Florida Oncologists Pay $3.5 Million for Medicare and Medicaid Fraud

September 26, 2013,

Cancer patient.jpgThanks to a whistleblower, the Department of Justice has announced yet another Medicare fraud settlement with a group that was charging full physician rates for work that was actually being done by non-physicians. In this particular False Claims Act lawsuit, the allegations of Medicare fraud and Medicaid fraud are particularly disturbing; according to the Government's and the whistleblower's lawyers, Emerald Coast Radiation Oncology Center LLC, physicians were billing for radiation oncology services that they were supposed to be supervising - when in fact the doctors were not even present, much less supervising the work. The defendants paid the Government a combined $3.5 million.

Certainly if I had to undergo radiation I would expect a doctor to be supervising what was happening, and apparently Medicare's regulations demand nothing less. In this case, it sounds as if the doctors were not even particularly subtle about flaunting the Medicare rule; the doctors even billed for supervising procedures while they "were on vacation or were working at another radiation oncology clinic."

Now that's a trick: billing for work you are doing in Florida, when you are really miles away . . . well, I was about to say lying on a beach somewhere, but then I recalled that these doctors already live on the Gulf Coast in Florida, so I instead I will say . . . skiing on a mountain slope.

Medicare and Medicaid found out about the fraud from whistleblower Richard Koch, a former employee of Gulf Coast Radiation Oncology Centers. Koch filed a qui tam lawsuit under the False Claims Act, meaning that he brought the case on behalf of the Government. In order to encourage whistleblowers like Koch to come forward, the False Claims Act (FCA) calls for the Government to give a percentage of what it recovers to the whistleblower who stuck his neck out to let them know they were being ripped off.

In this case, the Government passed $609,796 of its recovery along to Koch. Under the FCA statute, a whistleblower is entitled to between 15% and 25% of the amount that the Government collects as a result of the lawsuit he brings (the percentage can go as high as 30% if the Government chooses not to intervene).

This is by no means the first False Claims Act lawsuit where a doctor's group has had to reimburse the Government because it fraudulently billed as if a doctor was performing services, when in reality the procedures were being done by a P.A., nurse, or even an unlicensed technician. I have written several entries about the surprising number of allegations that anesthesiology practices have billed a high rate for doctor-performed anesthesia, when the anesthesia services should have been charged at a lower rate because they in fact were performed by a nurse anesthetist.

Medicare was alerted supposed to supervise Emerald Coast billed as if physiciansfor will bills for radiation oncology services that were supposed to be supervised by physicians.

The whistleblower in this FCA lawsuit is a former employee of Emerald Coast. The settlement involved a number of other Defendants, as well: Gulf Region Radiation Oncology Centers Inc. (GRROC) and Gulf Region Radiation Oncology MSO LLC, were accused of fraud and participated in the settlement, as did Sacred Heart Health System Inc., and West Florida Medical Center Clinic P.A. Two individual doctors, Dr. Gerald Lowrey and Dr. Rod Krentel, were sued and participated in the settlement.

OIG Says SEC Whistleblower Program Is On Its Way to Stopping Fraud

September 23, 2013,

Stock going down.jpgThis past January, the Office of the Inspector General for the Securities and Exchange Commission issued a very complimentary report about the SEC's newly-developed Whistleblower Program, which is designed to help the SEC ferret out securities fraud. The findings are a clear tribute to the leadership of Sean McKessy, head of the SEC Office of the Whistleblower. While the SEC has not issued many awards yet, certainly the report supports what I said in my blog entry, SEC Hands Out Its Second Award to Whistleblowers; I believe the SEC is serious about investigating tips from whistleblowers and about rewarding them.

According to the OIG's Evaluation of the SEC Whistleblower Program, the new rules and regulations that a whistleblower and his lawyer should follow are "clearly defined and user-friendly." The final rules are appropriate for the group they were intended to reach, which is "potential whistleblowers, compliance officers, corporate counsel, and law firms engaged in whistleblower litigation" (like my law firm is).

The report touted the SEC for the way in which it has promoted the whistleblower program by both "outreach efforts" and a "strong internet presence." The inspectors specifically noted the two videos by OWB Chief Sean McKessy.

Continue reading "OIG Says SEC Whistleblower Program Is On Its Way to Stopping Fraud" »

Four Lessons from the SEC's Second Award to Whistleblowers

September 19, 2013,

New York Stock Exchange.jpgWhistleblowers and their attorneys have been closely following the SEC's new program to reward people who report securities fraud violations. In my last blog entry, SEC Hands Out Its Second Award to Whistleblowers, I talked about the announcement that the SEC is awarding $25,000 to whistleblowers. The award will be split among three whistleblowers who alerted the SEC to fraud by Locust Offshore Management and its CEO, Andrey Hicks.

Given how few awards the SEC has given out under the new program, as a whistleblower attorney I have to pore over the little information we do have in order to advise my clients about how the SEC will handle their complaints.

With the newest award, the SEC has dropped several clues about how it will handle these cases. First, the case against Locust Offshore Management and Hicks shows that the SEC is committed to compensating whistleblowers even when a defendant is prosecuted criminally. Hicks was prosecuted criminally for the fraud at Locust Offshore. He pled guilty to wire fraud, and as part of the deal he cut with prosecutors, he forfeited his interest in property amounting to $170,000 in the criminal case. The SEC is giving the whistleblowers credit for the money that was collected in the criminal action against CEO Hicks. Noting that "a provision in the whistleblower rules allows whistleblowers" to request an award from money collected in a "related action," the SEC awarded the whistleblowers 15% (split 3 ways) of the amount that Hicks forfeited in the criminal proceeding.

Since a criminal prosecution could siphon off most or all of the defendants' money, it was critical that the SEC assure whistleblowers that it would not undermine their awards via a criminal prosecution. The whistleblower is entitled to a percentage of the amount the Government collects in any agency proceeding - criminal or otherwise -- for good reason. Whistleblowers often fear losing their job and careers if they blow the whistle, and they will be far less likely to risk coming forward if they has little or no prospect of compensation that could make up for his financial losses. And, from the defendants' perspective, it would be dangerous to allow the Government to eliminate the whistleblower's award by prosecuting a case criminally, because it could incentivize the Government to prosecute cases criminally instead of working out civil penalties.

The SEC's latest award also demonstrates that the SEC will split an award if several people blow the whistle on a single company. In the Locust Offshore Management case, three different whistleblowers approached the SEC with information, and this latest award is to be split among all three. According to the SEC's press release, two of the whistleblowers provided information that led to the opening of the case, and the third identified key witnesses.

Third, the SEC has the option of giving up to 30% of what is collected to the whistleblower, and it did so in its first award (the only other given to date). In this case, however, the SEC gave the minimum award of 15%, and that amount must be divided among three people who provided relevant information.

Fourth, in neither of the first two awards did the SEC name the whistleblowers who had provided the information. The point is very encouraging to whistleblowers, who often are afraid to come forward for fear they could damage their job prospects within their industries.

The SEC Office of the Whistleblower was begun in the wake of Enron, after the SEC was heavily criticized for ignoring tips from Enron employees. The SEC not only did not reward the Enron whistleblowers, it blatantly ignored them. The result was devastating for Enron shareholders, and the ill effects rippled through our economy.

Congress passed the Dodd-Frank Act on July 21, 2010, in order to help the SEC reward whistleblowers who report securities fraud. Under the statute, the SEC enacted a set of rules and set up the SEC "Office of the Whistleblower." The Office's mission is to vet tips about securities fraud, and to reward people who report fraud and violations of SEC regulations.

SEC Hands Out Its Second Award to Whistleblowers

September 16, 2013,

Wall Street Main Street.jpgThe SEC is awarding $25,000 under the SEC whistleblower program. The award will be split among three whistleblowers who reported fraud by a hedge fund and its CEO/manager.

Whistleblowers and their lawyers have been waiting to see whether the SEC will live up to its promise to reward people who report securities fraud that cheats stockholders. The SEC is hardly breaking any records for the number of awards it has handed out - this award is just the second one the SEC has made since Congress strengthened the SEC whistleblower provisions in 2010.

In this case, the three whistleblowers - who were not identified -- gave the SEC information about securities violations by Locust Offshore Management and its CEO, Andrey C. Hicks. While the three tipsters are splitting something slightly north of $25,000 right now, the SEC Office of the Whistleblower has said that the three ultimately will split $125,000 for reporting the corporate fraud by Locust Offshore and Hicks.

It would be easy for whistleblowers to be discouraged by the fact that the pace at which the SEC is handing out awards is so painfully slow. However, two things give me hope that the SEC is quite serious about its whistleblower program.

First, it was telling that the August 30th press release was the second that the SEC has given out for this one award. It issued one press release in June, when it decided to give the whistleblowers 15%, and then made this second statement when it actually paid the trio the first installment of the money that they will receive. Even if the pace of the awards has been slow, the fact that the SEC is touting this award suggests to me that it is eager to convince whistleblowers and their lawyers that it is serious about rewarding insiders who are willing to step forward to help the SEC stop securities fraud.

Second, last fall I attended a conference for attorneys who represent whistleblowers. Sean McKessy, head of the SEC Office of the Whistleblower, came to talk to our group. I wrote a blog entry about what Mr. McKessy said, SEC's Whistleblower Program: One Year, One Award, and Three Thousand Tips Later. He reported that the public would see the number of awards increase as the SEC had time to finish evaluating the tips that had come in. Once these tips worked their way through the system, he said, rewards would become more frequent. McKessy struck me as very serious and dedicated to the task of using whistleblower's tips to stop the securities fraud that has helped undermine our economy in the last few years.

With McKessy fully committed to the whistleblower program, I am optimistic that we will see the SEC making a number of awards to securities whistleblowers over the next few months. No doubt McKessy would like to have more awards he could point to as evidence that the SEC is taking whistleblower tips seriously, but I believe he has set up the framework for a strong program, and we will soon see the SEC stopping securities fraud results.

Watch Out Georgia Drivers! Deadly Crashes Happen Over Labor Day.

August 30, 2013,

Labor Day.jpgAs a Georgia car wreck lawyer, I represent families that have been torn apart when a loved one is killed in a car wreck. I am hoping that if I blog about the fact that so many people are killed in Georgia in car accidents that happen over the Labor Day weekend, Georgians will realize how incredibly careful they need to be as they drive this weekend. In 2009, 14 people were killed on Georgia's highways and streets over Labor Day. Hopefully we can make that number smaller this year.

A few months back, I started researching how many accidents occur in Georgia over the holiday weekends. I had been prepared for a large number of car crashes occurring over New Year's Eve, and even Christmas. But I was stunned by how many people were being killed on relatively quieter holidays, like Columbus Day. I started blogging any time we have a holiday about why people need to be careful that weekend.

To get my data, I used the Fatality Analysis Reporting System (FARS), which is maintained by the National Highway and Traffic Safety Administration (NHTSA). NHTSA collects data on fatal car accidents from all 50 states as well as from the territories of the United States. FARS only includes data about car accidents in which at least one person dies; it does not include information about car accidents in which someone is seriously injured, has a head injury, or even is paralyzed unless someone also died in the same accident. The latest data available on the public, online database is from 2009, which is why I am using that year as my benchmark.

In 2009, NHTSA started the data for the holiday on September 4, 2009 -which was a Friday - and ended it on Monday, September 7, 2009. Over those four days, 14 people died.

The first death occurred on Friday, September 4th. One person died in a car collision in the city of Augusta in Richmond County.

Four more people were killed on Saturday, September 5th. One person died in a car crash in Hall County, here in Georgia. Two people were killed in a horrible collision in Pickens County, Georgia. A third person died in an auto wreck that happened that Saturday in Washington County.

The single deadliest day of the weekend was Sunday, September 6th. Six people were killed in six separate automobile accidents that happened around the State of Georgia. One person was killed in an automobile crash in Cobb County. Two people were killed in separate car accidents in Fulton County. One of the two people was killed in Atlanta, and the other in College Park, both of which are in Fulton County. Hall County saw one person killed in a car wreck that happened on September 6th over the Labor Day holiday. McDuffie County and Gilmer County each also saw one person die in an auto collision on Sunday.

One person died in a Fulton County car wreck in the city of College Park. A second person died in Gilmer County, in the city of Ellijay.

Four more people died in Georgia auto accidents on September 9, 2007. On that day, one person died in Walton County, a second in Madison County, a third in the city of Douglas in Coffee County, and a fourth in Blackshear in Pierce County, Georgia.

These accidents are ample evidence that Labor Day can make for dangerous driving for Georgians. So be careful out there this weekend!

Healthcare Fraud So Shocking You Won't Believe Me That It Happened

August 6, 2013,

Chemo.jpgAccording to a criminal complaint filed by the U.S. Attorney for the Eastern District of Michigan, a Detroit doctor has been falsely diagnosing patients with cancer, just so he can give them chemotherapy and make money from doing that.

I am a whistleblower lawyer, and I had so much to do today that I had decided I would skip blogging today. But then I read about this case, and was so shocked and infuriated that I just had to write.

The accusation is so bizarre that I'll say it again. The Complaint says that Dr. Fata of Michigan diagnosed patients with cancer, even though they did not have cancer, because he decided he would like to make more money. Apparently he couldn't drum up enough cancer patients who needed chemotherapy, so he invented a few.

The Complaint is filed as a healthcare fraud indictment. The doctor is accused of defrauding Medicare because he billed for chemotherapy, PET scans and other cancer treatments for patients who did not have cancer. The Complaint talks about how much money the U.S. has lost to the fraud. I represent whistleblowers who file False Claims Act lawsuits, so I am curious as to whether a whistleblower told the Government about the fraud. I could not tell from the Complaint, but the Complaint did give the dates on which Dr. Fata's employees were interviewed, and I noted that one of Dr. Fata's employees was interviewed three days before the others. The Complaint gave less information about this employee than it did about the others.

The doctor also is accused of giving people more chemotherapy and more drugs than they needed - a lot more. For example, an oncologist who had worked with the doctor said that over a two-year period, Dr. Fata ordered 56 doses of Rituximab for a non-Hodgins lymphoma patient - even though the correct dosage would have been 12. The doctor also treated patients who had Idiopathic Thrombocytopenic Purpura (ITP). These patients were to be given Rituximab for 5-6 weeks before they had surgery to remove their spleens. Allegedly the drug was so profitable for Dr. Fata that he kept patients on it for years and never mentioned the surgery option.

For two patients, Dr. Fata allegedly ordered a "maintenance dose" of chemotherapy - even though the patients were in remission. Fortunately, the Complaint says these two patients sought second opinions.

The doctor also is accused of hiring three foreign doctors and letting them treat patients even though the foreign doctors were not licensed in the U.S.

Yes, Dr. Fata's actions would have defrauded Medicare and Medicaid. But can you imagine the agony that these patients and their families went through? The Complaint notes that the doctor generally did not tell patients they had been diagnosed with cancer, but he did falsify their records. It seems very likely that some of these patients "learned" that they had cancer when they talked to their insurance carriers or their other doctors.

And then the Government says that the doctor intentionally gave chemotherapy to the patients knowing they did not need it! These patients became desperately ill from chemotherapy - for nothing! I can imagine that a dad was so sick he couldn't travel to see his son's graduation from college. A mom couldn't snuggle her child to sleep at night because she was in the bathroom throwing up. Somebody lost a job because he or she didn't have the strength to go to work.

As a lawyer, I've generally got a lot to say, but words fail me here.

Yes, Dr. Fata made a large profit. According to the Complaint, his company billed Medicare $35 million in just two years, and $25 million of that was for Dr. Fata's services. But how can you even plumb the depths of the misery that this man must have caused, allegedly just to make more money?

False Claims Act Case Stops Double Billing By Maryland Cardiologist

August 5, 2013,

According to the Department of Justice press release, a Maryland nuclear cardiologist and his two companies double billed for myocardial perfusion studies, also known as nuclear stress tests. A federal court in the District of Columbia has entered a $17 million judgment against the three in a False Claims Act ("FCA") healthcare lawsuit.

Health and Human Services' Office of the Inspector General apparently found this case itself, without the help of a whistleblower. I wrote recently about the problems that Medicare is going to face given recent, extreme budget cuts for OIG. This case is precisely the type that will go undetected as OIG ramps down its enforcement efforts due to deep budget cuts. As OIG loses its ability to fight fraud, we are going to become more and more dependent on whistleblowers to keep Medicare and Medicaid from getting swindled. I am an attorney who represents whistleblowers, so I know that we have many brave souls in this country who will blow the whistle on fraud, sometimes at extreme cost to their careers. At the same time, the amount of Medicare and Medicaid fraud is overwhelming. Combining cases brought with and without whistleblowers, DOJ says it has recovered $ 10.7 billion for healthcare fraud since 2009. Such a large recovery is great news for taxpayers, but it is a drop in the bucket given that an estimated $60 billion is being swindled from Medicare yearly.

According to the allegations in the FCA lawsuit, the doctor and his companies were double billing for nuclear stress tests that the doctor performed on patients. The myocardial perfusion study has two parts -- a "stress" portion and a "rest" portion -- which can be done in one day or which can be spread over two days. Regardless of whether the doctor does the test on one day or two, he is only allowed to submit one bill for both parts - in other words, the two parts must be billed as a single test. According to the Government, however, Dr. Malik, however, was billing the phases separately so that he got paid double the amount he should have.

The Government also accused the doctor of a practice called "unbundling." When a healthcare provider "unbundles" a charge, it bills separately for a number of procedures or medications that should be included in the main bill. According to the federal allegations, the doctor was billing separately for items that were already included in the reimbursement for the nuclear stress test itself, such as "intravenous injections, drug infusions, 3D rendering and drug administration." The Government also said that Dr. Malik had been using inappropriate billing codes, presumably billing for procedures more expensive than the nuclear stress tests he actually was conducting.

The U.S. Attorney for the District of Columbia, Ronald C. Machen, Jr., pointed out that medical overbilling ultimately results in "the rising cost of health care for all Americans", because it "fraudulently divert[s] critical resources from government health care programs."

It was unclear how much of the money the doctor would be able to pay. Machen said that the Government would do "everything in our power to obtain every cent" of the money owed.

According to DOJ lawyers, the federal Government, the Maryland Attorney General's office, and the A.G. for the District of Columbia, jointly investigated the medical overbilling case. They filed suit against Dr. Istiaq Malik, his P.C. and another company he owned, Advanced Nuclear Diagnostics.


Now Here's A Bad Idea: Government Decreases Funding to Fight Medicare Fraud

August 2, 2013,

Money - stacks of.jpgBudget cuts are making healthcare whistleblowers more important than ever. According to the Department of Health and Human Services Office of Inspector General, thanks to cuts in the HHS budget, Medicare and Medicaid are about to have even fewer resources to fight fraud and abuse.

The Center for Public Integrity obtained internal documents from HHS-OIG that discuss the effects budget cuts are about to have on Medicare's ability to defend itself against fraud in the medical field -- and the outlook is grim. In all, OIG is losing 400 employees - a full 20% of its staff - as a result of the cuts.

Now that is a short-sighted plan. I don't know whether Congress or HHS is deciding where to place the cuts, but it is a huge mistake to cut funding from the branch of the agency devoted to getting money back in to Medicare and Medicaid coffers. As a whistleblower attorney, I can attest that there are brave men and women willing to risk their jobs to try to stop fraud. But these whistleblowers can address only a small fraction of the fraud.

As I explained in an earlier legal blog post, Government Recovers $4.9 Billion Thanks to False Claims Act, last year whistleblowers helped the Government recover $4.9 billion, and 3.3 billion of that was just for fraud in the healthcare field. But the Government estimates that Medicare is losing more than $60 billion to fraud every year. With those sorts of numbers, the Government simply cannot afford to shut down a program designed to bring dollars back into taxpayer coffers.

If the Government gives up fighting fraud, it not only will lose money, it also will embolden fraudsters who know they are very likely to get away with what they are doing.

A Harvard professor is predicting dire problems could result from the cuts to OIG funding. Malcolm Sparrow is warning that the Government needs to "stay ahead" of the cheaters, "Otherwise three years from now we will be saying how could we not have predicted this mess?"

OIG is worried, too. In an internal memo, an OIG official admitted: "As OIG's budget resources decline, so do our enforcement and oversight activities." And the cuts could not come at a worse time, as the government prepares to ramp up its spending in the health care arena. The agency conceded that it "will not be able to keep pace" with the coming expansion.

Whistleblowers who have inside information about fraud will become increasingly important as OIG's ability to fight fraud decreases. The sheer amount of fraud in the healthcare arena was already overwhelming for OIG. Now, with their staff and budget cut drastically, they will be less able to detect fraud on their own or pursue fraud.

The False Claims Act was strengthened in 2009 and 2010, fortunately just in time to encourage whistleblowers to step into the breach being created by the lack of agency funding to pursue fraud. A whistleblower who tells the Government about fraud can receive between 15% and 30% of the amount that the Government recovers. The Government is protected because the Government does not have to pay the whistleblower anything unless the whistleblower's suit actually collects money for the Government.

With the Government ceding more of the ground on fighting fraud, we can only hope the changes are enough to convince whistleblowers to come forward, so that we can stop hemorrhaging our nation's healthcare dollars.

Hospital Pays $8 Million for Overcharging Medicare for Long-Term Acute Care

August 1, 2013,

Hospital beds.jpgA whistleblower will receive $2.16 million for helping Medicare recover $8 million taken from it by fraud. Darlene Tucker, a former administrator at Southern Crescent Hospital, filed a False Claims Act lawsuit against Dubuis Health System, and her employer, Southern Crescent Hospital for Specialty Care, Inc. She alleged that, due to the long-term, acute care facility's Medicare fraud, patients were being kept at the hospital even after they no longer needed the medical care - all so that Dubuis and Southern Crescent could bilk Medicare of a few more bucks per patient.

Joshua Schwitzerlett, a reporter with the Ring of Fire, described the case in an article, $8 Milllion Hospital False Claims Settlement, Whistleblower Gets $2.16 Million. Dubuis and Southern Crescent treated patients who were extremely ill, and needed acute care. These patients were expected to need care for a lengthy period of time. Tucker's suit alleged, however, that from 2003 to 2009, Dubuis and Southern Crescent kept patients in the hospital well past the time the patients needed acute care. According to the suit, the extended stays were not medically necessary. In fact, the only reason that Dubuis and Southern Crescent were keeping the patients in the hospital was so that the facility could keep billing Medicare for the patients' care.

Obviously a patient does not enter long-term, acute care unless the patient is very ill. By definition a patient is admitted for acute care because he or she has a complex illness. Second, the patients' doctors have acknowledged that the patient is going to need that high level of care for more than 25 days.

On the other hand, many or most of these patients are going to improve eventually. They are not being given a life sentence in the hospital. When they get better, like every other hospital patient in the world, they want to get out of the hospital and go home.

The False Claims Act is meant to address exactly this sort of fraud. The statute is aimed at people who are swindling the Government in some way. The FCA covers fraud against Medicare, Medicaid, the military, or any other Government agency. But here the case was especially important because what the Defendants were doing did more than rob the taxpayer coffers; it also affected the lives of innocent people who were confined in a hospital when they should have been allowed to go home to their families.

The DOJ did not release much information about how the fraud worked. It is hard to imagine a doctor listening to a patient beg to go home, and then looking the patient straight in the eye and telling him that he needs to stay in the hospital - even though the doctor does not actually believe the patient needs to stay in the hospital. Even if the hospital was pressuring the doctor, it is just hard to believe that a doctor would keep a patient from going home to his family simply because the doctor was hoping to squeeze a few more dollars out of the patient's Medicare coverage. Perhaps the fault lay entirely with the long-term care facility. The hospital may have been overriding the doctors' orders to send patients home - also a very frightening possibility, since it raises the specter of a hospital interfering with the medical care its patients are receiving.

Regardless of just how the fraud was being executed, it certainly is the type of behavior that needs to stop. Congratulations and thank you to Ms. Tucker and to colleague James Kauffman, who was Ms. Tucker's whistleblower lawyer.

Feds Say Baltimore Pharmacy Charging Medicare and Medicaid Twice for Same Drugs

July 31, 2013,

Pink pills.jpgSome pharmacies automatically refill prescriptions that have been prescribed by a doctor. The courtesy can be a real time-saver. When you are getting low on a prescription, you can head down to the drug store any time, knowing your prescription will be waiting for you. But the feds allege that a Baltimore pharmacy turned a courtesy into a scheme to commit Medicare and Medicaid pharmacy fraud. According to indictments filed in the case, the pharmacy owner and employees were billing Medicare and Medicaid for refills even when the patient never picked up the drug. To add insult to injury, they then restocked the drugs and resold them to Medicare and Medicaid when the next patient came along.

When a pharmacy automatically refills a prescription, most patients will pick up the refill -- but not every patient will. Sometimes the prescription may sit in the basket at the pharmacy, never claimed. Perhaps the patient has moved and changed pharmacies. The patient may have decided that the prescription was too expensive, or that he or she didn't need to take it anymore. In all of these situations, the pharmacy is left with the prescription sitting in the basket of medications waiting to be picked up. Most pharmacies cull through the baskets every few days, and restock the pills or medications that have not been picked up. Until the patient picks up the prescription refill, no one is charged for the drug - not Medicare, Medicaid, a private insurance company, or the patient.

But according to an indictment filed against a pharmacy's owner and two employees of the business, a Baltimore pharmacy was gaming the system.

A Baltimore Sun article, Two from Harford charged with bilking Medicare, Medicaid on prescription refills, reports that two employees and the drug store owner were billing Medicare and Medicaid before the patient showed up. Then, when a prescription went unclaimed, they did not let Medicare or Medicaid know that the pills had not been picked up. Instead, they restocked the pills and used them when a new patient came in with a prescription for that particular drug. Thus, Medicare and Medicaid wound up paying twice for the very same pills or drugs.

The indictments say the scheme netted the pharmacies $ 2.6 million in reimbursements for prescriptions that were never provided to patients, but instead were restocked.

According to the Baltimore Sun, a grand jury now has returned an indictment against Reddy Vijay Annappareddy, the owner of Pharmacare, LLC, and Caremerica, LLC. Two employees, Jigar Patel and Vipinkumar Patel, apparently no relation to one another, also were indicted and arrested. On July 25, 2013, the feds swept three pharmacies and a storage space for documents, looking for evidence in the case.

Is this type of drug store Medicare fraud rampant? I have not heard about this type of fraud happening, but as my friend Patrick Burns pointed out, when fraud is this simple and this lucrative, chances are that it is happening in more than one place. If so, I hope there are some drug store whistleblower employees who will come forward. They would be helping Medicare, Medicaid, and all of us as taxpayers. And if instead they keep silent and restock the pills, they may wind up like the Patels - employees who stand accused of being involved in the fraud.

More Anesthesia Fraud Stopped By Whistleblowers Under the False Claims Act

July 30, 2013,

Surgeons in surgery.jpgAs a lawyer for whistleblowers and a taxpayer, I was pleased to see that the Government took affirmative action to stop anesthesia fraud. This time, according to an article in the Newport Beach Coronado del Mar Patch, the University of California-Irvine paid $1.2 million to resolve allegations that it had been allowing Certified Registered Nurse Anesthetists or residents to administer anesthesia without a supervisory anesthesiologist being either present or available. Lawyers for the whistleblower filed a suit stating that even when the supervisor was not present, the hospital filled out records - in advance of the surgery, even - to make it look like the surgeon was there. The hospital then billed for the higher rate it was entitled to charge if the anesthesiologists directly supervised the medical procedures. The California Board of Regents paid the United States government in order to resolve the allegations that the University of California-Irvine (UCI) had overcharged Medicare by this practice.

I have received a shocking number of calls about fraud by anesthesiologists and anesthesia groups - far and away more than for any other type of Medicare fraud, Medicaid fraud or Government contract procurement fraud. Apparently I am not alone. Several cases reported in the legal case journals relate to anesthesiologists accused of defrauding the Government. Because of the way the anesthesia field is set up, almost all of these cases all revolve around the question of supervision.

Certainly most people who go into the hospital are under the impression that a doctor is administering their anesthesia. In fact, frequently a nurse anesthetist is administering the anesthesia. A nurse anesthetist does have some specialized training in anesthesia, but is not an M.D.

Under Medicare's rules, an anesthesiologist can bill Medicare the most if he or she personally performs the anesthesia. However, the anesthesiologist also can bill for "medically directing" anesthetists who actually perform the procedures. The Medicare rules require several "touchstones" to prove that the anesthesiologist actually is doing the supervising. For example, the anesthesiologist has to be present at certain, key points in the procedure, and has to be on call to help. The anesthesiologists only can request reimbursement for four or fewer anesthesiology procedures at the same time. The point of all of these rules, of course, is to make sure that the doctor is really involved in and supervising the work being done on patients. If the anesthesiologist is not as involved in the supervision, he still can bill Medicare if he supervises the anesthetists less closely, but in that case he must expect a lower rate for his work in "medically supervising" the process.

The University of California-Irvine suit was filed by an anesthesiologist, Dr. Dennis O'Connor. Hats off to Dr. O'Connor, who stood up for the right thing.

I have heard about a number of cases in which anesthesiologists went to great lengths to conceal the fact that they were not supervising the anesthetists, yet were billing as if they were closely supervising, or even personally performing, the procedure.

I cannot imagine why the anesthesia field in particular would have a disproportionate number of doctors bent on Medicare fraud and Medicaid fraud. Certainly anesthesia billing fraud needs to be brought to a screeching halt, and we owe a debt of gratitude to the courageous doctors, anesthetists, billers and coders who are willing to step forward in order to stop fraudulent billing in this area. I hope more anesthesia whistleblowers like Dr. O'Connor will come forward, before the reputation of the entire industry takes a serious battering.

Highway Robbery? False Claims Act Allegations Against Concrete Mixing. Company

July 29, 2013,

Rebar.jpgFalse Claims Act lawsuits cover fraud of all types, from doctors and hospitals cheating on Medicare claims to defense contractors overbilling. But many people do not realize that the Act also covers fraud related to all types of procurement contracts, including highway contract fraud related to projects that are partially funded by federal dollars. In states that have FCA statutes, highway contractors also may be liable to the state government under the state's version of the False Claims Act.

According to a press release from the U.S. Attorney's Office for the Middle District of Tennessee, Sherman-Dixie Concrete Industries, Inc. to Pay $664,000 to Settle False Claims Act Allegations, a Tennessee concrete mixing company is learning that fact the hard way.

The Tennessee company is accused of cutting corners in making concrete products. According to Department of Justice (DOJ), Sherman-Dixie was cranking out concrete end walls and catch basis that did not meet the specifications set out in its contract. Sherman-Dixie was making these concrete pieces under a contract with the Tennessee Department of Transportation (TDOT). The pre-cast concrete pieces did not have the appropriate "strength and placement of rebar" inside them. Despite the fact that the pieces did not meet the contract specifications, the company certified that they did.

Marlies Gonzalez was the DOT-OIG Regional Special Agent-in-Charge of the investigation into the allegations that the concrete did not meet the specifications about how the rebar was placed. In commenting on the settlement, Gonzalez stressed that the Government was using the FCA to send " a strong message" to companies that tried to "substitute inferior products in transportation-related projects." Gonzalez pointed out that cutting corners on these concrete pieces is a safety issue, not just a fraud issue.

The case was unusual in that the Tennessee Department of Transportation learned of the fraud on its own. Since by definition fraud is something people try to cover up, usually fraud is not detected unless a whistleblower comes forward with inside information that is being hidden from the Government.

The Federal Government became involved because the U.S. Department of Transportation provided a substantial portion of the funding for the highway project. Because both the state and the federal governments contributed to the funding for the project, the U.S. Department of Transportation, the FBI and the U.S. attorney for the Middle District of Tennessee jointly conducted the investigation into the fraud.

The concrete company also agreed to a monitoring agreement. Under a monitoring agreement, a company agrees to take measures that will enable to company and the government to monitor the company's future compliance on its procurement contracts.
Whistleblowers who come forward to tell the Government about fraud do an immense service to all of us as taxpayers. In order to reward them for bringing the information, the Government awards between 15% and 30% of its recovery to the whistleblower. In order for the whistleblower to be paid under the Act, the whistleblower's lawyer must file suit and help the whistleblower follow the somewhat complex rules set out in the federal False Claims Act, which is found at 31 U.S.C. § 3729, et seq.

False Claims Act Case Enforces Trade Agreements Act; $5.66 Million Recovery

July 15, 2013,

China Shipping Container.jpgCDW-Government, LLC, has agreed it will pay $5.66 million to settle a whistleblower's lawsuit brought under the False Claims Act. According to a United States Department of Justice press release, the suit alleged that CDW violated its contract with the United States by concealing the fact that it was buying products that were made in countries prohibited under the U.S. Trade Agreements Act. Despite the fact that it had bought the products in countries from which it had agreed it would not buy, it then resold those products to the United States. The claims were initially brought by a former sales representative for the company, John Liotine. Whistleblower Liotine will be paid $1.56 million out of the total amount of the settlement.

The CDW case is especially important because of what it says about damages. In some False Claims Act whistleblower cases, the damages are very clear. For example, if a company promises to provide widgets, but through fraud never does, the Government never got the benefit of its bargain at all. In CDW's case, however, CDW actually was providing supplies to the Government. But the Government has very specifically said that it only wanted to buy goods from approved countries - and the Government was not getting the benefit of that bargain.

When a government contractor ignores a restriction the Government puts in its contract, ostensibly the Government still gets the goods and services it requested. But if contractors are allowed to ignore these provisions, of course, then the Government will be denied the chance to do what every other contracting party gets to do - bargain for what it really wants. If the Government cannot enforce these provisions, ultimately the provisions have no meaning.

On January 12, I wrote a law blog entry entitled Hardware Distributor Grainger to Pay $70,000,000 for Fraud Against the Government. That legal blog post talked about a whistleblower's case against an Illinois-based hardware distributor. In that case, as in this one, the relator charged the defendant with violating its government contract by buying products from countries that were not members of reciprocal trade agreements with the United States.

The Government now has settled at least two similar False Claims Act suits, illustrating that it is going to be serious about enforcing the requirements in its contracts. Indeed, if the Government were to walk away from cases like these, then it might as well remove any provisions in its contracts about complying with the Trade Agreements Act or other similar legislation.

The False Claims Act is found at 31 U.S.C. § 3729, et seq., and it allows whistleblowers to inform the Government when they know someone is trying to defraud the Government. The whistleblower (also called a 'relator') has to follow various procedural requirements and file a lawsuit informing the Government about the fraud. A relator who correctly follows the steps is then entitled to between 15% and 25% of what the Government recovers. If the Government chooses not to intervene (i.e., take over the case), then the relator is entitled to receive between 25% and 30% of whatever is recovered on the Government's behalf. Abraham Lincoln was a proponent of the FCA, which dates back to the Civil War. Thanks to the law, the Government has recovered billions of dollars that otherwise would have been lost to fraudsters bent on cheating the Government and the American taxpayers.


KBR Loses Argument that First to File Rule Bars Whistleblower's Lawsuit

July 9, 2013,

Glass of water.jpgMost people might be embarrassed to admit that they have been repeatedly accused of cheating the American taxpayers. Defense contracting giant KBR, however, tried to use the fact to its advantage. It argued that a court should dismiss a whistleblower's lawsuit because other, prior lawsuits also had alleged that KBR violated the False Claims Act by defrauding the U.S. military. In U.S. ex rel. Carter v. Halliburton Co., et al (3/18/13), the Fourth Circuit rejected KBR's argument, ruling that two prior fraud lawsuits could not prevent the whistleblower from pursuing his FCA suit, because the two prior lawsuits had been dismissed voluntarily and were no longer pending.

Under the False Claims Act, only the first relator to file a complaint can bring a whistleblower lawsuit. The FCA provides that: "When a person brings an action under this subsection, no person other than the Government may intervene or bring a related action based on the facts underlying the pending action." 31 U.S.C. § 3730(b)(5).

According to the allegations, KBR had a contract to test and purify water for military camps in Iraq. In 2006, a former KBR employee, Benjamin Carter, filed a False Claims Act lawsuit alleging that for nearly four months KBR actually did not do the testing and purification it was hired to do. Despite the fact that it was not performing the services, the former employee said, KBR represented to the United States that it was testing and purifying the water. It also billed the U.S. for the testing and purification work that its employees were supposed to be doing, but weren't.

Carter initially filed suit in the United States District Court for the Central District of California, but the case was transferred to the Eastern District of Virginia, which is in the Fourth Circuit, which issued the March 2013 opinion.

When it instituted the "first to file" rule, Congress no doubt intended to avoid headaches that could result if people read about False Claims Act cases and then filed their own suits. FCA cases might devolve into long squabbles among plaintiffs about who was entitled to the whistleblower's share of the FCA recovery.

In recent years, however, defendants have begun to try to take advantage of the first to file rule. In the FCA arena, suits often are dismissed for a host of complicated reasons. The reasons could range from the plaintiff's desire to remain anonymous to a concern that the plaintiff has valid evidence but lacks access to some critical piece of proof he needs.
The Defendants have tried to turn the first to file rule to their advantage, arguing that any earlier suit bars the new whistleblowers' lawsuit - even if the first claim was dismissed.

KBR claimed that two similar cases had been filed earlier, and argued that those cases barred Carter from filing his claim, because he was not the first to file. KBR made the argument even though the two prior cases had been voluntarily dismissed and were no longer pending.

In evaluating KBR's argument, the 4th Circuit joined a number of other Circuits in adopting the "same material elements of fraud" standard. Analyzing the two cases presented by KBR, the 4th Circuit determined that the two other cases did have the same material elements of fraud. However, the Court thought it was important that neither of the two cases was pending. The court decided that: "once a case is no longer pending the first-to-file bar does not stop a relator from filing a related case." Since both of the original actions had been dismissed, plaintiff Carter could pursue his claims.

Cash Hors D'Oeuvres Anyone? Suit Alleges Blatant Off-Label Marketing Pitch by Cephalon

July 8, 2013,

Waiter with tray platter.jpgI guess nobody much cared about the food that night.

According to a whistleblower lawsuit filed by a former manager at pharmaceutical manufacturer Cephalon, at a 2008 sales launch meeting the company passed out cash - literally. The suit, which is filed under the False Claims Act ("FCA"), says that the meeting was designed to encourage employees to sell two drugs - Treanda and Fentora. To make the point that selling prescription drug Treanda would be very profitable for the sales reps, the company hired waiters to pass trays of $50 bills during dinner. A Cephalon VP told the sales representatives to grab handfuls of the bills as the waiters passed by, explaining that they could earn huge bonuses by selling Treanda - which would be just like "taking free money."

According to a pharmalot article, How to Motivate Off-Label Promotion? Give
Reps Trays of $50 Bills
, the FCA lawsuit claims that Cephalon projected $500 million in sales for Treanda in the next year -- a figure that would be impossible unless the drug was sold for off-label uses.

While $50 bills certainly beat rubber chicken or meatballs-on-a-stick, the VP's reported comment about "free money" beg the question. Free - to whom? Prescription drugs are not free to the people who take the drugs, or to their insurance companies -- and the pharmaceuticals certainly are not free to U.S. taxpayers. In 2010, Medicare spent 12% of its entire budget on prescription drugs under the Part D program - a whopping $62.0 billion in all.

I would be willing to bet that the VP submitted an expense claim for those $50 bills that the waiters offered to the sales representatives. After all, those bills weren't free to him - just like drugs are not free to those who ultimately pay for them.

Spending money on necessary pharmaceutical drugs is one thing. A Congressional Budget Office Report argues that spending on prescription drugs actually saves money because it decreases spending in other medical areas. But nobody can justify spending money on prescription drugs that are not necessary or don't work. Those drugs can't help the patients, and unlike the platters of $50 bills, they certainly are not free.

Treanda is approved by the FDA to treat chronic lymphocytic leukemia. According to the lawsuit, the company decided it would profit by marketing Treanda for indolent non-Hodgkin's lymphoma, even though the medication was only approved as a second or third-line treatment for the disease. To push the drug as a frontline treatment, the company relied on a German study by a consultant hired by Cephalon. The False Claims Act lawsuit says that the company executives believed that there were significant problems with the German study, but decided to hide the problems and push the drug, anyway.

The FCA lawsuit also alleges that the company encouraged offlabel marketing of a drug called Fentosa, which is a painkiller.

Cephalon paid $425 million to resolve allegations of Medicaid fraud in 2008. The claims had been made in another whistleblower lawsuit filed by a Philadelphia sales rep. The Philly sales rep alleged that the company was pushing off-label marketing for three other drugs: Actiq, Gabitril and Provigil. The Government resolved those FCA claims for $375 million to address the overpayments by Medicaid, plus a $50 million payment for a corporate criminal plea.

Teva Pharmaceutical now owns drug maker Cephalon.