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Recent False Claims Act Settlements Show Critical Role of Whistleblowers In Combating Fraud

In recent weeks, the Department of Justice (“DOJ”) has announced multiple False Claims Act settlements in qui tam whistleblower cases.  The FCA allows a private individual, who has inside knowledge of fraud resulting in a financial loss to the United States Government, to file a lawsuit on behalf of the Government in federal court.  Once the Government recovers any damages in the case, the whistleblower who initiated the lawsuit is eligible for a reward of between 15-30% of the total amount recovered.

Last month, the DOJ announced that it had entered into a settlement agreement with ResMed Corp. for $37.5 million.  ResMed is a manufacturer of medical equipment related to sleep apnea in San Diego, California.  Whistleblowers initially filed five separate qui tam lawsuits against ResMed claiming that it illegally paid kickbacks to suppliers, sleep labs, and health care providers to sell more of its equipment.  The alleged actions violated the Anti-Kickback Statute, which prevents the knowing and willful payment of any remuneration for inducing the referral of services or items that are paid for by a federal healthcare program, such as Medicare, Medicaid, or TRICARE.

Violations of the Anti-Kickback Statute are often the basis for FCA claims as ultimately, the kickbacks cause the fraudulent payment of federal taxpayer dollars.  In this case, the whistleblowers alleged that ResMed provided free or below-cost services and equipment, as well as interest-free loans, to sleep labs, physicians, and other entities all in hopes of inducing more sales of its equipment.  As a result of the settlement, the whistleblowers who initially filed FCA complaints against ResMed will split a $6.2 million award.

Another FCA settlement, worth $1.41 million, was announced last week with Tenet Healthcare Corporation and its affiliated hospital Desert Regional Medical Center (“DRMC”), located in Palm Springs, California.  This agreement settles FCA allegations that DRMC was knowingly charging Medicare for implanting heart monitors into patients when such operations were medically unnecessary.  Michael Grace, a former employee of DRMC, first brought the alleged violations to light by filing a qui tam FCA complaint.  He will receive an award of $240,789.  Medicare regulations only allow for reimbursement of services and treatments which are reasonable and medically necessary.

As pointed out by Timothy B, DeFrancesaca, Special Agent in Charge for the Office of Inspector General of the U.S. Department of Health and Human Services, “[i]nvasive medical procedures, such as implanting heart monitors, are not without risk.  Therefore, when these procedures are medically unnecessary, as contended in this case, people in government health programs are put at needless peril, and taxpayers end up with the bill.”

Finally, the DOJ reached a settlement agreement with Guardian Elder Care Holdings, Inc. (“Guardian”) and its related entities, for $15,1466,278, on February 19, 2020.  Guardian runs over 50 nursing homes in Pennsylvania, Ohio, and West Virginia.  A qui tam FCA case brought by whistleblowers Phillipa Krause and Julie White alleged that Guardian overbilled Medicare and the Federal Employees Health Benefits Program for medically unnecessary rehabilitation therapy services.  For six years, Guardian allegedly billed patients for the highest level of physical therapy reimbursable by Medicare.  It did so even though these treatments were not medically necessary, but rather were provided to patients simply to increase revenue.

As part of the False Claims Act settlements, the two whistleblowers will receive $2.8 million as an award.  In the DOJ press release announcing the settlement, U.S. Attorney William McSwain explained that “[t]oo much rehabilitation therapy can actually harm patients, just like giving them too many pills or too much medicine.  And of course it harms taxpayers who foot the bill for unnecessary treatment.”

Copyright Kohn, Kohn & Colapinto, LLP 2020. All Rights Reserved.

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About this Author

Todd Yoder Associate Attorney KKC
Associate Attorney

Todd Yoder graduated cum laude from the Georgetown University Law Center in May 2016 and holds a Bachelor of Science degree in Business Management from Purdue University. He served as a legal intern with the National Whistleblower Center during the summer of 2014.

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