Headlines that Matter for Companies and Executives in Regulated Industries

DOJ News

DaVita Medical Holdings LLC enters $270M Settlement

DaVita Medical Holdings LLC entered into a $270 million settlement agreement with the Justice Department to resolve False Claims Act claims implicating Health Care Partners Holdings LLC, an independent physician association that DaVita acquired in 2012. DaVita voluntarily disclosed to the government that Health Care Partners had caused Medicare Advantage Organizations with which it contracted to submit claims for payment using incorrect diagnosis codes that resulted in higher payments to the MAOs, and in turn to DaVita. Read the DOJ press release here.

Kalispell Regional Healthcare System Agrees to $24 million Settlement

Kalispell Regional Healthcare System (“KRH”), a Montana-based healthcare system, and six related entities, agreed to pay $24 million in settlement of potential FCA liability stemming from allegations that they violated the Stark Law and Anti-Kickback Statute, and accordingly submitted false claims, by paying excessive compensation to physicians in order to induce referrals to the health centers. Read the DOJ press release here.

AmerisourceBergen Corporation to Pay $625 million to Resolve Civil FCA Liability

AmerisourceBergen Corporation and four of its subsidiaries (collectively “ABC”) reached an agreement with the Justice Department to pay $625 million to resolve civil FCA liability arising from an alleged scheme to repackage injectable drugs into pre-filled syringes so that, by harvesting the excess drug product contained in the original vials, ABC could create more doses than it purchased and bill multiple medical providers for the same vial, in turn causing those providers to overbill the federal government. The settlement also resolves allegations of improper kickbacks to physicians for purchases of ABC drugs through the pre-filled syringe scheme. AmerisourceBergen Specialty Group, a subsidiary included in the civil settlement, agreed to pay $260 million last year to settle criminal charges arising from this scheme, for a total payment of $885 million to the government. Read the DOJ press release here.

A Doctor's Conspiracy to Defraud Medicare Equates to 11 Years in Prison

A Detroit doctor was sentenced to over 11 years in prison for her part in a conspiracy to defraud Medicare of approximately $8.9 million by providing physician services without a license and that were not medically necessary, and submitting claims for payment from Medicare as if the services were provided by a licensed physician. She and her co-conspirators also falsified medical records in order to bill Medicare for services that were not rendered. Read the DOJ press release here.

Litigation Developments

United States ex rel. Cairns v. D.S. Medical, LLC

A qui tam action under the FCA resulted in a $5.5 million judgment against two individuals and two LLC defendants, held jointly and severally liable for treble damages and steep statutory penalties. The relator alleged that DS Medical, LLC and its agent, Debra Seeger, gave kickbacks to Dr. Sonjay Fonn and Midwest Neurosurgeons, LLC in exchange for the purchase of spinal implants used in Dr. Fonn’s surgeries, and that all four defendants conspired to and did violate the FCA by agreeing to receive or solicit kickbacks from two implant manufacturers in connection with 223 false claims. A jury found Dr. Fonn and Midwest liable on the kickback claims and found all four defendants liable of conspiracy to violate the FCA, but only assessed damages on the conspiracy claim against the LLCs. The court affirmed the award of treble damages on the kickback claims and, because the defendants were jointly and severally liable for the claim, adjusted the award to hold the individual defendants jointly and severally responsible for the conspiracy damages, in addition to statutory penalties of $5,500 for each of the 223 false claims. The case is United States ex rel. Cairns v. D.S. Medical, LLC, case number 1:12CV00004 AGF, in the Eastern District of Missouri.

United States ex rel. Olcott v. Southwest Home Health Care, Inc.

A federal judge dismissed a medical software company, Kinnser Software, Inc. (“Kinnser”) from a qui tam action implicating a home health provider, Southwest Home Health Care, Inc. (“Southwest”), that allegedly submitted claims for payment for services that were not provided to patients and that included unnecessary diagnoses codes, by supplying the software used to create false medical records and, through a single Kinnser representative, either participating in falsifying the records submitted to Medicare or knowing that Southwest employees were doing so.The court held that the complaint failed to plead fraud with particularity under Rule 9(b) with respect to Kinnser because the complaint failed to identify any specific patient whose records were falsified at Kinnser’s direction, nor did the complaint allege that the representative acted at Kinnser’s direction or that Kinnser had knowledge of the scheme. The case is United States ex rel. Olcott v. Southwest Home Health Care, Inc., case number 12-CV-605-CVE-FHM, in the Northern District of Oklahoma.

United States ex rel. Duffy v. Lawrence Memorial Hospital

A federal court granted summary judgment in favor of Lawrence Memorial Hospital (“LMH”), holding that inaccuracies in LMH’s patient records about patients’ “arrival time” did not support a false implied certification claim, even though the Hospital made certifications of compliance with employee anti-fraud education requirements—a condition of payment from Medicaid. The court explained that the relator did not demonstrate that the alleged falsehoods actually affected a reimbursement decision, or even that they were likely to have an effect, and thus the inaccuracies were not material, an essential element of an FCA claim. The case is United States ex rel. Duffy v. Lawrence Memorial Hospital, case number 14-2256-SAC-TJJ in the District of Kansas.