Healthcare-Related False Claims Act Settlements Reach $1.8 Billion in FY 2023

The False Claims Act (FCA), the federal government’s primary tool for civil enforcement, is resulting in record returns. The U.S. Department of Justice reported 543 settlements and judgments, recovering $2.68 billion in the fiscal year ending Sept. 30, 2023.

Of that, more than $1.8 billion related to matters involving the healthcare industry, including managed care providers, hospitals, pharmacies, laboratories, long-term acute care facilities and physicians.

Comparatively speaking, for FY 2022, recoveries surpassed $2.2 billion, with $1.7 billion related to matters involving the healthcare industry,

While the $1.8 billion was from federal healthcare fraud, the U.S. Justice Department also was instrumental in recovering additional money for state Medicaid programs, which is funded by states and the federal government.

Whistleblowers Are Key to Rooting Out Healthcare Fraud

Whistleblowers filed 712 qui tam, or whistleblower, actions in fiscal year 2023, up from 652 the year before. Of the more than $2.68 recovered, more than $2.3 billion was the result of these actions. Of those 712 new cases, 348 related to healthcare.

During the same period, the government paid more than $349 million to the individuals who exposed fraud and false claims by filing these actions. Whistleblowers receive a portion of the monies recovered – generally between 15 percent and 20 percent.

The False Claims Act imposes triple damages and penalties on those who knowingly and falsely claim money from the United States or knowingly fail to pay money owed to the United States. These recoveries restore funds to federal programs such as Medicare, Medicaid, and TRICARE, the healthcare program for service members and their families.

Medicare Advantage Fraud

The Justice Department continued to pursue cases alleging false claims in the Medicare Advantage (or Medicare Part C) program. “As Medicare Part C is now the largest component of Medicare, both in terms of federal dollars spent and the number of beneficiaries, the work of the Justice Department in this area is of critical importance,” DOJ noted.

Among those settlements:

The Cigna Group agreed to pay $172 million to resolve allegations that it knowingly submitted and failed to withdraw inaccurate and untruthful diagnosis codes for its Medicare Advantage Plan patients to increase its payments from Medicare.

Martin’s Point Health Care Inc. agreed to pay $22.5 million to resolve allegations that it knowingly submitted inaccurate diagnosis codes for its Medicare Advantage Plan patients that were not supported by the patients’ medical records to increase reimbursements from Medicare.

In addition to securing these settlements, the Justice Department continued to litigate a number of other cases involving the Medicare Advantage program, including actions against UnitedHealth Group, Independent Health Corporation, Elevance Health (formerly Anthem), and the Kaiser Permanente consortium.

Medically Unnecessary Fraud

The Justice Department also pursued and resolved matters in which providers billed federal healthcare programs for medically unnecessary services and substandard care.

Cornerstone Hospital Medical Center and related entities agreed to pay $21.6 million to resolve allegations that the former long-term acute care facility knowingly submitted claims for services performed by unlicensed and unauthorized students, and services that were not provided or effectively worthless.

Smart Pharmacy Inc., SP2 LLC, and Gregory Balotin agreed to pay at least $7.4 million to resolve allegations that they unnecessarily added the antipsychotic drug aripiprazole to topical compounded pain creams to boost federal reimbursement for the compounded creams and waived patient copayments.

Healthcare Kickbacks

Cardiac Imaging Inc. and its founder, owner, and CEO Sam Kancherlapalli, agreed to pay $85.5 million to resolve allegations that, with Kancherlapalli’s oversight and approval, Cardiac Imaging paid kickbacks to cardiologists in the form of above-fair market value supervision fees, to induce those doctors to refer their patients to Cardiac Imaging for PET scans.

Carter Healthcare LLC and its President Stanley Carter and Chief Operations Officer Bradley Carter agreed to pay $22.9 million to resolve allegations that Carter Healthcare improperly paid physicians under the guise of medical directorships to induce referrals of home health patients.

Modernizing Medicine Inc. agreed to pay $45.4 million to resolve allegations that it improperly solicited and received kickbacks from a lab company in exchange for recommending and arranging for ModMed’s users to utilize the lab company’s pathology lab services, conspired with the lab company to improperly donate ModMed’s electronic health record technology to healthcare providers, and paid kickbacks to its customers and other influential sources to recommend ModMed’s technology and refer potential customers to ModMed.

NextGen Healthcare Inc. agreed to pay $31.2 million to resolve allegations that it misrepresented the capabilities of certain versions of its electronic health record (EHR) software by using an auxiliary product that was designed only to meet government certification criteria but lacked critical functionality. The government further alleged that NextGen provided unlawful payments in the form of credits, often worth as much as $10,000, along with tickets to sporting events and entertainment, that it gave to current customers whose recommendation of NextGen’s software led to a new sale.

Five corporate entities and ten individuals paid more than $2.6 million to settle allegations of kickbacks for laboratory referrals, including sham investment distributions from management service organizations. Among them, Peggy Borgfeld who agreed to pay $325,000 and be excluded from federal healthcare programs for five years to resolve allegations that she falsely certified to Medicare that certain laboratory testing claims complied with the Anti-Kickback Statute. Also, Dr. Chad Shelton, Dr. Michael Boedefeld, and their medical practice agreed to pay $396,360 to settle allegations they received kickbacks in return for their laboratory referrals. The settlements are part of an ongoing investigation that so far has resulted in settlements with 43 physicians and recoveries of more than $46 million.

Other Healthcare Fraud

Lincare Holdings Inc. agreed to pay $29.0 million to resolve allegations that it fraudulently billed Medicare Advantage plans and Medicare Part B for oxygen equipment rental payments.

BioTelemetry Inc. and its subsidiary CardioNet LLC, agreed to pay nearly $45 million to resolve allegations that they submitted claims for heart monitoring tests that were evaluated, in part, outside the United States, in violation of federal law.

How We Can Help

DOJ indicated that healthcare fraud would continue to be a priority area of focus and that it would continue to prosecute violators under the FCA and Anti-Kickback Statute. Healthcare organizations can mitigate their risk by addressing whistleblower claims as soon as they are made and by establishing best practices in their compliance programs.

The Health Law Offices of Anthony C. Vitale is known for its representation of whistleblowers, as well as its ability to defend those who become the target of a whistleblower action. For more information call 305-358-4500 or send us an email to info@vitalehealthlaw.com and let’s discuss how we might be able to assist you.