National Health Care Fraud Takedown Results in Charges Against Over 412 Individuals Responsible for $1.3 Billion in Fraud Losses

Thursday, July 13, 2017

Largest Health Care Fraud Enforcement Action in Department of Justice History

Attorney General Jeff Sessions and Department of Health and Human Services (HHS) Secretary Tom Price, M.D., announced today the largest ever health care fraud enforcement action by the Medicare Fraud Strike Force, involving 412 charged defendants across 41 federal districts, including 115 doctors, nurses and other licensed medical professionals, for their alleged participation in health care fraud schemes involving approximately $1.3 billion in false billings. Of those charged, over 120 defendants, including doctors, were charged for their roles in prescribing and distributing opioids and other dangerous narcotics. Thirty state Medicaid Fraud Control Units also participated in today’s arrests. In addition, HHS has initiated suspension actions against 295 providers, including doctors, nurses and pharmacists.

Attorney General Sessions and Secretary Price were joined in the announcement by Acting Assistant Attorney General Kenneth A. Blanco of the Justice Department’s Criminal Division, Acting Director Andrew McCabe of the FBI, Acting Administrator Chuck Rosenberg of the Drug Enforcement Administration (DEA), Inspector General Daniel Levinson of the HHS Office of Inspector General (OIG), Chief Don Fort of IRS Criminal Investigation, Administrator Seema Verma of the Centers for Medicare and Medicaid Services (CMS), and Deputy Director Kelly P. Mayo of the Defense Criminal Investigative Service (DCIS).

Today’s enforcement actions were led and coordinated by the Criminal Division, Fraud Section’s Health Care Fraud Unit in conjunction with its Medicare Fraud Strike Force (MFSF) partners, a partnership between the Criminal Division, U.S. Attorney’s Offices, the FBI and HHS-OIG.  In addition, the operation includes the participation of the DEA, DCIS, and State Medicaid Fraud Control Units.

The charges announced today aggressively target schemes billing Medicare, Medicaid, and TRICARE (a health insurance program for members and veterans of the armed forces and their families) for medically unnecessary prescription drugs and compounded medications that often were never even purchased and/or distributed to beneficiaries. The charges also involve individuals contributing to the opioid epidemic, with a particular focus on medical professionals involved in the unlawful distribution of opioids and other prescription narcotics, a particular focus for the Department. According to the CDC, approximately 91 Americans die every day of an opioid related overdose.

“Too many trusted medical professionals like doctors, nurses, and pharmacists have chosen to violate their oaths and put greed ahead of their patients,” said Attorney General Sessions. “Amazingly, some have made their practices into multimillion dollar criminal enterprises. They seem oblivious to the disastrous consequences of their greed. Their actions not only enrich themselves often at the expense of taxpayers but also feed addictions and cause addictions to start. The consequences are real: emergency rooms, jail cells, futures lost, and graveyards.  While today is a historic day, the Department’s work is not finished. In fact, it is just beginning. We will continue to find, arrest, prosecute, convict, and incarcerate fraudsters and drug dealers wherever they are.”

“Healthcare fraud is not only a criminal act that costs billions of taxpayer dollars – it is an affront to all Americans who rely on our national healthcare programs for access to critical healthcare services and a violation of trust,” said Secretary Price. “The United States is home to the world’s best medical professionals, but their ability to provide affordable, high-quality care to their patients is jeopardized every time a criminal commits healthcare fraud. That is why this Administration is committed to bringing these criminals to justice, as President Trump demonstrated in his 2017 budget request calling for a new $70 million investment in the Health Care Fraud and Abuse Control Program. The historic results of this year’s national takedown represent significant progress toward protecting the integrity and sustainability of Medicare and Medicaid, which we will continue to build upon in the years to come.”

According to court documents, the defendants allegedly participated in schemes to submit claims to Medicare, Medicaid and TRICARE for treatments that were medically unnecessary and often never provided. In many cases, patient recruiters, beneficiaries and other co-conspirators were allegedly paid cash kickbacks in return for supplying beneficiary information to providers, so that the providers could then submit fraudulent bills to Medicare for services that were medically unnecessary or never performed. The number of medical professionals charged is particularly significant, because virtually every health care fraud scheme requires a corrupt medical professional to be involved in order for Medicare or Medicaid to pay the fraudulent claims.  Aggressively pursuing corrupt medical professionals not only has a deterrent effect on other medical professionals, but also ensures that their licenses can no longer be used to bilk the system.

“This week, thanks to the work of dedicated investigators and analysts, we arrested once-trusted doctors, pharmacists and other medical professionals who were corrupted by greed,” said Acting Director McCabe. “The FBI is committed to working with our partners on the front lines of the fight against heath care fraud to stop those who steal from the government and deceive the American public.”

“Health care fraud is a reprehensible crime.  It not only represents a theft from taxpayers who fund these vital programs, but impacts the millions of Americans who rely on Medicare and Medicaid,” said Inspector General Levinson. “In the worst fraud cases, greed overpowers care, putting patients’ health at risk. OIG will continue to play a vital leadership role in the Medicare Fraud Strike Force to track down those who abuse important federal health care programs.”

“Our enforcement actions underscore the commitment of the Defense Criminal Investigative Service and our partners to vigorously investigate fraud perpetrated against the DoD’s TRICARE Program. We will continue to relentlessly investigate health care fraud, ensure the taxpayers’ health care dollars are properly spent, and endeavor to guarantee our service members, military retirees, and their dependents receive the high standard of care they deserve,” advised Deputy Director Mayo.

“Last year, an estimated 59,000 Americans died from a drug overdose, many linked to the misuse of prescription drugs. This is, quite simply, an epidemic,” said Acting Administrator Rosenberg. “There is a great responsibility that goes along with handling controlled prescription drugs, and DEA and its partners remain absolutely committed to fighting the opioid epidemic using all the tools at our disposal.”

“Every defendant in today’s announcement shares one common trait – greed,” said Chief Fort. “The desire for money and material items drove these individuals to perpetrate crimes against our healthcare system and prey upon many of the vulnerable in our society.  Thanks to the financial expertise and diligence of IRS-CI special agents, who worked side-by-side with other federal, state and local law enforcement officers to uncover these schemes, these criminals are off the street and will now face the consequences of their actions.”

The Medicare Fraud Strike Force operations are part of a joint initiative between the Department of Justice and HHS to focus their efforts to prevent and deter fraud and enforce current anti-fraud laws around the country. The Medicare Fraud Strike Force operates in nine locations nationwide. Since its inception in March 2007, the Medicare Fraud Strike Force has charged over 3500 defendants who collectively have falsely billed the Medicare program for over $12.5 billion.

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For the Strike Force locations, in the Southern District of Florida, a total of 77 defendants were charged with offenses relating to their participation in various fraud schemes involving over $141 million in false billings for services including home health care, mental health services and pharmacy fraud.  In one case, the owner and operator of a purported addiction treatment center and home for recovering addicts and one other individual were charged in a scheme involving the submission of over $58 million in fraudulent medical insurance claims for purported drug treatment services. The allegations include actively recruiting addicted patients to move to South Florida so that the co-conspirators could bill insurance companies for fraudulent treatment and testing, in return for which, the co-conspirators offered kickbacks to patients in the form of gift cards, free airline travel, trips to casinos and strip clubs, and drugs.

In the Eastern District of Michigan, 32 defendants face charges for their alleged roles in fraud, kickback, money laundering and drug diversion schemes involving approximately $218 million in false claims for services that were medically unnecessary or never rendered. In one case, nine defendants, including six physicians, were charged with prescribing medically unnecessary controlled substances, some of which were sold on the street, and billing Medicare for $164 million in facet joint injections, drug testing, and other procedures that were medically unnecessary and/or not provided.

In the Southern District of Texas, 26 individuals were charged in cases involving over $66 million in alleged fraud. Among these defendants are a physician and a clinic owner who were indicted on one count of conspiracy to distribute and dispense controlled substances and three substantive counts of distribution of controlled substances in connection with a purported pain management clinic that is alleged to have been the highest prescribing hydrocodone clinic in Houston, where approximately 60-70 people were seen daily, and were issued medically unnecessary prescriptions for hydrocodone in exchange for approximately $300 cash per visit.

In the Central District of California, 17 defendants were charged for their roles in schemes to defraud Medicare out of approximately $147 million. Two of these defendants were indicted for their alleged involvement in a $41.5 million scheme to defraud Medicare and a private insurer. This was purportedly done by submitting fraudulent claims, and receiving payments for, prescription drugs that were not filled by the pharmacy nor given to patients.

In the Northern District of Illinois, 15 individuals were charged in cases related to six different schemes concerning home health care services and physical therapy fraud, kickbacks, and mail and wire fraud.  These schemes involved allegedly over $12.7 million in fraudulent billing. One case allegedly involved $7 million in fraudulent billing to Medicare for home health services that were not necessary nor rendered.

In the Middle District of Florida, 10 individuals were charged with participating in a variety of schemes involving almost $14 million in fraudulent billing.  In one case, three defendants were charged in a $4 million scheme to defraud the TRICARE program.  In that case, it is alleged that a defendant falsely represented himself to be a retired Lieutenant Commander of the United States Navy Submarine Service. It is alleged that he did so in order to gain the trust and personal identifying information from TRICARE beneficiaries, many of whom were members and veterans of the armed forces, for use in the scheme.

In the Eastern District of New York, ten individuals were charged with participating in a variety of schemes including kickbacks, services not rendered, and money laundering involving over $151 million in fraudulent billings to Medicare and Medicaid. Approximately $100 million of those fraudulent billings were allegedly part of a scheme in which five health care professionals paid illegal kickbacks in exchange for patient referrals to their own clinics.

In the Southern Louisiana Strike Force, operating in the Middle and Eastern Districts of Louisiana as well as the Southern District of Mississippi, seven defendants were charged in connection with health care fraud, wire fraud, and kickback schemes involving more than $207 million in fraudulent billing. One case involved a pharmacist who was charged with submitting and causing the submission of $192 million in false and fraudulent claims to TRICARE and other health care benefit programs for dispensing compounded medications that were not medically necessary and often based on prescriptions induced by illegal kickback payments.

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In addition to the Strike Force locations, today’s enforcement actions include cases and investigations brought by an additional 31 U.S. Attorney’s Offices, including the execution of search warrants in investigations conducted by the Eastern District of California and the Northern District of Ohio.

In the Northern and Southern Districts of Alabama, three defendants were charged for their roles in two health care fraud schemes involving pharmacy fraud and drug diversion.

In the Eastern District of Arkansas, 24 defendants were charged for their roles in three drug diversion schemes that were all investigated by the DEA.

In the Northern and Southern Districts of California, four defendants, including a physician, were charged for their roles in a drug diversion scheme and a health care fraud scheme involving kickbacks.

In the District of Connecticut, three defendants were charged in two health care fraud schemes, including a scheme involving two physicians who fraudulently billed Medicaid for services that were not rendered and for the provision of oxycodone with knowledge that the prescriptions were not medically necessary.

In the Northern and Southern Districts of Georgia, three defendants were charged in two health care fraud schemes involving nearly $1.5 million in fraudulent billing.

In the Southern District of Illinois, five defendants were charged in five separate schemes to defraud the Medicaid program.

In the Northern and Southern Districts of Indiana, at least five defendants were charged in various health care fraud schemes related to the unlawful distribution and dispensing of controlled substances, kickbacks, and services not rendered.

In the Southern District of Iowa, five defendants were charged in two schemes involving the distribution of opioids.

In the Western District of Kentucky, 11 defendants were charged with defrauding the Medicaid program.  In one case, four defendants, including three medical professionals, were charged with distributing controlled substances and fraudulently billing the Medicaid program.

In the District of Maine, an office manager was charged with embezzling funds from a medical office.

In the Eastern and Western Districts of Missouri, 16 defendants were charged in schemes involving over $16 million in claims, including 10 defendants charged as part of a scheme involving fraudulent lab testing.

In the District of Nebraska, a dentist was charged with defrauding the Medicaid program.

In the District of Nevada, two defendants, including a physician, were charged in a scheme involving false hospice claims.

In the Northern, Southern, and Western Districts of New York, five defendants, including two physicians and two pharmacists, were charged in schemes involving drug diversion and pharmacy fraud.

In the Southern District of Ohio, five defendants, including four physicians, were charged in connection with schemes involving $12 million in claims to the Medicaid program.

In the District of Puerto Rico, 13 defendants, including three physicians and two pharmacists, were charged in four schemes involving drug diversion, Medicaid fraud, and the theft of funds from a health care program.

In the Eastern District of Tennessee, three defendants were charged in a scheme involving fraudulent billings and the distribution of opioids.

In the Eastern, Northern, and Western Districts of Texas, nine defendants were charged in schemes involving over $42 million in fraudulent billing, including a scheme involving false claims for compounded medications.

In the District of Utah, a nurse practitioner was charged in connection with fraudulently obtaining a controlled substance, tampering with a consumer product, and infecting over seven individuals with Hepatitis C.

In the Eastern District of Virginia, a defendant was charged in connection with a scheme involving identify theft and fraudulent billings to the Medicaid program.

In addition, in the states of Arizona, Arkansas, California, Delaware, Illinois, Iowa, Louisiana, Massachusetts, Michigan, Minnesota, Mississippi, New York, Oklahoma, Pennsylvania, Rhode Island, South Dakota, Texas, Utah, Vermont and Washington, 96 defendants have been charged in criminal and civil actions with defrauding the Medicaid program out of over $31 million. These cases were investigated by each state’s respective Medicaid Fraud Control Units. In addition, the Medicaid Fraud Control Units of the states of Alabama, Florida, Georgia, Illinois, Indiana, Iowa, Kansas, Kentucky, Missouri, Nebraska, New York, North Carolina, Ohio, Texas, and Utah participated in the investigation of many of the federal cases discussed above.

The cases announced today are being prosecuted and investigated by U.S. Attorney’s Offices nationwide, along with Medicare Fraud Strike Force teams from the Criminal Division’s Fraud Section and from the U.S. Attorney’s Offices of the Southern District of Florida, Eastern District of Michigan, Eastern District of New York, Southern District of Texas, Central District of California, Eastern District of Louisiana, Northern District of Texas, Northern District of Illinois and the Middle District of Florida; and agents from the FBI, HHS-OIG, Drug Enforcement Administration, DCIS and state Medicaid Fraud Control Units.

A complaint, information, or indictment is merely an allegation, and all defendants are presumed innocent unless and until proven guilty.

Additional documents related to this announcement will shortly be available here: https://www.justice.gov/opa/documents-and-resources-july-13-2017.

This operation also highlights the great work being done by the Department of Justice’s Civil Division.  In the past fiscal year, the Department of Justice, including the Civil Division, has collectively won or negotiated over $2.5 billion in judgements and settlements related to matters alleging health care fraud.

M&T Bank Agrees to Pay $64 Million for FCA liability

M&T Bank Corp. (M&T Bank) has agreed to pay the United States $64 million to resolve allegations that it violated the False Claims Act by knowingly originating and underwriting mortgage loans insured by the U.S. Department of Housing and Urban Development’s (HUD) Federal Housing Administration (FHA) that did not meet applicable requirements, the Justice Department announced today.  M&T Bank is headquartered in Buffalo, New York.

“Mortgage lenders that fail to follow FHA program rules put taxpayer funds at risk and increase the chances of borrowers losing their homes,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division.  “We will continue to hold lenders accountable for knowingly submitting ineligible loans for FHA insurance.”

“M&T Bank bypassed its responsibility to originate and underwrite mortgages in accordance with the standards required by the FHA,” said First Assistant U.S. Attorney James P. Kennedy Jr. for the Western District of New York.  “This case demonstrates that when a financial institution takes such a detour, we will work to ensure that it does not bypass the consequences of that conduct.”

During the time period covered by the settlement, M&T Bank participated as a direct endorsement lender (DEL) in the FHA insurance program.  A DEL has the authority to originate, underwrite and endorse mortgages for FHA insurance.  If a DEL approves a mortgage loan for FHA insurance and the loan later defaults, the holder of the loan may submit an insurance claim to HUD, FHA’s parent agency, for the losses resulting from the defaulted loan.  Under the DEL program, the FHA does not review a loan for compliance with FHA requirements before it is endorsed for FHA insurance.  DELs are therefore required to follow program rules designed to ensure that they are properly underwriting and certifying mortgages for FHA insurance, to maintain a quality control program that can prevent and correct deficiencies in their underwriting practices, and to self-report any deficient loans identified by their quality control program.

The settlement announced today resolves allegations that M&T Bank failed to comply with certain FHA origination, underwriting and quality control requirements.  As part of the settlement, M&T Bank admitted to the following facts: Between Jan. 1, 2006, and Dec. 31, 2011, it certified for FHA insurance mortgage loans that did not meet HUD underwriting requirements and did not adhere to FHA’s quality control requirements.  Prior to 2010, M&T Bank failed to review all Early Payment Default (EPD) loans, which are loans that become 60 days past due within the first six months of repayment.  Between 2006 and 2011, M&T also failed to review an adequate sample of FHA loans, as required by HUD.

Additionally, M&T created a quality control process that allowed it to produce preliminary major error rates that were significantly lower (sometimes below one percent) than what the rate would have been if M&T had calculated its preliminary major error rate by dividing the number of loans with preliminary major errors by the number of loans reviewed to determine what percent of loans contained a preliminary major error.

M&T Bank also failed to adhere to HUD’s self-reporting requirements.  While M&T Bank identified numerous FHA insured loans with “major errors” between 2006 and 2011, M&T Bank did not report a single loan to HUD until 2008, and thereafter self-reported only seven loans to HUD.  As a result of M&T’s conduct and omissions, HUD insured hundreds of loans approved by M&T that were not eligible for FHA mortgage insurance under the Direct Endorsement program and that HUD would not otherwise have insured.  HUD subsequently incurred substantial losses when it paid insurance claims on those loans.

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“This recovery on behalf of the Federal Housing Administration should serve as a reminder of the potential consequences of not following HUD program rules and the value of private citizen assistance, including whistleblowers, in pursuing lenders that violate the rules,” said Inspector General David A. Montoya of the Department of Housing and Urban Development.

“It is critically important that FHA-approved lenders comply with HUD’s underwriting standards and originate mortgages that borrowers can sustain,” said HUD General Counsel Helen Kanovsky.  “We are pleased M&T Bank worked with the Department of Justice and HUD to arrive at an agreeable settlement that protects FHA’s insurance fund.”

The allegations resolved by this settlement arose from a whistleblower lawsuit filed under the False Claims Act by a former employee of M&T Bank, Keisha Kelschenbach.  Under the False Claims Act, private citizens can sue on behalf of the government and share in any recovery.  The share to be awarded in this case has not yet been determined.

The settlement was the result of a joint investigation conducted by HUD, HUD’s Office of Inspector General, the Civil Division and the U.S. Attorney’s Office for the Western District of New York.

The lawsuit is captioned U.S. ex rel. Kelschenbach v. M&T Bank Corp, 13-CV-0280(S) (W.D.N.Y.).

Minnesota-Based ev3 to Pay United States $1.25 Million to Settle False Claims Act Allegations

Medical device manufacturer ev3 Inc., formerly known as Fox Hollow Technologies Inc., has agreed to pay the United States $1.25 million to resolve allegations under the False Claims Act that Fox Hollow caused certain hospitals to submit false claims to Medicare for unnecessary inpatient admissions related to minimally-invasive atherectomy procedures, the Justice Department announced today.

“Today’s settlement demonstrates our commitment to ensure that the Medicare Trust Fund is used to pay for only necessary medical care,” said Acting Assistant Attorney General Joyce R. Branda of the Justice Department’s Civil Division.  “Charging the government for higher-cost inpatient services that patients do not need wastes the country’s precious health care resources.”

“It should come as no surprise to anyone that proper health care of a patient includes more than just competence of a provider, it requires accuracy and honesty in billing Medicare for the patient’s treatment,” said U.S. Attorney William J. Hochul Jr. of the Western District of New York.  “In this case, a medical device manufacturer allegedly induced hospitals to admit patients as inpatients for minimally-invasive procedures involving its device, even though many of those patients should have been treated as outpatients at significantly less cost.  This was done in order to collect higher Medicare reimbursements which ultimately drive up costs for all taxpayers and beneficiaries of government health programs.”

The United States alleged that Fox Hollow, which was acquired by ev3 Inc. in late 2007, knowingly caused 12 hospitals located throughout nine states to submit claims to Medicare for medically unnecessary inpatient stays for certain Medicare beneficiaries undergoing elective atherectomy procedures.  Atherectomy is a minimally-invasive surgical procedure that uses a small cutting device to remove atherosclerosis, or hardening of the arteries, from large blood vessels within the body, and it is intended to open up narrowed coronary arteries to increase blood flow and circulation.  One such device used in atherectomy procedures is the Silver Hawk Plaque Excision System sold by Fox Hollow.  The United States alleged that throughout 2006 and 2007, to increase hospital purchases of the Silver Hawk device, Fox Hollow advised hospitals that they should bill Silver Hawk atherectomy procedures as more expensive inpatient claims, as opposed to less costly outpatient claims.  As a result, certain hospitals allegedly claimed greater reimbursement than they were entitled to for treating Medicare beneficiaries who underwent Silver Hawk atherectomy procedures.

“Medical device makers that try to boost their profits by causing patients to be admitted for unnecessary and expensive inpatient hospital stays will be held accountable,” said Special Agent in Charge Thomas O’Donnell of the U.S. Department of Health and Human Services, Office of Inspector General (HHS-OIG).  “Both patients and taxpayers deserve to have medical decisions made based on what is medically appropriate.”

The civil settlement resolves a lawsuit filed under the whistleblower provision of the False Claims Act, which permits private parties to file suit on behalf of the United States for false claims and obtain a portion of the government’s recovery.  The lawsuit was filed by Amanda Cashi, who formerly worked as a Fox Hollow sales representative.  Cashi will receive $250,000.

This settlement illustrates the government’s emphasis on combating health care fraud and marks another achievement for the Health Care Fraud Prevention and Enforcement Action Team (HEAT) initiative, which was announced in May 2009 by the Attorney General and the Secretary of Health and Human Services.  The partnership between the two departments has focused efforts to reduce and prevent Medicare and Medicaid financial fraud through enhanced cooperation.  One of the most powerful tools in this effort is the False Claims Act.  Since January 2009, the Justice Department has recovered a total of more than $23.5 billion through False Claims Act cases, with more than $15 billion of that amount recovered in cases involving fraud against federal health care programs.

The settlement with ev3 was the result of a coordinated effort among the U.S. Attorney’s Office for the Western District of New York, the Civil Division’s Commercial Litigation Branch, and HHS-OIG.

The claims resolved by this settlement are allegations only and there has been no determination of liability.

The civil lawsuit is captioned United States ex rel. Cashi v. Fox Hollow Technologies, Inc., et al. Civ. No. 09-CV-01066-S (W.D.N.Y.).

Dignity Health Agrees to Pay $37 Million to Settle False Claims Act Allegations

Dignity Health has agreed to pay the United States $37 million to settle allegations that 13 of its hospitals in California, Nevada and Arizona knowingly submitted false claims to Medicare and TRICARE by admitting patients who could have been treated on a less costly, outpatient basis, the Justice Department announced today.  Dignity, formerly known as Catholic Healthcare West, is based in San Francisco and is one of the five largest hospital systems in the nation with 39 hospitals in three states.

“Charging the government for higher cost inpatient services that patients do not need wastes the country’s vital health care dollars,” said Acting Assistant Attorney General Joyce R. Branda for the Justice Department’s Civil Division.  “This department will continue its work to stop abuses of the nation’s health care resources and to ensure patients receive the most appropriate care.”

The settlement resolves allegations that 13 Dignity Health hospitals knowingly overcharged Medicare and TRICARE, part of the military health care program, for inpatient services for patients who should have been treated on a less costly, outpatient basis.  Because hospitals generally receive significantly higher payments from federal health care programs for inpatient admissions as opposed to outpatient treatment, the admission of numerous patients who do not need inpatient care, as alleged here, can result in substantial financial harm to federal health care programs.

The United States alleged that from 2006 through 2010, 13 Dignity hospitals billed Medicare and TRICARE for inpatient care for certain patients who underwent elective cardiovascular procedures (e.g., stents, pacemakers) in scheduled surgeries when the claims should have been billed as outpatient surgeries.  In addition, the government alleged that from 2000 through 2008, four of the hospitals billed Medicare for beneficiaries undergoing elective kyphoplasty procedures, which are minimally-invasive and performed to treat certain spinal compression fractures that should have been billed as less costly outpatient procedures.  Lastly, the government alleged that from 2006 through 2010, 13 hospitals admitted patients for certain common medical diagnoses where admission as an inpatient was medically unnecessary and appropriate care could have been provided in a less costly outpatient or observation setting.

“This settlement demonstrates this office’s commitment to protecting our federal health care programs,” said U.S. Attorney Melinda Haag for the Northern District of California.  “We will continue to aggressively and appropriately pursue False Claims Act allegations of wrongdoing in the health care industry.”

As part of today’s agreement, Dignity entered into a corporate integrity agreement with the U.S. Department of Health and Human Services – Office of Inspector General (HHS-OIG) requiring the company to engage in significant compliance efforts over the next five years.  Under the agreement, Dignity is required to retain independent review organizations to review the accuracy of the company’s claims for services furnished to federal health care program beneficiaries.

“Hospitals that attempt to boost profits by admitting patients for expensive and unnecessary inpatient hospital stays will be held accountable,” said Special Agent in Charge Ivan Negroni of HHS-OIG’s San Francisco Office.  “Both patients and taxpayers deserve to have medical decisions made solely on what is best for the patient based on medical necessity.”

This settlement resolves a lawsuit filed in the U.S. District Court for the Northern District of California by Kathleen Hawkins, a former employee of Dignity, under the qui tam or whistleblower provisions of the False Claims Act, which permit private citizens to bring lawsuits on behalf of the United States and obtain a portion of the government’s recovery.  Hawkins will receive approximately $6.25 million.

This settlement illustrates the government’s emphasis on combating health care fraud and marks another achievement for the Health Care Fraud Prevention and Enforcement Action Team (HEAT) initiative, which was announced in May 2009 by the Attorney General and the Secretary of Health and Human Services.  The partnership between the two departments has focused efforts to reduce and prevent Medicare and Medicaid financial fraud through enhanced cooperation.  One of the most powerful tools in this effort is the False Claims Act.  Since January 2009, the Justice Department has recovered a total of more than $23 billion through False Claims Act cases, with more than $14.8 billion of that amount recovered in cases involving fraud against federal health care programs.

The settlement was a result of a coordinated effort by the Civil Division, the U.S. Attorneys’ Offices for the Northern District of California and the Western District of New York and the HHS-OIG.

The case is captioned United States ex rel. Hawkins v. Catholic Healthcare West, et al., CV C 09-5604 JCS.  The claims resolved by this settlement are allegations only and there has been no determination of liability.

Amedisys Home Health Companies Agree to Pay $150 Million to Resolve False Claims Act Allegations

Amedisys Inc. and its affiliates (Amedisys) have agreed to pay $150 million to the federal government to resolve allegations that they violated the False Claims Act by submitting false home healthcare billings to the Medicare program, the Department of Justice announced today.  Amedisys, a Louisiana-based for-profit company, is one of the nation’s largest providers of home health services and operates in 37 states, the District of Columbia and Puerto Rico.

“It is critical that scarce Medicare home health dollars flow only to those who provide qualified services,” said Stuart F. Delery, Assistant Attorney General for the Civil Division.  “This settlement demonstrates the department’s commitment to ensuring that home health providers, like other providers, comply with the rules and don’t misuse taxpayer dollars.”

The settlement announced today resolves allegations that, between 2008 and 2010, certain Amedisys offices improperly billed Medicare for ineligible patients and services.  Amedisys allegedly billed Medicare for nursing and therapy services that were medically unnecessary or provided to patients who were not homebound, and otherwise misrepresented patients’ conditions to increase its Medicare payments.  These billing violations were the alleged result of management pressure on nurses and therapists to provide care based on the financial benefits to Amedisys, rather than the needs of patients.

Additionally, this settlement resolves certain allegations that Amedisys maintained improper financial relationships with referring physicians.  The Anti-Kickback Statute and the Stark Statute restrict the financial relationships that home healthcare providers may have with doctors who refer patients to them.  The United States alleged that Amedisys’ financial relationship with a private oncology practice in Georgia – whereby Amedisys employees provided patient care coordination services to the oncology practice at below-market prices – violated statutory requirements.

“Combating Medicare fraud and overbilling is a priority for my office, other components of the Department of Justice, and United States Attorneys’ Offices across the country,” said Zane David Memeger, United States Attorney for the Eastern District of Pennsylvania.  “We have recovered billions of dollars in federal health care funds from schemes such as the one alleged in this case.  Those are health care dollars that should be spent on legitimate medical needs.”

“Home health services are a large and growing part of our federal health care system,” said Sally Quillian Yates, United States Attorney for the Northern District of Georgia.  “Health care dollars must be reserved to pay for services needed by patients, not to enrich providers who are bilking the system.”

“Amedisys made false Medicare claims, depriving the American taxpayer of millions of dollars and unlawfully enriching Amedisys,” said Joyce White Vance, U.S. Attorney for the Northern District of Alabama.  “The vigorous enforcement work by assistant U.S. attorneys in my office, along with their colleagues in North Georgia, Eastern Pennsylvania, Eastern Kentucky and the Civil Division of the Justice Department, has secured the return of $150 million to the taxpayers and stands as a warning to future wrongdoers that we will aggressively pursue them.”

“This settlement represents a significant recovery of public funds and an important victory for the taxpayers,” said Kerry B. Harvey, United States Attorney for the Eastern District of Kentucky.  “Fighting health care fraud and recovering tax payer dollars that fund our vital health care programs is one of the highest priorities for our district.”

Amedisys also agreed to be bound by the terms of a Corporate Integrity Agreement with the Department of Health and Human Services – Office of Inspector General that requires the companies to implement compliance measures designed to avoid or promptly detect conduct similar to that which gave rise to the settlement.

“Improper financial relationships and false billing, as alleged in this case, can shortchange taxpayers and patients,” said Daniel R. Levinson, Inspector General for the U.S. Department of Health and Human Services.  “Our compliance agreement with Amedisys contains strong monitoring and reporting provisions to help ensure that people in Federal health programs will be protected.”

This settlement resolves seven lawsuits pending against Amedisys in federal court – six in the Eastern District of Pennsylvania and one in the Northern District of Georgia – that were filed under the qui tam, or whistleblower, provisions of the False Claims Act, which allow private citizens to bring civil actions on behalf of the United States and share in any recovery.  As part of today’s settlement, the whistleblowers – primarily former Amedisys employees – will collectively split over $26 million.

This settlement illustrates the government’s emphasis on combating health care fraud and marks another achievement for the Health Care Fraud Prevention and Enforcement Action Team (HEAT) initiative, which was announced in May 2009 by Attorney General Eric Holder and Secretary of Health and Human Services Kathleen Sebelius.  The partnership between the two departments has focused efforts to reduce and prevent Medicare and Medicaid financial fraud through enhanced cooperation.  One of the most powerful tools in this effort is the False Claims Act.  Since January 2009, the Justice Department has recovered a total of more than $19.2 billion through False Claims Act cases, with more than $13.6 billion of that amount recovered in cases involving fraud against federal health care programs.

The United States’ investigation was conducted by the Justice Department’s Commercial Litigation Branch of the Civil Division; the United States Attorneys’ Offices for the Eastern District of Pennsylvania, Northern District of Alabama, Northern District of Georgia, Eastern District of Kentucky, District of South Carolina, and Western District of New York; the Department of Health and Human Services’ Office of Inspector General; the Federal Bureau of Investigation; the Office of Personnel Management’s Office of Inspector General; the Defense Criminal Investigative Service of the Department of Defense; and the Railroad Retirement Board’s Office of Inspector General.

The lawsuits are captioned United States ex rel. CAF Partners et al. v. Amedisys, Inc. et al. 10-cv-2323 (E.D. Pa.); United States ex rel. Brown v. Amedisys, Inc. et al., 13-cv-2803 (E.D. Pa.); United States ex rel. Umberhandt  v. Amedisys, Inc., 13-cv-2789 (E.D. Pa.); United States ex rel. Doe et al. v. Amedisys, Inc., 13-cv-3187 (E.D. Pa.); United States ex rel. Ognen et al. v. Amedisys, Inc. et al. 13-cv-4232 (E.D. Pa.); United States ex rel. Lewis v. Amedisys, Inc., 13-cv-3359 (E.D. Pa.); and United States ex rel. Natalie Raven et al. v. Amedisys, Inc. et al., 11-cv-0994 (N.D. Ga.).  The claims settled by the agreement are allegations only, and there has been no determination of liability.

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ISTA Pharmaceuticals Inc. Pleads Guilty to Federal Felony Charges; Will Pay $33.5 Million to Resolve Criminal Liability and False Claims Act Allegations

Pharmaceutical company ISTA Pharmaceuticals, Inc. pled guilty earlier today to conspiracy to introduce a misbranded drug into interstate commerce and conspiracy to pay illegal remuneration in violation of the Federal Anti-Kickback Statute, the Department announced today.  U.S. District Court Judge Richard J. Arcara accepted ISTA’s guilty pleas.  The guilty pleas are part of a global settlement with the United States in which ISTA agreed to pay $33.5 million to resolve criminal and civil liability arising from its marketing, distribution and sale of its drug Xibrom.

ISTA pled guilty in the Western District of New York to criminal charges that the company conspired to illegally introduce a misbranded drug, Xibrom, into interstate commerce.  Under the Food, Drug and Cosmetic Act (FDCA), it is illegal for a drug company to introduce into interstate commerce any drug that the company intends will be used for uses not approved by the Food and Drug Administration (FDA).  Xibrom is an ophthalmic, nonsteroidal, anti-inflammatory drug that was approved by FDA to treat pain and inflammation following cataract surgery.  In order to expand sales of Xibrom outside of its approved use, ISTA conspired to introduce misbranded Xibrom into interstate commerce.

Between 2005 and 2010, some ISTA employees promoted Xibrom for unapproved new uses, including the use of Xibrom following Lasik and glaucoma surgeries, and for the treatment and prevention of cystoid macular edema.  The evidence showed that continuing medical education programs were used to promote Xibrom for uses that were not approved by the FDA as safe and effective, and that post-operative instruction sheets for unapproved uses were paid for by some company employees and provided to physicians.  These activities are evidence of intended uses unapproved by FDA, which rendered the drug misbranded under the FDCA.

ISTA pled guilty to a felony based on evidence that some ISTA employees were told by management not to memorialize in writing certain interactions with physicians regarding unapproved new uses, and not to leave certain printed materials in physicians’ offices relating to unapproved new uses.  These instructions were given in order to avoid having their conduct relating to unapproved new uses being detected by others.  ISTA agreed that this conduct represented an intent to defraud under the law.

In addition, ISTA pled guilty to a conspiracy to knowingly and willfully offering or paying remuneration to physicians in order to induce those physicians to prescribe Xibrom, in violation of the federal Anti-Kickback Statute.  Under the law, it is illegal to offer or pay remuneration, directly or indirectly, overtly or covertly, in cash or in kind, to physicians to induce them to refer individuals to pharmacies for the dispensing of drugs, for which payments are made in whole or in part under a Federal health care program.  In this matter, certain ISTA employees, with the knowledge and at the direction of ISTA, offered and provided physicians with free Vitrase, another ISTA product, with the intent to induce such physicians to refer individuals to pharmacies for the dispensing of the drug Xibrom.  In addition, ISTA provided other illegal remuneration, including a monetary payment to sponsor an event of a non-profit group associated with a particular physician, a golf outing, a wine-tasting event, paid consulting or speaker arrangements, and honoraria for participation in advisory meetings which were intended to be marketing opportunities, with the intent to induce physicians to refer individuals to pharmacies for the dispensing of the drug Xibrom.

Under the terms of the plea agreement, ISTA will pay a total of $18.5 million, including a criminal fine of $16,125,000 for the conspiracy to introduce misbranded Xibrom into interstate commerce, $500,000 for the conspiracy to violate the Anti-Kickback Statute, and $1,850,000 in asset forfeiture associated with the misbranding charge.

ISTA also entered into a civil settlement agreement under which it agreed to pay $15 million to the federal government and states to resolve claims arising from its marketing of Xibrom, which caused false claims to be submitted to government health care programs.  The civil settlement resolved allegations that ISTA promoted the sale and use of Xibrom for certain uses that were not FDA-approved and not covered by the Federal health care programs, including prevention and treatment of cystoid macular edema, treatment of pain and inflammation associated with non-cataract eye surgery, and treatment of glaucoma.  The United States further alleged that ISTA’s violations of the Anti-Kickback Statute resulted in false claims being submitted to federal health care programs.  The federal share of the civil settlement is $14,609,746.16, and the state Medicaid share of the civil settlement is $390,253.84.  Except as admitted in the plea agreement, the claims settled by the civil settlement agreement are allegations only, and there has been no determination of liability as to those claims.

“As today’s global resolution demonstrates, the Department of Justice is committed to making sure that pharmaceutical companies play by the rules,” said Stuart F. Delery, Acting Assistant Attorney General for the Civil Division.  “Health care fraud in any form undermines the integrity of our health care system and can drive up costs for all of us.”

“Today’s resolution sends a clear message that pharmaceutical companies cannot put profit ahead of people, by disregarding laws designed to protect the health of the American public,” said United States Attorney William J. Hochul, Jr.  “The fact that ISTA offered doctors illegal inducements – such as a wine tasting, golf outing, and payments to attend what were in essence marketing sessions – makes the company’s illegal conduct particularly deserving of the hefty penalty ISTA has agreed to pay.”

“It is especially concerning when companies actively take steps to conceal improper conduct which may jeopardize public health,” said Antoinette V. Henry, Special Agent in Charge, Metro-Washington Field Office, FDA Office of Criminal Investigations. “We will continue to work tirelessly with the Department of Justice and our law enforcement counterparts to uncover such conduct.”

In addition to the criminal fines and asset forfeiture, ISTA’s parent company, Bausch+Lomb, Incorporated (B+L), has agreed to maintain a Compliance and Ethics Program.  B+L has agreed that it will maintain policies and procedures that: (1) prohibit the involvement of sales and marketing personnel and others on the businesses’ commercial team in the final decision-making process with respect to educational grants in the United States, while also ensuring that the educational programming is focused on objective scientific and educational activities and discourse; (2) require sales agents to discuss only those product uses that are consistent with what is indicated on the product’s approved package labeling and to forward requests for information regarding uses of B+L’s products not approved by FDA to a Medical Affairs Professional; and (3) prohibit the company from engaging in any conduct that violates the Anti-Kickback Statute, including the offering or paying of any remuneration to any person to induce such person to prescribe any drug for which payment may be made in whole or in part under a Federal health care program.  The Program also requires that B+L’s President of Global Pharmaceuticals conduct an annual review of the effectiveness of B+L’s Program as it relates to the marketing, promotion, and sale of prescription pharmaceutical products, and certify that to the best of his or her knowledge, the Program was effective in preventing violations of Federal health care program requirements and the FDCA regarding sales, marketing, and promotion of B+L’s prescription pharmaceutical products.

The civil settlement resolves two lawsuits filed under the whistleblower provisions of the False Claims Act, which permit private parties to file suit on behalf of the United States for false claims and obtain a portion of the government’s recovery.  The civil lawsuits were filed in the Western District of New York and are captioned United States ex rel. Keith Schenker v. ISTA Pharmaceuticals, Inc. and United States, et al., ex rel. DJ PARTNERSHIP 2011, LLP  v. ISTA Pharmaceuticals, Inc.  As part of today’s resolution, Mr. Schenker will receive approximately $2.5 million from the federal share of the civil recovery.

Upon conviction for the criminal charges described above, ISTA will face mandatory exclusion from Federal healthcare programs.  Exclusion will mean that on the effective date of the exclusion, any ISTA labeled drugs in ISTA’s possession would no longer be reimbursable by Medicare, Medicaid, or other Federal healthcare programs.  In June 2012, B+L acquired ISTA.  Simultaneous with the False Claims Act settlement and the entry of the plea, the U.S. Department of Health and Human Services’ Office of Inspector General, ISTA, and B+L will enter into a Divestiture Agreement under which ISTA agrees to be excluded for 15 years, effective six months after the date of the settlement.  Under the terms of the Divestiture Agreement, ISTA will transfer all assets to B+L or a B+L subsidiary and will stop shipping ISTA labeled drugs within six months of the Divestiture Agreement.  Six months after the effective date of the Divestiture Agreement, all ISTA labeled drugs in the possession of ISTA or B+L will no longer be reimbursable by Medicare, Medicaid, and other Federal healthcare programs.  Those ISTA labeled drugs in the stream of commerce at that time will continue to be reimbursable.

“We agreed to enter into this Divestiture Agreement based on the facts of this case, including that B+L did not have a corporate relationship with ISTA during the improper conduct,” said Daniel R. Levinson, Inspector General of the U.S. Department of Health and Human Services.  “In addition, B+L acquired ISTA more than a year after the improper conduct ended, and B+L did not hire any of ISTA’s executives or senior management.”

The criminal case was prosecuted by Assistant Director Jeffrey Steger of the Consumer Protection Branch of the Civil Division of the Department of Justice and Assistant United States Attorney MaryEllen Kresse of the Office of the U.S. Attorney for the Western District of New York.  They were assisted by Associate Chief Counsel Kelsey Schaefer of the Food and Drug Division, Office of General Counsel, Department of Health and Human Services.  The case was investigated by the Food and Drug Administration’s Office of Criminal Investigations and Health and Human Services Office of Inspector General.  The civil settlement was handled by Trial Attorneys Colin Huntley and Benjamin Young of the Commercial Litigation Branch of the Civil Division of the Department of Justice and Assistant United States Attorney Kathleen Lynch of  the Office of the U.S. Attorney for the Western District of New York.

This resolution is part of the government’s emphasis on combating health care fraud and another step for the Health Care Fraud Prevention and Enforcement Action Team (HEAT) initiative, which was announced by Attorney General Eric Holder and Kathleen Sebelius, Secretary of the Department of Health and Human Services in May 2009. The partnership between the two departments has focused efforts to reduce and prevent Medicare and Medicaid financial fraud through enhanced cooperation. One of the most powerful tools in that effort is the False Claims Act, which the Justice Department has used to recover more than $10.4 billion since January 2009 in cases involving fraud against federal health care programs. The Justice Department’s total recoveries in False Claims Act cases since January 2009 are over $14.3 billion.