Alleged Kickback Scheme in California Exposed by False Claims Whistleblower

Healthcare Fraud

On June 21, the U.S. Department of Justice (DOJ) announced that Alta Vista Healthcare & Wellness Centre LLC (a skilled nursing facility in Riverside, California) and its management company, Rockport Healthcare Service, have agreed to pay the United States and California $3.825 million to resolve allegations that they violated the False Claims Act (FCA) by the “submission of false claims to Medicare and Medicaid by paying kickbacks to physicians to induce patient referrals.” According to the government’s accusations, healthcare providers were giving kickbacks in exchange for referrals, which may potentially violate the Anti-Kickback Statute (AKS).

Neyirys Orozco, a former accountant at Alta Vista, reported the alleged fraud to the government and will receive over $581,094 as a qui tam whistleblower under the False Claims Act. Through the act, private citizens have the authority to file lawsuits on behalf of the government when they have knowledge of an individual or company defrauding the government. These individuals, known as qui tam whistleblowers, may receive 15-30% of the government’s recovery as compensation.

According to the allegations, between 2009 and 2019, Alta Vista, under Rockport’s direction and control, provided physicians with lavish gifts, such as expensive dinners, golf trips, limousine rides, massages, luxury items, tablets, and gift cards worth up to $1000 as incentives. Additionally, they allegedly offered Medicare patients various perks, including food, money, rent payment, exemption from medical costs, and other incentives to encourage them to stay at the facility for as long as possible. Furthermore, daily meetings were reportedly held to discuss the status of all Medicare patients and how to prevent them from leaving the facility. According to the government’s allegations, Alta Vista separately provided monthly stipends of $2,500 to $4,000 to physicians for their supposed role as medical directors with the intention to encourage doctors to refer patients.

The Principal Deputy Assistant Attorney General Brian M. Boynton, head of the Justice Department’s Civil Division, stated that “Kickbacks can impair the independence of physician decision-making and waste taxpayer dollars. The department is committed to preventing illegal financial relationships that undermine the integrity of our public healthcare programs.”

The government is taking an interest in addressing these allegations and has shown a commitment to taking action. “The administrators and beneficiaries of the Medicare and Medicaid programs expect that providers will make decisions based on sound medical judgment, not their personal self-interest,” said U.S. Attorney Martin Estrada for the Central District of California. “As this case demonstrates, our office will take decisive action to address allegations that medical providers are paying or receiving improper financial benefits that could impact the care provided to patients.”

“Kickbacks impose hidden costs on the health care system, compromise medical decision making, and taint the doctor-patient relationship,” said Special Agent in Charge Timothy B. DeFrancesca of the U.S. Department of Health and Human Services Office of the Inspector General (HHS-OIG). “Working tirelessly with our law enforcement partners, HHS-OIG will continue to prevent the waste of valuable taxpayer dollars and protect the integrity of federal health care programs.”

In recent weeks, the U.S. Supreme Court has issued two decisions in False Claims Act whistleblower cases. On June 16, the Supreme Court issued an 8-1 ruling in United States, ex rel. Polansky v. Executive Health Resources, Inc. The decision grants the DOJ the authority to dismiss qui tam whistleblower lawsuits in cases in which it chose not to intervene.

On June 1, the U.S. Supreme Court issued an unanimous decision in U.S. ex rel. Schutte v. SuperValu Inc. The decision, heralded as a major victory by whistleblower advocates, overturns U.S. Court of Appeals rulings which allowed fraudulent companies to escape liability under the False Claims Act if they could prove their fraudulent actions could be based on a “reasonable interpretation of the law” regardless of whether or not the company intended to commit fraud.

Further Reading:

California Skilled Nursing Facility and Management Company Agree to Pay $3.825 Million to Settle Allegations of Kickbacks to Referring Physicians

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