On February 22, 2024, the Department of Justice (“DOJ”) announced that it recovered over $2.68 billion in False Claims Act (“FCA”) settlements and judgments during the 2023 federal fiscal year. Notably, this amount stems from the highest number of settlements and judgments in a single year, including 543 settlements and judgments during this last fiscal year.
In addition to the record-setting number of settlements and judgments, whistleblower activity continues to grow with over 712 qui tam lawsuits filed in 2023, averaging more than 13 new cases every week. Whistleblowers continue to be one of the federal government’s greatest assets in FCA cases, with qui tam actions accounting for over $2.3 billion of the $2.68 billion in settlements and judgments.
Consistent with prior years and the government’s enforcement priorities, the health care industry continues to be the largest source of FCA settlements and judgments and of increased interest to whistleblowers. Of the $2.68 billion in settlements and judgments, over $1.8 billion is attributed to cases involving the health care industry, including managed care providers, hospitals, pharmacies, laboratories, long-term acute care facilities and physicians.
Health Care Fraud Actions
Medicare Advantage. As the largest component of Medicare, Medicare Advantage (Medicare Part C) was a target in 2023. A Medicare Advantage plan provider agreed to pay over $172 million to the government in connection with allegations that it failed to withdraw inaccurate or untruthful diagnosis codes for its enrollees. Another Medicare Advantage plan provider agreed to pay $22.5 million due to allegations that it had submitted inaccurate diagnosis codes for its enrollees. These inaccurate codes allegedly were not supported by the patient’s medical records.
Unnecessary Services or Substandard Care. The DOJ also took enforcement actions against providers for unnecessary services and substandard care. A long-term care hospital agreed to pay $21.6 million in connection with a whistleblower’s allegations that it knowingly submitted claims for services performed by unlicensed and unauthorized students. A compounding pharmacy paid $7.4 million towards allegations that it unnecessarily added an antipsychotic drug to pain creams to increase its reimbursement and waived associated patient copays. One skilled nursing care and rehabilitation facility paid $7.1 million in connection to allegations that it had provided “worthless services” to its residents resulting in medication errors, unnecessary falls, pressure ulcers and other problems with the facility operations.
Stark Law and Kickbacks. The Stark Law and the Anti-Kickback Statute remain fertile grounds for whistleblower allegations and settlements. The DOJ and whistleblowers filed suits against various individuals and entities for improper remuneration to induce the purchase of goods and services paid by a federal health care program. An imaging company agreed to pay $85.5 million in connection with allegations that the company paid cardiologists above fair market value supervision fees to induce referrals for PET scans and for time when the physicians were not on site. Another company paid $22.9 million to resolve allegations that it improperly paid physicians’ medical directorship fees to induce referrals of home health patients. Other settlements included $45.4 million related to kickbacks to a lab and $31.2 million in connection with allegations of exchange of valuable credits and sporting event tickets in exchange for sales leads. The DOJ also resolved various matters involving allegations of kickbacks for laboratory referrals including sham investment distributions from management service organizations.
Practical Takeaways
FCA enforcement targeting the health care industry continues to be a profitable pursuit for the federal government and of increased interest to whistleblowers. Recoveries made by the federal government are rarely the result of successful litigation, but of settlements made prior to any finding of liability; the penalties under the FCA, including treble damages and fines up to nearly $28,000 per claim, as well as the tremendous costs of litigation, often lead providers to settle these matters, even if confident in their defenses.
The DOJ may independently make a decision to investigate health care entities or intervene in conjunction with a qui tam action initiated by a whistleblower. From the federal government’s initial decision to investigate (often through a Civil Investigative Demand), even low-dollar compliance concerns can cause significant disruption, expense and reputational harm.
As the DOJ continues to closely examine all types of health care entities and physician relationships, organizations need to continuously develop and operationalize effective compliance programs to address compliance concerns before they reach the level of a government investigation. Areas of compliance focus should include financial arrangements, medical necessity and proper standards of care, in addition to emerging areas of compliance risk post-public health emergency and the end of Stark waivers and flexibilities, including in telehealth arrangements. Even the best compliance program is subject to whistleblowers’ accusations, and advice of counsel, both to assure compliance and as a potential future defense, is essential to protect against future FCA claims.
Proactive compliance programs include internal investigations and making strategic and appropriate self-disclosures to the government to avoid the extensive costs associated with responding to a government investigation. When significant concerns do arise, such as receiving a Civil Investigative Demand, health care entities must respond promptly and cooperate fully to mitigate the risk of a prolonged investigative period. Hall Render attorneys have extensive experience counseling clients, from initial compliance decisions, through enforcement investigations and self-disclosures, all the way to FCA litigation, if necessary.
For help understanding your legal obligations, designing a compliance program, investigating a potential issue, responding to Civil Investigative Demands and defending against FCA allegations, please contact:
- Scott Taebel at (414) 721-0445 or staebel@hallrender.com;
- David Honig at (317) 977-1447 or dhonig@hallrender.com;
- Jessica Biondo at (248) 519-3093 or jbiondo@hallrender.com;
- Jenny Kumosz at (202) 631-4154 or jkumosz@hallrender.com; or
- Your primary Hall Render contact.
Hall Render blog posts and articles are intended for informational purposes only. For ethical reasons, Hall Render attorneys cannot give legal advice outside of an attorney-client relationship.
