Offender

2012 Settlement

This is not Omnicare’s first settlement with the DOJ. In 2012, the company agreed to pay $124.24 million for allegedly offering improper financial incentives to skilled nursing facilities in exchange for their continued selection of Omnicare drugs to elderly Medicare and Medicaid beneficiaries.

That settlement resolved allegations that Omnicare submitted false claims by entering into below-cost contracts to supply prescription medication, and other pharmaceutical drugs, to skilled nursing facilities (Medicare and Medicaid participants) and their patients, to induce the facilities to use Omnicare as their pharmacy provider. In addition to the facilities’ claims for reimbursement from Medicare for short-term rehabilitation treatment rendered to patients, Omnicare submitted additional claims for reimbursement to Medicare and Medicaid for drugs Omnicare supplied.

This settlement resolved allegations, also brought in two lawsuits, that Omnicare violated the Anti-Kickback Statute. The first whistleblower, former Omnicare employee Donald Gale, will receive $17.24 million. Of the $124.24 million settlement, states received $8.24 million.

2009 Settlement

In November 2009, Omnicare settled a case for $98 million that alleged that the pharmacy committed Medicaid fraud through several kickback schemes, including a whistleblower allegation that pharmaceutical manufacturer Johnson & Johnson paid Omnicare to increase sales of J&J’s Risperdal anti-psychotic drug.

Bernard Lisitza, a former Omnicare employee, alleged that J&J made quarterly rebate payments on Omnicare’s purchases of Risperdal under rebate agreements both entities executed in April 1997 and March 2000. The agreements allegedly conditioned rebate payment upon Omnicare’s engaging in an “active intervention program” to convince physicians to prescribe Risperdal and requiring that all competitive anti-psychotic products be “Prior Authorized for Risperdal failure.”

2006 Settlement

In November 2006, Omnicare paid $49.5 million to settle Medicaid fraud charges that it switched the drugs of senior citizens in nursing homes and other facilities, in an attempt to evade Medicaid price ceilings. These charges primarily involved generic forms of Zantac and Prozac.


This case is part of a much larger investigation on the use of medications in nursing homes.  Omnicare’s history shows that for more than a decade, the company has engaged in a variety of questionable kickback schemes to gain an edge over its competitors, in addition to other growth strategies that the federal government has intervened to stop. It is interesting to note that most, if not all, of these cases were initially brought by whistleblowers.  The media around this case was a simple rehashing by the government from when DOJ first filed the complaint in 2014 and the actions are all pre 2008 activities.

Omnicare has been referred to as the “King of Kickbacks,” as it is “one of the top violators of federal laws designed to protect the integrity and viability of Medicare, Medicaid, and other taxpayer-funded government health care programs.”  

It is likely that Omnicare has taken steps to improve their compliance programs and monitor them for effectiveness. Or, alternatively, maybe now that Omnicare has been acquired by CVS Health as of 2015, more checks and balances have been put in place.


Complaint 2014

DOJ Press Release Settlement 10-17-2016

August 02, 2016

Largest Medicare/Medicaid Fraud Takedown in History

The Department of Justice (DOJ) recently announced that it is charging hundreds of individuals across the country with committing Medicare fraud worth hundreds of millions of dollars. The takedown – being called the "largest takedown in history" both in terms of the number of people charged and the loss amount – mostly involves separate fraudulent billings to Medicare, Medicaid, or both, for treatments that were never provided.

The DOJ states that over three hundred people all across the country have been charged with about $900 million in false billing. The defendants are charged with various crimes, including conspiracy to commit health care fraud, violations of anti-kickback statutes, money laundering, and aggravated identity theft.

Florida has the high honor of being the state where most of the fraud was allegedly committed, with over $200 million of fraud allegedly carried out there. Individuals in California, Texas, and Michigan are charged with committing more than $100 million worth of fraud in each state.

In one particular instance, a Detroit clinic billed Medicare for more than $36 million, only to be revealed as a front for a narcotics diversion scheme. Another instance highlights a physician in Texas, who has been charged with participating in schemes to bill Medicare for "medically unnecessary home health services that were often not provided." In Florida, the owner of several infusion clinics allegedly defrauded Medicare out of over $8 million for a scheme involving the reimbursement of expensive intravenous drugs that were never actually purchased and never given to patients.

The court documents for each case will be posted online, as they become available here.

Home Health Fraud

Interestingly, much of the fraud involved home health care agencies and other types of services that have previously been identified as particularly vulnerable to fraud by the Health and Human Services (HHS) Office of Inspector General (OIG).

Part D Fraud

Another trend noted was an increase in fraud involving the Medicare Part D prescription drug program. According to Attorney General Loretta Lynch, "We saw new evidence of identity theft, including the use of stolen doctors' IDs to prepare fake prescriptions." According to the DOJ, over sixty of those arrested and charged with fraud were charged with fraud related to Part D.

The HHS OIG office noted that one in three Part D beneficiaries received commonly abused opioids last year, a trend it considers concerning, stating, "[m]isuse of opioids not only has serious financial costs but also human costs, including deaths from overdoses. These continuing high rates provide further evidence of this crisis facing our Nation."

As the federal government continues to crackdown on fraud, spending by Medicare Part D program for compound prescriptions rose 600% over the past decade. According to federal auditors, the trend raises questions about whether the drugs, which are customized for specific patient needs, were medically necessary or dispensed appropriately.

Attorney General Loretta Lynch stated,

As this takedown should make clear, health care fraud is not an abstract violation or benign offense. It is a serious crime. The wrongdoers that we pursue in these operations seek to use public funds for private enrichment. They target real people – many of them in need of significant medical care.

HHS OIG Reports

The HHS OIG released two reports recently on the topic, one of which shows that more than 1,400 pharmacies had questionable billings for opioid drugs and a number of cities had higher than average billings for certain medications last year. The other report calls on the Centers for Medicare & Medicaid Services (CMS) to implement more of the OIG's recommendations for fighting fraud and abuse in Part D.

One area of concern for HHS is spending on commonly abused opioid drugs – such spending grew at a faster rate than spending for all Part D drugs – 156% versus 136%. The report also details questionable Part D billing practices in 1,432 retail pharmacies last year, including high numbers of prescriptions per beneficiary; high percentages of prescriptions for commonly abused opioids; high numbers of prescribers for commonly abused opioids per beneficiary receiving opioids; and high percentages of beneficiaries with excessive supplies of a drug.

The second report recommends that plan sponsors be required to report to the CMS and/or its Medicare Drug Integrity Coordinator all potential fraud and abuse, as well as data on inquiries and corrective actions they take in response to fraud and abuse. Additional recommendations are made, including that CMS implement a way to reject prescriptions written by exclusive providers; restrict certain beneficiaries to a limited number of pharmacies or prescribers; and determine the effectiveness of plan sponsors' fraud and abuse detection programs.

The CMS has stated that in 2016, it will require Part D plans to stop filling and paying for prescriptions from providers who are not enrolled into Medicare, among a number of other ongoing initiatives to strengthen the integrity of Part D. CMS has also stated that it is already analyzing and monitoring potential fraud in hotspots and is working with the Medicare fraud strike force in those areas.


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