Business Crimes Hotline

Mid-December Wave of Hospital FCA Settlements

On Dec. 18, 2015, the Department of Justice (DOJ) announced two separate settlements reached with hospitals that violated the False Claims Act (FCA). The first instance involved 21st Century Oncology, an integrated cancer care company headquartered in Fort Meyers, FL, which agreed to pay $19.75 million to resolve the allegations that four of its urologists routinely and continually ordered tests that were not medically necessary, but merely increased profits. The DOJ asserted that the hospital not only knew of the FCA violations, but encouraged them by offering doctors bonuses that were contingent upon the number of unnecessary tests referred to the 21st Century laboratories. The lawsuit was filed by a whistleblower ' a 21st Century medical assistant ' under the qui tam provisions of the FCA, whereby a private party is permitted to bring a suit on behalf of the government and share in any recovery. In this case, the medical assistant is expected to receive $3.2 million for her role.

The second settlement announced by the DOJ in December concerned 32 hospitals, spanning 15 states, all of which agreed to pay a collective $28 million related to improper Medicare billing for kyphoplasty procedures. These minimally invasive procedures ' typically done on an outpatient basis ' were billed at a far more costly inpatient rate, which significantly increased the hospitals' Medicare billings. Benjamin C. Mizer, Principal Deputy Assistant Attorney General and head of the DOJ's Civil Division, stated that such unlawful actions “wastes the country's vital health care dollars.” He further offered that “[t]he Department of Justice is committed to ensuring that Medicare funds are expended appropriately, based on the medical needs of patients rather than the desire to maximize hospital profits.” All but three of the hospitals settled after they were named as defendants in qui tam lawsuits. In addition to this settlement, in May 2008, the DOJ settled with Medtronic Spine LLC (the corporate successor to Kypohon, Inc.) for $75 million for the company's role in counseling hospital providers on sales and pricing strategies to increase profits by defrauding Medicare, in large part by performing kyphoplasty procedures on an inpatient, rather than outpatient, basis. These tactics ultimately allowed the company to price its products with an over 80% profit margin.

According to DOJ press releases, both settlements indicate “the government's emphasis on combating health care fraud and marks another achievement for the Health Care Fraud Prevention and Enforcement Team (HEAT) initiative.” HEAT, which was announced in May 2009, is a joint effort between the Attorney General and the Secretary of Health and Human Services designed to reduce and prevent Medicare and Medicaid fraud. One of the primary tools for doing so remains the FCA, which has allowed the DOJ to recover over $26.7 billion through false claims cases, approximately $16.8 billion of which is related to fraud against federal health care programs.

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