In fiscal year 2022, health care fraud remained a leading source of False Claims Act settlements and judgments. These recoveries restore funds to federal programs such as Medicare, Medicaid, and TRICARE, the health care program for service members and their families. But just as important, enforcement of the False Claims Act deters others who might try to cheat the system for their own gain, and in many cases, also protects patients from medically unnecessary or potentially harmful actions.
Fraud and Abuse in the Medicaid Program
The Medicaid program affords health care coverage to millions of Americans, including some of the nation’s most vulnerable populations, such as eligible low-income adults, children, pregnant women, elderly adults, and people with disabilities. The program is funded jointly by states and the federal government.
Mallinckrodt ARD LLC, previously Questcor Pharmaceuticals Inc., paid $260 million to resolve separate allegations relating to its drug H.P. Acthar Gel, which is approved to treat, among other things, acute exacerbations of multiple sclerosis and infantile spasms. The government alleged that the company knowingly underpaid rebates to the Medicaid program by improperly designating Acthar as a “new drug” as of 2013, as opposed to a preexisting drug for which Mallinckrodt had significantly raised the price in years prior. The government separately alleged that, from 2010 through 2014, Mallinckrodt knowingly used a foundation as a conduit to pay illegal kickbacks in the form of copay subsidies so that it could market Acthar as “free” to doctors and patients while increasing its price significantly.
Gold Coast Health Plan, a county-organized health system in California and three of its providers, Ventura County, Dignity Health, and Clinicas Del Camino Real, Inc., paid a combined total of $70.7 million to resolve claims that they knowingly submitted or caused the submission of false claims to California’s Medicaid program in connection with the “Adult Expansion” population that was created by the Patient Protection and Affordable Care Act. The United States alleged that the payments were not for “allowed medical expenses” under Gold Coast’s contract with the state, were pre-determined amounts that did not reflect fair market value, were duplicative of services already required to be rendered, and were unlawful gifts of public funds in violation of the state constitution.
Unnecessary Services and Substandard Care
The Department also pursued and resolved matters in which providers billed federal health care programs for medically unnecessary services. The provision of unnecessary medical services not only wastes taxpayer funds but also can expose patients to harmful procedures and treatments or cause them to forego other potentially more effective treatments.
The Department filed claims under the False Claims Act against American Health Foundation (AHF), its affiliate management corporation, and three affiliated nursing homes — Cheltenham Nursing & Rehabilitation Center (Cheltenham), The Sanctuary at Wilmington Place (Wilmington Place), and Samaritan Care Center and Villa (Samaritan) — for providing grossly substandard skilled nursing services between 2016 and 2018. In its complaint, the United States alleged the three AHF nursing homes provided grossly substandard services that failed to meet required standards of care in various ways, including by failing to follow appropriate infection control protocols and not maintaining adequate staffing levels.
Providence Health & Services Washington (Providence), a health care and hospital system operating in seven western U.S. states, paid $22.7 million to resolve allegations that it billed federal health care programs for medically unnecessary neurosurgeries. At one hospital in Washington state, neurosurgeons were paid based on a productivity metric that provided a financial incentive to perform more surgeries of greater complexity. As part of the settlement agreement, Providence admitted that its medical personnel expressed concerns that two neurosurgeons were endangering patient safety, creating an excessive level of complications and negative outcomes, performing surgery on candidates who were not appropriate for surgery, and failing to properly document their procedures and outcomes.
Eargo Inc., a company that sells and dispenses hearing aid devices directly to customers nationwide, paid $34.37 million to resolve False Claims Act and common law allegations that it submitted or caused to be submitted claims containing unsupported hearing loss-related diagnosis codes to the Federal Employees Health Benefits Program for the reimbursement of its hearing aid devices.
Carrefour Associates LLC and its related companies, which operate under the name Crossroads Hospice, paid $5.5 million to resolve allegations that Crossroads Hospice knowingly submitted false claims to Medicare for hospice services for patients who were not terminally ill.
Signature Home Health Services of Florida LLC and its related entities (collectively, SignatureHomeNow) paid $2.1 million to resolve allegations that SignatureHomeNow improperly admitted and provided services to Medicare beneficiaries who: (i) were not homebound; (ii) did not require certain skilled care; (iii) did not have valid or otherwise appropriate plans of care in place; and//or did not have appropriate face-to-face encounters needed to be appropriately certified to receive home health services.
Hayat Pharmacy paid $2.05 million to resolve allegations that it submitted false claims to Medicare and Medicaid for prescription medications that the pharmacy had switched from lower cost medications to higher cost medications without any medical need and/or a valid prescription.
The Department also resolved several matters in which providers billed federal health care programs for unnecessary drug testing. Physician Partners of America LLC (PPOA), its founder, its former chief medical officer, and certain of its affiliated entities paid $24.5 million to resolve allegations that they billed federal health care programs for unnecessary urine drug, psychological, and genetic testing. The United States alleged that PPOA required its physician-employees to order multiple urine drug tests at the same time without determining whether any testing was reasonable and necessary, or even reviewing the results of initial testing to determine whether additional testing was warranted. Similarly, the United States alleged that PPOA instructed physicians to automatically order psychological and genetic testing that it did not use or intend to use, and that PPOA instructed physicians to schedule bi-weekly telehealth appointments for the sole purpose of increasing revenue during the pandemic. Finally, the United States alleged that, at the time PPOA was engaged in this conduct, it obtained a loan under the Paycheck Protection Program while certifying that it was not engaged in illicit activity. This settlement resolved allegations under the False Claims Act, the Physician Self-Referral Law (Stark Law), and the Financial Institutions Reform, Recovery, and Enforcement Act (FIRREA).
MD Spine Solutions LLC dba MD Labs Inc. and two of its owners agreed to pay up to $16 million to resolve allegations that MD Labs submitted claims for medically unnecessary urine drug tests.
Finally, Radeas LLC paid $11.6 million to resolve allegations that it billed Medicare for medically unnecessary urine drug testing by performing presumptive and confirmatory tests on the same urine sample at the same time.
Medicare Advantage Matters
The Department pursued cases alleging that organizations participating in the Medicare Advantage (Medicare Part C) program knowingly submitted or caused the submission of inaccurate information or knowingly failed to correct inaccurate information about the health status of beneficiaries enrolled in their plans to increase reimbursement. This past year, the department intervened in one case against Cigna Corp and continued to litigate a number of other cases, including actions against UnitedHealth Group, Independent Health Corporation, Elevance Health (formerly Anthem), and the Kaiser Permanente consortium.
The Department filed suit to protect TRICARE, the federal health care program providing insurance for active-duty military personnel, military retirees, and military dependents. The department sued Professional Compounding Centers of America Inc. (PCCA), a company that sells active pharmaceutical ingredients and other products and services to compounding pharmacies. The complaint alleges that PCCA reported fraudulent and inflated Average Wholesale Prices for its ingredients that bore no relationship to the actual prices at which it sold those ingredients to its pharmacy customers, thereby causing those pharmacies to submit inflated compound prescription claims to TRICARE.
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