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WASHINGTON, D.C. – False claims against federal healthcare programs generated approximately 40 percent of the record $5.7 billion in recovered funds associated with civil cases involving fraud against the government during the most recent fiscal year, according to a press release issued late last week by the U.S. Department of Justice (DOJ). 

The approximately $2.3 billion in recoveries tied to false claims against programs such as Medicare and Medicaid helped the DOJ exceed the $5 billion mark in one fiscal year for the first time, with total recoveries from January 2009 through Sept. 30 amounting to $22.75 billion – more than half of all cumulative recoveries made since Congress amended the False Claims Act 28 years ago to strengthen the statute and increase the incentives for whistleblowers to file suit.

“In the past three years, we have achieved the three largest annual recoveries ever recorded under the statute,” said Acting Associate Attorney General Stuart F. Delery of the DOJ’s Civil Division. “This sustained success demonstrates that these figures result not only from large individual matters, but from a continuous commitment year after year to pursue those who defraud taxpayers and to remain vigilant in identifying those who would unlawfully obtain money from the federal (government).”

The recoveries reflect the current administration’s priorities “to hold the financial industry accountable for its part in the gross misconduct that led to the housing and mortgage crisis, and to continue to root out fraud in the healthcare industry,” the DOJ release read. 

“It has been an extraordinary year for civil fraud recoveries, but the true significance is not in breaking records or making history; it is in the billions of dollars restored to the federal treasury,” said Acting Assistant Attorney General Joyce R. Branda. “The False Claims Act was enacted both to protect vital taxpayer dollars and deter those who would misuse public funds. The department will continue to enforce the law aggressively to ensure the integrity of government programs designed to keep us safer, healthier and economically more prosperous.”    

The False Claims Act is the government’s primary civil remedy to redress false claims for government funds and property under government contracts. Most false claims actions are filed under the act’s whistleblower, or qui tam, provisions that allow individuals to file lawsuits alleging false claims on behalf of the government. 

If the government prevails in the action, the whistleblower receives up to 30 percent of the recovery.  The number of qui tam suits filed in the 2014 fiscal year exceeded 700 for the second year in a row, and recoveries in qui tam cases during that year totaled nearly $3 billion, with whistleblowers receiving $435 million.

The total sum of $2.3 billion in healthcare fraud recoveries marks five straight years the department recovered more than $2 billion in cases involving false claims against federal healthcare programs.

“This steady, significant, and continuing success can be attributed to the high priority the Obama Administration has placed on fighting healthcare fraud,” the DOJ’s press release read, noting that in 2009, Attorney General Eric Holder and U.S. Health and Human Services Secretary Kathleen Sebelius announced the creation of an interagency task force, the Health Care Fraud Prevention and Enforcement Action Team (HEAT), to increase coordination and optimize criminal and civil enforcement. 

The pharmaceutical industry accounted for what the DOJ labeled a “substantial part” of the $2.3 billion in healthcare fraud recoveries during the most recent fiscal year. Arguably most notably, global industry powerhouse Johnson & Johnson (J&J) and two of its subsidiaries paid $1.1 billion to resolve False Claims Act claims related to the prescription drugs Risperdal, Invega, and Natrecor. The government alleged that J&J promoted the drugs for uses not approved as safe and effective by the U.S. Food and Drug Administration (FDA); as such, because J&J marketed the drugs for uses not covered by federal healthcare programs, the company’s promotion of the drugs caused physicians and other healthcare providers to submit hundreds of millions of dollars in alleged false claims against Medicare, Medicaid, TRICARE, and other federal healthcare programs, the DOJ reported. 

The government also alleged that J&J paid kickbacks to physicians and to Omnicare Inc., the nation’s largest provider of pharmaceuticals to nursing homes and long-term care facilities. In addition to the federal civil settlement, J&J paid more than $600 million in civil claims for state Medicaid programs and $485 million in criminal fines and forfeitures, amounting to a $2.2 billion overall resolution and marking one of the largest healthcare fraud settlements in U.S. history.

In a separate settlement, the DOJ also recovered $116 million from Omnicare; that settlement resolved allegations that the company engaged in a kickback arrangement with skilled nursing facilities to induce the facilities to select Omnicare as their pharmacy provider. This was an alleged violation of the Anti-Kickback Statute, which prohibits offering, paying, soliciting, or receiving remuneration to induce referrals of items or services covered by Medicare, Medicaid, and other federally funded programs. 

“The statute is designed to ensure that the decisions of doctors and other professionals in prescribing drugs or recommending providers are driven by the needs of the patient and not the prospect of personal gain,” the DOJ’s press release read. “Since claims for services or supplies induced by kickbacks are not eligible for reimbursement under federal healthcare programs, the government alleged that these claims violated the False Claims Act.” 

Cases involving hospitals resulted in $333 million in settlements and judgments, with significant recoveries from two hospital chains in particular, the DOJ also reported. Community Health Systems Inc., the nation’s largest operator of acute-care hospitals, paid more than $98 million to settle allegations that it billed Medicare, Medicaid, and TRICARE for inpatient services that “should have been provided in a less costly outpatient or observation setting,” according to the press release, while Halifax Hospital Medical Center and Halifax Staffing Inc., hospital service providers in Florida, paid $85 million to resolve allegations that it violated the Stark Law, which prohibits hospitals from billing Medicare for certain services when referred by physicians who have a financial relationship with the hospital. 

The government also had significant recoveries for home health services provided in alleged violation of the False Claims Act – Amedisys Inc., one of the nation’s largest providers of home health services, paid $150 million to resolve allegations that it billed Medicare for medically unnecessary services, for services provided to patients who were not homebound, and for violations of the Anti-Kickback Statute. The government alleged that Amedisys management pressured nurses and therapists to provide care based on the financial benefits to Amedisys rather than the needs of patients.

In a trio of cases involving cardiac procedures, the government also recovered $85 million based on claims involving “potentially life-threatening conduct,” the DOJ reported. Boston Scientific Corp., which purchased Guidant LLC, Guidant Sales LLC, and Cardiac Pacemakers Inc. in 2006, paid $30 million to settle claims that Guidant sold defective heart devices to healthcare facilities that in turn implanted them into Medicare patients. 

“The devices were small defibrillators surgically implanted into patients’ chests. When a working device detects an irregular heartbeat, it sends an electrical pulse to shock the heart back to its normal rhythm,” the press release explained. “The Guidant devices allegedly short-circuited, rendering them ineffective.” 

In the other two cases, Kentucky hospitals King’s Daughters Medical Center and Saint Joseph Health System Inc. billed Medicare and Medicaid for coronary procedures that the government alleged were unnecessary. King’s Daughters paid $39 million in federal claims and $2 million in state Medicaid claims to settle allegations that it billed for medically unnecessary coronary stents and diagnostic catheterizations, and that it had prohibited financial relationships with physicians referring patients to the hospital. St. Joseph’s paid $16 million in federal claims and $366,000 in state Medicaid claims to settle allegations that the hospital in London, Ky., billed Medicare and Medicaid for numerous invasive cardiac procedures that were performed on patients who did not need them, including procedures involving coronary stents, pacemakers, coronary artery bypass graft surgeries, and diagnostic catheterizations.

Additional information on the government’s efforts to combat healthcare fraud is available online at StopMedicareFraud.gov, a webpage jointly established by the DOJ and the U.S. Department of Health and Human Services.

About the Author

Mark Spivey is a national correspondent for RACmonitor.

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Mark Spivey

Mark Spivey is a national correspondent for RACmonitor.com, ICD10monitor.com, and Auditor Monitor who has been writing and editing material about the federal oversight of American healthcare for more than a decade.

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