It was a good week for the Department of Justice in reigning in corporate fraud. Not only did it secure more than $700 million in fines and penalties from Crédit Agricole for violations of the International Emergency Economic Powers and Trading With the Enemy Acts. See DOJ Catch of the Week. It also pulled in two additional eight and nine-figure settlements from two separate False Claims Act cases originated by whistleblowers. Last Friday, the DOJ resolved a $237 million judgment against Tuomey Healthcare System for illegally billing Medicare for services referred by physicians with whom the hospital had improper financial relationships. See DOJ Press Release. And only three days later, the DOJ secured $256 million from Millennium Health to resolve charges it billed Medicare for medically unnecessary urine drug and genetic testing. See DOJ Press Release.
Under the terms of the Tuomey settlement, the South Carolina-based healthcare system will pay $72.4 million and will be sold to Palmetto Health, a multi-hospital healthcare system also based in South Carolina. The settlement follows a previous jury verdict and recently affirmed judgment against Tuomey for more than $237 million for violations of the False Claims Act and Stark Law. The government had successfully argued that Tuomey, fearing it could lose lucrative outpatient procedure referrals to a new freestanding surgery center, entered into contracts with 19 specialist physicians that required the physicians to refer their outpatient procedures to Tuomey. This was in exchange for payments to the physicians that far exceeded fair market value and included part of the money Tuomey received from Medicare for the referred procedures. The government argued that Tuomey ignored and suppressed warnings from one of its attorneys that the physician contracts were “risky” and raised “red flags.”
The Millennium settlement centered around government allegations that Millennium Health (formerly Millennium Laboratories) systematically billed federal health care programs for excessive and unnecessary urine drug testing from Jan. 1, 2008, through May 20, 2015. According to the government, Millennium caused physicians to order excessive numbers of urine drug tests, in part through the promotion of “custom profiles,” which instead of being tailored to individual patients were in effect standing orders that caused physicians to order large number of tests without an individualized assessment of each patient’s needs. The government further alleged that Millennium’s provision of free point of care urine drug test cups to physicians — expressly conditioned on the physicians’ agreement to return the urine specimens to Millennium for hundreds of dollars’ worth of additional testing — violated the Stark Law and the Anti-Kickback Statute.
Both cases originated from whistleblower lawsuits filed under the qui tam provisions of the False Claims Act. The Tuomey matter originated in a whistleblower lawsuit filed by
Dr. Michael K. Drakeford, an orthopedic surgeon who was offered, but refused to sign, one of the illegal contracts. Dr. Drakeford will receive a whistleblower award of approximately $18.1 million. The Millennium matter originated in several whistleblower lawsuits. The whistleblowers will collectively receive whistleblower awards amounting to roughly $32 million.
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