Florida Imaging Clinic and Its Former Owners Settle Kickback and Stark Allegations Brought by Whistleblowers for $3 Million

On June 9, 2011, the United States Attorneys’ Office for the Southern District of Florida announced it had reached a $3 million settlement with Midtown Imaging LLC, a Florida imaging facility, and its former owners, Midtown Imaging P.A. and PBC Medical Imaging, to resolve allegations brought by two whistleblowers alleging that the imaging facility violated the False Claims Act by submitting false claims to the Medicare program by entering into certain leasing and professional services agreements with referring physicians and physician groups in violation of the Anti-Kickback Statute and the Stark Law.

The whistleblowers’ complaint described the following “schemes”:

  • The imaging facility owners gave a physician group free use of imaging equipment and an imaging facility in excess of the time and payments contemplated in the block lease agreement between the facility and the group.
  • The facility owners provided professional radiology interpretation services to referring physicians at below fair market value rates.
  • There were additional arrangements for which there were no written agreements.
  • The facility owners paid a referring neurologist as a “Medical Director” and “Facility Supervisor” without a written agreement and the fees paid were not fair market value for the services actually provided.
  • The facility owners entered into an arrangement to provide professional interpretations of radiological images to a referring physician group under which the physician group paid a fixed annual fee but received a credit for Medicare fees recovered by the facility owners.

The whistleblowers were both radiologists who were part-owners of the entity that did most of the professional interpretations for the imaging facility. They filed the whistleblower lawsuit against the imaging facility and its owners in November 2009. Assistant Attorney General Tony West made this statement in the press release announcing the $3 million settlement: “The Justice Department is committed to investigating cases that threaten the integrity of the Medicare program. The department will continue to protect patients by pursuing federal health care providers that have improper financial relationships with referring physicians.”

The whistleblowers will receive $600,000 as their share of the settlement for bringing this case on behalf of the United States.

Third Circuit Reinstates Whistleblowers’ Claims Against Medicare Managed Care Plans Alleging Violations of the Anti-Kickback Statute

On June 30, 2011, the federal appeals court for the Third Circuit reinstated a lawsuit, United States ex rel. Wilkins v. United Health group Inc., filed by two whistleblowers on behalf of the United States alleging that United Health Care and its subsidiaries, Americhoice and Americhoice-New Jersey (both Medicare Advantage plans) (“UHC”), violated the False Claims Act when they falsely certified compliance with the Anti-Kickback Statute (“AKS”).

The whistleblowers, a former manager and a former sales representative for UHC, alleged they were fired after complaining about UHC’s marketing practices. In their lawsuit the whistleblowers alleged that UHC marketed the plan in violation of Medicare rules, paid kickbacks to physicians, and failed to implement a compliance program.

Among the allegations were that Americhoice paid a clinic $27,000 to induce clinic owners to change dual eligible beneficiaries to Americhoice, and that Americhoice agents offered payments to entice doctors to provide Americhoice agents with the names of the physicians’ patients.

The United States District Court for the District of New Jersey had dismissed the case on the grounds that the whistleblowers had failed to state a claim because: (1) they had not identified a single false claim, (2) the marketing violations were not relevant to CMS’s decision to pay, and (3) the whistleblowers failed to allege that UHC had certified compliance with the AKS or that compliance with the Anti-Kickback Statute is a condition of payment under the Medicare program.

The Third Circuit Court of Appeals agreed that the marketing violations failed to state a claim as they were conditions of participation (not conditions of payment) for which CMS had other remedies for addressing noncompliance other than withholding payment. However, the Appeals Court reinstated the AKS claim, finding that the whistleblowers had alleged that UHC submitted monthly certifications of compliance which could form the basis for a False Claims Act violation under either an express or implied false certification theory of liability. Specifically, the Appeals Court stated: “Compliance with the [Anti-Kickback Statute] is clearly a condition of payment under Parts C and D of Medicare [managed care and prescription drug benefits] and appellees do not refer us to any judicial precedent holding otherwise.”

The appeals court remanded the Anti-Kickback Statute portion of the case back to the district court for further proceedings.

Both of these cases were brought by former insiders who blew the whistle on the organizations they previously worked with. These cases should serve as a reminder to health care providers that continued vigilance with respect to their relationships with physicians and other referral sources is essential to ensure compliance with the Anti-Kickback Statute (and the Stark Law as well).