DOJ: False Claims Act settlements, judgments exceed $2B in 2022 and most involved health care fraud

The Justice Department announced that the 2022 settlements are the second-highest number in a single year. Most of the settlements involved the health care industry, including drug and medical device manufacturers, durable medical equipment, home health and managed care providers, hospitals, pharmacies, hospice organizations, and physicians.

The 351 settlements and judgments under the False Claims Act exceeded $2.2 billion in the fiscal year ending Sept. 30, 2022, the second-highest number of settlements and judgments in a single year, according to the Department of Justice (DOJ). Recoveries since 1986, when Congress took steps to strengthen the civil False Claims Act by increasing incentives for whistleblowers to file lawsuits alleging false claims on behalf of the government, now total more than $72 billion.

More than $1.7 billion of the $2.2 billion related to matters involving the health care industry, including drug and medical device manufacturers, durable medical equipment, home health and managed care providers, hospitals, pharmacies, hospice organizations, and physicians. These amounts reflect recoveries arising only from federal losses, and, in many of these cases, the department was instrumental in recovering additional amounts for state Medicaid programs, according to the DOJ. The recoveries in fiscal year 2022 also reflected the department’s focus on new enforcement priorities, including fraud in pandemic relief programs and alleged violations of cybersecurity requirements in government contracts and grants.

Whistleblowers filed 652 qui tam suits in fiscal year 2022, and this past year the department reported settlements and judgments exceeding $1.9 billion in these and earlier-filed suits.

Here’s a breakdown of the health care-related settlements and judgments:

Health care fraud

Health care fraud and abuse remains a leading source of False Claims Act settlements and judgment and recoveries in 2022 restored funds to Medicare, Medicaid, and TRICARE, the health care program for service members and their families:

• Mallinckrodt ARD LLC, previously Questcor Pharmaceuticals Inc., paid $260 million to resolve separate allegations relating to its drug, H.P. Acthar Gel, which is approved to treat, among other things, acute exacerbations of multiple sclerosis and infantile spasms. The government alleged that the company knowingly underpaid rebates to the Medicaid program by improperly designating Acthar as a “new drug” as of 2013, as opposed to a preexisting drug for which Mallinckrodt had significantly raised the price in years prior. The government separately alleged that, from 2010 through 2014, Mallinckrodt knowingly used a foundation as a conduit to pay illegal kickbacks in the form of copay subsidies so that it could market Acthar as “free” to doctors and patients while increasing its price significantly.
• Gold Coast Health Plan, a county-organized health system in California and three of its providers, Ventura County, Dignity Health, and Clinicas Del Camino Real, Inc., paid a combined total of $70.7 million to resolve claims that they knowingly submitted or caused the submission of false claims to California’s Medicaid program in connection with the “Adult Expansion” population that was created by the Patient Protection and Affordable Care Act. The United States alleged that the payments were not for “allowed medical expenses” under Gold Coast’s contract with the state, were pre-determined amounts that did not reflect fair market value, were duplicative of services already required to be rendered, and were unlawful gifts of public funds in violation of the state constitution.

Medically unnecessary services and substandard care

• The DOJ filed claims under the False Claims Act against American Health Foundation (AHF), its affiliate management corporation, and three affiliated nursing homes—Cheltenham Nursing & Rehabilitation Center (Cheltenham), The Sanctuary at Wilmington Place (Wilmington Place), and Samaritan Care Center and Villa (Samaritan)—for providing grossly substandard skilled nursing services between 2016 and 2018. In its complaint, the United States alleged the three AHF nursing homes provided grossly substandard services that failed to meet required standards of care in various ways, including by failing to follow appropriate infection control protocols and not maintaining adequate staffing levels.
• Providence Health & Services Washington (Providence), a health care and hospital system operating in seven western U.S. states, paid $22.7 million to resolve allegations that it billed federal health care programs for medically unnecessary neurosurgeries. At one hospital in Washington state, neurosurgeons were paid based on a productivity metric that provided a financial incentive to perform more surgeries of greater complexity. As part of the settlement agreement, Providence admitted that its medical personnel expressed concerns that two neurosurgeons were endangering patient safety, creating an excessive level of complications and negative outcomes, performing surgery on candidates who were not appropriate for surgery, and failing to properly document their procedures and outcomes.
• Eargo Inc., a company that sells and dispenses hearing aid devices directly to customers nationwide, paid $34.37 million to resolve False Claims Act and common law allegations that it submitted or caused to be submitted claims containing unsupported hearing loss-related diagnosis codes to the Federal Employees Health Benefits Program for the reimbursement of its hearing aid devices.
• Carrefour Associates LLC, and its related companies, which operate under the name Crossroads Hospice, paid $5.5 million to resolve allegations that Crossroads Hospice knowingly submitted false claims to Medicare for hospice services for patients who were not terminally ill.
• Signature Home Health Services of Florida LLC, and its related entities (collectively, SignatureHomeNow) paid $2.1 million to resolve allegations that SignatureHomeNow improperly admitted and provided services to Medicare beneficiaries who were not homebound, did not require certain skilled care, did not have valid or otherwise appropriate plans of care in place, and/or did not have appropriate face-to-face encounters needed to be appropriately certified to receive home health services.
• Hayat Pharmacy paid $2.05 million to resolve allegations that it submitted false claims to Medicare and Medicaid for prescription medications that the pharmacy had switched from lower cost medications to higher cost medications without any medical need and/or a valid prescription.
• Physician Partners of America LLC (PPOA), its founder, its former chief medical officer, and certain of its affiliated entities paid $24.5 million to resolve allegations that they billed federal health care programs for unnecessary urine drug, psychological, and genetic testing. The United States alleged that PPOA required its physician-employees to order multiple urine drug tests at the same time without determining whether any testing was reasonable and necessary, or even reviewing the results of initial testing to determine whether additional testing was warranted. Similarly, the United States alleged that PPOA instructed physicians to automatically order psychological and genetic testing that it did not use or intend to use, and that PPOA instructed physicians to schedule bi-weekly telehealth appointments for the sole purpose of increasing revenue during the pandemic. Finally, the United States alleged that, at the time PPOA was engaged in this conduct, it obtained a loan under the Paycheck Protection Program while certifying that it was not engaged in illicit activity. This settlement resolved allegations under the False Claims Act, the Physician Self-Referral Law (Stark Law), and the Financial Institutions Reform, Recovery, and Enforcement Act (FIRREA).
• MD Spine Solutions LLC dba MD Labs Inc. and two of its owners agreed to pay up to $16 million to resolve allegations that MD Labs submitted claims for medically unnecessary urine drug tests.
• Radeas LLC paid $11.6 million to resolve allegations that it billed Medicare for medically unnecessary urine drug testing by performing presumptive and confirmatory tests on the same urine sample at the same time.

Medicare Advantage matters

The department pursued cases alleging that organizations participating in the Medicare Advantage (or Medicare Part C) program knowingly submitted or caused the submission of inaccurate information or knowingly failed to correct inaccurate information about the health status of beneficiaries enrolled in their plans to increase reimbursement. This past year, the department intervened in one case against Cigna Corp and continued to litigate a number of other cases, including actions against UnitedHealth Group, Independent Health Corporation, Elevance Health (formerly Anthem), and the Kaiser Permanente consortium.

Drug pricing

DOJ filed suit against Professional Compounding Centers of America Inc. (PCCA), a company that sells active pharmaceutical ingredients and other products and services to compounding pharmacies. The complaint alleges that PCCA reported fraudulent and inflated Average Wholesale Prices for its ingredients that bore no relationship to the actual prices at which it sold those ingredients to its pharmacy customers, thereby causing those pharmacies to submit inflated compound prescription claims to TRICARE.

Unlawful kickbacks

• The department intervened and pursued claims under the False Claims Act in several qui tam actions alleging kickback violations. For example, DOJ said it filed a complaint against two laboratory CEOs, a hospital CEO, six physicians, and other individuals and entities, alleging False Claims Act violations based on patient referrals in violation of the Anti-Kickback Statute (AKS) and the Stark Law, as well as alleging that defendants caused claims to be improperly billed to federal health care programs for medically unnecessary laboratory testing.
• It also filed suit against a chiropractor, 15 office-based labs primarily owned by the chiropractor, and five affiliated companies owned by the chiropractor, alleging that the defendants offered physicians the opportunity to invest in the labs to induce them to refer their Medicare and TRICARE patients to the labs for the treatment of peripheral arterial disease.
• Fiscal year 2022 also saw the resolution of numerous matters involving kickback violations, according to the announcement. In a case pursued by a whistleblower, the pharmaceutical company Biogen Inc. paid $843.8 million to resolve allegations that between 2009 and 2014 the company offered and paid kickbacks, including in the form of speaker honoraria, speaker training fees, consulting fees, and meals, to physicians who spoke at or attended Biogen programs in connection with Biogen’s multiple sclerosis drugs Avonex, Tysabri, and Tecfidera.
• Durable medical equipment manufacturer Philips RS North America, LLC, formerly Respironics, Inc., paid $24.75 million to resolve allegations that it knowingly provided unlawful kickbacks to DME suppliers to induce them to select Respironics’ respiratory equipment. The inducements allegedly came in the form of physician prescribing data that Respironics provided free of charge yet knew was valuable in assisting DME suppliers’ marketing efforts to physicians.
• Flower Mound Hospital Partners LLC, a partially physician-owned hospital, paid $18.2 million to resolve allegations that it knowingly submitted claims to federal health care programs that arose from violations of the Stark Law and the AKS. The government alleged that the hospital repurchased shares from physician-owners aged 63 or older and then resold those shares to younger physicians, impermissibly taking into account the volume or value of physician referrals when selecting the physicians to whom the shares would be resold and determining the number of shares each physician would receive.
• Kaléo Inc. paid the United States $12.7 million for alleged false claims for the drug Evzio, used to reverse opioid overdoses, for providing illegal remuneration to prescribing physicians and their office staff, and for directing physicians to send Evzio prescriptions to certain preferred pharmacies that, in turn, submitted false prior authorization requests to insurers. In addition, the United States obtained a $1.3 million settlement from pharmacy Solera Specialty for submitting false and misleading prior authorizations for the drug.
• The United States obtained settlements from 32 Texas doctors totaling more than $5 million to resolve allegations that these doctors violated the AKS and the Stark Law in a scheme to receive improper remuneration from management service organizations (MSOs) in exchange for ordering laboratory tests from designated entities, including a $582,522 settlement with Dr. Mitchell Finnie. The remuneration was allegedly disguised as investment returns but in fact was based on, and offered in exchange for, the doctors’ referrals. The United States also obtained settlements with two health care executives in connection with the scheme.
• Other recoveries relating to kickback violations involved clinical laboratories (Metric Lab Services, LLC), medical device companies (Arthrex, Inc.), and physician practice groups (Ambulatory Anesthesia of Atlanta, LLC and Northside Anesthesiology Consultants LLC).

COVID-related fraud

In response to the COVID-19 crisis, Congress authorized emergency funding for federal agencies to provide direct financial assistance to individuals, businesses, and state, local, and Tribal governments.

The DOJ pursued those who sought to misuse other pandemic-related resources. MorseLife Health System Inc. (MorseLife), a Florida-entity that oversees a nursing home and an assisted living facility, paid the United States $1.75 million to resolve allegations that it facilitated COVID-19 vaccinations for hundreds of individuals ineligible to participate in the Centers for Disease Control and Prevention’s Pharmacy Partnership for Long-Term Care Program (LTC PPP). Although that program was specifically designed to vaccinate long term care residents when doses of the COVID-19 vaccine were in limited supply, MorseLife was alleged to have arranged vaccines for members of MorseLife’s Board of Directors and individuals whom MorseLife targeted for donations to its private foundation.

Cybersecurity

In October 2021, the department announced its Civil Cyber-Fraud Initiative, which is dedicated to using the False Claims Act to combat new and emerging cyber threats. This year marked the department’s first settlement under this initiative:

• Comprehensive Health Services, LLC, (CHS) located in Cape Canaveral, Fla., paid $930,000 to resolve allegations that it falsely represented to the State Department and the Air Force that it had complied with contract requirements relating to the provision of medical services at State Department and Air Force facilities in Iraq and Afghanistan. The allegations included that CHS submitted claims to the State Department for the cost of a secure electronic medical record system to store all patients’ medical records, including confidential identifying information of U.S. service members, diplomats, officials, and contractors working and receiving medical care in Iraq. The government alleged that CHS failed to disclose that it had not consistently stored patients’ medical records on a secure system, and instead put copies of some records on an internal, unsecured, network drive.

Holding individuals accountable

DOJ also continued to use the False Claims Act to deter and redress fraud by individuals as well as corporations. In addition to cases noted above, the DOJ said:

• Minas Kochumian, from Los Angeles, California, paid $9.5 million to resolve allegations that he submitted false claims to Medicare and Medi-Cal for procedures and tests never performed, including injections of medication designed to treat osteoarthritis and osteoporosis, drainage of cysts, and removal and destruction of various growths.
• Harry Doyle and his wife and office assistant Sonya Doyle, of Philadelphia, paid $3 million to resolve allegations of submitting false claims to the U.S. Department of Labor’s Office of Worker’s Compensation Program (OWCP) for psychiatric services that were not provided, as well as upcoding and double-billing patient claims. This is the largest recovery against a single psychiatrist in the history of the OWCP. Dr. Doyle also agreed to voluntary exclusion from federal health care programs for 25 years.
• The United States obtained a $1 million settlement with pharmacist Riad Zahr and two specialty pharmacies Zahr owned and operated–Plymouth Towne Care Pharmacy doing business as People’s Drug Store and Shaska Pharmacy LLC doing business as Ray’s Drugs–for submitting false and misleading prior authorization requests for Evzio.