$1.7B Reported in Health Care False Claims Settlements, Judgements

WASHINGTON—More than $1.7 billion in False Claims Act settlements and judgments reported by the Department of Justice in fiscal year 2022 were associated with the health care industry, including homecare sectors such as home health, durable medical equipment (DME) and medical device manufacturers.

Included in the tally is a $24.75 million settlement by DME manufacturer Philips RS North America, LLC, formerly Respironics, Inc. That settlement was in response to allegations that Philips provided unlawful kickbacks to DME suppliers to induce them to select Respironics’ respiratory equipment.

Settlements and judgments under the False Claims Act exceeded $2.2 billion in the fiscal year ending Sept. 30, 2022, Principal Deputy Assistant Attorney General Brian M. Boynton, head of the Justice Department’s Civil Division, announced. The government and whistleblowers were party to 351 settlements and judgments, the second-highest number of settlements and judgments in a single year in history. Recoveries since 1986, when Congress substantially strengthened the civil False Claims Act, now total more than $72 billion.

“Protecting taxpayer dollars by preventing fraud and abuse is a critical priority for the Department of Justice,” said Boynton. “The large number of settlements and judgments this past year demonstrates that the False Claims Act remains one of the most important tools for ensuring that public funds are spent properly and advance the public interest.”

The False Claims Act imposes treble 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. The False Claims Act thus serves to safeguard government programs and operations that provide access to medical care, support the U.S. military and first responders, protect American businesses and workers, help build and repair infrastructure, offer disaster and other emergency relief, and provide many other critical services and benefits.

Of the more than $2.2 billion in False Claims Act settlements and judgments reported by the DOJ this past fiscal year, more than $1.7 billion related to matters that 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 amounts included in the $1.7 billion 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. 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.

In 1986, Congress strengthened the False Claims Act by increasing incentives for whistleblowers to file lawsuits alleging false claims on behalf of the government. These whistleblower, or “qui tam,” actions comprise a significant percentage of the False Claims Act cases that are filed. Qui tam cases may be pursued by the government or the whistleblower, and this past year significant recoveries were obtained by both. When a qui tam action is successful, the whistleblower, also known as the relator, typically receives a portion of the recovery ranging between 15% and 30%. 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.

Health Care Fraud
In fiscal year 2022, health care fraud remained a leading source of False Claims Act settlements and judgments. These recoveries restore funds to federal programs such as Medicare, Medicaid and TRICARE, the health care program for service members and their families. But just as important, enforcement of the False Claims Act deters others who might try to cheat the system for their own gain, and in many cases, also protects patients from medically unnecessary or potentially harmful actions. As in years past, the act was used to pursue matters involving a wide array of health care providers, goods and services.

Some examples include: 

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.

Unlawful Kickbacks
Kickbacks paid or received by health care providers undermine the integrity of federal health care programs by tainting medical decision-making, increasing health care costs and adversely affecting competition. Federal law prohibits the willful solicitation or payment of illegal remuneration to induce the purchase of a good or service paid for by a federal health care program.

The department intervened and pursued claims under the False Claims Act in several qui tam actions alleging kickback violations. For example, the department 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. 

The department 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. In a case pursued by a whistleblower, the pharmaceutical company Biogen Inc. paid $843.8 million to resolve allegations that 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. The relator alleged that this conduct occurred between 2009 and 2014.

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

The department’s efforts in this area have included the pursuit of cases involving improper payments under the Paycheck Protection Program (PPP), which was enacted to provide loans guaranteed by the U.S. Small Business Administration (SBA) to eligible small businesses for payroll, rent, utility payments, and other business-related costs. The department has pursued borrowers that improperly received duplicate or inflated PPP loans or were otherwise not eligible to receive any PPP loan. Over the last year, the department has resolved 35 False Claims Act matters, recovering over $6.8 million and avoiding more than $1.5 million in losses for SBA tied to federal guarantees on improper loans.

The department also pursues lenders who improperly disburse PPP funds. This year, the department obtained its first-ever False Claims Act settlement with a bank that allegedly made a PPP loan to a customer it knew was ineligible because its sole owner was facing criminal charges at the time of the loan. Prosperity Bank, a regional bank in Texas and Oklahoma, paid $18,673 to resolve these allegations.

The department also 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.