For fiscal year 2023, the Department of Justice (DOJ) recouped over $2.68 billion through the enforcement of False Claims Act (FCA) settlements and judgments, a notable increase from FY 2022’s $2.2 billion recoupment.¹

Additionally, over $1.8 billion out of the over $2.68 billion recovered are, according to the report, within the “health care industry, including managed care providers, hospitals, pharmacies, laboratories, long-term acute care facilities, and physicians,” which is an increase from FY 2022.

As the last few years of FCA settlements and judgements have shown, the health care industry has remained the dominate focus of the DOJ, given the high dollar return. FY 2023 also reflected a focus on the DOJ’s priorities for other areas of recoupment, including “fraud in pandemic relief programs and alleged violations of cybersecurity requirements in government contracts and grants.”

Whistleblower - or qui tam suits - continue to make up a significant percentage of FCA filed cases with a weekly average of 13 new cases. Compared to FY 2022, qui tam suits increased from 652 suits (with settlement and judgments exceeding $1.9 billion and payouts of over $488 million) to over 712 qui tam suits with settlement and judgments exceeding $ 2.3 billion.

The FCA “remains one of our most important tools for rooting out fraud, ensuring that public funds are spent properly, and safeguarding critical government programs” acting Associate Attorney General Benjamin C. Mizer reported.

Investigations and actions under the FCA are a lucrative investment for the federal government, with more than $75 billion recouped since 1986.²

The following are key areas of health care enforcement for FY 2023:

Medicare Advantage

Medicare Advantage, also known as Medicare Part C, is the largest section for dollars spent and beneficiary enrollment to the federal Medicare program.

Common areas of concern with the FCA included Medicare Advantage organizations “knowingly submit[ing] or caus[ing] the submission of inaccurate information or knowingly fail[ing] to correct inaccurate information about the health status of beneficiaries enrolled in their plans [to increase their reimbursement from Medicare].”³

Notably, Cigna paid $172 million in connection with allegations that it increased payments from Medicare by submitting and not withdrawing inaccurate diagnosis codes for its Medicare Advantage enrollees, and by falsely certifying the accuracy of the data submitted. It was also alleged that Cigna “paid vendors to conduct in-home assessments” of Cigna’s enrollees but failed to “perform or order the diagnostic testing or imaging necessary” which was needed to properly rely on the diagnosis code reported by the vendor. Cigna also entered into a five-year Corporate Integrity Agreement (CIA) with the Office of Inspector General (OIG) in connection with this settlement that requires “numerous accountability and auditing provisions.”

Another Medicare Advantage organization, Martin’s Point Health Care, Inc., paid $22.5 million to resolve false claims allegations that it “submitted inaccurate diagnosis codes for its Medicare Advantage Plan enrollees in order to increase reimbursements from Medicare.” The diagnosis codes submitted to Medicare were not supported by the patients’ medical records.

Unnecessary Medical Services and Substandard Care

In what has become an annual highlight, the DOJ made substantial recoupments from provider entities who billed Medicare for unnecessary services or substandard care.

Cornerstone Hospital Medical Center in Houston paid $21.6 million to settle allegations that it submitted claims from its long-term care facility for unauthorized services, which were not provided or were “so inadequate they were considered worthless.” Records showed the facility submitted claims for payment for services provided by a physician when the physician was out of the country. Further investigations showed services submitted as provided by a physician were actually provided by unlicensed and unauthorized students.

Smart Pharmacy, Inc. in Florida paid $7.4 million to settle allegations in violation of the FCA that it included an antipsychotic drug to topical compounded pain creams in order “to boost reimbursement and by routinely waiving patient copayment obligations” without regard to the patient’s financial need. It was determined that there was “no adequate clinical basis” to add the antipsychotic drug, but was a means to increase reimbursement for the topical cream.

A New York nursing facility paid $7.1 million to resolve allegations that it submitted claims for providing worthless services and substandard care to residents. The facility allegedly “failed to adequately staff the home, and residents suffered medication errors, unnecessary falls, and the development of pressure ulcers.” The facility also failed to “maintain hot water throughout the facility, have an adequate linen inventory, and dispose of solid waste.” The facility closed in 2021 after the DOJ started their investigation.

Opioid Epidemic

As in previous years, the DOJ has continued to pursue FCA actions against providers and other actors within the pharmaceutical industry for their role in the opioid crisis.

For example, the DOJ intervened in a whistleblower lawsuit against Rite Aid Corporation which alleges that “Rite Aid knowingly filled unlawful prescriptions for controlled substances.” As one of the largest pharmacies in the country, Rite Aid has more than 2,000 pharmacies in 17 states. In the complaint, Associate Attorney General Vanita Gupta states that “Rite Aid’s pharmacists repeatedly filled prescriptions for controlled substances with obvious red flags, and Rite Aid intentionally deleted internal notes about suspicious prescribers.” The DOJ concluded that such behavior was “highly indicative that the prescriptions were unlawful.” Furthermore, “these unlawful prescriptions included … [the] highly abused combination of drugs … for excessive quantities of opioids, such as oxycodone and fentanyl, and prescriptions issued by prescribers whom Rite Aid pharmacists had repeatedly identified internally as writing illegitimate prescriptions.” Further developments on this case can be found under United States ex rel. White et al. v. Rite Aid Corp., et al.⁴

Unlawful Kickbacks

Recoupments made from claims for unlawful kickbacks are another annual theme for the DOJ that was evident in their 2023 enforcement actions. Kickbacks not only increase the cost of health care, but also impact medical decision-making and fair competition. For those reasons, the DOJ continues to seek FCA recoupments utilizing the Anti-Kickback Statute and Stark Law as the basis for such claims.

An Oklahoma based organization paid over $7 million to resolve allegations that it improperly submitted claims to Medicare knowing the services were up coded or medically unnecessary. The organization entered into a CIA and its president and chief operating officer were excluded from federal health care program participation for five years. Additionally, the organization paid over $22 million to resolve allegations that it provided kickbacks to medical directors for referrals of home health patients.

Illinois based Cardiac Imaging, Inc., along with its owner paid $85.5 million in connection with allegations that it paid kickbacks in the form of supervision fees above the fair market value to cardiologists to induce referrals to its imaging facility for PET scans. It was further alleged that these fees were paid for times the cardiologists were not on site. Both the business and owner entered into a CIA for five years.

The DOJ also resolved various kickback claims between “labs and recruiters allegedly providing kickbacks to providers disguised as legitimate payments” and kickbacks for sham investment distributions. In combination, corporations and individuals paid over $2.68 million to settle these kickback allegations, along with individuals being excluded from federal health care programs.

Individual Accountability

Not only are health care entities held accountable under the FCA, but individual providers may be as well.

Notably the DOJ highlighted four physicians who paid $23.9 million (combined) to resolve allegations “they falsified the place of service for skin grafts to fraudulently maximize reimbursements” which was not supported by the medical record.

Additionally, a Tennessee physician paid $6.6 million to settle allegations he “submitted false claims for dermatological procedures that were billed as if both the surgery and pathology portions of the procedures were performed by the doctor.” The investigation revealed that a some of the services were provided by another individual who was not the billing physician.

Robust Enforcement Continues

In keeping with the past years, the DOJ’s rigorous actions indicate their continued attention toward FCA claims.

In addition to the settlements and judgments, 18 CIAs were entered into between the government and health care entities, a decrease from last year. CIAs are made between the Office of Inspector General of the Department of Health and Human Services (HHS OIG) and the health care entity.

Under a CIA, the entity as part of the civil settlement agrees to obligations in exchange for potentially not being excluded from federal health care programs. These CIAs, along with the annual releases from the DOJ and Advisory Opinions, can alert health care entities to enforcement trends that may assist them in focusing their own compliance efforts.

In FY 2023, there were 12 Advisory Opinions published by the HHS OIG. Topics included preferred hospital network in Medigap policies, cochlear implant manufacturer providing free hearing aids, and providing financial assistance for transportation, lodging, and meals by a drug manufacturer to financially needy pediatric patients.

With this continued and robust enforcement by the DOJ of FCA claims, clients submitting claims potentially within the reach of the FCA can best mitigate the risk of a FCA violation by creating and implementing a strong compliance program. A strong, enforced, and properly tailored compliance program provides the necessary oversight for health care entities to be proactive toward compliance risks which could lead to a FCA violation. Compliance programs should aim to educate, audit, and combat against fraud and abuse, and focus on risk areas especially relevant to the specific health care entity.

Some Takeaways

Attorneys and business leaders should work together to establish compliance programs that clients can successfully implement. Clients should annually review their compliance program and make it a priority for the organization.

Annual reviews are essential to ensure the compliance program reflects and meets the organization’s evolving needs. These reviews should also include an overview of the compliance program’s success and whether there is any room for improvement.

Furthermore, these programs should be used continuously as proactive measures to prevent or reduce impact from noncompliance.

Health law attorneys familiar with the past year of FCA enforcement actions can add value to annual compliance plan reviews by identifying trends and helping clients consider how they can prevent, detect, and deter the types of problematic conduct that gave rise to enforcement actions against other health care entities.

This article was originally published on the State Bar of Wisconsin’s Health Law Blog. Visit the State Bar sections or the Health Law Section webpages to learn more about the benefits of section membership.

Endnotes

¹ See the Feb. 22, 2024, announcement from the U.S. Department of Justice’s Office of Public Affairs. Unless otherwise noted, all subsequent quotes are from the DOJ’s release cited here.

² Id.

³ Id.

⁴ United States ex rel. White et al. v. Rite Aid Corp., et al., No. 1:21-cv-1239 (N.D. Ohio).