Published on:

California-based CRC Health Corp. (“CRC”) has agreed to settle allegations by a whistleblower in a qui tam lawsuit that it submitted false claims to Medicaid in violation of the False Claims Act. Specifically, the whistleblower claimed that CRC knowingly billed Medicaid for substance abuse treatment that was either not provided or for treatment that was not provided by properly qualified and licensed personnel.

CRC is the owner and operator of a residential substance abuse treatment facility in Burns, Tennessee called New Life Lodge (“New Life”). In 2011, Angie Cederoth, a former New Life employee, filed a whistleblower complaint under the qui tam provisions of the False Claims Act.

The False Claims Act permits private individuals to file qui tam lawsuits on behalf of the government against individuals or entities that may be committing fraud against the government. The individual who pursues the action, called a relator, is typically entitled to a percentage of any monies recovered by the government as a reward.

In the whistleblower’s complaint, she alleged that, from 2006 to 2012, New Life submitted claims to Medicaid for substance abuse treatment services that were either not provided or were provided by individuals who were not properly licensed therapists in the State of Tennessee.

In addition, the government alleged that New Life violated Tennessee state regulations by not having a licensed psychiatrist available to patients, by exceeding the Tennessee Department of Mental Health patient-staff ratios, by billing for Tennessee Medicaid patients in excess of New Life’s state-licensed bed capacity, and for allegedly double-billing Medicaid for prescription medications given to patients at the facility.

Medicaid is a health care program for individuals and families who meet specific low income criteria. It is jointly funded by federal and state governments, and managed by the states. CRC has agreed to pay $9.25 million to the federal government and the State of Tennessee Medicaid program to settle the whistleblower’s allegations.
The whistleblower will receive approximately $1.5 million as her reward under the qui tam provisions of the False Claims Act.

To read more about the types of government fraud that may violate the False Claims Act, click here.

Published on:

Hope Cancer Institute (“Hope”) and its owner Dr. Raj Sadasivan have agreed to settle allegations by three whistleblowers in a qui tam lawsuit that they violated the False Claims Act and committed fraud against the government when they submitted falsified claims to Medicare and Medicaid.  Hope, located in Kansas City, Kansas, and Sadasivan have agreed to pay $2.9 million to settle the government’s and whistleblowers’ allegations that they billed the government for larger doses of cancer drugs than were actually given to patients, and falsified the amount of time spent treating patients.

According to The Kansas City Star, three employees working in Hope’s office first uncovered the alleged fraud when they discovered medical records for a patient none of the employees recognized. In 2012, the employees, Krisha Turner, Crystal Dercher, and Amanda Reynolds, filed a qui tam lawsuit under the provisions of the False Claims Act against Hope and Sadasivan.

According to the whistleblowers’ lawsuit, they saw Sadasivan physically alter medical records with scissors and tape before he photocopied and submitted the altered records to Medicare and other government health care programs. Specifically, the whistleblowers alleged that they discovered 13 patients whose medical records had been altered to reflect that the patients received 1,000 milligrams of the intravenous chemotherapy drug Rituxan, when the patients had only received doses of 500 milligrams.  The government contends Sadasivan overbilled the government by $145,000 for each patient.

In addition, according to the Justice Department, Hope and Sadasivan also submitted claims to Medicare and Medicaid for the chemotherapy drugs Avastin and Taxotere that were not given to patients.  The government alleged that employees of Hope were instructed to bill for a predetermined amount of each drug at a specific dosage level, even if a lower dosage was given to the patient.

According to The Kansas City Star, Sadasivan also billed Medicare at a higher rate for more involved 25-minute patient visits when in reality, he typically spent about 10 minutes with each patient.  10-minute patient visits are billed at a lower rate.

The three whistleblowers will share in a percentage of the $2.9 million settlement proceeds as their reward under the qui tam provisions of the False Claims Act.

If you know of government fraud, click here to see if you may have a valid qui tam claim.

Published on:

The Justice Department announced that the United States has intervened in two whistleblowers’ qui tam lawsuit alleging that a durable medical equipment supplier, Orbit Medical Enterprises, Inc. (“Orbit Medical”) and its former vice president and sales manager, Jake Kilgore, violated the False Claims Act.

According to its website, Orbit Medical based in Salt Lake City, Utah, specializes in the distribution of durable medical equipment such as power wheelchairs, mobility aids like canes and walkers, in-home oxygen tanks, and other home medical equipment. In 2010, two former employees of Orbit Medical filed a qui tam lawsuit in the United States District Court for the District of Utah alleging that Orbit Medical and Kilgore increased the company’s power wheelchair sales by falsifying physician prescriptions and supporting documentation.

Medicare Part B covers durable medical equipment such as power-operated wheelchairs.  In order to be eligible for Medicare coverage, a physician must perform a face-to-face examination of the Medicare beneficiary and provide a written prescription for the power wheelchair.

According to the whistleblowers’ qui tam suit, Kilgore directed Orbit Medical’s sales representatives to knowingly alter physician prescriptions and supporting paperwork so that its power wheelchair claims would be covered and paid for by federal health care programs such as Medicare, the Federal Employees Health Benefits Plan, and the Defense Health Agency. The government contends that Orbit’s submissions to federal government programs were false claims in violation of the False Claims Act.  Specifically, the whistleblowers allege that Orbit staff created documents purporting to falsely certify that physicians examined patients in person, altered prescriptions to falsely show medical necessity for power wheelchairs, and forged physicians’ signatures on prescriptions.

In October 2013, a federal grand jury in Utah indicted Kilgore for health care and wire fraud related to his time at Orbit Medical.  According the Federal Bureau of Investigation, the scheme allegedly resulted in the payment of more than $15 million by Medicare to Orbit.

If the government is ultimately successful in its claims against Orbit Medical, or if the case is settled, the whistleblowers, Dustin Clyde and Tyler Kackson,  may be entitled to receive a percentage of any recovery under the qui tam provisions of the False Claims Act.

To read more about healthcare fraud, click here.

Published on:

A New York federal judge has ruled that the bankruptcy court erred when it allowed Hawker Beechcraft Corp. (“Hawker”) to discharge damages and penalties that could stem from a whistleblowers’ qui tam lawsuit alleging it violated the False Claims Act. 

In 2007, Donald Minge and David Kiehl, former employees of TECT Aerospace and TECT Wellington (collectively “TECT”), filed a whistleblower lawsuit under the qui tam provisions of the False Claims Act against TECT and Hawker. TECT is a government subcontractor that manufacturers airplane parts for airplane manufacturers such as Hawker.  According to the qui tam complaint, in January 1996, Hawker was awarded a contract to provide T-6A and King Air aircraft to the U.S. Air Force and the U.S. Navy’s Joint Primary Aircraft Training System program.

According to the complaint, Hawker and it subcontractors, such as TECT, were to perform the contact pursuant to certain drawings and specifications.  The whistleblowers’ complaint alleged that TECT and Hawker knowingly misrepresented to the federal government that the airplanes they provided to the government complied with contract specifications, when, in fact, they did not.

Specifically, the whistleblowers alleged that wing spars for the aircraft, the part that gives the wing of the aircraft its strength, were “hot formed,” a process that can cause wrinkles in the metal, and workers used hammers and crowbars to pound the wrinkles out, so the parts would pass inspection. According to the complaint, this process did not comply with manufacturing specifications.  The whistleblowers alleged that TECT and Hawker submitted false claims to the government when it certified that the planes complied with contract specifications when they did not.

In 2012, Hawker filed for Chapter 11 bankruptcy protection.  The bankruptcy court found that debt potentially due to the federal government as a result of the False Claims Act case was dischargeable.  Hawker emerged from bankruptcy protection in February 2013 and was sold to Textron, the parent company of Cessna.

The whistleblowers subsequently appealed.  U.S. District Judge P. Kevin Castel determined that the qui tam claims should not be discharged in bankruptcy because the whistleblowers plainly alleged fraud by the debtor in a contract with a government agency.  The proceeding was remanded back to the bankruptcy court for further proceedings.

If the whistleblowers are ultimately successful, they will receive a portion of any monies recovered by the government as their reward under the qui tam provisions of the False Claims Act.

If you know of government fraud, click here to see if you may have a whistleblower claim.

Published on:

Okland Construction headquartered in Utah has agreed to settle allegations made by a whistleblower in a qui tam lawsuit that it violated the False Claims Act in connection with the Small Business Administration’s (“SBA”) Section 8(a) Program for Small and Disadvantaged Businesses.

The SBA’s Section 8(a) Program is a business development program designed to assist companies that are majority owned and controlled by individuals that are socially and economically disadvantaged, as defined by the SBA. Section 8(a) approved companies are eligible to receive sole-source contracts (no-bid contracts) up to a maximum of $4 million for goods and services contracts and $6.5 million for manufacturing contracts.

Smaller 8(a) approved firms are permitted to form joint ventures with large business “mentors” to bid on and perform contracts. The Mentor-Protégé Program enhances the ability of disadvantaged firms to perform larger prime contracts and benefits new companies by demonstrating how experienced businesses operate.

According to Fox Business, Okland entered into a mentor-protégé arrangement with Saiz Construction in 2002, but did not form an SBA-approved joint venture.  Without an approved joint-venture arrangement, mentor and protégé entities cannot jointly bid and perform 8(a) contracts that are set aside solely for 8(a) approved businesses.

In 2011, Saiz Construction and its owner Abel Saiz filed a whistleblower lawsuit under the qui tam provisions of the False Claims Act alleging that Okland did not form a qualifying joint venture with Saiz Construction and was not eligible to jointly bid or perform the primary functions on multiple set aside contracts with Saiz Construction.  The government alleged that Okland prepared the bids for the contracts, provided the project managers, submitted invoices and preformed accounting functions on the contracts.  According to the whistleblower, Okland concealed its extensive involvement in performing the 8(a) contracts by misrepresenting that its employees were actually employees of Saiz Construction.  The government contended these misrepresentations were false claims submitted in violation of the federal False Claims Act.

Okland has agreed to pay $928,000 to resolve the allegations.  As their reward under the qui tam provisions of the False Claims Act, Saiz Construction and Abel Saiz will share in $148,480 of the settlement proceeds.

To read more about set aside contract fraud, click here.

Published on:

Tenet Healthcare Corporation and several of its affiliates have agreed to settle allegations by a whistleblower in a qui tam lawsuit that the entities violated the Stark Law, the Anti-kickback Statute, and the False Claims Act by engaging in improper financial relationships with certain physicians. According to the Settlement Agreement, the Defendants Tenet Healthcare Corporation, Tenet Healthsystem GB, Inc. Tenet South Fulton, Inc., Tenet Hialeah Healthsystem, Inc., Lifemark Hospitals of Florida, Inc., Tenet HealthSystem North Shore, Inc., Tenet Good Samaritan, Inc., Tenet St. Mary’s Inc., Brookwood Center Development Corporation, Eastern Professional Properties, Inc., AMISUB (SFH), Inc., Tenet Hospitals Limited, San Ramon Regional Medical Center, Inc. and Los Alamitos Medical Center (collectively “Tenet”) have agreed to pay $4,000,000 to settle the whistleblower’s allegations.  

The Settlement Agreement reflects that the whistleblower, Marc Osheroff, filed a lawsuit under the qui tam provisions of the federal False Claims Act, as well as the state False Claims Acts of Florida, California, Texas, and Tennessee in July 2009.  The United States, Florida, California, Texas, and Tennessee declined to intervene in the qui tam action.  The whistleblower chose to proceed with the case on his own.

The whistleblower alleged that Tenet engaged in improper financial relationships with numerous physicians in violation of the Stark Law and the Anti-kickback Statute.  Specifically, the whistleblower alleged that, between 2005 and 2013, Tenet entered into medical office building leases with the physicians at rates that were below fair market value.  Tenet then allegedly submitted false claims to Medicare for inpatient and outpatient services referred by those same physicians, in violation of the False Claims Act.

The Tenet hospitals identified in the Settlement Agreement include Atlanta Medical Center, South Fulton Medical Center, Hialeah Hospital, Palmetto General Hospital, North Shore Medical Center, Good Samaritan Medical Center, St. Mary’s Medical Center, Saint Francis Hospital, Doctors Hospital at White Rock Lake and San Ramon Regional Medical Center.

As his reward under the qui tam provisions of the False Claims Act the whistleblower will receive $1,000,000 of the settlement proceeds.  In addition, Tenet will pay an additional $1,000,000 for the whistleblower’s attorneys’ fees and costs.

To read more about healthcare fraud, click here.

Published on:

A federal judge in Gulfport, Mississippi has ordered State Farm Fire and Casualty Co. (“State Farm”) to pay treble damages, as well as the two whistleblowers’ costs and attorneys’ fees, in a qui tam lawsuit after it was found to have violated the False Claims Act.   In 2013, a federal jury found that State Farm knowingly submitted false claims to the National Flood Insurance Program (“NFIP”) after Hurricane Katrina in violation of the federal False Claims Act. 

Two independent insurance adjusters, sisters Cori and Kerri Rigsby, filed a lawsuit under the qui tam provisions of the False Claims Act alleging that State Farm caused falsified documents to be submitted to NFIP.  The false documents allegedly made it appear that property damage caused by wind damage (covered under the State Farm policy) was caused by flood waters (covered under NFIP.)  According to the Complaint, State Farm’s motivation in creating the false reports was to pay less for wind damage under the policy, and be able to charge the NFIP for more of the loss.

The complaint filed by the whistleblowers in 2006 asserted claims on behalf of a number of policyholders. Judge Halil Suleyman Ozerden, however, limited the whistleblowers’ case to the insurance claim that the pair had independent, personal knowledge about for homeowners Thomas and Pamela McIntosh of Biloxi, Mississippi.  The Judge dismissed all of the whistleblowers’ other claims, a decision they have since appealed to the 5th Circuit.  The government declined to intervene in the whistleblower’s lawsuit.

According to the Sun Herald, an engineer initially concluded that the damages to the McIntosh’s home were caused by wind, but was pressured by State Farm to re-examine the claim and blame the loss on Katrina’s storm surge.

The Judge ordered State Farm to pay treble damages of $750,000 to the government, a civil penalty of $8,250, the whistleblowers’ attorneys’ fees of $2,610,149, and costs of $303,078.  As their reward under the qui tam provisions of the False Claims Act, the whistleblowers will share in 30% of the $750,000.

To read more about how to determine whether you may have a viable case as a whistleblower under the qui tam provisions of the False Claims Act, click here.

Published on:

Pennsylvania-based Teva Pharmaceuticals USA Inc. (“Teva USA”) and its subsidiary IVAX LLC, based in Florida, have agreed to settle allegations by the government that they violated the Anti-Kickback Statute and the False Claims Act.

According to its website, Teva is the largest generic pharmaceutical company in the United States.  Teva claims that 1 out of every 6 generic prescriptions in the U.S. is filled with a Teva drug.   Teva USA and IVAX are both subsidiaries of Teva Pharmaceuticals Industries, Ltd. headquartered in Israel.

According to the Justice Department, IVAX, and later Teva USA when it acquired IVAX in 2006, paid improper kickbacks to an Illinois physician Michael J. Reinstein in order to induce him to prescribe the generic version of clozapine, a strong anti-psychotic medication.  In November 2012, the government filed a civil action against Reinstein alleging that he schemed with IVAX and Teva to prescribe the clozapine generic in return for an annual $50,000 consulting agreement and other remuneration in violation of the Anti-Kickback Statute.   The government alleged that the prescription-for-pay scheme occurred from 2003 to until at least 2009 and resulted in the submission of thousands of false claims to Medicare and the Illinois Medicaid program.

Clozapine is an anti-psychotic mediation of last-resort used to treat schizophrenia.  Due to its seriously potential side-effects (potentially deadly decrease in white blood cells, seizures, inflammation of the heart muscle, and increased mortality in elderly patients) clozapine is rarely used except in cases where patients do not respond to other treatment options.

According to the government, Reinstein was the largest prescriber of generic clozapine in the country.  In addition to the direct payments to Reinstein, IVAX allegedly provided all expenses paid trips to Florida for Reinstein, his family and employees.

Teva and IVAX have agreed to pay the State of Illinois Medicaid program $12.1 million and the United States $15.5 million to settle the government’s allegations against them.  The case against Reinstein remains pending in the United States District Court for the Northern District of Illinois.

To read more about pharmaceutical fraud cases, click here.