Whistleblower Law Blog
Topic: False Claims Act (FCA)
On January 12, 2016, a nursing home company and two subsidiaries agreed to pay $125 million to settle a False Claims Act lawsuit alleging that they caused skilled nursing facilities to submit false claims to the government. The relators’ combined share of $24 million represents just over 19 percent of the government’s recovery. The case is United States ex rel. Halpin and Fahey v. Kindred Healthcare, Inc., et al., Case No. 1:11cv12139-RGS, and was filed in the U.S. District Court for the District of Massachusetts.
The qui tam action, in which the government intervened, was originally filed by two relators. Janet Haplin is a physical therapist and former rehabilitation manager for Rehab Care; and Shawn Fahey is an occupational therapist who worked for RehabCare.
Kindred Healthcare purchased RehabCare Group, Inc. and RehabCare Group East Inc. in 2011. The government’s complaint alleged that the companies submitted claims to Medicare for “rehabilitation therapy services that were not reasonable, necessary and skilled, or that never occurred,” according to the Department of Justice.
By R. Scott Oswald
Managing Principal, The Employment Law Group, P.C.
If a government supplier quietly ignores vital rules but still bills taxpayers as if it had complied, can it be held liable under the federal False Claims Act — even if it never directly lies about its compliance?
In today’s arguments in Universal Health Services Inc. v. United States ex rel. Escobar, the U.S. Supreme Court heard two diametrically opposed views. There was little doubt about which side the justices preferred; their resulting debate was limited to sorting out the details.
District Court, in Case Against Moody’s, Leaves the Door Open for Claims Against Rating Agencies Under the False Claims Act
In United States ex rel. Kolchinsky v. Moody’s Corporation, Case No. 1:12-cv-01399 (S.D.N.Y. 2012), a former employee of Moody’s credit rating agency alleged that the agency engaged in rampant fraud leading up to the financial crisis. On February 4, 2016, the U.S. District Court for the Southern District of New York, in its opinion on Moody’s motion to dismiss, rejected several theories of liability against Moody’s but left open the possibility of liability under the False Claims Act for Moody’s use of an electronic “Ratings Delivery Service.”
Ilya Eric Kolchinsky was Moody’s Managing Director. His first amended complaint alleges that he repeatedly attempted to raise concerns to his superiors about Moody’s false credit ratings. Moody’s ignored Kolchinsky’s concerns and ultimately terminated him. In 2009 and 2010, Kolchinsky testified at three separate congressional hearings regarding the concerns he raised while at Moody’s.
THIS POST CONCERNS A CLIENT OF THE EMPLOYMENT LAW GROUP® LAW FIRM. THE RESULTS OF ALL CASES DEPEND ON A VARIETY OF FACTORS UNIQUE TO EACH CASE. PAST SUCCESSES DO NOT PREDICT OR GUARANTEE FUTURE RESULTS.
Our Founding Fathers called whistleblowing “the duty of all persons in the service of the United States,” and Abraham Lincoln signed the False Claims Act to foster the practice. But while federal laws reward people who report fraud against the government, whistleblowing isn’t always easy.
On March 8, 2016, the U.S. Department of Justice announced that it would award whistleblower Joseph Ting more than $7 million for his role in a settlement under which 21st Century Oncology, the cancer-care giant, will return $34.7 million to taxpayers to resolve allegations that it overbilled government insurance programs including Medicare.
The outcome was a long-awaited vindication for Dr. Ting, who was represented in the case by The Employment Law Group® law firm. (Read more about our firm’s involvement in the case.) In this candid Q&A, Dr. Ting talks about the experience of being a whistleblower.
Do you remember the moment you decided to take this action against your employer?
I don’t remember an exact time, but it started in March 2014 — shortly after 21st Century took over South Florida Radiation Oncology, the cancer treatment center where I worked. 21st Century was pushing us to implement its so-called Gamma project as fast as possible. This was a huge undertaking and I did not see any medical benefit. 21st Century seemed to be concerned about maximizing its profits, not patient care. I knew I could not be part of that, so I had to do something.
What was the problem with Gamma, exactly?
I am a medical physicist; part of my job deals with calibrating radiation therapy for cancer patients. With Gamma, 21st Century was demanding that an extra measurement be taken for every radiation dose given to every patient — and that each extra measurement be billed to the patient’s insurance. They said it was to confirm proper dosing.
Precision is important, so I did everything I could to understand what Gamma does. But the more I looked into it, the more I had doubts about the whole thing. In my opinion the extra measurement provided no medical value. People were not properly trained to use Gamma, it did not work properly in many cases, and no one looked at the results anyway. Plus it made treatment sessions longer, which is unfair to patients. Later I found out it was being billed improperly, too.
Did you raise these concerns internally?
Yes. I talked to my immediate supervisor. His attitude was that there was nothing he could do about it — it was 21st Century policy. But he shared my concerns with the technology director of 21st Century, and the three of us had a meeting. The technology director said something like, “Oh, we don’t charge for that, it’s just for the patients’ benefit.” But I knew that was not true.
So you decided to file a whistleblower lawsuit on behalf of the taxpayers who were paying for this via Medicare. Did that make your work uncomfortable?
The lawsuit did not impact my work directly because no one knew I had blown the whistle. The process is kept secret from the defendant for a period of time. But I did feel more stressed at work. I avoided doing any Gamma work because I was not comfortable with it, so I felt separate from the rest of the group. I really believed they were doing something wrong, and I felt like I had alienated myself. No one said anything, but that was a significant part of my reason to depart in July 2014. I couldn’t be part of the group anymore. I could not be a silent participant.
Do you have any regrets about blowing the whistle?
No. It was the right thing to do. I suppose that if news had broken before I found a new job, then maybe I would have had trouble finding employment — I don’t know. I could retire if necessary, but I enjoy my work and I’m not willing to retire yet. If I were younger, maybe I would have thought this was more of a risk. But it is important to listen to your conscience.
Tell us a little about your new job.
It’s a relief from the stress I experienced at South Florida Radiation Oncology. Where I work now is a very friendly environment and everybody is part of the culture together. We’re transparent and open and talk about things. I am part of the group again.
Is your employer abusing Medicare? The Employment Law Group can help you to take action.
On September 29, 2015, a federal judge in Washington revived a state retaliation claim against a contractor accused of False Claims Act (FCA) violations, citing a recent Washington State Supreme Court ruling that overturned a previous decision that would have made the FCA retaliation provision the plaintiff’s sole avenue for relief.
Maxmillian Salazar III had sued federal fire-safety contractor Monaco Enterprises, Inc. under the federal False Claims Act based on allegations that the company overbilled the U.S. Government. Salazar also alleged that Monaco fired him, in violation of Washington state common law, for reporting the overbilling. In October 2011, the company had fired Salazar, its former Director of Application Engineering, after he reported overbilling he witnessed while performing work related to Monaco’s procurement process.
Under Washington state precedent in place since the decision in Cudney v. Alsco, Inc., 259 P.3d 244 (Wash. 2011), Salazar was barred from bringing the state retaliation claim because the FCA includes its own anti-retaliation provision (31 U.S.C. § 3730(h)). Cudney held that a plaintiff could not bring a claim of wrongful discharge in violation of public policy under Washington state common law if an alternate remedy for the retaliatory filing existed under any state or federal statute.
The U.S. Department of Justice announced settlements in six large qui tam cases during August – including a medical fraud case where the whistleblower earned over a two million dollar reward.
The False Claims Act (FCA) penalizes fraud against the U.S. government. Its qui tam provision allows whistleblowers to sue on behalf of the government, and to get up to 30% of recovered funds as a reward.
On June 24, 2015, DaVita Kidney Care, a division of DaVita Healthcare Partners and one of the largest U.S. kidney dialysis providers, agreed to pay the U.S. government nearly half a billion dollars to settle allegations brought by two former employees that it violated the False Claims Act by intentionally wasting dialysis medications in order to receive higher Medicare payments.
In 2007, two whistleblowers – Dr. Alon Vainer and nurse Daniel Barbir – brought a qui tam action against DaVita after observing that DaVita was throwing out good medicine for which it then billed Medicare. In March 2011, the Justice Department decided not to intervene in the case, but the whistleblowers continued to litigate the case. This settlement is one of the largest recoveries in which the Justice Department did not intervene. The whistleblowers are entitled to 25% to 30% of the nearly half a billion dollar settlement. DaVita’s settlement comes on the heels of two other recent settlements by the company: one in 2014 for $350 million for alleged kickbacks, and one in 2012 for $55 million for the alleged overbilling of a drug.
Allegations of fraud against Medicare, a frequent impetus for qui tam actions under the False Claims Act, often involve an enormous number of false claims as part of a larger scheme of fraud committed by an entity. These large numbers of claims present a practical problem in determining liability and calculating damages. In a recent case, United States ex rel. Angela Ruckh v. Genoa Healthcare, et al., the United States District Court for Middle District of Florida affirmed the use of statistical sampling to demonstrate liability in a qui tam action.
In Ruckh, the Relator alleges that a number of health care facilities defrauded the U.S. government by “upcoding” (billing for higher level services than the facility actually performed). The Relator alleges that the Defendants submitted false claims from fifty-three different health care facilities. Given the impracticality of analyzing each and every claim from the various facilities, the Relator sought to use statistical sampling, as well as expert testimony, to extrapolate the amount of overpayment and assess liability. The Defendants in Ruckh relied on a footnote in a 1993 district court case from Massachusetts, United States v. Friedman, No. 86-0610-MA, 1993 U.S. Dist. LEXIS 21496 (D. Ma. Jul 23, 1993), for the proposition that statistical sampling cannot be used to demonstrate liability and calculate damages.
In February 2015, two Florida doctors and their spouses paid $1.13 million to settle allegations that they received kickbacks in exchange for home health care referrals. Drs. Alan Buhler and Craig Prokos hired their wives as “marketers,” and referred patients for home care services. The settlement will resolve the allegations brought by a relator under the qui tam provisions of the federal False Claims Act, which allows private parties to bring suit on behalf of the United States government to recover funds paid by the government based on false claims. The relator is entitled to a share of the settlement amount.
Home health care is an area of continuing and rising fraud. Fraudulent conduct has become part of a number of companies’ business plans. Some businesses view making a settlement payment a cost of doing business, knowing that the settlement will be only a fraction of the money they have fraudulently received. Often, though, criminal charges are also brought against the fraudster.
Federal Court in South Carolina Holds That A Complaint Is Not Barred by The FCA’s First-to-File Rule If the Earlier-Filed Complaint was Voluntary Dismissed
The United States District Court for the District of South Carolina held that the False Claims Act’s (FCA) first-to-file rule requires that another complaint must be pending. Thus, the voluntary dismissal of an earlier-filed complaint clears the way for subsequent complaints, and no comparison of content of the complaints is necessary to allow the later-filed case to proceed.