Those were the biggest healthcare fraud and abuse recoveries reported by the U.S. Department of Justice in 2017.
For the fiscal year ending Sept. 30, Justice recovered more than $2.4 billion in total settlements and judgments from healthcare firms for alleged fraud affecting Medicare, Medicaid and TriCare.
This is the eighth consecutive year that the department’s civil health care fraud settlements and judgments have exceeded $2 billion, with a healthy chunk of that coming from an electronic health record system vendor.
The vendor, eClinicalWorks, along with some employees paid $155 million to resolve allegations that they falsely obtained certification for the company’s EHR software by concealing from its certifying entity that its software did not comply with the requirements for certification.
As a result of the deficiencies in its software, the company allegedly caused physicians who used its software to submit false claims for federal incentive payments. The government also alleged that eClinicalWorks paid unlawful kickbacks to certain customers in exchange for promoting its product.
The biggest healthcare recoveries came from the pharmaceutical industry. Drug manufacturer Mylan paid $465 million to resolve allegations that it underpaid rebates owed under the Medicaid Drug Rebate Program by erroneously classifying its patented drug EpiPen as a generic to avoid paying higher rebates. Mylan paid $231.7 million to the federal government and $213.9 million to state Medicaid programs.
Shire Pharmaceuticals paid $350 million to resolve allegations that it and the company it acquired in 2011, Advanced BioHealing, induced clinics and physicians to use or overuse its bioengineered human skin substitute by offering lavish dinners, drinks, entertainment and travel; medical equipment and supplies; unwarranted payments for purported speaking engagements and bogus case studies; and cash, credits and rebates.
In addition to the alleged kickbacks, the settlement also resolved allegations brought by whistleblowers that the two companies unlawfully marketed the skin substitute for uses not approved by the Food and Drug Administration, made false statements to inflate the price of the product, and caused improper coding, verification, or certification of claims for the product and related services. The settlement included $343.9 million in federal recoveries, and another $6.1 million in recoveries to state Medicaid programs.
Life Care Centers of America and its owner agreed to pay $145 million to settle allegations that it caused skilled nursing facilities to submit false claims for rehabilitation therapy services that were not reasonable, necessary, or skilled. This was the largest civil settlement with a skilled nursing facility chain in the history of the False Claims Act.
The government alleged that Life Care instituted corporate-wide policies and practices designed to place beneficiaries in the highest level of Medicare reimbursement irrespective of the clinical needs of the patients, resulting in the provision of unreasonable and unnecessary therapy. Life Care also allegedly sought to keep patients longer than necessary in order to continue billing for rehabilitation therapy.
In some cases, individual owners and executives of healthcare firms agreed to be held jointly and severally liable for settlement payments.
Girish Navani, Rajesh Dharampuriya, and Mahesh Navani, three founders of eClinicalWorks, agreed to joint and several liability for their company’s $155 million settlement.
Forrest Preston, the owner of Life Care Centers of America, agreed to joint and several liability for his company’s $145 million settlement.
Nicholas and Gregory Melehov, the owners of Medstar Ambulance Inc., agreed to be jointly and severally liable for a $12.7 million settlement with their company.
The Justice Department also obtained more than $60 million in settlements and judgments with individuals under the False Claims Act that did not involve joint and several liability with the corporate entity.
After 21st Century Oncology paid $19.8 million to resolve allegations that it billed federal healthcare programs for medically unnecessary laboratory tests, Justice secured separate settlements with various individual urologists, including a $3.8 million settlement with Dr. Meir Daller, resolving allegations that the physicians referred unnecessary tests to a laboratory owned and operated by 21st Century Oncology.
Dr. Robert Windsor, a pain management physician, agreed to a $20 million consent judgment to resolve allegations that he billed a federal healthcare program for surgical monitoring services that he did not perform and for medically unnecessary diagnostic tests.
Dr. Gary Marder, owner and operator of the Allergy, Dermatology & Skin Cancer Centers in Port St. Lucie and Okeechobee, Fla., agreed to an $18 million consent judgment in connection with the performance of radiation therapy services. Joseph Bogdan, the owner of AMI Monitoring, agreed to pay $1 million to resolve liability for his alleged involvement in billing Medicare for higher and more expensive levels of cardiac monitoring services than requested by the ordering physicians. Siddhartha Pagidipati, the former CEO of Freedom Health, agreed to pay $750,000 to resolve liability for his alleged involvement in an illegal scheme to maximize payment from the Medicare Advantage program.
After the report was released, the Justice Department announced another sizable settlement. Kmart Corp. agreed to pay $32.3 million to settle allegations its pharmacies caused federal health programs to overpay for prescription drugs by not telling the government about discounted prices.
The Department of Justice announced the settlement agreement Friday. A whistleblower lawsuit alleged Kmart offered discounted prices to customers who paid in cash through club programs but didn’t report those discounts to federal health programs such as Medicare Part D and Medicaid.
The Department of Justice says the agreement is a part of a $59 million settlement that includes a resolution of state Medicaid and insurance claims against Kmart. The whistleblower will receive $9.3 million.
“Large healthcare recoveries benefit vulnerable Medicare and Medicaid beneficiaries as well as the taxpayers who support these programs,” said Daniel Levinson, HHS’ Inspector General, in a written statement.