In Fiscal Year 2020, the U.S. Department of Justice announced that out of $2.2 billion recovered from False Claims Act (FCA) settlements and judgements, $1.6 billion came from qui tam cases. In anticipation of the report for Fiscal Year 2021, this article breaks down some of the standout FCA cases from the past year.
The FCA
The qui tam provisions of the FCA allows private individuals to file lawsuits on behalf of the U.S. government if they have knowledge about a company or individual defrauding the U.S. government or federal programs. The government then has the opportunity to take on the qui tam case and use their resources to pursue the case. If the case ends with a settlement, the whistleblower who brought the qui tam case receives a monetary award ranging from 15 to 30% of the government’s total recovery. In this way, the FCA incentivizes whistleblowers to come forward with information about fraud and misconduct.
In 2021 so far, the Justice Department announced a wide number of decisions that stemmed from qui tam whistleblower lawsuits from a range of industries. The healthcare field was vastly overrepresented in this year’s False Claims Act decisions, and settlements with healthcare providers and manufacturers raked in big numbers for the U.S. government and whistleblowers alike. The DOJ also announced a handful of settlements with defense contractors. This article will highlight different cases from the aforementioned categories and a few other standout cases.
Healthcare: Kickbacks, Medically Unnecessary Procedures, and Defective Equipment
Arriva Medical LLC and Alere: $160 Million Settlement
On August 2, Arriva Medical LLC and its parent company Alere Inc. Agreed to pay $160 million to resolve allegations that they violated the FCA. According to prior WNN reporting, “Arriva was the largest Medicare mail-order diabetic testing supplier until the company shut down in December of 2017.” The DOJ alleged that “Arriva and Alere caused the submission of false claims to Medicare because of kickbacks paid to Medicare subscribers.” The settlement “also resolves claims that the two companies charged Medicare for new glucometers when patients were ineligible for new ones, and billed Medicare for deceased patients.”
The whistleblower, Gregory Goodman, “worked at an Arriva call center in Antioch, Tennessee before blowing the whistle.” Goodman alleged “that between 2010 and 2016, Arriva advertised ‘free’ or ‘no cost’ glucometers to new and existing patients.” Arriva and Alere “fulfilled their promise of free glucometers by waiving, or not collecting, the copayments required for new glucometers.” However, “[t]he lawsuit alleges that Arriva and Alere advertised these free glucometers as a way to increase their client base, and encourage patients to order more of their diabetes supplies from Arriva.” The DOJ press release details several other allegations of Arriva and Alere submitting false claims.
For his role in the case, Goodman received an award of over $28.5 million.
South Carolina Healthcare Providers: $140 Million Settlement
In September, “[a] group of South Carolina healthcare providers, laboratories, and testing facilities all owned or managed by chiropractor Daniel McCollum” entered into a settlement in which they “will pay a total of $140 million to the U.S. government after failing to defend against charges of kickback schemes and unnecessary testing,” according to WNN.
“The five whistleblowers involved in the final settlement filed three separate qui tam cases against the organizations owned or managed by McCollum. Donna Rauch, Muriel Calhoun, Brandy Knight, Karen Mathewson and Tracy Hawkins will collectively receive a portion of 15 to 30% of the total $140 million amount, which will be split between the whistleblowers.” At the time of the DOJ’s announcement, the size of the whistleblower awards had yet to be determined.
Allegedly, “Oaktree Medical Centre P.C. (Oaktree), FirstChoice Healthcare P.C. (FirstChoice), Labsource LLC (Labsource), Pain Management Associates of the Carolinas LLC (PMA of the Carolinas) and Pain Management Associates of North Carolina P.C. (PMA of North Carolina), allegedly provided illegal financial incentives to providers who were considering using their services.” Additionally, the DOJ alleged that “ProLab LLC (ProLab) and ProCare Counseling Center LLC (ProCare) billed federal medical programs for unnecessary urine drug tests.” The alleged illegal financial incentives constituted alleged violations of the Stark Law and the Anti-Kickback Statute, which aims to “make sure that any kind of testing or medical service provided to patients is medically necessary and not predicated on a preexisting financial or gift-giving relationship,” the WNN article states.
Thus, kickback schemes in the healthcare field erode trust in the medical system: “[w]hen organizations are allowed to successfully get away with schemes that wrongfully incentivize false billing, the entire medical system suffers as a result.”
Prime Healthcare Services and Two Doctors: $37.5 Million Settlement
On July 19, the DOJ announced that “Prime Healthcare Services system (Prime), Prime’s Founder and Chief Executive Officer Dr. Prem Reddy, and California interventional cardiologist Dr. Siva Arunasalam” entered into a settlement with the U.S. and California. The settlement resolves allegations of a kickback scheme. Allegedly, Prime paid kickbacks to Dr. Arunasalam “for patient referrals.” Some Prime hospitals also allegedly “billed Medi-Cal, the Federal Employees Health Benefits Program and the U.S. Department of Labor’s Office of Workers’ Compensation Programs for false claims based on inflated invoices for implantable medical hardware. Dr. Arunasalam was not implicated in this conduct.”
As part of the settlement, “Dr. Arunasalam will pay $2,000,000; Dr. Reddy paid $1,775,000; and Prime paid $33,725,000.”
Whistleblowers filed separate qui tam lawsuits in federal court in Los Angeles, one by former Prime executive Martin Mansukhani and the other by “Marsha Arnold and Joseph Hill, who were formerly employed in the billing office at Shasta Regional Medical Center, a Prime hospital in Redding, California.” According to the DOJ, “Mr. Mansukhani will receive $9,929,656 as his share of the federal government’s recovery.”
University of Miami: $22 Million Settlement
Another subcategory of healthcare FCA settlements revolves around unnecessary medical testing that are then billed to federal medical programs. One example is the May 10 settlement between the U.S. and the University of Miami (UM), which agreed to pay $22 million to resolve allegations that it “routinely ordered medically unnecessary laboratory tests and used misleading billing practices to increase their reimbursement from Medicare,” a WNN article states.
Allegedly, UM violated the FCA when it “billed medically unnecessary tests to Medicare for patients at the Miami Transplant Institute, a kidney transplant program run by UM at Jackson Memorial Hospital (JMH). Allegedly, each time patients checked into the MTI, a UM electronic test ordering system automatically ordered a battery of tests, some of which were medically unnecessary. The government claims that several of these tests were ‘dictated by financial considerations rather than patient care,’” WNN reports.
UM also allegedly “caused JMH to bill additional false claims to Medicare by forcing them to use UM pre-transplant laboratory testing at inflated prices.” It also allegedly failed to satisfactorily notify patients and beneficiaries when it “converted multiple physician offices to Hospital Facilities, and then sought payment at higher rates,” the DOJ press release states. However, the press release did not provide any details about the whistleblower(s) in the case, instead just reporting that there were three qui tam lawsuits that were filed.
St. Jude Medical Inc.: $27 Million Settlement
In early July, St. Jude Medical Inc. paid $27 million “to resolve whistleblower allegations that it knowingly sold defective heart devices, many of which were implanted into patients,” WNN reported. Allegedly, between 2014 and 2016, “St. Jude’s defective heart devices were sold and implanted in patients who were insured under federal medical programs, thus causing false claims to be billed to the government.”
The government alleged that the company “knew in 2013 that there were defects in their Fortify, Fortify Assura, Quadra and Unify devices, but didn’t publicly disclose this information.” The devices are “automatic internal defibrillators that are implanted in patients who are at increased risk for irregular heartbeats. When the device senses an irregular beat, it sends a small shock to the heart that helps the heart return to a healthy rhythm. The government claimed that St. Jude knew about a problem with the lithium batteries in the devices that caused them to short out and die prematurely.”
“In August of 2016, St. Jude reported to the FDA that the number of battery-related incidents in patients using the devices had increased to ‘729, including two deaths and 29 events associated with loss of pacing,’” WNN reports. This led to a swift FDA recall, “but as these devices are surgically implanted into patients, removing defective devices proved far more difficult. According to the government ‘thousands of [the devices] had been implanted into patients between Nov. 20, 2014, and Oct. 10, 2016.’ In 2017, “St. Jude was acquired by Abbott Laboratories.”
Debbie Burke sued St. Jude under the FCA’s qui tam provisions; Burke is “a patient who had one of the recalled devices implanted.” At the time of the settlement announcement, the DOJ did not announce the size of Burke’s whistleblower award.
Defense Manufacturing
Navistar Defense LLC: $50 Million Settlement
On May 27, the DOJ announced that Navistar Defense LLC agreed to pay the U.S. government $50 million “to resolve allegations that Navistar used falsified documents to induce the U.S. Marine Corps to buy Navistar products at artificially inflated prices,” according to a WNN article.
The whistleblower in this case was Duquoin Burgess, who worked at Navistar as a Government Contracts Manager and filed a qui tam lawsuit. Navistar allegedly “used fraudulent commercial sales invoices to artificially inflate the value of their product, a suspension system designed for Mine-Resistant Ambush Protected vehicles.” According to the article, Navistar allegedly “knowingly cooked up commercial sales that had never occurred to drive up the price of the product during contract negotiation. The DOJ report claims that the government relied heavily on these fake invoices in making their decision to accept the higher rates of the contract.”
For his role in blowing the whistle, Burgess “will receive $11,060,000” of the Navistar settlement, the DOJ press release announced.
Insitu Inc.: $25 Million Settlement
On January 12, the DOJ announced that Insitu Inc., which is a “wholly owned subsidiary of The Boeing Company,” agreed to pay $25 million to settle allegations that it violated the FCA. Allegedly, Insitu “knowingly misrepresented the costs of building and operating Unmanned Aerial Vehicles (UAVs) under contracts with several branches of the military,” according to WNN.
The whistleblower in this case is D R O’Hara, who filed a qui tam lawsuit. O’Hara formerly served as an executive at Insitu and alleged “that Insitu acquired the seven non competitively-bid defense contracts in question by falsely claiming that they would use new materials to make the UAVs, or drones.” Additionally, the government alleged “that Insitu knowingly used less expensive recycled and refurbished materials to make the drones, which significantly brought down the cost of the entire project. The government alleges that Insitu planned to use the recycled materials the whole time, even while they told the government a different story,” the WNN article reports. For his role in the case, O’Hara will receive a whistleblower award of over $4.6 million.
Another Notable Case
Archdiocese of New Orleans: Over $1 Million Settlement in Hurricane Katrina-Related Allegations
On November 15, the DOJ announced that the Archdiocese of New Orleans agreed to pay over $1 million to resolve allegations that it violated the FCA “by knowingly submitting false claims for payments to the Federal Emergency Management Agency (FEMA).” Allegedly, the Archdiocese of New Orleans “knowingly signed certifications for FEMA funding that contained false or fraudulent damage descriptions and repair estimates that were prepared by AECOM, an architecture and engineering firm.” One example of the alleged false claims is “purported damage to a nonexistent central air conditioning unit.” According to prior WNN reporting, the Archdiocese of New Orleans allegedly engaged in this behavior from 2007-2013.
These types of cases disadvantage deserving communities, and this alleged behavior is especially cruel in defrauding FEMA in the wake of natural disasters. Inspector General Dr. Joseph V. Cuffari for the Department of Homeland Security Office of Inspector General said in the press release: “Funds fraudulently obtained by FEMA deprive deserving recipients and communities truly in need.”
The whistleblower who originally filed the qui tam lawsuit against the Archdiocese of New Orleans is Robert Romero, “an AECOM Project Specialist.” The U.S. intervened in the case in June 2020, and according to the press release, “[t]he lawsuit against AECOM and another disaster relief applicant remains ongoing.”
Conclusion
If these standout cases from 2021 show the world anything, it’s that qui tam whistleblower lawsuits can result in huge recoveries that are part of the fight against corruption across industries. These settlements show how whistleblowers can expose fraud and corruption that actively harms other individuals and bring down schemes that take advantage of the U.S. government.
WNN eagerly awaits the report from Fiscal Year 2021 to get an even fuller idea of how whistleblowers have helped fight fraud and misconduct this year.