False Claims Act Resource Center

Archive for August, 2010

Hospital to the Stars to repay Government $5.25 million

Tuesday, August 31st, 2010

St. John’s Medical Center of Santa Monica, California has agreed to repay the federal government $5.25 million to settle claims that it overbilled Medicare.  The government alleged that St. John’s “turbocharged” its claims to Medicare by raising charges more quickly than its actual costs rose.  According to the government, the practice allowed St. John’s to obtain significantly greater outlier payments, which are payments designed to reimburse hospitals for extraordinarily costly care to patients, that it was not entitled to receive.  The payment covers claims made between 1996 and 2009. 

For more information see:  http://www.fiercehealthcare.com/story/medicare-fraud-saint-johns-health-center-pay-5-25m-overbilling/2010-08-26

Massachusetts settles with medical device company for “off label” marketing

Tuesday, August 31st, 2010

The Massachusetts Attorney General settled claims of off label marketing with medical device maker, Stryker Biotech.  The state claimed that Stryker violated state consumer protection laws by falsifying documents from Massachusetts hospitals’ Institutional Review Boards in order to obtain get approval for the use of its bone growth products.  Thus, Stryker was alleged to have marketed products that the government had yet to approve.  “Off label” marketing describes the illegal practice of marketing a product for a use that was not approved.  Such “off-label” marketing is misleading to health care providers about the appropriate use of approved products.  Stryker Biotech agreed to pay the state $1.35 million to settle the claims. 

For more information see: http://www.bizjournals.com/boston/stories/2010/08/23/daily27.html?ana=e_du_pub

Furuno USA settles qui tam claims over its navigation equipment

Tuesday, August 31st, 2010

Furuno USA, settled a qui tam lawsuit against it for supplying electronic equipment to the US Coast Guard and Navy that was manufactured in China in violation of the Federal Trade Agreements Act. The government claimed that Furuno continued to provide Chinese navigation equipment even after it was advised that the equipment could not be manufactured in China. In addition to the nearly $700,000 settlement, Furuno agreed to pay $95,000 in attorney fees to the relator. The relator’s share of the settlement is approximately $159, 864.

For more information se: http://wireupdate.com/wires/9085/us-reach-695000-settlement-with-furuno-usa-in-dispute-over-navigation-equipment/

Johnson & Johnson Unit Issued FDA Warning Letter

Friday, August 27th, 2010

On August 19, 2010, the U.S. Food and Drug Administration issued a warning letter to DePuy Orthopaedics, Inc., a business unit of Johnson & Johnson, stating that it is marketing two products without required clearance or approvals in violation of the Federal Food, Drug, and Cosmetic Act. The warning letter was specifically directed at two (2) DePuy Orthopaedics’ products, the TruMatch Personalized Solutions System and the Corail Hip System. The FDA claimed that the TruMatch system did not receive pre-market approval and was misbranded because of the lack of notification to the FDA. Likewise, the Corail Hip System received FDA pre-market notification but was marketed for uses beyond that specific notification. DePuy is required to respond within fifteen (15) days to the FDA’s letter and explain its plan to prevent these violations from occurring in the future and document any corrective action taken.

For more information see: http://www.fda.gov/ICECI/EnforcementActions/WarningLetters/ucm223613.htm

Medicare and Medicaid Contractor Settles Claim for $137.5 Million

Wednesday, August 25th, 2010

On August 20, 2010, it was announced that a Medicare and Medicaid managed-care company, WellCare Health Plans, Inc., reached a preliminary settlement to pay $137.5 million to settle a False Claims Act case which has been pending for the past four years.  The allegations arise from claims that WellCare was responsible for schemes to avoid repaying overpayments which it received from Florida and New York’s Medicaid programs, inflate reinsurance payments, and disenroll Medicaid beneficiaries whom the company considered unprofitable.  The False Claims Act complaint also alleged that the company stole $400 million to $600 million from Medicare and Medicaid programs in several states.

This lawsuit was initiated by a former WellCare senior analyst, Sean Hellein, who worked with the Justice Department and wore a hidden wire as part of the undercover investigation into the alleged criminal misconduct by WellCare.  The False Claims Act allows the individual who initiates the lawsuit to share in a portion of the recovery obtained in any lawsuit or settlement.

For more information see:  http://www.ama-assn.org/amednews/2010/08/16/bisg0820.htm

or http://online.wsj.com/article/BT-CO-20100810-713391.html

Energy Companies to Pay $6.9 Million to Resolve False Claims Act Allegations

Wednesday, August 25th, 2010

On August 20, 2010, the U.S. Department of Justice announced that two oil companies, Dominion Oklahoma Texas Exploration & Production, Inc. and Marathon Oil Company, will pay the United States $2,219,974.98 and $4,697,476.57, respectively, in an effort to resolve claims that the companies each violated the False Claims Act.  These allegations stem from complaints that both energy corporations knowingly underpaid royalties owed on natural gas leases from federal and Indian land.  More specifically, the complaint claimed that Dominion and Marathon improperly deducted from the royalties the values of the cost of boosting gas up to pipeline pressures and that Dominion improperly reported processed gas as unprocessed gas to reduce royalty payments.

The Dominion and Marathon settlements arise from the lawsuit filed by Harold Wright under the False Claims Act, which allows private citizens to file suits on behalf of the United States and share in any recovery.  Mr. Wright is now deceased and, as a result, his heirs will receive $1.822 million from these settlements.  Other settlements to date in this case include agreements with Burlington Resources for $105.3 million, Shell for $56 million, Chevron, Texaco, and Unocal for $45.5 million, and Mobil for $32.2 million.

For more information see:  http://www.justice.gov/opa/pr/2010/August/10-civ-942.html

New Amendments to New York False Claims Act

Friday, August 20th, 2010

On August 16, 2010, New York Governor David A. Paterson signed into law legislation strengthening New York’s False Claims Act.  The New York False Claims Act allows individuals to bring civil actions (“qui tam”) on behalf of the state to recover fraudulent payments and overpayments made to third-party suppliers of goods and services.  The state may choose to intervene in such an action or allow the action to proceed as a private suit.  The new legislation permits “qui tam” plaintiffs to bring actions for tax fraud, but only when the net income or sales of the defendant total $1 million or more and the damages pleaded in the action exceed $350,000.  Moreover, the legislation strengthens the protections for whistle-blowers who recover information concerning the misuse of government funds.  The value of these recoveries to New York State is estimated at over $20 million each year.

The President of the New York State Bar Association, Stephen P. Younger, commended Governor Paterson by stating, “This legislation strengthens the existing New York False Claims Act by enhancing the state’s ability to obtain financial recovery for losses suffered due to fraud perpetrated by contractors and others against the government.”  President Younger continued, “The state bar and its Commercial and Federal Litigation section have long been supporters of the New York False Claims Act.  I want to commend the Governor and the State Legislature for making these much-needed enhancements to further protect the interests of all New Yorkers.”

For more information see:  http://readme.readmedia.com/State-Bar-Commends-Governor-Paterson-for-Signing-Legislation-to-Strengthen-New-Yorks-False-Claims-Act/1695467

Nelnet to Pay $55 Million to Settle Suit for Student Loan Fraud

Wednesday, August 18th, 2010

Last Friday, Nelnet announced that it would pay $55 million to settle a False Claims Act suit alleging that the company defrauded the federal government by improperly benefiting from a student loan subsidy program.  The suit, brought by Jon Oberg, alleged that Nelnet exploited a loophole in federal law that allowed Nelnet to guarantee that it would receive 9.5% interest on student loans offered by the company and subsidized by the government.  The program was phased out in the 1990s; however, Nelnet and others managed to continue to receive the subsidy by packaging new loans with older loans that were grandfathered in.  As interest rates fell, the result of Nelnet’s strategy was to obligate the government to pay double the applicable interest rate for subsidized loans.

In all, Oberg alleged that Nelnet received $407 million in improper benefits from the subsidy loophole.  Because damages under the False Claims Act are trebled, Nelnet’s potential liability had it lost the trial that was originally scheduled to begin yesterday, at over $1.2 billion.  Rather than face that potentially ruinous result, Nelnet, which has maintained all along that it did not violate the law, chose to settle.  Due to a 2007 settlement agreement with the Department of Education, Nelnet is no longer employing the subsidy, foregoing nearly $900 million in profits.

For more information see:  http://journalstar.com/business/local/article_b8d770c0-a710-11df-b09e-001cc4c03286.html

Federal Court Allows Government’s Medicaid Fraud Suit to Move Forward

Wednesday, August 18th, 2010

Late last month, a federal court in Virginia ruled that the government may proceed with a False Claims Act suit against a juvenile psychiatric facility run by subsidiaries of Universal Health Services, Inc.  The suit alleges that the Marion Youth Center, a treatment center for adolescent boys, submitted false claims to Medicaid.  Specifically, the government claims that the defendants falsely represented that they provided inpatient psychiatric services to children covered by Medicaid.  In reality, the government claims that the facility failed to provide psychiatric treatment and instead operated like a detention facility, submitting bills to Medicaid for what amounted to little more than confinement.  The government also alleges that the facility deliberately provoked and taunted children on Medicaid to create a pretext justifying longer stays for the children, thus increasing the Marion Youth Center’s Medicaid billings and payments.

The defendants had moved to dismiss the suit, arguing that the government failed to allege a violation of the False Claims Act, or a similar Virginia anti-fraud law.  The court agreed as to parent company UHS, but held that the case may proceed against two UHS subsidiaries that operate the Marion Youth Center.  The government is now seeking to amend its complaint to add detailed allegations that UHS supervised and controlled operations, including Medicaid billing, at Marion.

For more information see:  http://online.wsj.com/article/BT-CO-20100809-711002.html?mg=com-wsj

U.S. to Pursue False Claims Act Kickback Suit Against Pacemaker Manufacturer

Wednesday, August 18th, 2010

Last week, the United States Department of Justice announced that it would intervene in a False Claims Act suit against St. Jude Medical, Inc., alleging that the manufacturer of pacemakers and other heart devices participated in an illegal kickback scheme resulting in the submission of false claims for reimbursement to the government.  The U.S. had previously declined to intervene in December 2009, but now, after reviewing additional documents and interviewing more witnesses, believes it has “good cause to intervene.”

The suit against St. Jude Medical was filed by Charles Donigan, who worked as a technical service specialist for the company from 2004 until 2007.  Donigan’s suit alleged that St. Jude Medical paid kickbacks to doctors, hospitals and other healthcare providers to induce them to prescribe its products.  The providers then submitted claims for reimbursement to Medicare and other federal programs in violation of the False Claims Act, according to Donigan.  The suit also alleges that St. Jude violated a separate anti-kickback law by providing “sham fees” for phony clinical studies, and by providing doctors and their spouses with various lobbyist-like perks, such as vacations, tickets to sporting events, and “educational” programs at luxury resorts.

The government’s decision to intervene comes on the heels of a June settlement with St. Jude in a separate False Claims Act suit, under which the company agreed to pay $3.7 million to settle allegations that it paid illegal kickbacks to Kentucky and Ohio hospitals. 

For more information see:  http://www.reuters.com/article/idUSTRE6755E820100806?type=domesticNews


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