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Catch of the Week: Waived Copayments and “Free” Glucometers Result in $160 Million Recovery in Whistleblower Action Against Previously-Barred Arriva Medical

Posted  August 4, 2021

Mail-order diabetes supply company Arriva Medical has agreed to pay $160 million to resolve a False Claims Act case filed in 2013 by a whistleblower who worked for ten months in one of the company’s call centers.  The government intervened in the whistleblower’s action in early 2019, and the case had been set for trial in June 2022.

The settlement is the latest in a long string of actions against Arriva and related individuals and entities.  While Arriva at one point claimed to be the nation’s largest Medicare mail-order diabetic testing supplier, Arriva’s Medicare billing privileges were revoked in October 2016, and the company ceased operations in 2017.  While Arriva is no longer in business, its parent company Alere Inc. – which was alleged to have known about and participated in Arriva’s wrongful conduct – is also a party to the settlement (and Alere is now owned by Abbot Laboratories).

The government previously settled related claims against two former Arriva executives, David Wallace and Timothy Stocksdale, receiving a payment of $1 million.  The government is continuing to pursue claims against Alere consultant Ted Albin, who oversaw and directed Arriva’s submission of claims to Medicare, as well as Albin’s company Grapevine Billing & Consulting Services, Inc.

Arriva’s Wrongful Conduct

Arriva sold durable medical equipment covered by Medicare Part B.  Part B generally covers 80% of the patient cost, with the patient liable for 20% of the cost as a copayment, in addition to an annual deductible.  Suppliers such as Arriva that seek Medicare reimbursement for DME provided to Medicare beneficiaries must certify that their claims for payment are “accurate, complete, and truthful,” and in compliance with applicable rules and regulations.

The government’s complaint against Arriva alleges a “large-scale fraud scheme lasting from as early as 2009 until at least November 2016.”  The alleged wrongful conduct includes:

  • Waived copayments.  Arriva advertised a “no cost guarantee” for diabetic testing supplies.  The whistleblower and government alleged that between 2010 and 2016, Arriva, with Alere’s approval, routinely waived copayments for Medicare beneficiaries ordering glucometers and diabetic testing supplies.
  • Billing for glucometers without regard to eligibility or medical necessity.  Arriva, with Alere’s approval, was alleged to have systematically provided all new patients with a glucometer, billed to Medicare, without regard to the patients’ eligibility or need for one.  In fact, Medicare beneficiaries are only eligible to seek reimbursement for a new meter once every five years, and Medicare only pays for DME that is reasonable and necessary.
  • Billing for deceased patients.  Arriva was alleged to have submitted claims for payment for Medicare beneficiaries who had been deceased on the reported dates of service.  Allegations that Arriva billed Medicare for deceased patients were cited by CMS as the basis for Arriva’s 2016 Medicare billing revocation.

Waiver of copayments and free supplies may seem innocuous at first blush.  But, companies offer such benefits for specific business reasons: to encourage Medicare beneficiaries to create and maintain customer relationships with Arriva, and to purchase diabetic testing supplies from Arriva that are paid for by Medicare.  Such patient inducements encourage patients to select medical services that are free, not those that are medically necessary.  This can result in overutilization and therefore waste taxpayer dollars.  Routine copayment waivers and other patient inducements undermine cost-sharing principles and increase healthcare costs. While patients avoid their small share of the cost, insurers and the government are left to pick up the rest.

Offering routine copayment waivers and free supplies has long been held to violate the Anti-Kickback Statute.  The payment of unlawful kickbacks taints a provider’s claims for payment to Medicare for those supplies or services.  Such tainted claims are deemed to be false claims under the False Claims Act.

The Whistleblower Action Against Arriva

The whistleblower, Gregory Goodman, was employed at an Arriva call center in Tennessee for ten months in 2013.  As reported in the Tennessean, Goodman was not comfortable with the way the company pushed employees to sell glucose meters and waive co-pays.  While he had little experience in the healthcare field, the company’s actions “just didn’t feel right,” and he “did a bit of reading.”  He filed his False Claims Act complaint under seal against Arriva and Alere on August 1, 2013, and an amended complaint on March 12, 2014.

The government investigated for nearly six years before intervening in 2019.  As the government’s claims are shaped by its investigation, the government’s claims are both the same as, and different from, Goodman’s claims.  First, neither Albin nor Grapevine were named as defendants by the relator.  The government named Albin as a defendant in April 2019, and added Grapevine as a defendant in August 2019.  Second, Goodman’s qui tam complaint does not include allegations regarding claims for deceased beneficiaries; these claims were added by the government complaint in intervention, and may have been uncovered during the government investigation of Goodman’s claims.

Third, the government intervened to pursue only some of Goodman’s claims.  Such partial interventions are not uncommon, leaving relators with a choice about whether to pursue the claims on their own.  Goodman’s qui tam complaint included allegations, among others, that defendants offered kickbacks to secondary insurance providers, illegally marketed other medical equipment to new patients, and offered inducements to Medicare beneficiaries to switch to Arriva’s “preferred brands” of diabetic testing supplies.  While the Relator could have pursued these theories of liability even without the government’s intervention, he chose to dismiss the claims.

Goodman will receive a whistleblower award of $28,548,749, representing 17.8% of the total $160 million settlement.  Given the scope of wrongdoing alleged at Arriva, and the gap between Arriva’s actions and long-standing regulations on copayment waivers, it is notable that the only qui tam action resolved by the settlement was the action filed by Goodman (another former Arriva employee filed a whistleblower action in 2019, shortly before the government intervened in Goodman’s action, but after the government declined to intervene in that case, it was dismissed in part based on the False Claims Act’s first-to-file bar).  Goodman’s pursuit of his claims when others stayed silent is a testament to his determination to investigate and speak up about things that didn’t feel right, and an exemplar of the courage of whistleblowers.

A History of Litigation Against Alere and Arriva

Arriva and Alere are not newcomers to settlements with the government.  In 2016, Alere’s legal troubles became an issue during Abbott Laboratories’ acquisition of Alere.  That acquisition was ultimately completed, but since then, Alere has been a party to a number of significant government settlements.

  • Just last month, Alere agreed to pay $40 million to resolve allegations that it knowingly sold its InRatio blood coagulation monitors despite receiving reports that the devices produced inaccurate readings.
  • In 2018, Alere agreed to pay $33.2 million to resolve allegations that it failed to take appropriate corrective actions after receiving reports that its Triage point-of-care diagnostic testing devices produced erroneous results.
  • In 2017, Alere agreed to pay $13 million to resolve SEC claims of accounting fraud based on its recording of revenue based on sales of products still being stored at warehouses or otherwise not yet delivered to the customers.
  • As said above, in 2016, CMS revoked Arriva’s Medicare billing number after CMS found that Arriva billed Medicare for services purportedly provided to Medicare beneficiaries who were deceased on the purported dates-of-service.

Blowing the Whistle on DME Fraud and Unlawful Copayment Waivers

Fraud affects a wide range of healthcare programs funded, directly or indirectly, by the United States and various individual states.  Whistleblowers play a critical role in exposing such fraud, and by filing an action under the False Claims Act may be eligible to receive a share of the government’s recovery as a financial reward.  These whistleblower rewards recognize the significant role whistleblowers can play in saving money for U.S. taxpayers and ensuring the integrity of government healthcare programs.

If you have information about unlawful copayment waivers for federal healthcare program beneficiaries, or information about other healthcare or durable medical equipment fraud, please contact the experienced whistleblower attorneys of Constantine Cannon for a free and confidential consultation.

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Tagged in: Anti-Kickback and Stark, Catch of the Week, FCA Federal, Healthcare Fraud, Medical Billing Fraud, Medical Devices and DME, Whistleblower Case, Whistleblower Rewards,