Whistleblower Qui Tam Lawyer Blog
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According to the Department of Justice, a for-profit education company based in Baltimore, Maryland, Education Affiliates (“EA”), has agreed to settle five qui tam cases alleging the company submitted fraudulent claims to the U.S. Department of Education in violation of the False Claims Act.  According to EA’s website, it offers post-secondary education programs at 51 campuses throughout the United States.  EA operates under several trade names, including All State Career, Fortis College, Tri-State Business Institute, Technical Career Institute, Fortis Institute, St. Paul’s School of Nursing, Capps College, Denver School of Nursing, and Driveco CDL Learning Center.  The campuses are located in Pennsylvania, Alabama, Florida, Maryland, Texas, and Ohio.

According to the government, five whistleblowers initiated lawsuits against EA under the qui tam provisions of the False Claims Act between 2010 and 2014 in United States District Courts in Maryland, Texas, Alabama and Ohio. The whistleblowers alleged that the for-profit operator of trade and professional schools altered admissions tests scores to admit unqualified students, created fraudulent high school diplomas or referred prospective students to “diploma mills” in order to procure invalid online high school diplomas, and falsified federal student loan applications.  According to the whistleblowers, each submission of a claim for federal student aid for a student that was admitted through improper and/or fraudulent means was a violation of the federal False Claims Act.

In addition, the whistleblowers alleged that employees who were involved with enrolling students for campuses in Birmingham, Houston, and Cincinnati received improper incentive compensation and made material misrepresentations to prospective students about graduation and job placement rates.

EA has agreed to pay $13 million to the federal government to settle the allegations that it violated the False Claims Act.  Of that amount, $1.9 million relates to federal financial aid awarded to students at the Fortis-Miami campus based on invalid high school diplomas issued by a diploma mill.  The whistleblowers will share in $1.8 million of the settlement proceeds as their reward under the qui tam provisions of the False Claims Act.

 

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On June 23, 2015, the United States Court of Appeals for the District of Columbia Circuit issued a helpful decision for qui tam whistleblowers in U.S. ex rel Heath v. AT&T, Inc., Case No. 14– 7094, 2015 WL 3852180 (D.C. Cir. 2015).

The issue concerns the level of factual detail that a whistleblower must allege in his or her complaint in order to survive a motion to dismiss under Federal Rule of Civil Procedure 9(b).  Under that rule, plaintiffs who allege fraud must do so “with particularity.”  In the context of qui tam whistleblower claims, many courts have applied an overly strict construction of Rule 9(b) by requiring that whistleblowers know the precise details of the exact “false claims” that were submitted to and paid by the government.

This level of detail can be impossible for many whistleblowers to allege.  As an example, an employee of a fraudulent healthcare facility may know precise details as to when and how his or her employer is paying kickbacks to physicians in order to generate referrals of patients.   These types of kickbacks make all claims submitted to Medicare “false” within the meaning of the False Claims Act.   The whistleblower may be able to allege the details of the kickback scheme with great specificity.   However, because he or she does not work in the billing department, he or she probably has little, if any, of the precise details regarding the exact “claims” submitted to Medicare or Medicaid.   Under those circumstances, many courts have taken the view that the whistleblower’s claim lacks “particularity.”

In the Heath case, the D.C. Circuit joined the growing trend of cases moving away from this overly strict application of Rule 9(b).   Heath involved a conspiracy by AT&T to cause inflated bills to be submitted to the federal government.  The whistleblower had a great deal of knowledge about the conspiracy, but not the dates and amounts of the bills themselves.   AT&T argued the lawsuit should be dismissed because the whistleblower could not point to any specific bills that had been paid by the government.

In a helpful decision, the D.C. Circuit rejected this argument:

“We accordingly join our sister circuits in holding that the precise details of individual claims are not, as a categorical rule, an indispensable requirement of a viable False Claims Act complaint, especially not when the relator alleges that the defendant knowingly caused a third party to submit a false claim as part of a federal regulatory program.”   See U.S. ex rel Heath v. AT&T, Inc., 2015 WL 3852180, * 12 (D.C. Cir. 2015).

This case should prove helpful to whistleblowers who have valid information about schemes to defraud the government but do not have the dates, times, and amount of the actual bills sent to the government.

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According to the Justice Department, the Medicare Fraud Strike Force conducted a nationwide operation in 17 cities this week.  The sweep resulted in criminal charges against 243 individuals for their alleged participation in healthcare fraud schemes involving over $700 million in false billings to government healthcare programs.  Forty-six (46) of the individuals were doctors, nurses, or other licensed medical professionals. According to the U.S. Attorney for the Southern District of Florida, seventy-three (73) of the individuals are residents of South Florida.

According to the U.S. Attorney General, those charged are alleged to have participated in various criminal activities including violation of the anti-kickback statute, money laundering, identity theft, and conspiracy to commit healthcare fraud.  The charges relate to claims submitted to government healthcare programs, such as Medicaid and Medicare for treatments that were either medically unnecessary or never provided.  In some cases, patient recruiters or others were allegedly paid illegal kickbacks in return for providing beneficiary information to medical providers so the providers could submit fraudulent bills to government healthcare programs.

U.S. Attorney Wifredo Ferrer, announced that the majority of the 73 Florida residents charged live in Miami-Dade County.  The Florida residents charged include:

  • Owners and operators of several pharmacies who are charged with paying Medicare beneficiaries for their personal identification numbers which in turn were used to submit false and fraudulent Medicare Part D claims for prescriptions.
  • Owners and operators of a pharmacy who are charged with submitting false claims for drugs that were not medically necessary and were not provided. In addition, they allegedly submitted false drug wholesaler invoices to conceal that they had not purchased sufficient quantities of prescriptions drugs to have filled all of the prescriptions they had submitted to the government for payment.
  • A doctor who is charged with submitting false claims to Medicare that home health care services were medically necessary and provided when, in fact, the services were neither necessary, nor provided.
  • An owner and a director of nursing for a home health agency who are charged with creating false and fraudulent patient assessment forms stating that Medicare and Medicaid beneficiaries were qualified to receive home health care when they were not.
  • Individuals who allegedly submitted fraudulent claims for physical therapy services that were not provided.
  • An individual who is charged with submitting claims on behalf of his home health agency employer, but then having the payments sent to his home, which he then deposited in bank accounts that he alone controlled.
  • An individual who is charged with laundering money that was used to conceal the payment of illegal kickbacks.
  • Owners and operators of a behavioral health facility who are charged with paying patient recruiters and assisted living facility owners in exchange for patient referrals.

The Florida residents that have been charged were allegedly involved in defrauding Medicare and Medicaid out of approximately $263 million.

 

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According to the Department of Justice, Children’s Hospital, Children’s National Medical Center, Inc. and its affiliated entities (collectively “CNMC”) have agreed to settle a pending qui tam lawsuit in which the federal government intervened.  The entities will pay $12.9 million to settle allegations that they violated the False Claims Act.

According to its website, CNMC is the sole exclusive provider of pediatric care in the Washington D.C. metropolitan area, and the only freestanding children’s hospital between Philadelphia, Pittsburgh, Norfolk, and Atlanta.  Reportedly, CNMC is the largest non-government provider of primary care in the District of Columbia, seeing over 35,000 children annually in all of its 30 locations combined. According to CNMC, it performed more than 17,860 surgical procedures, 123,332 radiological examinations, and more than 1 million laboratory tests in calendar year 2013.

In 2014, a former CNMC employee, James Roark Sr., filed a whistleblower complaint under the qui tam provisions of the False Claims Act against CNMC.  In his complaint, the whistleblower alleged that CNMC submitted false claims to the Medicaid programs of the Commonwealth of Virginia and the District of Columbia, as well as to the Department of Health and Human Services (“DHHS”).  Medicaid is a joint federal and state program that provides free or low-cost health coverage to people with limited income and resources.

Specifically, the whistleblower, and later the federal government, alleged that CNMC knowingly misstated information on cost reports and applications which was then used by DHHS and Medicaid to calculate reimbursement rates.  In addition, the government alleged that CNMC intentionally misrepresented its available bed count on its application under the Children’s Hospitals Graduate Medical Education Payment Program (“CHGME”).  The CHGME is run by the DHHS’ Health Resources and Services Administration and provides federal funds to freestanding children’s hospitals to help them maintain graduate medical education programs.   As a result of the false claims allegedly submitted by CNMC, CNMC received over-payments from the Virginia and District of Columbia Medicaid programs.

CNMC has agreed to pay $12.9 million to settle the allegations that it violated the False Claims Act. The whistleblower will receive approximately $1.89 million as his reward under the qui tam provisions of the False Claims Act.

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According to the Justice Department, Orbit Medical, Inc. and Rehab Medical, Inc. have agreed to settle allegations that Orbit violated the False Claims Act.  Orbit is a durable medical equipment supplier based in Salt Lake City, Utah. Rehab, a partial successor of Orbit, is headquartered in Indianapolis, Indiana.

According to the government, in 2010, two former employees of Orbit, Dustin Clyde and Tyler Jackson, filed a whistleblower complaint under the qui tam provisions of the False Claims Act.  The whistleblowers alleged that Orbit submitted false claims to government healthcare programs for power wheelchairs and accessories.

Government healthcare programs such as Medicare, the Federal Employees Health Benefits plan, and the Defense Health Agency will only pay for power wheelchairs for beneficiaries under limited circumstances, i.e. the individual cannot perform activities of daily living in their home wither other less costly mobile assistance equipment like a cane, walker or power scooter.  In addition, before the cost of a power wheelchair will be reimbursed by the government, the patient must be examined by a physician, receive a written prescription dated within 45 days of the examination, and provide documentation that evidences the patient’s medical need for the power wheelchair.  The government also requires very specific information on the prescription including the diagnoses that wheelchair is expected to accommodate, how long the patient will need the power wheelchair, and the physician’s signature.

In their qui tam complaint, the whistleblowers alleged that Orbit’s employees knowingly altered the paperwork for government healthcare beneficiaries in order to have the power wheelchair claims paid for by the government.  It was specifically alleged that Orbit employees were instructed to: 1) falsify prescriptions and supporting documentation to establish medical necessity, 2) forge physician’s signatures, and 3) alter documents to make it appear as though they came from a physician’s office.

The Justice Department says that Orbit and Rehab have agreed to settle the allegations for $7.5 million.  The whistleblowers will share in $1.5 million of the settlement proceeds as their reward under the qui tam provisions of the False Claims Act.  The government’s claims against Orbit’s former vice president and sales manager Jake Kilgore remain pending.  Kilgore was previously indicted by a federal grand jury in Utah for health care and wire fraud in 2013.

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According to the Department of Justice, United Parcel Service, Inc. (“UPS”) has agreed to settle allegations that it submitted false claims to the United States in connection with contracts to deliver packages for next day delivery.  The Justice Department alleged that UPS knowingly concealed that it had not complied with its delivery guarantees in violation of the False Claims Act.

In 2011, a former UPS employee, Robert Fulk, filed a whistleblower lawsuit under the qui tam provisions of the False Claims Act in the U.S. District Court for the Eastern District of Virginia.  The allegations in the whistleblower’s complaint related to hundreds of contracts UPS had with the U.S. General Services Administration and the U.S. Transportation Command to provide delivery services to federal agencies.  The contracts required guaranteed delivery by UPS before specific times the next day.  The whistleblower alleged that when UPS didn’t meet the delivery deadline by the specified time, it falsified delivery documentation to make it appear as though it had met the delivery deadline.  Under the contracts, federal agencies would have been eligible to request a refund for the late delivery of packages. By falsifying the documents, the government contended that UPS deprived the federal government of those refunds.

In the complaint, the whistleblower specifically alleged that, from 2004 to 2014, UPS knowingly recorded inaccurate delivery times on packages to make it appear that the packages were delivered on time when in fact, they were not.  In addition, the whistleblower alleged that UPS applied exception codes to excuse late deliveries such as “security delay,” “customer not in,” or “business closed” when UPS knew those exception codes did not apply, and provided incorrect performance data under the federal contracts for delivery services.

UPS has agreed to pay $25 million to the federal government, and $740,000 to the state of New Jersey to settle the claims.  According to the Justice Department, the case remains pending as to the claims asserted by California, Delaware, Florida, Hawaii, Illinois, Indiana, Massachusetts, Minnesota, Nevada, New Hampshire, New Mexico, New York, North Carolina, Rhode Island, Tennessee, Chicago, New York City, and Washington, D.C.

The whistleblower, Robert Fulk, will receive approximately $3.75 million of the settlement proceeds as his reward under the qui tam provisions of the False Claims Act.

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The U.S. Department of Justice announced that Westchester County Health Care Corporation d/b/a Westchester Medical Center (“WMC”) has agreed to settle allegations first raised by a whistleblower that it violated the Anti-Kickback Statute, the Stark Law, and the False Claims Act.  According to the U.S. Attorney for New York, WMC will pay $18.8 million in settlement of the claims.

According to the government, WMC, the clinical affiliate of New York Medical College, operates a tertiary and quaternary care hospital in Valhalla, New York.  Tertiary care is the most specialized form of healthcare involving sophisticated technology and medical specialists.  Tertiary care may include complex surgery, such as neurosurgery, cardiac surgery, plastic surgery, and organ transplantation, as well as neonatology, psychiatry, cancer care, and intensive care. Quaternary care may involve experimental treatments and procedures.

In 2006, whistleblower Dan Bisk, a resident of Westchester County, New York and former compliance officer for WMC, filed a complaint under the qui tam provisions of the False Claims Act.  Mr. Bisk passed away in 2009 while the case was pending.  His wife pursued the case on his behalf after his death.   According to the complaint filed by the whistleblower and the complaint-in-intervention filed by the government, WMC violated the Anti-Kickback Statute and the Stark Law in connection with its relationship with Cardiology Consultants of Westchester, P.A.  (“CCW”).

According to the complaint-in-intervention, from approximately January 2001 to December 2007, WMC advanced monies to CCW to open a practice for the express purpose of generating referrals to the hospital. The government alleged that when CCW began “repaying” WMC, WMC entered into retroactive, no-work consulting agreements pursuant to which it paid CCW tens of thousands of dollars and it allowed CCW to use WMC’s fellows in CCW’s private office free-of-charge.  According to the Justice Department, this arrangement was violative of the Anti-Kickback Statute and the Stark Law.  The government also alleges that claims submitted to Medicare for services rendered to patients referred to WMC by CCW violated the False Claims Act.

According to the Justice Department, WMC will pay $18.8 million to settle the allegations. The estate of the whistleblower will receive approximately $3.71 million of the settlement proceeds as a reward under the qui tam provisions of the False Claims Act.

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The Department of Justice announced that PharMerica Corporation, headquartered in Louisville, Kentucky, will pay $31.5 million to settle allegations in a qui tam suit that PharMerica violated the Controlled Substances Act and the False Claims Act.

PharMerica is a long-term care pharmacy that dispenses prescription medications to residents of nursing homes and skilled nursing facilities. According to its website, PharMerica serves over 300,000 patients in 45 states and fills approximately 40 million prescriptions per year.  It employs roughly 6,000 employees across the country.

In 2009, a former PharMerica employee, Jennifer Bluth f/k/a Jennifer Denk, filed a whistleblower complaint under the qui tam provisions of the False Claims Act alleging that PharMerica violated the Controlled Substances Act by dispensing Schedule II controlled drugs without a valid prescription.  The whistleblower further alleged that all submissions of claims to Medicare for payment of these improperly dispensed mediations were made in violation of the False Claims Act. The whistleblower was previously employed as the Pharmacy Operations Manager in PharMerica’s facility in Pewaukee, Wisconsin.

According to the Drug Enforcement Agency, Schedule II controlled drugs are dangerous drugs with a high potential for abuse and the potential to lead to severe psychological or physical dependence by users.  Some examples of Schedule II drugs are Vicodin, cocaine, fentanyl, methamphetamine, morphine, methadone, Demerol, oxycodone, Adderall, and Ritalin.

The government intervened in the whistleblower’s complaint and filed its own complaint in 2013.  In its complaint, the government alleged that between January 2007 and December 2009, PharMerica derived approximately 45% of its revenue from prescription medications billed to Medicare Part D, many of which were for Schedule II drugs. According to the government’s complaint, during this period, PharMerica dispensed prescriptions for controlled substances based on requests from the long-term care facility, rather than upon a valid prescription from a medical practitioner as required by the Controlled Substances Act. The complaint alleges that PharMerica filled prescriptions based solely on order forms it received from staff at long-term care facilities; based on a resident’s previous hospital discharge order provided by the long-term care facility staff; or after receiving replenishment stickers that PharMerica had previously provided to the long-term care facility.

According to the Justice Department, PharMerica will pay $8 million to resolve the allegations that it violated the Controlled Substances Act and $23.5 million to resolve the False Claims Act allegations.  The whistleblower will receive approximately $4.3 million of the proceeds as her reward under the qui tam provisions of the False Claims Act.

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The Department of Justice announced that five ambulance companies in California have agreed to collectively pay $11.5 million to settle allegations in a whistleblower’s qui tam complaint that they violated the False Claims Act and the Anti-Kickback Statute.  The Anti-Kickback Statute prohibits the exchange of anything of value in an effort to induce the referral of federal health care program business.

According to the government, the California ambulance companies that were named in the whistleblower’s complaint are: Pacific Ambulance, Inc. and Bowers Companies, Inc. (collectively “Pacific-Bowers”); Care Ambulance Service, Inc.; Balboa Ambulance Services, Inc.; and E.R. Ambulance, Inc.

According to the Pacific-Bowers website, the companies, based in Orange County, are California’s largest independent regional provider of non-emergency ambulance services.  The pair was acquired by Rural/Metro Corporation in December 2011 (after the alleged wrongdoing took place).

According to their respective websites, Care Ambulance Service, Inc. provides services to residents of Orange, Los Angeles and Riverside Counties; Balboa Ambulance Services has been operating in San Diego County since 1989, and E.R. Ambulance is also based in San Diego.

According to the Justice Department, in 2009, then-CEO of Care Medical Transportation, Inc., Kelvin Carlisle, filed a whistleblower complaint under the qui tam provisions of the False Claims Act.  In the complaint, the whistleblower alleged that the defendant companies were engaged in a so-called “swapping” kickback scheme.  According to the government, the scheme involved providing deeply discounted (50-100% off) the cost of non-emergency ambulance services provided under Medicare Part A to hospital and skilled nursing home patients.  In return, the hospitals and skilled nursing homes agreed to use the defendant ambulance companies for rides covered under Medicare Part B.  The government claims this arrangement violated the Anti-Kickback Statute and the False Claims Act.

The whistleblower, Kelvin Carlisle, will receive approximately $1.7 million of the settlement proceeds as his reward under the qui tam provisions of the False Claims Act.

If you know of fraud on the government and want more information on False Claims Act and whistleblower cases, click here to read our Frequently Asked Questions and view the video Whistleblower Awards Work for the Benefit of All by the Taxpayers Against Fraud.

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According to the Justice Department, specialty pharmacy, Accredo Health Group, has agreed to pay $60 million to settle allegations that it violated the False Claims Act in connection with a kickback scheme involving the prescription drug Exjade.  The government announced that it has intervened in the portion of the case against Novartis Pharmaceuticals Corp. involving the same alleged conduct.

Exjade is a prescription medication used to treat hemosiderosis – a chronic condition caused when a person has too much iron in their blood.  The body stores excess iron in the heart and liver, which can cause damage to those organs.  According to the Exjade website, it is used to help reduce iron levels in the blood. The main cause of chronic iron overload is receiving multiple blood transfusions. Sickle cell disease is one condition that requires frequent transfusions.

In 2011, a former Novartis area sales manager, David Kester of Raleigh, North Carolina, filed a qui tam action alleging that pharmaceutical giant Novartis engaged in an illegal kickback scheme involving Exjade and other medications.  According to the whistleblower’s Complaint, between 2007 and 2012, Novartis provided kickbacks to specialty pharmacies, including Accredo, in the form of patient referrals and cash remuneration styled as “performance rebates” or “performance discounts” in return for recommending that pharmacy customers refill Exjade.  In addition, the government claimed that Accredo’s employees knowingly understated the serious and potentially life-threatening side effects of Exjade when promoting the drug to patients.  The government alleges that each submission to Medicaid, Medicare, or other government health care program that resulted from the kickback scheme was a violation of the False Claims Act.

The Justice Department announced that Accredo has agreed to settle the False Claims Act allegations.  It will pay $45 million to the federal government for the false claims submitted to Medicare and $15 million to the states for the false claims submitted to the states’ various Medicaid programs.  The government intervened as to the allegations against Novartis.  The trial of those claims is set for November.

The whistleblower will be entitled to a portion of the monies received by the government as his reward under the qui tam provisions of the False Claims Act.