Health Care Fraud and Abuse Control Program FY 2004

The Department of Health and Human Services
And
The Department of Justice
Health Care Fraud and Abuse Control Program
Annual Report For FY 2004



SEPTEMBER 2005

Monetary Results

During 2004, the Federal Government won or negotiated approximately $605 million in judgments and settlements, and it attained additional administrative impositions in health care fraud cases and proceedings. The Medicare Trust Fund received transfers of more than $1.51 billion during this period as a result of these efforts, as well as those of preceding years, and an additional $99 million in federal Medicaid money was similarly transferred to the Centers for Medicare and Medicaid Services (CMS) as a result of these efforts. The HCFAC account has returned over $7.3 billion to the Medicare Trust Fund since the inception of the program in 1997.

Enforcement Actions

In FY 2004, U.S. Attorneys' Offices opened 1,002 new criminal health care fraud investigations involving 1,685 potential defendants. Federal prosecutors had 1,626 health care fraud criminal investigations pending, involving 2,361 potential defendants, and filed criminal charges in 395 cases involving 646 defendants. A total of 459 defendants were convicted for health care fraud-related crimes during the year. Also in FY 2004, the Department of Justice opened 868 new civil health care fraud investigations, and had 1,362 open civil health care fraud investigations. The Department of Justice filed complaints or intervened in 269 civil health care cases in 2004.

ACCOMPLISHMENTS
Overall Recoveries

During this fiscal year, the Federal Government won or negotiated approximately $605 million in judgments and settlements, and it attained additional administrative impositions in health care fraud cases and proceedings. The Medicare Trust Fund received transfers of more than $1.51 billion during this period as a result of these efforts, as well as those of preceding years, and an additional $99 million in federal Medicaid money was similarly transferred to CMS as a result of these efforts. Note that some of the judgments, settlements, and administrative actions that occurred in 2004 will result in transfers in future years, just as some of the transfers in 2004 are attributable to actions from prior years.

In addition to these enforcement actions, numerous audits, evaluations and other coordinated efforts yielded recoveries of overpaid funds, and prompted changes in Federal health care programs that reduce vulnerability to fraud. HHS agreed in FY 2004 to recover more than $601 million in OIG recommended refunds – the largest amount in the past 10 years.

Program Accomplishments

Working together, HHS/OIG, DOJ and their law enforcement partners have brought to successful conclusion the investigation and prosecution of numerous health care fraud schemes. In addition to these, numerous audits, evaluations and other coordinated oversight efforts yielded recoveries of overpaid funds, and prompted changes in Federal health care programs that reduce vulnerability to fraud. During FY 2004, the many significant HCFAC Program accomplishments included the following:

Fraud Issues

Pharmaceutical Companies Fraud

Pfizer, a division of the Warner-Lambert Company, paid $430 million in fines and settled its FCA liability for illegal marketing conduct and fraudulent promotion of the drug Neurontin for uses that were not approved by the U.S. Food and Drug Administration (FDA). Neurontin was approved by the FDA in December 1993 solely for adjunctive or supplemental anti-seizure use by epilepsy patients. Under the provisions of the Federal Food, Drug and Cosmetic Act, 21 U.S.C. § 301, et seq., a company must specify the intended uses of a product in its new drug application to FDA. Once approved, the drug may not be marketed or promoted for so-called "off-label" uses - any use not specified in an application and approved by FDA. However, Warner-Lambert's strategic marketing plans, as well as other evidence, showed that the company aggressively marketed Neurontin to treat a wide array of ailments for which the drug was not approved. The company promoted Neurontin for the treatment of various pain disorders, Amyotrophic Lateral Sclerosis (ALS, a degenerative nerve disease commonly referred to as Lou Gehrig's Disease), attention deficit disorder, migraine, drug and alcohol withdrawal seizures, and restless leg syndrome.
Warner-Lambert promoted Neurontin for unapproved uses even when scientific studies did not demonstrate effectiveness. For example, the company promoted Neurontin as effective for use as the sole drug (monotherapy) for epileptic seizures, even after the FDA specifically had not approved monotherapy use. Similarly, Warner-Lambert falsely promoted Neurontin as effective for treating bipolar disease, even when a scientific study demonstrated that a placebo worked as well or better than the drug. As a consequence of the unlawful promotion scheme, patients who received Neurontin for unapproved and unproven uses had no assurance that their doctors were exercising their independent and fully-informed medical judgment, or whether the doctor was instead influenced by misleading statements made by, or inducements provided by, Warner-Lambert.

Warner-Lambert pleaded guilty to felony violations of the Federal Food, Drug, and Cosmetic Act, and paid a criminal fine of $240 million, the second largest criminal fine ever imposed in a health care fraud prosecution. The company also settled its Federal civil FCA liabilities by paying the United States $83.6 million, plus interest, for losses to the Federal portion of the Medicaid program, and resolved its civil liabilities to the fifty states and the District of Columbia by paying $68.4 million, plus interest, for losses to the state Medicaid programs. In addition, Warner Lambert paid $38 million to fund a remediation program, to be administered by state consumer protection offices, to address harm caused to consumers. Finally, Pfizer Inc, Warner-Lambert's parent company, agreed to comply with the terms of a corporate compliance program, designed to ensure that the changes Pfizer, Inc. made after acquiring Warner-Lambert in 2000 are effective, and that the company will detect and correct any future off-label marketing conduct on a timely basis. In addition, Warner-Lambert agreed to a state court injunction barring the improper conduct that was the subject of the state's Consumer Protection Division's investigation.

Schering Sales Corporation, a sales and marketing subsidiary of drug manufacturer Schering-Plough Corporation, pleaded guilty and paid a $52.5 million fine on charges that it paid a health maintenance organization (HMO) a kickback to induce the HMO to keep Schering's drug, Claritin, on its formulary (a list of drugs that the HMO covers for its beneficiaries). Schering-Plough also settled its FCA liability and paid the United States, 50 state Medicaid programs, and certain Public Health Service (PHS) entities, approximately $293 million for failing to report the company’s true best price for Claritin to the Medicaid programs. At the same time, Schering-Plough entered into a Corporate Integrity Agreement, or CIA with the HHS/OIG to correct its government pricing and Medicaid rebate reporting failures.

In the late 1990s, Claritin was Schering’s best-selling drug. Claritin was substantially more expensive, however, than its biggest competitor, Allegra. When one of Schering’s best customers demanded a price reduction in Claritin -- because it cost the HMO millions of additional dollars a year to purchase Claritin instead of Allegra -- Schering refused, in part, because it knew that it then would have to lower the Claritin price for the Medicaid programs. Under the Medicaid Drug Rebate Statute, drug manufacturers are required to report their “best prices” to the Federal Government and to pay quarterly rebates to Medicaid to ensure that the nation’s insurance program for the poor receives the benefit of favorable drug prices offered to other large purchasers of drugs. As a participant in the Medicaid Rebate Program, Schering was required to report its “best price” for and to pay rebates on Claritin. Similarly, under the provisions of the PHS drug pricing program, Schering was required to charge PHS entities such as AIDS drug programs and community health centers a discounted price, based in part on the Medicaid price.

After the HMO removed Claritin from its formulary, Schering offered to make up the difference in price between Claritin and Allegra by offering the HMO a $10 million package of added value, in lieu of an actual price reduction on Claritin. The United States alleged that, as part of this “value added” package, Schering offered to provide $3 million worth of deeply discounted Claritin Reditabs, health management services at far below fair market value, and an interest free loan in the form of prepaid rebates. Schering also offered to pay an annual fee of 2% of the annual gross sales of Schering drugs to the HMO, or approximately $2.4 million, disguised as a “data fee” in order to give the appearance that the fee was a fair market value transaction rather than a hidden inducement to the HMO to keep Claritin on its formulary.

Schering also provided, to another HMO, a risk share arrangement in which Schering covered a portion of the managed care customer’s respiratory drug costs, provided deep discounts on other Schering products, provided payment and services for Internet development, and provided an interest free loan in the form of prepaid rebates. Because of Schering’s failure to account for these discounts in its reported best price for Claritin, the Medicaid program and PHS entities paid far more for Claritin from 1998-2002 than Schering’s two managed care customers.

In an unrelated matter, Schering-Plough Corporation, Schering Corporation, and Warrick Pharmaceuticals paid the United States and the state of Texas $27 million to settle allegations that Warrick, a division of Schering-Plough, submitted false pricing information for its generic line of allergy and respiratory drugs. The government alleged that Warrick's manipulation of wholesale acquisition costs resulted in inflated claims for Federal and Texas Medicaid funds.

Misbranded Pharmaceutical Fraud

Two defendants in Idaho who ran clinics purporting to treat spinal injuries and other illnesses, were sentenced to 51 months in prison, and more than $800,000 in restitution. The Idaho residents were indicted on 28 counts of conspiracy, wire fraud and misbranding drugs. One of the defendants fled to Mexico and was a fugitive for almost two years before turning himself in and pleading guilty. The other defendant pleaded guilty and was sentenced to serve 33 months imprisonment. The defendants owned a clinic in Nampa, Idaho, and operated a website that promoted a product called Neuralyn. More than 150 patients, mostly paraplegics or quadra-plegics, paid up to $10,000 to come to Nampa or affiliated clinics in Utah and Colorado to be treated. Patients were told that Neuralyn was 85 to 95% successful and could enable them to move or even walk again by regrowing nerve cells. They were told, falsely, that the defendant was a medical doctor with training in biochemistry, that Neuralyn had undergone clinical studies, and that a patent application and FDA approval were pending. Neuralyn contained a topical anesthetic that gave temporary relief and led patients to believe they were improving. The defendants charged $300 to $500 for a vial of Neuralyn, which cost them only $15. The pharmacist who made the Neuralyn pleaded guilty to conspiracy to deliver a misbranded drug in interstate commerce with intent to defraud. The pharmacist cooperated, was given five years probation, and paid restitution.
The participating states, also victimized by this scheme, consisted of Alabama, Arizona, California, Colorado, Connecticut, Delaware, Georgia, Idaho, Indiana, Kentucky, Louisiana, Maine, Maryland, Michigan, Mississippi, New Hampshire, New Jersey, New York, Ohio, Pennsylvania, Tennessee, Texas, Utah, Virginia, Vermont, Washington, West Virginia, Wyoming; and the District of Columbia. The settlement covered the time period from January 1, 1997 to December 31, 2001. This settlement was reached through the efforts of Federal investigators and prosecutors, and the state Medicaid Fraud Control Units in the affected states.

Pharmaceutical Distribution Fraud

Eleven defendants and two companies, including five physicians, were convicted of conspiracy to distribute controlled substances and related offenses, in the Eastern District of Virginia, in connection with their operation of illegal internet pharmacies. Many of the defendants had the proceeds of their unlawful activity seized. Over $2.3 million has been ordered to be seized, and approximately $4 million in cash and assets are subject to a final order of seizure. The defendants operated a number of websites through which they unlawfully distributed and dispensed millions of pills, including phendimetrazine, a Schedule III weight loss stimulant sold by its brand name Bontril, phentermine and Meridia (Schedule IV weight loss drugs), and Viagra, Xenical, and Celebrex. Customers who ordered drugs from the websites were not required to provide a prescription before receiving the controlled substances. Instead, customers filled out an on-line questionnaire and chose the type, quantity, and dosage they wanted. The prescriptions were dispensed under the authorizations of co-conspirators through pharmacies owned by other co-conspirators. For a prescription to be valid, it must be issued for a legitimate medical purpose by an individual acting in the usual course of the professional practice. The prescriptions authorized by the physicians were not valid because they did not result from a legitimate doctor-patient relationship. Other than the on-line questionnaires, the physicians did not have any contact with the people ordering the medication, and did not monitor, or provide any means to monitor, medication response, weight loss or weight gain.


Two pharmacists were convicted on charges in Texas, related to the operation of an internet pharmacy and the illegal dispensing of controlled substances. Online customers of the internet pharmacy could simply access the website, complete a questionnaire, and pick their controlled substance of choice. The pharmacy found doctors willing to sign prescriptions without examining the patient in exchange for “per prescription” payments. More than 38,000 prescriptions for controlled substances were written or filled in defendants’ pharmacies, with roughly $5.6 million in pharmacy income from the sale of controlled substances. Although a Texas State Board of Pharmacy Inspector advised one of the defendants that prescriptions written without a valid doctor/patient relationship were invalid, the defendant moved to Oklahoma and set up a similar internet pharmacy there.


Neways, Inc., distributor of BioGevity - an oral spray with human growth hormone (HGH), was sentenced to pay a $500,000 criminal fine and to forfeit $1.25 million. Although sale of HGH for human consumption is illegal without a prescription, Neways distributed HGH without a doctor’s order, touting it as having a rejuvenating effect. The sentencing of Neways concludes the first prosecution in the United States of a company that distributed an oral spray containing HGH. HGH is a hormone produced by the pituitary gland that regulates growth. An adult misusing HGH is at risk of developing symptoms of the disease acromegaly such as enlargement and distortion of facial features, hands and/or feet, excessive growth of parts of the skull, thickening of the skin, development of hypertension, muscle weakness, enlargement of internal organs (including the heart, liver and spleen) and other syndromes, some of which are irreversible and possibly fatal.
False Prescriptions

Rite Aid Corporation, a national retail pharmacy chain, paid the United States $5.6 million and $1.4 million to participating states (a total of $7 million) to settle allegations that the company submitted false prescription claims to government health insurance programs. The United States alleged that Rite Aid billed government health care programs (Medicaid, TRICARE and the Federal Employee Health Benefits Program (FEHBP)) for drugs that were never delivered to beneficiaries of the government health care programs and were later returned to stock.
Durable Medical Equipment Fraud

Abbott Laboratories, Inc. paid the Federal Government $382 million and the 50 states and the District of Columbia a total of $32 million to resolve claims that its Ross Products Division defrauded the Medicare and Medicaid program over a 10-year period in connection with enteral feeding equipment. CG Nutritionals, Inc. (CG), a part of the Ross Products Division, pleaded guilty to obstructing a criminal investigation of health care offenses, paid a $200 million criminal fine, and was placed on 5-years of probation. In the settlement agreement resolving FCA liability, the United States alleged that Ross provided enteral infusion pumps at no charge to some of its customers, primarily nursing home suppliers, then advised the suppliers how to disguise the true cost of the pumps when the suppliers billed the government.


The United States also contended that up-front payments, signing bonuses, conversion bonuses, and education bonuses were offered to its customers to induce them to sign long term contracts for enteral products that were ultimately reimbursed by Medicare. The Medicare and Medicaid Anti-kickback Statute forbids the payment of remuneration to induce the referral of Medicare or Medicaid patients. As part of the settlement, CG will be permanently excluded from participation in the Medicare and Medicaid programs. Abbott also entered into a 5-year CIA with the HHS/OIG, which required Abbott to reform the sales and marketing practices of its enteral feeding operations. The case arose out of “Operation Headwaters,” a 3-year investigation into the illegal practices of durable medical equipment (DME) manufacturers.


The president and owner of an Indiana DME and pharmaceutical supplier was sentenced to 51 months imprisonment and ordered to pay over $1.9 million in restitution for health care fraud, mail fraud and unlawful kickbacks. The defendant is currently undergoing criminal forfeiture of assets, including a $1 million home and assets of two related businesses. The defendant had billed Medicare, Medicaid, and TRICARE for injectable solutions, intravenous (IV) therapies, and other selected services and supplies in grossly excessive quantities.


St. Francis Hospital, Inc., a South Carolina hospital, agreed to pay $9.5 million to resolve Medicare billing improprieties in its home health, hospice, and DME programs. After conducting an internal investigation and audit, St. Francis discovered significant error rates and documentation lapses in its claims submitted to Medicare. The hospital subsequently disclosed these findings to the HHS/OIG under its Provider Self-Disclosure Protocol. This settlement represents the largest to date brought solely under the Civil Monetary Penalties (CMP) Law.


Seven individuals in Miami, Florida were sentenced for their participation in a multi-million dollar conspiracy to defraud Medicare and launder the proceeds of the fraud. The scheme resulted in approximately $5 million in false claims to Medicare for power wheelchairs. Kickbacks were paid to patients to induce them to act as fictitious power wheelchair recipients. In some cases, the conspirators staged deliveries of wheelchairs to the patients, and, after photographing the patient in his or her new wheelchair, took away the chair or retrieved it later. All seven defendants pleaded guilty prior to trial. The two organizers of the conspiracy were sentenced to prison terms of 87 months and 53 months, respectively. The other five received prison terms ranging from 1 year and 1 day to 78 months. The organizers and their top patient recruiter were ordered to pay $1.7 million in restitution. The four other defendants were held responsible for paying restitution in amounts ranging from $406,000 to $867,000, as a portion of the joint restitution figure.


Four defendants, including a physician, were convicted in Los Angeles, California of charges of participating in a health care fraud scheme that sought approximately $2.6 million from the Medicare program for DME, including motorized wheelchairs, wheelchair accessories and hospital beds that were not medically necessary and, in many cases, were never delivered. One of the defendants, the owner of a Santa Monica wheelchair repair shop, paid patient recruiters, or “cappers,” a fee to identify and bring Medicare beneficiaries to a local physician’s clinic. The physician convicted as part of the scheme would have his physician’s assistant examine the patients brought by the “cappers” in exchange for kickbacks up to $500 from the repair shop owner, and would sign Certificates of Medical Necessity authorizing Medicare payment for a motorized wheelchair, hospital bed, or other equipment for the patients. The repair shop owner would then use the Medicare beneficiary information and the Certificates of Medical Necessity to bill Medicare for unneeded medical equipment, which frequently was never delivered to patients. The shop owner billed Medicare primarily for motorized wheelchairs, for which Medicare typically reimbursed the seller approximately $4,000 to $8,000 per chair.


Five defendants were convicted in the Northern District of Texas as a result of “Operation Roll Over,” an investigation of a multi-million dollar Medicare fraud scheme that involved the fraudulent billing of motorized wheelchairs to Medicare. Recruiters working for the suppliers told Medicare beneficiaries that, in exchange for their Medicare information, they could receive free scooters and electric wheelchairs. The suppliers then used the patients' Medicare information to file fraudulent claims. Some of the Medicare beneficiaries understood they were getting scooters, and actually received scooters, but the wheelchair suppliers billed Medicare for the substantially more expensive motorized wheelchairs. Sometimes Medicare beneficiaries received written notification from Medicare that they had received a motorized wheelchair when, in fact, they had never asked for one nor received one. Typically, the defendant wheelchair suppliers would bill Medicare from $8,000 to $10,000 for motorized wheelchairs, for which they would receive approximately $5,000 from Medicare. The defendants were charged with health care and mail fraud, and money laundering. Several luxury vehicles and $7 million in proceeds were seized in connection with the fraud scheme.


A defendant in Florida was sentenced to 37 months in prison and ordered to pay $1 million in restitution for health care fraud. The defendant operated and controlled four different DME companies using “straw nominee” owners to conceal the defendant’s true identity. The defendant submitted claims to Medicare for power wheelchairs that were either not provided, were used or refurbished but billed as new, or were exchanged for less expensive scooters. The defendant also billed for the equipment repairs and paid kickbacks for wheelchair referrals. In 1997, the defendant was convicted in state court of Medicaid provider fraud in connection with using the same DME scheme.
Physician Fraud

An Indiana physician was sentenced to 7-years incarceration (with 3 years suspended) for a scheme involving intimidating Medicaid beneficiaries by telling them they would lose their benefits if they did not make cash payments.


A Norwalk, Connecticut pediatrician pleaded guilty to charges of health care fraud and tax evasion as a result of "Operation Free Shot," an investigation coordinated by the FBI’s and HHS/OIG’s Health Care Fraud Task Force which focuses on Connecticut health care providers who bill Medicaid and other insurance programs for childhood vaccines the providers received free-of-charge from the joint federal/state Vaccines For Children (VFC) program. The physician also entered into a civil settlement agreement with the United States and the State of Connecticut to resolve the civil liability for submitting claims to Medicaid for vaccine doses received free from the VFC program from 1997 through 2002. As part of the civil settlement, the defendant agreed to pay double damages in the amount of $318,000 to the United States and the State of Connecticut to reimburse the Medicaid program, and to reimburse the private insurance companies improperly billed (in the amount of approximately $230,000). In order to resolve the tax evasion charges, the defendant also agreed to pay all back taxes, penalties, and interest, totaling approximately $700,000.


After a three and a half week trial, a Federal jury convicted a California psychologist of health care fraud, mail fraud, and making false statements for billing Medicare more than $1.3 million in services he did not provide to developmentally disabled patients. The psychologist, who had fired his attorney on the first day of trial and represented himself, failed to appear in court for the jury verdict, and was taken into custody the next day on a bench warrant. The psychologist submitted false claims for fictitious psychological services to a Medicare insurance carrier, and then engaged in an elaborate scheme to launder the money and conceal the fraud from the Medicare program. After the Medicare carrier challenged the validity of his claims, the psychologist began billing in the name of a corporation, which he alleged was a group practice with two other psychologists. The two psychologists testified at trial that they were not part of a group practice corporation. The psychologist set up a series of six entities through which he passed fraudulently obtained Medicare funds.
Home Health Care Fraud

A Cleveland doctor who operated a medical practice named “House Calls Unlimited” was convicted of health care fraud for billing Medicaid and Medicare for in-home visits he did not make from 1999 through 2001. The defendant claimed to have made house calls on days the defendant was out of state, and billed for more than 24 hours of care in a single day. In addition, the defendant charged higher rates for private house calls when, in fact, patients were seen in group homes or in the defendant’s home. The defendant also claimed to have made visits that were actually made by an unlicenced individual.


Three defendants and a Michigan home health agency (HHA) were ordered to pay $866,000 in restitution for conspiracy to commit health care fraud and mail fraud. Two of the defendants, the president of the HHA and a director for the HHA, billed Medicare and a private insurer for the construction of their luxury home, including contractors’ salaries and building materials and included these costs on the HHA’s cost report. The two defendants were sentenced to respective terms of 48 months and 30 months in prison, and each was ordered to pay a $100,000 fine. The general contractor, who was listed as a ghost employee on the HHA’s cost reports, was also sentenced to 15 months in prison. The HHA was ordered to pay a $10,000 fine.


Banner Health, headquartered in Phoenix, Arizona, paid the United States $6.1 million to settle allegations that the company submitted false claims to Medicare to obtain reimbursement for home health care visits by employees at its Wyoming facilities. The government alleged that Banner Health, formerly known as Lutheran Health Systems, filed claims that were either not reasonable and necessary, or for which the amount, frequency and duration of services were not reasonable and necessary. The settlement is one of the largest recoveries by the United States in Wyoming.
Clinical Laboratory Fraud

The owner of a clinical laboratory in Decatur, Illinois, received a sentence of five years imprisonment for mail fraud related to the lab's fraudulent billing to Medicare and Medicaid and was ordered to pay restitution of $2.5 million. The defendant admitted programming the laboratory’s billing computer to bill Medicare and Medicaid for a urinalysis test at a higher rate than the rate for the test that was actually performed. Additionally, each time the test was performed, four additional tests were billed under separate codes, even though none of these tests were performed. The defendant admitted that the billing fraud continued for over three years.


The owner of a medical testing laboratory extradited from the Philippines pleaded guilty to defrauding the Medicare program by submitting bills for blood testing that was never performed. The lab owner admitted the lab submitted fraudulent bills to the Medicare and California Medicaid programs for tests for RBC Protoporphyrin (a test that detects iron deficiency and lead poisoning), Thin Layer Chromatography (a test used to detect drug metabolytes), Chemiluminescent Assay (a test useful in the identification of chlamydia and tuberculosis), and Sedimentation Rate (a test used to measure inflammation and infection in rheumatism patients). The laboratory did not have the ability to perform these tests. In the course of seventeen months, the lab submitted approximately $2.2 million in fraudulent bills. Medicare paid approximately $1.3 million of those claims.
Ambulance Services Fraud

A Georgia patient ambulance transport company, First Med EMS, Inc., and its owner and director were sentenced on charges of conspiracy to defraud Medicare and Medicaid. The defendants submitted claims for emergency transport on behalf of individuals who did not qualify to receive such transportation. Moreover, multiple patients were transported at the same time, sometimes “stacking” patients in the front seat, but were billed as individuals. Patients were also transported in vehicles that were not licensed as ambulances, and accompanied by individuals who were not licensed EMS personnel. One of the defendants was sentenced to 30 months in prison, and the other was sentenced to 21 months in prison. The company was ordered to pay a $650,000 fine. All were ordered to pay $959,000 in joint and several restitution.
Physical Therapy Fraud

Eight defendants in Houston, Texas were convicted for their roles in a scheme to defraud Medicare and the Texas Medicaid program at physical therapy clinics. Several of the physical therapy technicians were not licensed and had little or no experience in providing physical therapy treatments. A physician convicted in connection with the scheme approved Medicare/Medicaid beneficiaries to receive therapy without examining the patients to determine if they qualified for physical therapy, and failed to supervise the therapy treatments as required under Medicare and Medicaid guidelines. The physician was sentenced to 5 years in prison and ordered to pay restitution to the Texas Medicaid program in the amount of $1.39 million.
Medicare Contractor Fraud

Highmark, Inc. entered an agreement to pay $1.5 million to resolve its liability under the civil FCA. The company’s Veritus division, a Medicare contractor, allegedly altered Medicare claims information to inflate its scores during performance evaluations of the contractor by Medicare. Highmark disclosed the wrongdoing to the Government.
Teaching Hospital Physicians’ Fraud

A four year investigation into billing practices in the University of Washington Medical System ended with the University's physician practice plans agreeing to pay $35 million in restitution, damages and penalties to the state and federal governments for overbilling Medicare and Medicaid. This FCA settlement is the largest ever paid by a practice group related to a teaching hospital for failing to comply with Federal billing regulations. As a result of the investigation, two University physicians were convicted of criminal charges in connection with the fraud, and a former University neurosurgeon pleaded guilty to obstruction of a Federal criminal health care investigation. In addition, a University-affiliated nephrologist pleaded guilty to health care billing fraud and admitted engaging in fraudulent conduct spanning approximately 11 years during which the defendant wrote notes in patients’ dialysis records indicating that he was present when he was not.
Nursing Home Registry Fraud

In Maryland, a registered nurse pleaded guilty to operating a scheme to defraud area nursing homes by making false representations to the nursing homes that the defendant provided them with state-licensed and certified employees from the defendant’s health care staffing company. The nurse’s company had provided temporary nursing staff to nursing homes, hospitals, patients’ homes and doctors’ offices, including licensed practical nurses (LPNs), registered nurses (RNs), certified nursing assistants (CNAs), and geriatric nursing assistants (GNAs). Under Maryland law, the company was required to verify the licensure and status of the LPNs, RNs, and GNAs before dispatching these workers to health care facilities to render temporary nursing support. In fact, many of the licenses the company provided to its client nursing homes were falsified, altered, or forged. When law enforcement agents executed search warrants at the defendant’s home and business, they found more than 60 “cut and paste” documents containing the names of several of the company’s employees that had been altered, blocked out, or “corrected” with white-out to make the documents appear as bona fide licensing and certification documents from the State of Maryland.
Podiatry Fraud

An Orange County, California podiatrist was convicted on 26 charges of fraudulently billing Medicare for more than $800,000 in procedures that were never performed. The evidence presented at trial showed that the podiatrist used the names and Medicare beneficiary numbers belonging to a few elderly patients to create and submit false claims for services that were never performed. The defendant submitted claims for daily or almost-daily surgical procedures and casting on these same patients for months at a time. The investigation began when a Medicare beneficiary reviewed a Medicare statement, noticed that the podiatrist had billed Medicare for more than 70 procedures never performed, and called Medicare’s hotline number to complain. When these patients were interviewed, they stated that they only saw the defendant once every two weeks or once a month, and then they only received toenail clippings.
Medicare Cost Report Fraud

Tenet Healthcare Corporation, one of the largest hospital companies in the country, agreed to pay the United States $22.5 million to resolve FCA allegations that North Ridge Medical Center, one of its facilities in Fort Lauderdale, Florida, improperly billed the Medicare program for millions of dollars for referrals provided by doctors with whom the hospital had prohibited financial arrangements. The settlement also resolved the government's allegations that the hospital had requested improper reimbursements on the cost reports it submitted annually to the Medicare program. The settlement was the largest FCA recovery the United States has obtained to date from a single hospital arising out of alleged violations of the “Stark Statute,” which prohibits hospitals from billing Medicare for services rendered to patients by doctors with whom the hospital has a financial relationship, unless the financial relationship falls within specified exceptions.