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Top Ten Healthcare Fraud Recoveries of 2022

Posted  January 6, 2023

Consistent with the trend in prior years, 2022 saw government enforcement agencies taking aim at fraud and false claims in healthcare.  As the cost of healthcare rises along with its share of the U.S. economy, the enforcement focus on healthcare fraud is likely to accelerate. And, as always, the role of whistleblowers will be critical, as demonstrated by the dominance of cases originated by whistleblowers under the qui tam provisions of the False Claims Act on this 2022 Healthcare Fraud Top Ten.  This year also stands out as a banner year for recoveries in declined cases – cases where the whistleblower proceeds without the government’s intervention – demonstrating the importance and perseverance of whistleblowers in recovering public dollars lost to fraud.

The majority of the recoveries on this list involve allegations of violations of the Anti-Kickback Statute, a federal law that prohibits medical providers from paying or receiving kickbacks, remuneration, or anything of value in exchange for referrals of patients who will receive treatment paid for by government healthcare programs such as Medicare and Medicaid.  There are also notable settlements involving other government healthcare programs and private insurance, and cases with less commonly seen fraud theories involving the Medical Loss Ratio, secondary payor issues, and offshoring of services.

Here are the top ten healthcare recoveries of 2022 by the numbers:

  1. Biogen. In September, Massachusetts-based Biogen, agreed to pay a whopping $900 million to resolve kickback allegations. A whistleblower first filed this case in 2012, alleging that Biogen paid kickbacks to its largest prescribing physicians to discourage them from prescribing the products of the company’s competitors.

This settlement is unique because the Department of Justice chose not to intervene in the action and the whistleblower, with his counsel, pursued litigation on their own. Historically, cases where the United States has not intervened have a much lower success rate and account for a small minority of recoveries under the FCA. This blockbuster settlement bucks that trend and resulted in a whistleblower award of more than $260 million.

  1. Mallinckrodt. In March, this pharmaceutical giant agreed to pay $260 million to resolve allegations that the company failed to pay amounts it owed under the Medicaid Drug Rebate Program. That program pegs the price Medicaid pays for drugs to inflation, requiring drug manufacturers to report the Average Manufacturer Prices (AMPs) of their Medicaid-covered drugs to the government; the higher the reported AMPs, the greater the rebate owed by the pharma company to the government. The whistleblower alleged that Mallinckrodt improperly calculated that rebate amount, pegging price increases not to the price of its drug in 1990 (when this rule was put in effect), but to 2013, when the drug was approved for additional indications.

Mallinckrodt is not the first manufacturer to run into issues with the program. In 2015, AstraZeneca and Cephalon paid a total of $54 million to resolve claims that they also improperly reduced AMPs by wrongfully accounting for service fees they paid to wholesalers. Bristol-Myers Squibb paying $75 million to resolve allegations was the seventh largest Healthcare Fraud recovery on last year’s list.

The Inflation Reduction Act, signed into law by President Biden this year, included provisions that enact a similar program for drugs Medicare pays for, in addition to drugs Medicaid pays for.

  1. Medi-Cal Recoveries. There were significant recoveries totaling $93.2 million in cases alleging false claims under the Adult Expansion Program of Medi-Cal (California’s Medicaid Program). While the cases involved multiple defendants, they each stemmed from payor and provider gamesmanship of the Medical Loss Ratio (MLR), which dictates the percentage of public healthcare dollars that must be spent on certain medical expenses, as opposed to on things like administrative expenses. In the case of California’s Medicaid expansion funding, that ratio is 85%.

In August, Southern California’s Ventura County Organized Health System and several medical providers including Dignity Health agreed to pay over $70 million to resolve allegations that the system and its affiliates submitted false claims for “Additional Services” to Expansion Program beneficiaries that were no allowed medical expenses, that were duplicative of services already required, and that weren’t reflective of fair market value. In this whistleblower-initiated case, the health system and the providers were accused of spending less than 85% of funding on medical expenses and then altering records and using unsupported billings to make it appear the MLR was being reached.

In December, Dignity Health and Tenet Healthcare agreed to pay over $22 million to settle similar allegations. The defendants, whose hospitals in San Luis Obispo County contracted with Medi-Cal, agreed to provide healthcare services to Expansion Program beneficiaries and return surplus funds if they did not spend at least 85% of the specified funds on eligible services.  The government alleged that the hospitals falsely billed for “Enhanced Services,” which allowed them to overstate AE spending.  The settlement resolved an action brought by a whistleblower who previously served as a Medical Director for the county health system through which Medi-Cal contracted with the hospitals.

  1. Florida Birth-Related Neurological Injury Compensation Association. In November, a Florida fund used to compensate those with birth-related neurological complications agreed to pay $51 million to resolve allegations that it defrauded Florida’s Medicaid program. The fund, established in 1988 as an alternative to the traditional tort system, was meant to provide compensation for the medical, rehabilitative and custodial care of children who suffered certain categories of birth-related neurological injuries. Virginia is the only other state with a similar regulatory regime.

Under the law, the fund is responsible for the payment of certain medical and other expenses incurred because of a birth-related neurological injury. Medicaid, in contrast, is generally only a payor of last resort, meaning it only covers claims when no other insurer is responsible for that claim. Here, whistleblowers accused the fund of improperly shifting costs it should have reimbursed onto Florida’s Medicaid program.

This, like the settlement with Biogen, resulted out of a whistleblower’s effort. The United States did not intervene in this action.

  1. Essilor. The world’s largest manufacturer of optical lenses agreed to two related settlements this year, paying over $45 million in total.

First, in August, the company agreed to pay $22 million to settle a case brought by three whistleblowers under the False Claims Act. The company was accused of paying kickbacks to optometrists and ophthalmologists to induce them to prescribe Essilor products. Medicare or Medicaid ended up for many of those tainted claims, resulting in a violation of the FCA.

Then, in December, the company agreed to pay another $23.8 million to the California Department of Insurance to settle similar kickback allegations. This settlement resolved allegations that Essilor’s kickbacks tainted claims paid for by private insurance plans in California, this is on top of the August settlement which only pertained to claims paid for by Medicaid and Medicare.

While most entries on this list, and on our blog in general, pertain to the False Claims Act, a law that allows whistleblowers to sue in the name of the United States and share in the recovery of any public money lost to fraud, several states, namely California or Illinois, have similar laws that allow whistleblowers to report fraud against private insurers and share in that recovery as well. This settlement is one of the largest under California’s law.

  1. Modernizing Medicine. In November, electronic health records company ModMed agreed to pay $45 million to settle fraud allegations involving two recent trends: kickbacks and fraud on EHR incentive programs.

On the kickbacks front, ModMed was accused of three schemes. First, the company allegedly received kickbacks from a pathology lab to steer users of its software to use that lab. Second, the company allegedly improperly gave its software out for free to increase orders to said pathology lab and expand its own user base as well. Finally, the company allegedly paid kickbacks to current customers to recommend its products.

The company was also accused of defrauding HHS’s incentive programs for the adoption of EHRs. In an effort for hospitals and other healthcare providers to digitize their records, HHS offers incentive payments for providers to adopt EHR systems. But there are strings attached to these payments, notably the software must meet certain functional requirements, known as “meaningful use.” ModMed allegedly knew that its software did not meet those requirements but marketed it as such anyhow.

Settlements with EHR companies have been increasing over the last several years, and DOJ has identified EHR fraud as an enforcement priority. While early settlements primarily involved false representations about EHR capabilities, and improper remuneration paid to purchasers of EHR systems, increasingly enforcement actions have included allegations like those here, that an EHR company solicited and received kickbacks from a provider of healthcare services or pharmaceutical in exchange for including features in its software that steered patients their way. In 2020, EHR provider Practice Fusion paid $145 million to settle kickback allegations, good enough for fifth place on that year’s list.

  1. BioTelemetry. In one of 2022’s final settlements, BioTelemetry agreed to pay nearly $45 million to resolve allegations that they submitted false claims to federal healthcare programs for cardiac monitoring tests that were improperly performed or interpret overseas and often by unqualified technicians. Generally, Medicare and other federal healthcare programs only pay for services performed in the United States. Instead, the company allegedly used an India-based contractor to perform diagnostic and analysis services of heart monitoring data. The government also alleged that most of the offshore technicians tasked with reviewing ECG data did not have the basic qualifications to perform or interpret the tests. The case was brought by a whistleblower.
  2. Bayer. In September, the pharmaceutical company agreed to pay $40 million to resolve fraud allegations concerning three of its drugs: Trasylol, Avelox and Baycol. The company was accused of paying kickbacks to hospitals and physicians to induce them into prescribing these drugs, as well as promoting some of these drugs “off-label,” or for uses they are not FDA-approved for. The company was also accused of downplaying safety issues related to these drugs.

The settlement resolved two suits brought by the same whistleblowers. Similar to the Biogen settlement at the top slot, and the Florida fund at the fifth slot, this case was not joined by the United States, instead being pursued by a whistleblower and their counsel, who will receive an award of $11 million.

  1. Eargo. In April, hearing aid company Eargo, which sells directly to consumers, agreed to pay nearly $35 million to resolve allegations that it defrauded the Federal Employees Health Benefits Program (FEHBP). The company allegedly provided hearing aids, and billed FEHBP for them, in situations where they were not medically necessary.

Most settlements on this list involve the two largest and best known federally-funded healthcare program, Medicare and Medicaid, but this settlement is a good reminder that the government funds healthcare through many other programs as well, including the FEHBP (the insurance plan for federal employees), Veteran programs paid for the VA, TRICARE (insurance for active duty military members), programs related to workplace injuries and/or health issues, including Worker’s Compensation Programs, and specific programs for energy workers, railroad workers, longshoremen, and miners, among others. Defrauding any of these programs, because they are all federally funded, can be a violation of the false claims act.

  1. Physician Partners of America. Rounding out the top ten, this Tampa-based provider group agreed to pay $24.5 million to settle a smorgasbord of fraud allegations. This is another case brought forward by a whistleblower. The allegations fall largely into three buckets:

First, the provider group was accused of billing Medicare and Medicaid for medically unnecessary urine drug testing, an area of recent enforcement activity for DOJ. The group allegedly ordered multiple tests at the same time when one would have been sufficient and even failed to review the results from preliminary tests before going ahead and ordering follow up testing. Second, PPOA was accused of paying kickbacks to its employees who were ordering the drug testing, offering them 40% of the profits from each test they ordered. Finally, PPOA also settled allegations that it was untruthful on its application for a $ 5.9 million PPP loan.

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