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Health Care Fraud

Most qui tam cases involve health care fraud that affects Medicare, Medicaid, or another government health care program. Gregg Shapiro has devoted much of his career to this specialized area of the law. While at the Department of Justice, Gregg brought dozens of cases, large and small, involving a broad range of health care frauds. Now, he continues to do so as a qui tam lawyer representing whistleblowers who bring cases on behalf of the government.

False Claims Act qui tam cases can arise from arise from a variety of types of health care frauds, including:

Any company or health care provider that engages in one of these types of fraud may face liability under the False Claims Act for the harm caused to a government health care program. In some cases, the liability can be substantial, as can the reward to the whistleblower who initiates the case.

Kickbacks and Stark Law Violations

Because of the pernicious effect kickbacks can have on medical decisionmaking, Congress has banned the payment of any form of remuneration that is intended to induce the referral or purchase of a health care good or service that is covered by Medicare or another government health care program. Further, under the Stark Law, Congress has prohibited hospitals and other providers from, among other things, paying inflated, above-fair-market compensation to physicians who refer certain designated healthcare services to those providers.

Congress intended these prohibitions to ensure that physicians and other healthcare providers make medical decisions for their patients based on their own medical judgment and not based on the providers’ personal financial interests.

But the temptations of money are always strong, and kickbacks and Stark Law violations continue to plague the health care system in the United States, notwithstanding past enforcement efforts. Indeed, in response to government enforcement activity, businesses in the health care industry often just try to find new and more creative ways to pay kickbacks that will generate more revenue for them at the expense of government payers.

Today, the most common forms of kickbacks and Stark Law violations include:

  • Pharmaceutical and medical device companies paying doctors via lavish meals, excessive fees for speaking or “consulting,” and excessive patent royalties.
  • Hospitals paying individual physicians, physician practices, or other hospitals excessive compensation to induce the referral of patients for expensive procedures at the paying hospitals.  
  • Pharmaceutical companies paying patients to take their most expensive drugs, either by arranging to waive drug co-pays, hiring the patients as “ambassadors,” or covering other costs for the patients.
  • Medical device and lab companies paying volume-based commissions to independent sales representatives (“1099s”), even though the anti-kickback statute prohibits such payments to third parties.

Upcoding and Other Medical Billing Fraud

Physicians and other health care providers have an obvious incentive to bill Medicare or Medicaid for work they did not do, but it’s often hard to detect this kind of fraud. That’s why a knowledgeable whistleblower can be essential to stopping medical billing fraud.

For example, if a billing clerk, nurse, or other employee notices that a physician is billing dozens of level 5 visits each day, or is billing for the work of nurse practitioners or physician assistants even when the physician is not in the building, the employee could file a qui tam suit that would initiate a government investigation of the practice. If the investigation confirmed the employee’s allegations, the employee would be entitled to an award under the False Claims Act.

Similarly, an employee of a nursing home or rehabilitation therapy provider may notice that the nursing home is coding patients with conditions they don’t actually have just to increase reimbursement under Medicare’s new Patient Driven Payment Model (PDPM). PDPM fraud is the latest in a long series of billing frauds involving the provision of (or failure to provide) rehabilitation therapy to Medicare beneficiaries in nursing homes. Again, the employee who observes this fraud could file a qui tam case to shine a light on the practice and potentially become eligible for a large reward.

False Price Reporting

Pharmaceutical companies have to report various prices, including Average Sales Price (ASP), Average Manufacturer Price (AMP), and Best Price. These prices determine the reimbursement amounts that the manufacturers and providers receive from Medicare and Medicaid when the companies’ drugs are used. Because even small changes in the reported prices can result in millions of dollars of payments, pharmaceutical companies have strong incentives to engage in fraudulent manipulation of the prices they report. When that occurs, it is virtually impossible to detect the fraud without assistance from a knowledgeable insider. Whistleblowers who have brought False Claims Act qui tam cases involving drug pricing fraud have received tens of millions of dollars in rewards when their allegations proved correct.

Marketing of Unapproved Drugs and Devices

So-called “off-label” cases were once the bread and butter of Department of Justice health care fraud prosecutors, but they are less frequent now. More common today are cases involving the sale of drugs or devices that are simply not covered by Medicare. For example, in a recent False Claims Act qui tam case that Gregg Shapiro handled, the whistleblower alleged that Akorn Pharmaceuticals was continuing to sell a prescription form of diclofenac sodium gel (the generic version of Voltaren), even after Voltaren had gone over-the-counter. Medicare is not supposed to be charged for over-the-counter drugs, and the case settled for $7.9 million.

Nursing Homes Switching Residents from Medicare Advantage to Original Medicare

Original Medicare generally reimburses nursing homes much more money per day than private Medicare Advantage plans do. Moreover, it is easier for a nursing home to keep a Medicare beneficiary for longer when the beneficiary has Original Medicare rather than a Medicare Advantage plan. As result, some unscrupulous nursing home operators pressure residents to switch from Medicare Advantage to Original Medicare, even when that may not be in the best long-term interest of the residents. Sometimes, the nursing operators even perform these switches without the consent of the residents or their families. This is an increasingly common form of fraud that already has been the subject of one recent False Claims Act settlement, and promises to be the basis for many more settlements in cases brought by qui tam whistleblowers.