False Claims Act Resource Center

Two Nursing Home Companies on the Hook for Unnecessary Rehab Services

September 15th, 2014 by Qui Tam

Life Care Services (Life Care) and CoreCare V (CoreCare) have agreed to pay the Department of Justice $3.75 million to settle allegations of false claims for billing for unreasonable or unnecessary rehabilitation therapy through RehabCare Group East (RehabCare), a rehabilitation therapy provider they hired to provide rehabilitation therapy services.  The Department of Justice alleged that Life Care and Core Care failed to prevent RehabCare from providing unreasonable or unnecessary therapy to patients in order to increase Medicare reimbursements to the facilities.  The government also alleged that the two companies failed to prevent RehabCare from engaging in multiple practices designed to inflate Medicare reimbursements. 

For more information, please click here.

Tennessee Federal Court Awards Damages against a Contractor even though the Government Received the Product for which it Paid

September 15th, 2014 by Qui Tam

The United States District Court for the Middle District of Tennessee has ordered a contractor who violated the False Claims Act to pay more than $700,000 in damages even through the contractor provided the government with the product it purchased.

In United States ex rel. Brian Wall v. Circle C Construction, LLC, No. 07-cv-91 (M.D. Tenn. August 22, 2014), Circle C Construction entered into a contract with the Army to construct buildings at a military base. The contract required Circle C to ensure that its subcontractors paid its employees in accordance with the prevailing minimum wage. Circle C subsequently submitted certifications to the government that it had complied with the minimum wage requirement. It was subsequently determined that the certifications were false because certain electricians were not paid what they were owed under the contract.

One of the issues which arose during the proceeding to assess damages was the amount of money which, given its fraud, Circle C would have been entitled to receive. The government argued that Circle C would have received nothing because, if it had known that Circle C would not comply with prevailing wage requirement for a portion of the project, it would not have paid Circle C for that portion. Circle C responded that it should not be required to pay any damages because the false certifications and the failure to pay the electricians the monies they were owed did not diminish the value of the buildings that the government purchased. The court agreed with the government, noting that there was ample evidence that the government would not have paid Circle C for the electrical work if it had known that Circle C was violating the minimum wage requirement. Therefore, Circle C was required to pay the government all of the monies it received in connection with the electrical work which was performed on the buildings. In accordance with the FCA, this amount was subsequently trebled.

False Claims Act Suit Accusing Merck of Falsifying Information regarding its Mumps Vaccine will Proceed

September 10th, 2014 by Qui Tam

The United States District Court for the Eastern District of Pennsylvania has denied Merck’s attempt to obtain dismissal of a lawsuit accusing the drug company of violating the False Claims Act by providing the government with false information regarding the effectiveness of its mumps vaccine.

In United States of America, ex. rel. Krahling v. Merck & Co, Inc., former employees claimed that Merck falsified and manipulated test data to make its mumps vaccine appear to be more effective than it actually was. According to the relators, the company failed to provide the government with accurate test results in order to mislead the government into purchasing the vaccine and that because the vaccine was not as effective as claimed, the government received something other than what it paid for. Merck argued that the relators were actually challenging the accuracy of the information contained on the product’s label and that this issue should be addressed by the Food and Drug Administration rather than through a suit under the FCA. The court disagreed, indicating that it would be inconsistent with the purpose of the FCA to hold that only the government can charge a defendant with committing fraud on the FDA or violating its regulations. The court then concluded that the relators had set forth sufficient facts in their complaint to support their contentions that Merck 1) submitted claims for payment to the government for the purchase of the vaccine after the allegedly fraudulent testing had taken place; 2) failed to provide the government with information regarding the effectiveness of the vaccine and this omission was material to the government continuing to purchase this product; 3) had a duty to provide the government with accurate information regarding the safety and effectiveness of the medication; 4) knew its claims were false and 5) deliberately concealed or provided incomplete information to the FDA. As a result, Merck’s motion to dismiss was denied and this issue will now proceed through the discovery process.

Georgia Court holds that Claiming Conduct was Lawful Results in Waiver of the Attorney-Client Privilege

September 2nd, 2014 by Qui Tam

According to a federal district court in Georgia, the attorney-client privilege is waived when one responds to an accusation of illegal activity with the contention that the conduct in question was legal.

In Barker v. Columbus Regional Healthcare System, Inc., No. 4:12-cv-108 (M.D. Ga. August 29, 2014), Richard Barker brought suit under the False Claims Act alleging that Columbus Regional Healthcare System, Inc. violated the federal Anti-Kickback Statute and the Stark Law and falsely stated that it had complied with these provisions when submitting claims for payment to various federal healthcare programs. Columbus Regional denied that it had knowingly violated the law. However, it also stated that it believed it had acted lawfully. Barker argued that this additional contention resulted in a waiver of the attorney-client privilege.

The district court agreed, stating that when one affirmatively asserts a belief that his or her conduct was legal, that person has inserted his or her knowledge of the law into the case. This results in a waiver of the attorney-client privilege because, in the court’s view, it would be unfair to allow defendants like Columbus Regional to present evidence showing that it intended to comply with the law while preventing those in Barker’s position from gaining access to information that might demonstrate that the defendant knew that it was violating the law. The court rejected Columbus Regional’s argument that, given the highly regulated nature of the healthcare industry, the dependence providers place on regular and candid communications with their attorneys and the benefits obtained from these open discussions, the court’s reasoning should not apply to suits under the False Claims Act alleging healthcare fraud. As a result, Columbus Regional was directed to produce all communications between it and its lawyers relating to whether the conduct which formed the basis of Barker’s suit would comply with the Anti-Kickback Statute, the Stark Law or associated regulations.

The analysis used by the Barker court was governed by the Eleventh Circuit’s twenty-year old decision in Cox v. Adm’r U.S. Steel & Carnegie, 17 F.3d 1386 (11th Cir. 1994). Columbus Regional may attempt to take an appeal from the district court’s decision. If this occurs, the Eleventh Circuit might revisit its prior reasoning. However, even if this happens, other courts may decide to adopt the analysis used in Barker. As a result, defendants who have been accused of illegal conduct should be cautious about how they respond to these charges. A mere denial of unlawful activity will likely not result in any adverse consequences. However, the assertion that the defendant believed that he or she acted in a lawful manner may result in the loss of the attorney-client privilege.

Bank of America Agrees to Pay over $9.6 Billion to Settle Claims relating to the Housing Crisis

August 26th, 2014 by Qui Tam

Bank of America will be paying the federal government, California, Delaware, Illinois, Maryland, New York and Kentucky a total of $9,650,000,000.00 to resolve claims arising out of the packaging, origination, marketing, sale, structuring, arrangement and issuance of residential mortgage-backed securities and collateralized debt obligations by Bank of America, Countrywide, Merrill Lynch and Franklin Financial Corporation. Included within this settlement are three suits brought by individuals under the False Claims Act. These lawsuits were based upon the alleged sale of defective residential mortgage loans to Fannie Mae and/or Freddie Mac. $1 billion of the settlement will be used to resolve these suits. The individuals who made these allegations have not been identified but will receive a portion of the money which is being paid. Over $5 billion will go to the United States Treasury as a civil monetary penalty. The remaining amount will go to the federal and state governments. Bank of America will also be providing $7,000,000,000.00 of consumer relief intended to address the harm that its alleged conduct caused.

The settlement addresses conduct that took place prior to January 1, 2009. This agreement does not prevent criminal charges from being brought in the future or lawsuits from being filed against any individual who is alleged to have engaged in wrongful conduct.

Community Health Systems Inc. to Pay $98.15 Million to Resolve False Claims Act Allegations

August 6th, 2014 by Qui Tam

The Justice Department announced today that Community Health Systems Inc. (CHS), the nation’s largest operator of acute care hospitals, has agreed to pay $98.15 million to resolve multiple lawsuits alleging that the company knowingly billed government health care programs for inpatient services that should have been billed as outpatient or observation services.  The settlement also resolves allegations that one of the company’s affiliated hospitals, Laredo Medical Center (LMC), improperly billed the Medicare program for certain inpatient procedures and for services rendered to patients referred in violation of the Physician Self-Referral Law, commonly known as the Stark Law.  CHS is based in Franklin, Tennessee, and has 206 affiliated hospitals in 29 states.

“Charging the government for higher cost inpatient services that patients do not need wastes the country’s health care resources,” said Assistant Attorney General Stuart F. Delery for the Justice Department’s Civil Division.  “In addition, providing physicians with financial incentives to refer patients compromises medical judgment and risks depriving patients of the most appropriate health care available.  This department will continue its work to stop this type of abuse of the nation’s health care resources and to ensure patients receive the most appropriate care.”

The United States alleged that from 2005 through 2010, CHS engaged in a deliberate corporate-driven scheme to increase inpatient admissions of Medicare, Medicaid and the Department of Defense’s (DOD) TRICARE program beneficiaries over the age of 65 who originally presented to the emergency departments at 119 CHS hospitals.  The government further alleged that the inpatient admission of these beneficiaries was not medically necessary, and that the care needed by, and provided to, these beneficiaries should have been provided in a less costly outpatient or observation setting.  CHS agreed to pay $89.15 million to resolve these allegations.  The settlement does not include hospitals that CHS acquired from Health Management Associates (HMA) in January 2014.

In addition, the government alleged that from 2005 through 2010, one of CHS’s affiliated hospitals, LMC in Laredo, Texas, presented false claims to the Medicare program for certain cardiac and hemodialysis procedures performed on a higher cost inpatient basis that should have been performed on a lower cost outpatient basis.  The government also alleged that from 2007 through 2012, LMC improperly billed Medicare for services referred to LMC by a physician who was offered a medical directorship at LMC, in violation of the Stark Law.  The Stark Law prohibits a hospital from submitting claims for patient referrals made by a physician with whom the hospital has an improper financial relationship, and is intended to ensure that a physician’s medical judgment is not compromised by improper financial incentives, and is instead based on the best interests of the patient.  CHS agreed to pay $9 million to resolve the allegations involving LMC.

“This is the largest False Claims Act settlement in this district and it reaffirms this office’s commitment to investigate and pursue health care fraud that compromises the integrity of our health care system,” said U.S. Attorney David Rivera for the Middle District of Tennessee.  “This office is committed to ensuring that all companies billing government healthcare programs are responsible corporate citizens and that hospital providers do not engage in schemes to increase medically unnecessary in-patient admissions of government healthcare program beneficiaries in order to increase profits.”

“This settlement demonstrates our commitment to working with our law enforcement partners and with the Department of Justice to protect the integrity of our nation’s health care system,” said U.S. Attorney Kenneth Magidson of the Southern District of Texas.  “Put simply, these types of fraudulent practices will not be tolerated and the investigation and resolution of such claims will continue to be a high priority of this office.”

“Health care providers should make treatment decisions based on patients’ medical needs, not profit margins,” said U.S. Attorney Anne M. Tompkins for the Western District of North Carolina.  “We will not allow this type of misconduct to compromise the integrity of our health care system.”

As part of today’s agreement, CHS entered into a Corporate Integrity Agreement with the U.S. Department of Health and Human Services – Office of Inspector General (HHS-OIG), requiring the company to engage in significant compliance efforts over the next five years.  Under the agreement, CHS is required to retain independent review organizations to review the accuracy of the company’s claims for inpatient services furnished to federal health care program beneficiaries.

“In an effort to ensure the company’s fraudulent past is not its future, CHS agreed to a rigorous multi-year Corporate Integrity Agreement requiring that the company commit to compliance with the law,” said Inspector General Daniel R. Levinson, of the U.S. Department of Health and Human Services.  “The dedicated work of OIG’s investigators, auditors, and attorneys, in concert with our law enforcement partners, has again resulted in the recovery of taxpayer dollars and better protection against fraud in the future.”

The settlement resolves lawsuits filed by several whistleblowers under the qui tam provisions of the False Claims Act, which permit private parties to file suit on behalf of the government and obtain a portion of the government’s recovery.  Those relators are Kathleen Bryant, former Director of Health Information Management at CHS’s Heritage Medical Center in Shelbyville, Tennessee; Rachel Bryant, former nurse at CHS’s Dyersburg Hospital in Dyersburg, Tennessee; Bryan Carnithan, former Emergency Medical Services Coordinator at CHS’ Heartland Hospital in Marion, Illinois; Amy Cook-Reska, former coder for CHS’ LMC in Laredo; Sheree Cook, former nurse at CHS’s Heritage Medical Center in Shelbyville; James Doghramji, former internal medicine and emergency room physician at CHS’s Chestnut Hill Hospital in Philadelphia; Thomas Mason, former emergency room physician at Lake Norman Regional Medical Center in Mooresville, North Carolina; Scott Plantz, former emergency room physician at CHS’s Longview Regional Medical Center in Longview, Texas; and Nancy Reuille, former nurse and Supervisor of Case Management at CHS’s Lutheran Hospital in Fort Wayne, Indiana.  The relators’ share of the settlement has not yet been determined.

This settlement illustrates the government’s emphasis on combating health care fraud and marks another achievement for the Health Care Fraud Prevention and Enforcement Action Team (HEAT) initiative, which was announced in May 2009 by Attorney General Eric Holder and the Secretary of Health and Human Services.  The partnership between the two departments has focused efforts to reduce and prevent Medicare and Medicaid financial fraud through enhanced cooperation.  One of the most powerful tools in this effort is the False Claims Act.  Since January 2009, the Justice Department has recovered a total of more than $20.2 billion through False Claims Act cases, with more than $14 billion of that amount recovered in cases involving fraud against federal health care programs.

This settlement was the result of a coordinated effort by the U.S. Attorney’s Offices for the Middle District of Tennessee, Southern District of Texas, Northern and Southern Districts of Illinois, Northern District of Indiana and Western District of North Carolina; the Civil Division’s Commercial Litigation Branch; HHS-OIG; DOD’s Defense Health Agency – Program Integrity Office and the FBI.

The lawsuits are captioned United States ex rel. Bryant v. Community Health Systems, Inc., et al., Case No. 10-2695 (S.D. Tex.);  United States ex rel. Carnithan v. Community Health Systems, Inc., et al., Case No. 11-cv-312 (S.D. Ill.);  United States ex rel. Cook-Reska v. Community Health Systems, Inc., et al., Case No. 4:09-cv01565 (S.D. Tex.);  United States ex rel. James Doghramji; Sheree Cook; and Rachel Bryant v. Community Health Systems Inc., et al., Case No. 3-11-cv-00442 (M.D. Tenn.);  United States ex rel. Mason v. Community Health Systems, Inc., et al., Case No. 3:12-cv-817 (W.D.N.C.);  United States ex rel. Plantz v. Community Health Systems, Inc., et al., Case No. 10C-0959 (N.D. Ill.);  United States ex rel. Reuille v. Community Health Systems Professional Services Corporation, et al., Case No. 1:09-cv-007RL (N.D. Ind.).  The claims resolved by this agreement are allegations only and there has been no determination of liability.

From the USDOJ: http://www.justice.gov/opa/pr/2014/August/14-civ-822.html


Agencies finalize Rule on Contractor Whistleblower Costs

July 30th, 2014 by Qui Tam

Effective July 25, 2014, The Department of Defense, General Services Administration, and NASA have implemented as a final with changes, an interim rule amending the Federal Acquisition Regulation (FAR) to adopt a section of the National Defense Authorization Act (NDAA) for the Fiscal Year (FY) 2013.  The rule addressed permissible legal costs incurred by a contractor or subcontractor related to a whistleblower proceeding brought by the submission of a complaint of reprisal by the contractor or subcontractor.

            The final rule will stop government contractors and subcontractors from charging the government legal fees related to whistleblower retaliation suits. These fees, incurred with any proceeding brought by a contractor or subcontractor employee submitting a whistleblower complaint of reprisal in accordance with 41 U.S.C.4712 or 10 U.S.C.2409, are treated the same as any pre-existing cost principle treats costs incurred with any proceeding brought by a Federal, State, local, or foreign government. This applies for violations of, or failure to comply with, any laws or regulations by the contractor, or costs incurred in connection with any proceeding brought by a third party in the name of the U.S. under the False Claims Act, 31 U.S.C.3730.  The final rule has been modified to include whistleblower complaints in the provisions at FAR 31.205-47(c).

Virginia Company will pay $343,000 to settle Medicare fraud claim

July 25th, 2014 by Qui Tam

On Tuesday, July 22, 2014, a federal judge in Pittsburgh approved a settlement in which a Virginia-based medical research firm will pay $343,000 to the U.S. to settle claims that it defrauded the government by improperly marketing genetic tests to patients at a Green County medical office.

The Justice Department asserts that American International Biotechnology (“AIB”) and a former contract sales agent, Jason Hoover, violated the federal False Claims Act by improperly obtaining referrals for genetic tests and billing to Medicare. Mr. Hoover was also accused of offering kickbacks of $50 per patient to a nurse at Lions Medical Center, a facility operated by Greentree Medical Center, located in Rices Landing, PA.

Greentree Medical Center initially raised the federal suit that was later joined by the Justice Department. In the complaint, filed in April 2013, Greentree and the U.S. asserted that Mr. Hoover devised the scheme starting in 2012. Mr. Hoover regularly visited Lions Medical to assess cardiac equipment, thereby obtaining patient insurance information. Mr. Hoover established exclusive contact with a registered nurse named Matt Burkett after meeting at a dinner to pitch AIB’s genetic tests. Under the guise that the genetic tests would be part of a free clinical trial, Mr. Hoover asked Mr. Burkett to simply swab each patient’s cheek and submit an order with the patient’s signature. According to the complaint, Mr. Hoover initially offered a $50 kickback for the nurse’s help. Mr. Burkett declined the bribe, but asked who specifically should be swabbed. Mr. Hoover instructed Mr. Burkett to swab “everyone who comes through the door.” Believing the testing was free and part of a research project, Mr. Burkett obtained patient consent and swabbed the patients’ cheeks. Mr. Hoover then completed the blank form and submitted the forms to the insurance companies, including Medicare. In some cases, Medicare paid as much as $4000 per patient for this unwanted testing. On numerous occasions Greentree asked AIB to stop billing, to no avail.

AIB asserts that they were unaware such activities occurred and put the blame solely on Mr. Hoover’s shoulders. “[AIB] had no knowledge of the alleged actions of the contract sales agent, and only learned of the action on receipt of the complaint; it did not approve or sanctions the actions of the sales agent.” AIB chose to settle the case rather that litigate to “avoid the delay; uncertainty, inconvenience and expense.”

Kickback Case Survives Motion to Dismiss

July 7th, 2014 by Qui Tam

A fraud suit alleging that five hospitals in the south bribed local clinics to refer undocumented immigrants to the hospitals to give birth has survived a motion to dismiss.


In the suit, captioned U.S. ex rel. Williams v. Health Management Associates (M.D. Ga.), a whistleblower alleges that the Georgia- and South Carolina-based hospitals paid local clinics fees, ostensibly for translation support, assistance in determining Medicaid eligibility and other services.  The clinics serve pregnant undocumented immigrants.  The women who use the clinics generally do not qualify for government healthcare programs.  However, Medicaid does reimburse hospitals for emergency services when undocumented immigrants give birth at their facilities.


The whistleblower in Williams alleged that the fees paid by the hospitals to the clinics were sham payments to induce the clinics to refer more patients to the hospitals. 


The defendants argued that the whistleblower’s complaint failed to state a claim for relief, but the court disagreed.  Among the reasons, the court noted that the whistleblower had alleged that the defendants executed certifications to the government falsely stating that the services for which they sought reimbursement were procured without payment of a kickback.  The certification further stated that the information provided to the government was “true, correct and complete.” 


Based on these alleged false certifications, the court concluded that the whistleblower had adequately alleged that the defendants had falsely billed the government for services provided to the undocumented pregnant women. 


The case now proceeds to discovery.




Nursing Home Operator Loses Challenge to ‘Worthless Services’ Conviction

July 7th, 2014 by Qui Tam

The Eleventh Circuit has turned back an appeal from a nursing-home operator convicted of healthcare fraud after he billed government programs while his residents went without food, diapers and medication.

The case, United States v. Houser, is notable for its treatment of the so-called “worthless services” theory, commonly used by whistleblowers alleging fraud against the government under the False Claims Act.

Houser, the nursing-home operator, ran three facilities in Rome, Georgia.  The facilities lacked working heating, air conditioning, diapers and food.  Staff had to borrow medications from some residents and give them to others because Houser failed to pay his pharmacy bill.

Houser was charged with and convicted of conspiracy to commit healthcare fraud based on his submission of claims for the virtually nonexistent services he provided to his residents.  On appeal, Houser argued that his conviction was impermissibly based on a “worthless services” theory, which, he contended, could be applied only in civil suits.  Under a worthless services theory, a contractor can be held liable for defrauding the government if, in performing a contract, it provides products or services that are so deficient as to be of no value to the government.

Houser contended that the worthless-services concept was too vague to be imported into criminal law.  The Eleventh Circuit rebuffed his argument, concluding that his conviction rested on his failure to provide certain services at all, not just the lack of value for services he did provide.

“We do not believe that Mr. Houser’s conviction requires us to draw the proverbial line in the sand for purposes of determining when clearly substandard services become ‘worthless,’” the court wrote.


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