December 21, 2015

A Big Friday for Whistleblowers

By the C|C Whistleblower Lawyer Team

In what might be a first of its kind for whistleblowers and the government, this past Friday there were four significant government fraud recoveries all initiated by whistleblowers. In the midst of what is certainly an ever-expanding parade of whistleblower-prompted fraud settlements by the government, this may be the only time four major settlements were announced in a single day.  And it does not even count the $39 million settlement from two days earlier by Endo Pharmaceuticals subsidiary Qualitest for allegedly selling understrength chewable fluoride tablets. Three of the Friday settlements involved alleged violations of the False Claims Act from overcharging Medicare for certain healthcare products or services the whistleblowers and government claimed were unnecessary or misrepresented, or otherwise improper. The fourth matter, brought under California’s unique Insurance Code False Claims Act, also involved alleged healthcare fraud.

First, there is Florida-based provider of integrated cancer care services 21st Century Oncology, that agreed to pay $19.75 million to resolve allegations it violated the False Claims Act by billing federal health care programs for laboratory tests that were not medically necessary. The tests involved were fluorescence in situ hybridization (or “FISH”) tests which are laboratory tests performed on urine that can detect genetic abnormalities associated with bladder cancer.  The government alleged that 21st Century submitted claims for unnecessary FISH tests that were ordered by four of its urologists, Dr. Meir Daller, Dr. Steven Paletsky, Dr. David Spellberg and Dr. Robert Scappa.  The government further alleged the company encouraged these physicians to order unnecessary FISH tests by offering bonuses that were based in part on the number of tests referred to 21st Century’s laboratory.  The whistleblower who originated the action is a former 21st Century medical assistant and will receive a whistleblower award of $3.2 million. See DOJ Press Release.

Second, there is Maryland-based splint supplier Dynasplint Systems Inc., and its founder and president, George Hepburn. They agreed to pay roughly $10.3 million to resolve allegations they violated the False Claims Act by improperly billing Medicare for splints provided to patients in skilled nursing facilities.  For patients staying in skilled nursing facilities, Medicare pays a bundled payment to cover all of a patient’s needs at the facility, including such items as splints.  No separate Medicare reimbursement is permitted.  To circumvent these rules, Dynasplint allegedly mispresented that patients were in their homes or other places that were not skilled nursing facilities.  Former Dynasplint sales executive Meredith Deane is the whistleblower who originated the action.  She will receive a whistleblower award of roughly $2 million. See DOJ Press Release

Third, there are the thirty-two hospitals in 15 states that agreed to pay more than $28 million to settle charges they violated the False Claims Act by submitting false claims to Medicare for minimally-invasive kyphoplasty procedures used to treat certain spinal fractures often arising from osteoporosis. According to the government, the settling hospitals billed Medicare for these procedures on a more costly inpatient basis when they should have been billed on a less costly outpatient basis.  The government previously settled with Medtronic Spine LLC, the corporate successor to Kyphon Inc., for $75 million to settle allegations the company counseled hospital providers to perform kyphoplasty procedures as inpatient rather than outpatient procedures.  Former Kyphon reimbursement manager Craig Patrick and former Kyphon sales manager Charles Bates are the whistleblowers who originated all but 3 of these settlements.  They will receive a whistleblower award of roughly $4.75 million. See DOJ Press Release. In remarking on the settlement for Modern Healthcare, Constantine Cannon partner Tim McCormack, who represented the whistle-blowers when he worked at a different law firm, said : “The Department of Justice recognizes that to truly reign in corrupt behavior, you can’t just look at a company that’s pushing it or consultants that are pushing it. You have to look at . . . hospitals that are benefiting.”

Finally, there is pharmaceutical company Warner Chilcott that agreed to pay $23.2 million to resolve allegations of drug marketing fraud by the California Department of Insurance. According to the whistleblowers and the State, Warner Chilcott executives violated the California Insurance Code False Claims Act, which prohibits anyone from defrauding private insurance companies by using kickbacks or other inducements to procure or steer clients or patients.  The whistleblowers, who were former Warner Chilcott employees, claimed the company knowingly used illegal inducements to influence physician decisions, including paying kickbacks and falsifying prior authorization forms to increase the number of prescriptions written for several Warner Chilcott medications.  While many states provide for whistleblower rewards for exposing fraud against government insurance programs like Medicaid, California is one of the only states that provides for rewards for exposing insurance fraud against private insurers.  And clearly California is looking to prompt whistleblowers to take advantage of this unique program.  In its press release announcing the settlement, the State gave a special shout out not only to the whistleblowers who originated the action, but also to the whistleblower lawyers who represented them. See CA Ins. Dept. Press Release

So hats off to the whistleblowers who made Friday another record-setting event in the government’s ongoing fight against fraud.  And kudos to the government, particularly the California Insurance Department, for recognizing how important whistleblowers are to this never-ending battle.

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