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Prominent Health Care Fraud Cases 2005 - 2006


Pharmaceutical Fraud
  • As a result of a qui tam suit by a small home infusion company, GlaxoSmithKline paid the United States $140 million to settle allegations of fraudulent drug pricing and marketing that resulted in the submission of inflated claims to Medicare, Medicaid, and other federally funded heath care programs. The company allegedly falsely inflated the prices of Zofran and Kytril, knowing that those prices would be used by federal programs to set reimbursement rates.
  • AdvancePCS, a pharmacy benefit management company, paid the United States $138.5 million to resolve allegations that it exacted kickbacks, disguised as administrative fees, service agreements and rebates, as well as cash payments, from drug manufacturers for marketing their drugs to providers reimbursed by federally insured health programs.
  • Pursuant to a qui tam suit, Omnicare, Inc., the nation’s largest provider of pharmacy services to skilled nursing facilities and assisted living communities, agreed to pay $49.5 million to the United States and 43 states to resolve allegations that it had substituted different versions of prescribed drugs solely to increase profits and not for any legitimate medical reason.

Pharmaceutical Distribution Fraud

  • A pharmacist and principal owner of King Drugs, Inc. pleaded guilty to illegally selling prescription drug samples to the public after repackaging the samples. The defendant paid $10.5 million to the United States, relinquished his pharmacy license, agreed to a permanent exclusion from all federal health benefit programs, and was sentenced to home confinement and probation.
  • A Las Vegas, Nevada individual was convicted of 17 felony counts related to the distribution of Rohypnol, otherwise known as the “date rape drug.” The defendant, who used forged and fraudulent documents to deceive U.S. Customs Service and Federal Drug Administration employees related to the importation of the drug from Germany, was sentenced to 10 years imprisonment and forfeited his home valued at $285,000.
  • A California man was sentenced to 51 months imprisonment for fraudulently operating an internet pharmacy. Customers paid a fee for a physician’s consultation, but there were no physicians associated with the pharmacy and the dispensed drugs were all counterfeit.

Hospital Fraud

  • Pursuant to a qui tam claim, HealthSouth Corporation paid the United States $327 million to settle allegations of three separate schemes to defraud federal health programs. The first scheme involved false claims for outpatient physical therapy services that were not supported by certified plans or administered by licensed physical therapists, and did not involve one-on-one therapy, as represented to the government. The second scheme involved overbilling Medicare on hospital cost reports and home office cost statements. The third scheme involved billing for unallowable costs, such as lavish entertainment and leisure travel expenses. HealthSouth also entered into a Corporate Integrity Agreement (“CIA”) with HHS/OIG to prevent future misconduct.
  • Pursuant to a qui tam suit, the Eisenhower Medical Center paid the United States $8 million to settle allegations that it fraudulently overbilled federal health insurance programs. The relator alleged that Healthcare Financial Advisors was asked to help prepare two cost reports – an inflated one for Medicare – and a second one designed for internal use which accurately reflected the amount of reimbursements the hospital should have received.

Dialysis Fraud

  • Gambro Healthcare paid $310 million to the United States to resolve allegations concerning the submission of false claims to Medicare and Medicaid in connection with dialysis services. The scheme involved a sham durable medical equipment company, phantom billing, billing for services that were not medically necessary, and paying kickbacks to physicians for referrals. The sham equipment subsidiary paid a $25 million criminal fine and agreed to a permanent exclusion from the Medicare program.

Fraud on Community Health Centers

  • Five individuals and a company, Duncan Drugs, were convicted of health care fraud for defrauding the Community Mental Health Center of East Central Georgia. The defendants fraudulently diverted $2 million of the Center’s funds, and paid almost $1 million in kickbacks to a Georgia representative which was used, in part, to fund his election campaigns. Sentences ranged from 33 months to 120 months in prison, and forfeitures and restitution equaled almost $3.5 million.
  • The former director of the Kickapoo Community Health Services Center was convicted of three felony counts related to the theft of the Center’s funds. He was sentenced to 15 years in prison and ordered to pay $100,000 in restitution.

Medicaid Fraud

  • An Indiana dentist was sentenced to 57 months in prison for a Medicaid fraud scheme for billing for services which were not provided or were not medically necessary. The defendant and his two corporations were ordered to pay $2.4 million in restitution and $70,000 to the Indiana Attorney General’s Office for the costs of the investigation by the state’s Medicaid Fraud Control Unit.
  • Pursuant to a qui tam suit, the University of Miami paid the United States almost $4 million to settle allegations that it fraudulently doublebilled and overcharged Medicaid in connection with several of its outpatient clinics. The relator alleged that the University billed Medicaid for outpatient services and that its outpatient clinics were also billing Medicaid for the same services.
  • A pharmacist and owner of Pierce Pharmaceuticals, Inc. was sentenced to 33 months in prison and ordered to pay $2 million in restitution to the North Carolina Medicaid program in connection with prescription drug fraud regarding long term care facilities. The defendant submitted claims for payment to the Medicaid program for refilling prescriptions that were never filled, delivered, or even requested by patients.

Chiropractic Fraud

  • The owners and operators of twelve chiropractic/medical clinics in Ohio pleaded guilty to conspiring to commit health care fraud by billing Medicare and private health care benefit programs $4.8 million for non-covered chiropractic services for which they were ultimately paid $1.7 million. The defendants owned a chain of chiropractic clinics and converted them to joint chiropractic and medical clinics so they could use medical doctor billing numbers to avoid limitations on chiropractic care and bill for non-covered services. The company, MedBack, fraudulently billed for all chiropractic services using Current Procedural Terminology (“CPT”) codes for physical therapy or for office visits to the medical doctor. The insurance plans denied payment for non-covered chiropractic services, and the owners sent appeal letters falsely stating that a medical doctor had performed all services and that the MedBank clinics did not provide chiropractic services. The defendants agreed to pay $1.7 million in restitution and be excluded from federal health care benefit programs for fifteen years.

Podiatry Fraud

  • A podiatrist in Ohio was sentenced to 135 months in prison and ordered to pay restitution of $1.7 million, as well as forfeit three Ohio properties following his second conviction on health care fraud charges. The defendant had previously pleaded guilty to upcoding claims submitted to Medicare for nursing home podiatry services, and had been ordered not to bill Medicare for eight years. At the time he was pleading guilty in 1998, however, the defendant was already scheming to keep control of his practice and its Medicare revenues. The defendant pretended to sell his practice and transfer financial control of the practice to another individual, all while continuing to control and expand the practice, and using its Medicare revenues to pay his own expenses.

Ambulance Services Fraud

  • Adventist Health System, Sunbelt Healthcare Corporation, and a management company that administered ambulance operations at three hospitals affiliated with the company, paid the government $20.3 million to settle allegations that they billed Medicare for ambulance transports that were not medically necessary. The management company and the hospitals allegedly created false physician certifications regarding the medical necessity of ambulance trips.

Kickbacks

  • PharMerica, Inc. and PharMerica Drug Systems, Inc. entered a settlement agreement with the HHS/OIG to resolve allegations that the companies paid unlawful kickbacks in connection with a purchase of a small Virginia pharmacy. In one of the largest settlements of a civil monetary penalty (“CMP”) kickback case to date, PharMerica agreed to pay more than $5.9 million to the government. A leading supplier of pharmacy services to long term care institutions, PharMerica overpaid for the purchase of the pharmacy in return for a commitment from the seller—who also owned 17 nursing homes—to refer its Medicare and Medicaid pharmacy business to PharMerica. The acquisition amounted to the unlawful purchase of referrals of federal health care program business from the nursing facility chain. PharMerica also entered into a five-year CIA with the HHS/OIG.
  • Peter Rogan, the former CEO of Edgewater Medical Center, was ordered to pay almost $65 million to the US government for various schemes to defraud federal health care programs primarily through unlawful referrals and kickbacks in violation of the Antikickback and Stark statutes.

False Claims by a Research University

  • The University of Alabama at Birmingham and two related entities agreed to pay the United States $3.39 million to settle allegations that they violated the False Claims Act (FCA) with respect to claims submitted in connection with the school’s health science research activities. The settlement resolved allegations that, in completing applications for federal health science research grants, the school overstated the percentage of work effort that the researchers were able to devote to the grant. It was also alleged that the university, and the entity through which its medical school faculty provide clinical services, unlawfully billed Medicare for clinical research trials that were also billed to the sponsor of research grants.

Fraudulent Heath Insurance Provider

  • A San Francisco executive was sentenced to 41 months in prison and ordered to pay $1.3 million in restitution for the operation of a fraudulent health insurance scheme that defrauded thousands of people across the United States. The victims purchased health insurance plans from the company, only to discover after illnesses or accidents that their health insurance was essentially worthless. The phony health insurance company collected over $2.8 million in premiums but deposited only a small fraction of those funds into trust accounts. Instead, the defendant executive spent much of the money on his personal expenses, paying salaries to members of his family, leasing expensive cars, buying football tickets, and paying commissions to so-called promoters who helped market the fraudulent plan.

Durable Medical Equipment Fraud

  • The owner of a California medical supply company pleaded guilty to health care fraud for $2.4 million in false bills to Medicare for power wheelchairs, hospital beds and other equipment that was never prescribed by a physician, and never received by the beneficiaries. The defendant agreed to forfeit his home, vehicles and bank accounts to pay restitution to the government.
  • A medical equipment company owner in Oklahoma was sentenced to serve 5 months in prison and to pay more than $340,000 in restitution after pleading guilty to health care fraud. She admitted to forging doctors’ names on phony certificates of medical necessity, furnished patients with scooters valued at $1,500, but billed the Medicaid program for electronic wheelchairs at $5,000.

Obstruction of a Federal Audit

  • OPI Properties, Inc., a subsidiary of the Swiss Novartis Corporation, pleaded guilty to nine felony counts of attempting to obstruct a federal audit. OPI was ordered to pay $4.5 million to the government and was permanently excluded from Medicare and Medicaid. Under a separate civil agreement, Novartis Nutrition Company, also a subsidiary of the Swiss company, agreed to pay over $44 million to the United States. OPI offered kickbacks to federal agents, operating as a storefront distributor of medical supplies, in exchange for a long-term contract involving services to Medicare patients, then created false invoices for the free items, instructing the undercover agents to produce the dummied invoices in the event of a Medicare audit.

Physician Fraud

  • A Virginia physician specializing in pain management was sentenced to 25 years imprisonment and ordered to pay a $1 million fine for his conviction on drug distribution charges and drug trafficking that resulted in one death and serious injuries to others. The Government proved that the defendant performed perfunctory exams on patients and then facilitated the patients’ demand for excessive amounts of controlled substances, including OxyContin, and that the physician knew that patients were abusing the controlled substances, or selling them to others.

Medicare Contractor Fraud

  • United Healthcare Insurance Company paid the United States $3.5 million to settle allegations that the company defrauded the Medicare program. As a former Durable Medical Equipment ("DME") Regional Carrier, United Healthcare contracted with CMS to process Medicare claims for DME submitted by providers, suppliers and Medicare beneficiaries in the Northeastern United States. The company allegedly knowingly mishandled phone inquiries received from Medicare beneficiaries and providers and then falsely reported its performance information to Centers for Medicare and Medicaid Services ("CMS") concerning the company’s handling of those calls.

Teaching Hospital Physicians’ Fraud

  • The University of Medicine and Dentistry of New Jersey agreed to pay the federal government $1.4 million to resolve allegations that the medical schools falsely represented that services billed to Medicare were personally provided by teaching faculty, when there was insufficient documentation that those physicians were “personally and identifiably involved” in the care.

Quality of Care Issues

  • A nursing home owned by Hillcrest Healthcare, Inc. disclosed egregious quality of care problems at its Connecticut facility. One resident had died of septic infection allegedly caused by improperly treated bedsores; others suffered from severe pressure sores, dehydration, and weight loss. The government also alleged that the home failed to employ adequate staffing and failed to follow plans of care. By consent order, the home surrendered its license and paid the state $200,000. The company pled nolo contendere in state court to charges of Manslaughter in the Second Degree arising out of death of the resident. The company agreed to pay the federal government $750,000 to resolve allegations of submitting false claims to Medicare and Medicaid, and agreed to be permanently excluded from the Medicare and Medicaid programs.
     
  • A suburban Pittsburgh nursing home and its former administrator were convicted of health care fraud and numerous false statements relating to health care matters. The government proved that the nursing home administrator and Atrium I Nursing and Rehabilitation Center engaged in a scheme to defraud Medicare and Medicaid out of more than $7 million from 1999 through August 2003. The scheme involved a failure to provide required care for Atrium residents, most of whom were diagnosed with Alzheimer’s disease. The defendants falsely represented they were providing appropriate care, and concealed deficiencies from regulatory agencies by the extensive falsification of records.

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Joe Griffith Co-Authors Book On Health Care Fraud Joe Griffith Co-Authors Book On Securities Fraud
 
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