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Treble Damages Awarded in Medicare Whistleblower Case

Posted  February 21, 2020

The Fifth Circuit upheld a 2018 lower court decision this week, finding defendant BestCare Laboratory Services, LLC and its owner Karim Maghareh liable for treble damages—to the tune of just over $30 million—under the False Claims Act.

BestCare provided clinical testing services for nursing home residents, many of whom were Medicare beneficiaries. Rather than billing for a technician’s travel to and from the facility to collect specimens—a practice approved in the CMS guidelines—the reimbursements were claimed on a per-specimen level, and without regard to whether they were transported or accompanied by a BestCare employee, as required under the guidelines. Often, specimens were shipped in bulk, via airplane, without a technician on board, yet BestCare sought and received reimbursement for each mile traveled by each specimen, without proration.

The billing fraud came to light in 2008 after a competitor, Dr. Richard Drummond, hired BestCare’s former billing manager, Martha Shirali. Drummond had long been suspicious of BestCare’s success in the field, as several of its competitors went out of business while BestCare continued to grow its market in a non-high-margin business. Shirali described BestCare’s billing procedures to Drummond, after which Drummond concluded that BestCare had been improperly billing Medicare for travel reimbursements. He subsequently filed a qui tam whistleblower suit under the False Claims Act.

In its defense, BestCare pointed to the CMS manual and two sub-regulatory guidelines on billing, which they misinterpreted to their benefit. They argued that Maghareh should not be held personally liable because he did not personally benefit from the fraud, nor did CMS pierce the corporate veil as required under Texas law. The court dispensed with both of those arguments, holding that the Government was only required to prove Maghareh’s participation in the conspiracy, and state law has no relevance to the Government’s federal claim under the FCA.

Maghareh argued he was not personally responsible for submission of the improper billings, but the court held that mere delegation to Ms. Shirali as their billing manager did not absolve her supervisor’s liability. Maghareh signed BestCare’s Medicare enrollment form (CMS 855B) which requires affirmation that the signer will not submit false claims, and he signed each subsequent billing claim for reimbursement, which claims fall under the requirements of Medicare participation.

Judge Oldham didn’t mince words in the opinion, concluding: “BestCare and Maghareh spent years submitting false claims to the Government. Now they must pay.” Read more here for the court decision.

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Tagged in: Court Decision, Defenses, FCA Federal, Importance of Whistleblowers, Laboratory and IDTF, Medical Billing Fraud, Medicare, Whistleblower Case,