DOJ Ends 2024 with a Flood of False Claims Act Successes

While many of us are enjoying the slowdown typically accompanying the holiday season, the Department of Justice (DOJ) has been hard at work with a flood of False Claims Act successes to usher in the New Year.  In the last two weeks alone, DOJ has secured roughly a dozen such settlements, returning roughly $165 million to the government’s coffers.

The False Claims Act is the government’s primary fraud-fighting tool through which the government annually recovers billions of dollars of ill-gotten gains.  It was enacted during the Civil War to go after war profiteers trying to defraud the Union Army with lame mules, empty munitions, and the like.

While the statute reaches virtually any type of fraud against the government, most of the False Claims Act cases DOJ brings involve healthcare fraud, and more specifically, fraud against Medicare/Medicaid and the other government healthcare programs.  Indeed, all but three of DOJ’s most recent spate of settlements involve healthcare fraud.  And notably, four of them involved violations of the Anti-Kickback Statute, a perennial DOJ enforcement priority, which prohibits paying or receiving any form of consideration to induce patient referrals.

Here is a breakdown of these recent settlements:

• December 26 — SoCal Medical Center ($10M). Southern California Medical Center (SCMC), Universal Diagnostic Laboratories, and their owners agreed to pay $10 million to settle DOJ and whistleblower charges of violating the False Claims Act, Anti-Kickback Statute, and Stark Law by paying kickbacks and making self-referrals.  According to the government, the defendants (i) paid marketers to refer Medicare/Medi-Cal patients to SCMC clinics, (ii) paid third-party clinics through above-market rent payments, complimentary and discounted services to clinic staff, and write-offs of balances owed by patients and clinic staff in exchange for referring Medicare/Medi-Cal patients to UDL for lab tests, and (iii) referred Medicare/Medi-Cal patients from SCMC clinics to UDL for lab tests.

• December 23 — MMM Holdings ($15M). The Puerto Rico-based healthcare provider agreed to pay roughly $15.2 million to settle DOJ charges of violating the False Claims Act and Anti-Kickback Statute through gift card incentive program.  According to the government, MMM distributed gift cards to administrative assistants of providers to facilitate the enrollment of thousands of Medicare beneficiaries in an MMM Medicare Advantage plan.

• December 23 — Food City ($8.5M). The Virginia-based grocery store chain agreed to pay roughly $8.5 million to settle DOJ and whistleblower charges of violating the False Claims Act by dispensing through its pharmacies opioids and other controlled substances covered by Medicare/Medicaid that were medically unnecessary and/or without a valid prescription.

• December 23 — Inform Diagnostics ($2.9M). The Texas-based clinical laboratory agreed to pay $2.9 million to settle DOJ charges of violating the False Claims Act and Anti-Kickback Statute through its purchased test arrangements (PTAs) with several physician practice customers.  According to the government, Inform Diagnostics used these PTA agreements to induce its physician customers to refer their patients for certain diagnostic services Inform Diagnostics billed to Medicare.

• December 23 — BTW Solutions ($1.5M). The Arkansas-based drug wholesaler for physicians treating workers’ compensation patients agreed to pay $1.5 million to settle DOJ and whistleblower charges of violating the False Claims Act and Anti-Kickback Statute for improperly billing the Department of Labor’s Workers’ Compensation Programs for certain pain creams.  According to the government, BTW induced the sale of its pain creams to physicians by offering them at or near cost, billing the government on behalf of the physicians at an exorbitant markup and then splitting the reimbursement with the physicians.

• December 20 — Independent Health ($98M). The Buffalo-based healthcare provider agreed to pay up to $98 million to settle DOJ and whistleblower charges of violating the False Claims Act by billing Medicare based on invalid diagnosis codes for its Medicare Advantage Plan patients.  According to the government, Independent Health created a wholly owned subsidiary (called DxID) to retrospectively search medical records to support additional diagnoses to generate higher risk scores, with the ultimate goal of inflating Medicare’s payments to Independent Health.

• December 20 — Cardiology Practices ($17.8M). Sixteen separate cardiology practices across 12 states agreed to pay roughly $17.8 million to settle DOJ and whistleblower charges of violating the False Claims Act by overbilling Medicare for diagnostic radiopharmaceuticals used to treat certain cancers and diseases.  According to the government, the settling cardiology practices regularly reported inflated acquisition costs to Medicare to increase their reimbursement payments.

• December 20 — Rapid Health ($8.2M). The Los Angeles-based pharmacy agreed to pay roughly $8.2 million to settle DOJ charges of violating the False Claims Act by billing Medicare for Covid-19 tests never provided.  According to the government, Rapid Health’s processing procedures caused the company to bill Medicare for Covid tests without shipping them to the beneficiary and Rapid Health was aware of the issues but continued to bill Medicare anyway.

• December 19 — Chemonics International ($3.1M). The Washington, DC based international development firm agreed to pay roughly $3.1 million to settle DOJ charges of violating the False Claims Act by submitting fraudulent claims for payment to the U.S. Agency for International Development (USAID).  According to the government, Chemonics (i) acted recklessly in failing to detect fraudulent charges by its subcontractor, Zenith Carex, for certain delivery services in Nigeria, and (ii) passed those inflated charges on to USAID under its Global Health Supply Chain-Procurement and Supply Chain Management contract.  The government claimed Chemonics allowed these overcharges for more than two years because of inadequate financial controls, monitoring, and employee training and support.

• December 18 — Lafayette RE Management ($680K). The New York City based private asset manager agreed to pay $680,000 to settle DOJ and whistleblower charges of violating the False Claims Act by securing improper loans under the COVID-19 Paycheck Protection Program (PPP).  According to the government, the company improperly obtained a PPP loan by falsely certifying it was economically necessary due to the uncertainty caused by the pandemic.

• December 16 — Revision Military ($426K). The Vermont-based manufacturer of protective eyewear systems agreed to pay $426,000 to settle DOJ charges of violating the False Claims Act by selling eyewear products it falsely represented were wholly sourced in the United States.  The Berry Amendment requires textile components in products sold to the military be sourced from the United States.  According to the government, however, the company used a non-domestic source of carrying pouches, cases, and/or straps for certain eyewear systems it sold to the military.

Also notable is that whistleblowers initiated roughly half these actions under the qui tam provisions of the False Claims Act, which allow private parties to bring False Claims Act lawsuits on behalf of the government and share in any government recovery.  Over the past thirty years, whistleblowers have been responsible for originating a majority of False Claims Act cases and have received billions of dollars in whistleblower rewards.

So if you think you might have information relating to potential fraud against the government, please do not hesitate to contact us.  We will connect you with an experienced member of the Constantine Cannon whistleblower team for a free and confidential consult.

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