Category Archives: HHS-OIG

Supervisor of $63 Million Health Care Fraud Scheme Sentenced in Florida to 10 Years in Prison

Posted on by
A former supervisor at defunct health provider Health Care Solutions Network Inc. (HCSN) was sentenced today in Miami to serve 10 years in prison for her central role in a fraud scheme that resulted in more than $63 million in fraudulent claims to Medicare and Florida Medicaid.

The sentence was announced by Acting Assistant Attorney General Mythili Raman of the Justice Department’s Criminal Division; U.S. Attorney Wifredo A. Ferrer of the Southern District of Florida; Michael B. Steinbach, Special Agent in Charge of the FBI’s Miami Field Office; and Special Agent in Charge Christopher B. Dennis of the U.S. Department of Health and Human Services Office of Inspector General (HHS-OIG), Office of Investigations Miami office.

Wondera Eason, 51, of Miami, was sentenced by U.S. District Judge Cecilia M. Altonaga in the Southern District of Florida.  In addition to her prison term, Eason was sentenced to serve three years of supervised release and ordered to pay $14,985,876 in restitution.

On April 25, 2013, a federal jury found Eason guilty of conspiracy to commit health care fraud.

Eason was employed as the director of medical records at HCSN’s partial hospitalization program (PHP).  A PHP is a form of intensive treatment for severe mental illness. In Florida, HCSN operated community mental health centers at two locations. After stealing millions from Medicare and Medicaid in Florida, HCSN’s owner, Armando Gonzalez, expanded the scheme to North Carolina, opening a third HCSN location in Hendersonville, N.C.

Evidence at trial showed that at all three locations, Eason, a certified medical records technician, oversaw the alteration, fabrication and forgery of thousands of documents that purported to support the fraudulent claims HCSN submitted to Medicare and Medicaid.  Many of these medical records were created weeks or months after the patients were admitted to HCSN facilities in Florida for purported PHP treatment and were utilized to support false and fraudulent billing to government-sponsored health care benefit programs, including Medicare and Medicaid. Eason directed therapists to fabricate documents, and she also forged the signatures of therapists and others on documents that she was in charge of maintaining.  Eason interacted with Medicare and Medicaid auditors, providing them with false and fraudulent documents, while certifying the documents were accurate.

The “therapy” at HCSN oftentimes consisted of nothing more than patients watching Disney movies, playing bingo and having barbeques. Eason directed therapists to remove any references to these recreational activities in the medical records.

According to evidence at trial, Eason was aware that HCSN in Florida paid illegal kickbacks to owners and operators of Miami-Dade County assisted living facilities (ALF) in exchange for patient referral information to be used to submit false and fraudulent claims to Medicare and Medicaid.  Eason also knew that many of the ALF referral patients were ineligible for PHP services because many patients suffered from mental retardation, dementia and Alzheimer’s disease.

From 2004 through 2011, HCSN billed Medicare and the Medicaid program more than $63 million for purported mental health services.

Fifteen defendants have been charged and have pleaded guilty or been convicted by a jury for their roles in the HCSN health care fraud scheme.

This case is being investigated by the FBI and HHS-OIG and was brought as part of the Medicare Fraud Strike Force, supervised by the Criminal Division’s Fraud Section and the U.S. Attorney’s Office for the Southern District of Florida.  This case was prosecuted by Trial Attorney Allan J. Medina, former Special Trial Attorney William Parente and Deputy Chief Benjamin D. Singer of the Criminal Division’s Fraud Section.

Since its inception in March 2007, the Medicare Fraud Strike Force, now operating in nine cities across the country, has charged more than 1,500 defendants who have collectively billed the Medicare program for more than $5 billion.  In addition, HHS’s Centers for Medicare & Medicaid Services, working in conjunction with HHS-OIG, is taking steps to increase accountability and decrease the presence of fraudulent providers.

 

North Carolina-Based Trans1 to Pay U.S. $6 Million to Settle False Claims Act Allegations

Posted on by
Medical device manufacturer TranS1 Inc., now known as Baxano Surgical Inc., has agreed to pay the United States $6 million to resolve allegations under the False Claims Act that the company caused health care providers to submit false claims to Medicare and other federal health care programs for minimally-invasive spine surgeries, the Justice Department announced today.
“The Justice Department is committed to ensuring that medical device manufacturers follow the law when providing devices to beneficiaries of federal health care programs,” said Stuart F. Delery, Acting Assistant Attorney General for the Justice Department’s Civil Division.  “It is critical that health care providers bill federal health care programs accurately and honestly for the work they perform, and it is imperative that they base their selection of medical devices on the best interests of their patients.”
The United States alleged that TranS1 knowingly caused health care providers to submit claims with incorrect diagnosis or procedure codes for minimally-invasive spine fusion surgeries using Trans1’s AxiaLIF System.  That device was developed as alternative to invasive spine fusion surgeries.  The United States alleges that TranS1 improperly counseled physicians and hospitals to bill for the AxiaLIF System by using incorrect and inaccurate codes intended for more invasive spine fusion surgeries.  The United States alleged that, as a result, health care providers received greater reimbursement than they were entitled to for performing the minimally-invasive AxiaLIF procedures.
The United States further alleged that TranS1 knowingly paid illegal remuneration to certain physicians for participating in speaker programs and consultant meetings intended to induce them to use TranS1 products, in violation of the Federal Anti-Kickback Statute, 42 U.S.C.  § 1320a-7b(b), and thereby caused false claims to be submitted to federal health care programs.  The Anti-Kickback Statute prohibits offering or paying remuneration to induce referrals of items or services covered by federally-funded programs and is intended to ensure that a physician’s medical judgments are not compromised by improper financial incentives and are based solely on the best interests of the patient.
In addition, the United States alleged that TranS1 promoted the sale and use of its AxiaLIF System for uses that were not approved or cleared by the U.S. Food and Drug Administration, including use in certain procedures to treat complex spine deformity, and which were thus not covered by federal health care programs.     

               
“A medical device manufacturer violates the law when it advises physicians and hospitals to report the wrong codes to federal health insurance programs in order to increase reimbursement rates,” said Rod J. Rosenstein, U.S. Attorney for the District of Maryland.  “Health care providers are required to bill federal health care programs truthfully for the work they perform.”
As part of the settlement, TranS1 has agreed to enter into a corporate integrity agreement with the Office of Inspector General of the Department of Health and Human Services.  That agreement provides for procedures and reviews to be put in place to avoid and promptly detect conduct similar to that which gave rise to this matter.
“Using kickbacks to encourage health providers to make false payment claims will not be tolerated,” said Daniel R. Levinson, Inspector General of the U.S. Department of Health and Human Services.  “TranS1’s agreement to now comply with government health laws is an important step.”
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 civil lawsuit was filed in the District of Maryland and is captioned United States ex rel. Kevin Ryan v. TranS1, Inc.  As part of today’s resolution, Mr. Ryan will receive $1,020,000 from the settlement.
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 $10.7 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 $14.7 billion.
The settlement with TranS1 was the result of a coordinated effort among the U.S. Attorney’s Office for the District of Maryland; the Commercial Litigation Branch of the Justice Department’s Civil Division; the Department of Health and Human Services’ Office of Inspector General; the Department of Defense, Office of the Inspector General; and the Office of Personnel Management, Office of Inspector General.

 

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

Executives from Miami-Area Mental Health Care Hospital Convicted for Participating in $70 Million Medicare Fraud Scheme

Posted on by
WASHINGTON – A federal jury today convicted four individuals for their participation in a Medicare fraud scheme involving nearly $70 million in fraudulent billings by Hollywood Pavilion (HP), a mental health care hospital.

Today’s verdict was announced by Acting Assistant Attorney General Mythili Raman of the Justice Department’s Criminal Division; U.S. Attorney Wifredo A. Ferrer of the Southern District of Florida; Special Agent in Charge Michael B. Steinbach of the FBI’s Miami Field Office; and Special Agent in Charge Christopher B. Dennis of the U.S. Department of Health and Human Services Office of Inspector General (HHS-OIG), Office of Investigations Miami office.

Karen Kallen-Zury, 59, of Lighthouse Point, Fla., and Daisy Miller, 44, of Hollywood, Fla., were each found guilty of one count of conspiracy to commit wire fraud and health care fraud, five substantive counts of wire fraud and two substantive counts of health care fraud.  Michele Petrie, 64, of Ft. Lauderdale, Fla., was found guilty of one count of conspiracy to commit wire fraud and health care fraud and three substantive counts of wire fraud.  Kallen-Zury, Miller, Petrie and a fourth defendant, Christian Coloma, 49, of Miami Beach, Fla., were also convicted of one count of conspiracy to pay bribes in connection with Medicare, with Kallen-Zury and Coloma also each being convicted on five substantive counts of paying bribes.

“The defendants convicted today participated in a massive scheme that attempted to defraud the United States of approximately $70 million by taking advantage of Medicare beneficiaries,” said Acting Assistant Attorney General Raman.  “By paying bribes to a network of patient recruiters and falsifying documents, the defendants created the illusion of providing intensive psychiatric care to qualifying patients, when in reality they provided no care of substance.  Today’s verdict illustrates the success of the inter-agency Medicare Fraud Strike Force, which is dedicated to stamping out Medicare fraud.”

The defendants were charged in an indictment returned on Oct. 2, 2012.  Evidence at trial demonstrated that the defendants and their co-conspirators caused the submission of false and fraudulent claims to Medicare through HP, a state-licensed psychiatric hospital located in Hollywood that purportedly provided, among other things, inpatient psychiatric care and intensive outpatient psychiatric care.  The defendants paid illegal bribes and kickbacks to patient brokers in order to obtain Medicare beneficiaries as patients at HP who did not qualify for psychiatric treatment.  The defendants then submitted claims to Medicare for those patients who were procured through bribes and kickbacks.

Karen Kallen-Zury, the CEO and registered agent of HP, attempted to conceal the payment of bribes and kickbacks by creating false documents to make it appear as if legitimate services were being rendered.

Evidence at trial established that Miller, the clinical director of HP’s inpatient facility, and Petrie, the head of HP’s intensive outpatient program, facilitated the payment of bribes to patient recruiters and oversaw the fraudulent admissions and treatment of unqualified patients.

Trial evidence also demonstrated that Coloma, the director of physical therapy for an entity associated with HP, facilitated the payment of bribes and kickbacks, and he supervised the creation of false documents to conceal the bribery scheme.

From at least 2003 through at least August 2012, HP billed Medicare nearly $70 million for services that were not properly rendered, for patients that did not qualify for the services being billed and for claims for patients who were procured through bribes and kickbacks.

The criminal case is being prosecuted by Trial Attorneys Robert A. Zink, Andrew H. Warren and Anne McNamara of the Criminal Division’s Fraud Section.  The case was investigated by the FBI and HHS-OIG, and was brought as part of the Medicare Fraud Strike Force, supervised by the Criminal Division’s Fraud Section and the U.S. Attorney’s Office for the Southern District of Florida.

Since its inception in March 2007, the Medicare Fraud Strike Force, now operating in nine cities across the country, has charged more than 1,500 defendants who have collectively billed the Medicare program for more than $5 billion.  In addition, HHS’s Centers for Medicare & Medicaid Services, working in conjunction with HHS-OIG, is taking steps to increase accountability and decrease the presence of fraudulent providers.

Former Department of Health and Human Services Employee Sentenced to Prison for Wire Fraud Scheme

Posted on by
A former employee of the Department of Health and Human Services’ Office of the Assistant Secretary for Preparedness and Response (HHS-ASPR) was sentenced today to serve six months in prison for his role in a scheme to defraud the United States by submitting fraudulent employment offers in order to claim retention bonuses totaling $138,875, announced Acting Assistant Attorney General Mythili Raman of the Justice Department’s Criminal Division.

 Michael A. Balady, 62, of Springfield, Va., was sentenced by U.S. District Judge Rudolph Contreras in the District of Columbia.  In addition to his prison term, Balady was sentenced to serve six months of home confinement and two years of supervised release, and he was ordered to pay a fine of $22,000.

Balady worked in the HHS-ASPR initially as the director of acquisition management systems in ASPR’s Biological Advanced Research and Development Authority and later as the acting director of ASPR’s Office of Acquisitions, Management, Contracts and Grants.  As part of his plea agreement, Balady admitted that he conspired with an employee of a communications firm based in Alexandria, Va., to fabricate employment offers for a position with that firm in order to justify retention bonuses paid to him by HHS.  Retention bonuses are monetary incentives paid by HHS to employees deemed essential to its mission who would be likely to leave in the absence of such a bonus.

From 2009 until 2012, Balady improperly received retention bonus payments totaling $94,940.  In June 2012, HHS approved another retention bonus in the amount of $38,875, but that bonus was never paid to Balady.

This case was investigated by the HHS Office of the Inspector General and was prosecuted by Trial Attorneys Richard B. Evans and Mark Angehr of the Criminal Division’s Public Integrity Section.

Owner of Louisiana-based Health Care Company Sentenced in Texas to 97 Months in Prison in Connection with $6.7 Million Medicare Fraud Scheme

Posted on by
The owner and operator of a Louisiana-based durable medical equipment (DME) company was sentenced today to serve 97 months in prison for his role in a $6.7 million Medicare fraud scheme, announced Acting Assistant Attorney General Mythili Raman of the Justice Department’s Criminal Division; U.S. Attorney Kenneth Magidson of the Southern District of Texas; and Special Agent in Charge Mike Fields of the Dallas Regional Office of the U.S. Department of Health and Human Service’s Office of the Inspector General (HHS-OIG).

Kenny Msiakii, 45, of Houston, was sentenced by U.S. District Judge Nancy Atlas in the Southern District of Texas.  In addition to his prison term, Msiakii was sentenced to serve three years of supervised release and ordered to pay $2.5 million in restitution.  On Dec. 13, 2012, a federal jury found Msiakii guilty of eight counts of health care fraud.

According to court documents, Msiakii was the owner and operator of Joy Supply and General Services, a company based in Shreveport, La., that purported to provide orthotics and other DME, including power wheelchairs, to Medicare beneficiaries.

Msiakii used Joy Supply’s Medicare provider number to submit claims to Medicare for DME, including orthotic devices, that were medically unnecessary and, in some cases, never provided.  Many of the orthotic devices were components of “arthritis kits” and purported to be for the treatment of arthritis-related conditions; however, the devices were neither medically necessary nor appropriate for such conditions.  The arthritis kit generally contained a number of orthotic devices including braces for both sides of the body and related accessories such as heat pads.

According to court documents, from November 2007 through September 2009, Msiakii submitted claims of approximately $6.7 million to Medicare and was paid approximately $3.6 million for devices that were not medically necessary and, in some cases, never provided.

This case is being prosecuted by Assistant Chief Laura M.K. Cordova of the Criminal Division’s Fraud Section.  The case was brought as part of the Medicare Fraud Strike Force, supervised by the U.S. Attorney’s Office for the Southern District of Texas and the Criminal Division’s Fraud Section.

Since its inception in March 2007, the Medicare Fraud Strike Force, now operating in nine cities across the country, has charged more than 1,500 defendants who have collectively billed the Medicare program for more than $5 billion.  In addition, HHS’s Centers for Medicare & Medicaid Services, working in conjunction with HHS-OIG, is taking steps to increase accountability and decrease the presence of fraudulent providers.

Four Former Wellcare Executives Found Guilty in Florida

Posted on by
A federal jury in Tampa found four former executives of WellCare Health Plans Inc., a health maintenance organization (HMO) operator, guilty of various charges, including health care fraud, making false statements relating to health care matters and making false statements to a law enforcement officer, announced Acting Assistant Attorney General Mythili Raman of the Justice Department’s Criminal Division, U.S. Attorney Robert E. O’Neill of the Middle District of Florida and Special Agent in Charge Christopher B. Dennis of the U.S. Department of Health and Human Services Office of Inspector General (HHS-OIG), Office of Investigations Miami office

Today, former WellCare Chief Executive Officer Todd S. Farha, 45, of Tampa, was convicted of two counts of health care fraud; former WellCare Chief Financial Officer Paul L. Behrens, 51, Odessa, Fla., was convicted of two counts of making false statements relating to health care matters and two counts of health care fraud; William L. Kale, 63, of Oldsmar, Fla., former vice president of Harmony Behavioral Health Inc. (a wholly-owned subsidiary of WellCare), was found guilty of two counts of health care fraud; and Peter E. Clay, 56, of Wellesley, Mass., former WellCare vice president of medical economics, was found guilty of making false statements to a law enforcement officer.

On March 2, 2011, a federal grand jury sitting in Tampa returned an indictment charging Farha, Behrens, Kale and Clay with various federal criminal violations related to a scheme to defraud the Florida Medicaid program, from the summer of 2003 through the fall of 2007, by making false and fraudulent statements relating to expenditure information for behavioral health care services.

WellCare operates HMOs in several states targeted for government-sponsored health care benefit programs like Medicaid.  Two WellCare HMOs operating in Florida, StayWell and Healthease, contracted with the Agency for Health Care Administration (AHCA), the Florida agency which administers the Medicaid program, to provide Florida Medicaid program recipients with an array of services, including behavioral health services.

In 2002, Florida enacted a statute that required Florida Medicaid HMOs to expend 80 percent of the Medicaid premium paid for certain behavioral health services upon the provision of those services.  In the event that the HMO expended less than 80 percent of the premium, the difference was required to be returned to AHCA.  As part of the scheme, the defendants falsely and fraudulently submitted inflated expenditure information in the company’s annual reports to AHCA, in order to reduce the WellCare HMOs’ contractual payback obligations for behavioral health care services.

On May 5, 2009, the government filed related charges in an information and deferred prosecution agreement (DPA) against WellCare.  Under that DPA, WellCare was required to pay $40 million in restitution, forfeit another $40 million to the United States and cooperate with the government’s criminal investigation.  The company complied with all of the requirements of the DPA.  As a result, the information was later dismissed by the court following a government motion.

In May 2009, an information and plea agreement for Gregory West, 55, of Tampa, a former WellCare analyst, was unsealed.  In his plea agreement, West admitted to participating in the scheme to defraud the Medicaid program and agreed to cooperate in the government’s investigation.  At trial, West provided extensive and detailed testimony explaining the complex scheme.  Other former WellCare executives provided additional testimony about the four individuals’ roles in the scheme.

The maximum penalty for each of the health care fraud counts is 10 years in prison.  The maximum penalty for all other counts is five years in prison. A sentencing date has not yet been set.

Thaddeus M.S. Bereday, of Tampa, WellCare’s former general counsel, was severed from the trial in February of this year.  He will be tried separately, at a later date.  Defendants are presumed innocent until proven guilty in a court of law.

The jury returned not guilty verdicts with respect to several counts and was unable to reach a verdict on others.  The judge declared a mistrial as to those counts on which the jury was deadlocked.  The Justice Department will decide, at a later date, whether to retry the individuals on those charges.

This case was investigated by HHS-OIG, the FBI and the Florida Attorney General’s Medicaid Fraud Control Unit.  It was prosecuted by Senior Litigation Counsel John Michelich of the Criminal Division’s Fraud Section and Assistant U.S. Attorneys Jay Trezevant and Cherie Krigsman of the Middle District of Florida and Special Assistant U.S. Attorney John Bowers.

Michigan Doctor Sentenced for Role in Medicare Fraud Scheme

Posted on by
Lansing-area resident Dr. Paul Kelly was sentenced to 18 months in prison today for his role in a $13.8 million Medicare fraud scheme.

Acting Assistant Attorney General Mythili Raman of the Criminal Division; U.S. Attorney for the Eastern District of Michigan Barbara L. McQuade; Special Agent in Charge Robert D. Foley III of the FBI’s Detroit Field Office; and Special Agent in Charge Lamont Pugh III of the U.S. Department of Health and Human Services, Office of Inspector General’s (HHS-OIG), Chicago Regional Office, made the announcement.

Kelly, 76, was sentenced by U.S. District Judge Gerald E. Rosen of the Eastern District of Michigan.  In addition to his prison term, Dr. Kelly was sentenced to three years of supervised release and ordered to pay $582,912 in restitution.

Kelly pleaded guilty on Jan. 10, 2013, to one count of health care fraud.  According to information contained in plea documents, beginning in or around January 2011 and continuing through approximately March 2011, Kelly signed home health care referrals for a home health agency called Moonlite Home Care Inc., located in Livonia, Mich. Kelly certified Medicare beneficiaries as homebound, a requirement for receiving home health care, when in fact, Kelly had never examined or met the beneficiaries, and they were not homebound. Medicare paid approximately $582,912 for fraudulent home health care claims submitted by Moonlite based on Kelly’s referrals.

This case was investigated by the FBI and HHS-OIG and was brought as part of the Medicare Fraud Strike Force, supervised by the Criminal Division’s Fraud Section and the U.S. Attorney’s Office for the Eastern District of Michigan. This case was prosecuted by Trial Attorney Catherine K. Dick of the Criminal Division’s Fraud Section.

Since its inception in March 2007, the Medicare Fraud Strike Force, now operating in nine cities across the country, has charged more than 1,500 defendants who have collectively billed the Medicare program for more than $5 billion.  In addition, HHS’s Centers for Medicare & Medicaid Services, working in conjunction with HHS-OIG, is taking steps to increase accountability and decrease the presence of fraudulent providers.

Doctor Convicted in Kickback Scheme Involving a Philadelphia Hospice

Posted on by

A federal jury sitting in the Eastern District of Pennsylvania convicted Eugene Goldman, M.D., 55, of Philadelphia, of one count of conspiring to violate the anti-kickback statute and four counts of violating the anti-kickback statute in relation to his role in a kickback scheme arising from his employment as the Medical Director at Home Care Hospice Inc. (HCH), announced Acting Assistant Attorney General Mythili Raman of the Justice Department’s Criminal Division and U.S. Attorney Zane David Memeger of the Eastern District of Pennsylvania. The evidence at trial proved that from approximately December 2000 until approximately July 2011, Goldman served as the medical director for HCH and regularly referred Medicare or Medicaid patient beneficiaries to HCH. HCH was a for-profit business in Philadelphia that provided hospice services for patients at nursing homes, hospitals and private residences. In December 2000, Goldman and one of the co-owners of HCH entered into a written contract to create the false appearance that all payments to Goldman from HCH were for services rendered in Goldman’s capacity as medical director for HCH, when in fact the large majority of payments from HCH to Goldman were illegal payments for the referral of Medicare and/or Medicaid patients to HCH. From January 2003 to October 2008, Goldman received approximately $263,000 in illegal payments for patient referrals. In January, February and March 2009, Goldman was captured on tape receiving kickbacks for patient referrals. Goldman faces a maximum penalty of five years in prison for each count of conviction when he is sentenced on Sept. 9, 2013, by U.S. District Judge Eduardo Robreno. The conviction will result in the mandatory exclusion of Goldman from participation in any federal health care program, and he also faces the possible loss of his medical license. The case was investigated by the FBI and the Department of Health and Human Services, Office of Inspector General. Assistant U.S. Attorney Suzanne B. Ercole and Trial Attorney Margaret Vierbuchen of the Organized Crime and Gang Section in the Justice Department’s Criminal Division prosecuted the case on behalf of the United States.

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

Posted on by
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.

Health Care Clinic Director Sentenced in Miami to 111 Months for His Role in $63 Million Health Care Fraud Scheme

Posted on by
A former health care clinic director and licensed therapist was sentenced in Miami to 111 months in prison today in connection with a health care fraud scheme involving defunct health provider Health Care Solutions Network Inc. (HCSN).

Acting Assistant Attorney General Mythili Raman of the Justice Department’s Criminal Division; U.S. Attorney Wifredo A. Ferrer of the Southern District of Florida; Michael B. Steinbach, Special Agent in Charge of the FBI’s Miami Field Office; and Special Agent in Charge Christopher B. Dennis of the U.S. Department of Health and Human Services Office of Inspector General (HHS-OIG), Office of Investigations Miami office, made the announcement.

Paul Thomas Layman, 66, of Miami, pleaded guilty on March 7, 2013, to conspiracy to commit health care fraud.

During the course of the conspiracy, Layman was employed as a substance abuse counselor, therapist and clinical director of HCSN’s Partial Hospitalization Program (PHP).  A PHP is a form of intensive treatment for severe mental illness.   HCSN of Florida (HCSN-FL) operated community mental health centers at three locations. During his employment, Layman worked full time at all HCSN-FL locations in various capacities.  According to court documents, Layman was aware that HCSN-FL paid illegal kickbacks to owners and operators of Miami-Dade County Assisted Living Facilities (ALF) in exchange for patient referral information to be used to submit false and fraudulent claims to Medicare and Medicaid.  Layman also knew that many of the ALF referral patients were ineligible for PHP services because many patients suffered from mental retardation, dementia and Alzheimer’s disease.

Court documents reveal that Layman was aware that HCSN-FL personnel were fabricating patient medical records. Many of these medical records were created weeks or months after the patients were admitted to HCSN-FL for purported PHP treatment and were utilized to support false and fraudulent billing to government sponsored health care benefit programs, including Medicare and Florida Medicaid.  During his employment at HCSN-FL, Layman signed fabricated PHP therapy notes and other medical records used to support false claims to government sponsored health care programs.

HCSN of North Carolina (HCSN-NC) operated one location in Hendersonville, N.C.  At HCSN-NC, Layman served as the clinical director and assisted HCSN owner Armando Gonzalez in obtaining necessary licensing, credentials and Medicare authorizations for HCSN-NC.  According to court documents, from 2008 through 2009, Layman purportedly supervised the therapists within the HCSN-NC PHP, including Alexandra Haynes, who was an unlicensed therapist purportedly performing PHP therapy to HCSN-NC patients.  Gonzalez and Haynes were sentenced to 168 months and 70 months, respectively, in prison.

According to court documents, from 2004 through 2011, HCSN billed Medicare and the Florida Medicaid program approximately $63 million for purported mental health services.

This case is being investigated by the FBI and HHS-OIG and was brought as part of the Medicare Fraud Strike Force, supervised by the Criminal Division’s Fraud Section and the U.S. Attorney’s Office for the Southern District of Florida. The cases are being prosecuted by Trial Attorney Allan J. Medina and Special Trial Attorney William J. Parente of the Criminal Division’s Fraud Section.

Since its inception in March 2007, the Medicare Fraud Strike Force, now operating in nine cities across the country, has charged more than 1,500 defendants who have collectively billed the Medicare program for more than $5 billion.  In addition, HHS’s Centers for Medicare & Medicaid Services, working in conjunction with HHS-OIG, is taking steps to increase accountability and decrease the presence of fraudulent providers.