Catch of the Week – Inform Diagnostics
Texas-based pathology laboratory company Inform Diagnostics, formerly known as Miraca Life Sciences Inc., agreed on January 30th to a $63.5 million settlement to resolve allegations it violated the False Claims Act (“FCA”), the Anti-Kickback Statute (“AKS”), and the Stark Law by providing subsidies to referring physicians for electronic health record (“EHR”) technology as well as free or discounted consulting services. The settlement amount will be paid by the former parent company of Inform, Japan-based Miraca Holdings Inc.
The settlement resolves three separate cases brought by different whistleblowers. All three cases were brought in the Middle District of Tennessee. The first was brought to light by former Miraca Life Science Senior Vice President of Commercial Operations Paul Dorsa in September 2013; the second was brought by a company called LPF LLC in June 2016; and the third was brought in December 2016 by former Miraca Life Sciences dermatopathologists Michael Heaphy and Brian Hall. The False Claim Act generally permits only the first relator to file a case on a particular fraudulent scheme to proceed. However, different relators often bring different factual information to bear or present legally distinct claims based on different fraudulent schemes. In such a situation, later-filed cases may not be barred by the FCA’s first-to-file rule. In its press release DOJ announced that the whistleblowers’ share of the settlement “had not yet been determined.”
The various suits resolved in this settlement focused on Inform’s alleged efforts from 2012 onward to induce physicians-via (1) direct remuneration and (2) free consulting services-to invest in the company’s EHR technology. Inform’s free consultations were aimed at educating physicians on how to use the new EHR systems to maximize their incentive payments and avoid losses through penalties. In exchange for remuneration and free services, the physicians agreed to refer patients to Inform for their laboratory needs.
The whistleblower complaints claimed that Inform took advantage of a government effort to get physicians to switch from paper records to EHR. That effort began in 2006 and had an anticipated completion date in 2014. Rules promulgated by the United States Department of Health and Human Services (“HHS”) allowed non-physician healthcare providers to pay up to 85% of the cost for physicians to transition to EHR. These rules constituted an exception to the Stark Law and a safe harbor under the AKS. But, both the exception and safe harbor prohibited the non-physician entity from covering costs in exchange for referrals.
Inform, then Miraca, allegedly based the amount of their EHR discounts to physicians on the forecasted return on investment they could get through the physician’s referrals to Inform. In other words, Inform/Miraca offered to cover potentially thousands of dollars of EHR transition money to physicians so long as physicians reciprocated with referrals. Inform/Miraca allegedly only targeted physicians who had a high potential to refer patients.
Regarding the settlement, Assistant Attorney General Jody Hunt from the Department of Justice Civil Division said “The Department of Justice has longstanding concerns about improper financial relationships between health care providers and their referral sources because those relationships can alter a physician’s judgment about the patient’s true health care needs and drive up health care costs for everybody. In addition to yielding a substantial recovery for taxpayers, this settlement should deter similar conduct in the future and help make health care more affordable.”
U.S. Attorney Don Cochran of the Middle District of Tennessee said “The wellbeing and needs of the patient should always be a medical provider’s primary considerations. The restrictions imposed by federal statutes exist to prevent improper influence on the parties prescribing and providing medical services, including laboratory tests. We will continue to enforce the laws that protect the integrity of federal health care programs.”
Qualified individuals who file claims under the qui tam provisions of the False Claims Act can be rewarded under the statute. Large settlements like this one provide one measure of the importance of whistleblowers in addressing fraud against the government. In this instance, three different whistleblowers, including a corporate whistleblower, were able to shed light on Inform/Miraca’s improper practice to secure referrals. This settlement demonstrates that multiple whistleblowers can bring unique information to the government that collectively leads to the government’s recovery of ill-gotten gains. Such a recovery ensures that taxpayer money is properly spent. Further, here, where AKS and Stark Law violations were alleged, resolution also assures patients that the professionals they rely on for medical care operate with independent judgment and their patient’s best interests in mind.
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