California Healthcare Fraud/Medicare Fraud Enforcement

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California Healthcare Fraud/Medicare Fraud Enforcement

 

In California, major healthcare fraud is civilly and criminally prosecuted by four separate United States Attorney’s Offices–the Southern, Northern, Eastern, and Central Districts of California.     

Federal-state fraud-fighting is particularly effective in California, as California’s state False Claims Act incentivizes whistleblowers to recoup stolen Medicaid dollars.

Modeled after the federal False Claims Act, the California False Claims Act permits private citizens to bring qui tam actions on behalf of the State of California to recover treble damages and civil penaltiesCal. Gov’t. Code § 12650 et seq.

The liability provisions of the California False Claims Act, Cal. Gov’t Code § 12651(a), provide liability for any person who:

 (1) knowingly presents, or causes to be presented, to an officer or employee of the state or of any political division thereof, a false claim for payment or approval;

(2) knowingly makes, uses, or causes to be made or used a false record or statement to get a false claim paid or approved by the state or by any political subdivision;

(3) conspires to defraud the state or any political subdivision by getting a false claim allowed or paid by the state or by any political subdivision.

False Claims Act qui tam actions have been successful in recovering stolen government health care dollars in California. By way of example, in November 1996, Laboratory Corporation of America Holdings (LabCorp) agreed to pay the Government $182 million to settle several qui tam suits alleging that it submitted false claims for medically unnecessary laboratory tests to federal and state health care programs. In a related criminal matter, the San Diego Regional Laboratory of Allied Clinical Laboratories, Inc., a LabCorp subsidiary, pleaded guilty to submitting a false claim to Medicare and the California Medicaid program, and was fined $5 million. Allied was excluded from participating in the programs as a result of its misconduct.

 

U.S. ex rel. Aviles v. Spectra Laboratories, Inc. et al. (N.D. Cal.)

 In December 1996, Spectra Laboratories, Inc., a California clinical laboratory specializing in end stage renal disease (ESRD) testing, agreed to pay the Government $10.1 million to settle a qui tam suit alleging that it improperly billed federal health insurance programs for tests on patients suffering from severe kidney failure. According  to DOJ, Spectra fraudulently billed Medicare, the Railroad Retirement Board, CHAMPUS, and the Federal Employees Health Benefits Program for lab tests it had already been reimbursed for under a “composite rate” for standard ESRD services.

 The case was filed pro se by former lab manager Almario Aviles in 1993.  Spectra allegedly billed the programs without regard to certain coverage rules, such as the “50/ 50 rule” governing billing for tests per-formed in automated “panels” with other tests  that are covered by the composite rate. The company also billed for medically unnecessary hepatitis BS antigen tests and used various marketing practices that may have improperly induced clients to order unnecessary tests. Spectra further improperly used a test ordering system, including a “Master Annual Prescription Form,” to obtain orders for all current patients at a dialysis facility and future admissions for the coming year. According to the Government, this form generated inaccurate diagnostic information and resulted in claims for medically unnecessary tests.  As part of the settlement, Spectra has entered into a corporate integrity agreement which requires that it establish a procedure designed to promote the ordering of medically necessary tests on a patient-specific basis. The relator’s share was 15 percent or $1.5 million. Representing the Government were Assistant U. S. Attorney Gail Killefer and James E. Ward IV of the DOJ Civil Division.

 

U.S. ex rel. McKeeman v. Physicians Clinical Laboratory et al. (E.D. Cal.)

 In October 1997, Physicians Clinical Laboratory (PCL), the second largest provider of clinical laboratory services in California, agreed to pay the Federal Government $2 million to settle a qui tam suit alleging overbilling for lab tests. PCL reportedly will also pay the State of California $100,000 to resolve allegations that the company overbilled Medi-Cal, California’s Medicaid program. According to DOJ, PCL overcharged Medicare, Medi-Cal, and CHAMPUS by using the wrong billing codes for blood and urine tests. The lawsuit was brought by Taylor McKeeman, PCL’s former vice president for clinical operations, who su pervised the company’s testing facilities throughout California. In November 1997, PCL and several of its affiliates filed for bankruptcy under Chapter 11. The relator’s share was $150,000. The relator’s counsel was R. Brooks Cutter (Sacramento, CA). Representing the Government was Assistant U.S. Attorney Robert Twiss.

 

U.S. ex rel. Prendergast and Silveira v. Meris Laboratories, Inc. et al. (ND Cal.)

 In February 1997, Meris Laboratories, Inc. agreed to pay the Government $5.2 million to settle a qui tam suit alleging that it defrauded Medicare and Medi-Cal, the California Medicaid program, by improperly billing for various laboratory tests.  The suit was filed by Janice Prendergast and Julia Silveira in 1993.  According to DOJ, Meris routinely added medically unnecessary HDL cholesterol and serum iron tests to panels it performed on automated machines, and then billed the Government separately for the tests, which physicians had not specifically ordered.  Meris also routinely billed for additional complete blood count (CBC) indices that were neither ordered by physicians nor medically necessary.  The additional indices, which are generated automatically by lab machinery at no extra cost, are merely manipulations of the results of other tests already included in a CBC and are rarely medically justified, according to DOJ.  Besides the settlement payment, Meris agreed separately to a corporate compliance agreement.  The relators’ share was 15 percent or $781,050.  The relators’ counsel was Alan Nudelman (Los Gatos, CA).  Representing the Government were Assistant U.S. Attorney Joann Swanson and James Ward IV of the DOJ Civil Division.

 

U.S. ex rel. Dodson v. Blue Shield of California (N.D.Cal.)

 In April 1997, Blue Shield of California agreed to pay the Government $12 million to settle a qui tam suit alleging that it submitted false claims under its contract with HCFA to process and pay Medicare claims. The lawsuit was filed in 1994 by Weldon Dodson, a former employee of Blue Shield’s Medicare division in Chico, California.  According to DOJ, Blue Shield of California covered up claims processing errors from HCFA auditors in order to obtain more favorable scores under a program for grading the carrier’s claims processing capabilities.  Blue Shield allegedly obstructed HCFA’s efforts to review its performance by altering or discarding documents that would have disclosed errors, substituting backdated documents, and rigging purportedly random samples of files. According to DOJ, in 1996 Blue Shield pled guilty in federal court in Sacramento to three felony counts of conspiracy and obstructing federal audits — the first criminal conviction of its kind against a Medicare contractor.  Blue Shield paid a criminal fine of $1.5 million for its misconduct. Blue Shield and the HHS OIG have agreed to a separate comprehensive corporate integrity agreement.  The relator’s share was 18 percent or $2.16 million.  Mr. Dodson was represented by Robert Vogel (Washington, D.C.).  Representing the Government was Assistant U.S. Attorney Gail Killefer.

 

U.S. ex rel. Montagano v. Midway Hospital Medical Center, Inc., OrNda Healthcorp and Summit Health Ltd. (C.D. Cal.)

In July 1997, DOJ announced that OrNda Healthcorp, a nationwide hospital company, agreed to pay the Government $12.65 million to settle a qui tam suit alleging that several of its hospitals defrauded Medicare through illegal contracts and kickbacks.  The action was brought in 1995 by Dr. James Montagano, chief of surgery at Midway Hospital in Los Angeles.  According to the lawsuit, OrNda had improper financial relationships with physicians and paid them for referrals of Medicare patients.  Some physicians were paid for being “directors” of hospital programs that did not exist, while other doctors were paid for services that were not needed or performed.

OrNda, which was based in Nashville, was acquired earlier this year by the Santa Barbara based Tenet Healthcare Corporation, the second largest investor-owned health care services company in the country.  Tenet was part of the settlement agreement as the successor in interest to OrNda.  The settlement does not resolve any potential claims against physicians involved in the fraudulent scheme.  The relator’s share was $2.34 million.  The relator’s counsel was Henry Gradstein of Gradstein, Luskin & Van Dalsem (Los Angeles, CA).  Representing the Government were Assistant U.S. Attorney Consuelo Woodhead and Laurie Oberembt of the DOJ Civil Division.

 

U.S. ex rel. Hearn v. Kurwa et al. (C.D. Cal.)

In December 1997, DOJ announced that Dr. Badrudin Kurwa, an opthamologist, paid the Government more than $375,000 to settle a qui tam suit alleging fraudulent Medicare billings. The suit was filed in 1996 by Sandra Hearn, who formerly worked as Dr. Kurwa’s practice administrator. The doctor allegedly submitted false claims since 1991 and, when faced with an audit of his billings, altered patient charts to conceal the irregularities. According to DOJ, the settlement represents more than ten times the amount the doctor billed Medicare. Kurwa further agreed to a five year compliance pro-gram with HHS. The relator was represented by Lisa Foster of Phillips & Cohen (San Diego, CA). Assistant U.S. Attorney Faith Devine represented the Government.

 

U. S. ex rel. Alderman v. Weiss et al. (C.D. Cal.)

In February 1998, DOJ announced that a medical equipment supplier and its owner agreed to pay the Government $1.75 million to settle a qui tam suit alleging improper marketing of incontinence supplies for elderly patients. The suit was brought by Geraldine Alderman, a former employee of Nissim Institutional Providers, Inc. Nissim, several related corporations, owner-operator Howard Weiss, and employee Mendel Duchman agreed to the set-tlement, concluding a case that resulted in criminal penalties as well. Pursuant to the alleged scheme, Medicare was falsely billed for adult urinary incontinence supplies to nursing home patients across the country. According to DOJ, saline solution, syringes, and lubricant were not provided as billed and were not med-ically necessary. The supplies were part of a package or “kit” which also included a free disposable diaper that served as an inducement to nursing homes to place orders for the kits.  In the earlier criminal prosecution, two of the related companies, Crown Ostomy, Inc. and Medi-Shield, Inc., pleaded guilty to wire fraud charges and each was ordered to pay a criminal fine of $75,000. Weiss and Nissim have also entered into a corporate integrity agreement with HHS, and four companies agreed to be permanently excluded from Medicare, Medicaid, and other federal health care pro-grams.  The matter was investigated by the HHS OIG and the Health Care Fraud Task Force for the Central District of California, which includes the FBI, Postal Inspection Service, California Bureau of Medi-Cal Fraud, and DCIS.  The criminal case was initially investigated by the U. S. Attorney’s Office for the Northern District of Florida prior to its transfer to Los Angeles. Assistant U. S. Attorney Consuelo Woodhead represented the Government on the civil side, and Assistant U. S. Attorney Kimberly Dunne handled the criminal action.

 

U. S. ex rel. Frisco and Jones v. Home Americair of California, Inc. et al. (C.D. Cal.) U. S. ex rel. Penizotto v. Bates East Corporation and Cynthia Bates (C.D. Cal.)

In April 1998, DOJ announced that a national franchisor of home oxygen equipment, three affiliates, and two individuals agreed to pay the Government $5 million to settle two qui tam suits alleging false Medicare claims. According to DOJ, Home Americair of California, Inc., its billing company, and two franchises, Florida Homecair and Bates East Corporation of Pennsylvania, engaged in a complex scheme to provide home oxygen equipment to Medicare beneficiaries who did not qualify for the service. In order to collect Medicare payments, the defendants submitted false medical information such as that relating to a patient’s blood oxygen level. One suit was filed by a former franchisee of Home Americair, Terry Frisco, and a respiratory therapist, Darrell Jones. The case was consolidated with another qui tam case filed by Bates East sales representative Todd Penizotto. Of the total settlement amount, $4.15 million resolves the Frisco and Jones matter.  In addition to the settlement payment, Home Americair agreed to institute a corporate integrity program. The relators’ share for Frisco and Jones was 23 percent or $960,250. Penizotto’s share was $148,500. Frisco was rep-resented by Michael Leslie of Caldwell, Leslie, Newcombe & Pettit (Los Angeles, CA), and Jones was represented by Robert Vogel (Washington, D. C.). Penizotto’s counsel was Lisa Foster of Phillips & Cohen (San Diego, CA). Representing the Government were Assistant U. S. Attorney David Ringnell and Polly Dammann, Daniel Anderson, and Mina Rhee of the DOJ Civil Division.

 

U. S. ex rel. Spear v. Mendez (N.D. Cal.)

In May 1998, it was reported that Fausto Mendez, Jr., president of Medical Science Institute Inc., agreed to pay the Federal Government and State of California $25,000 to settle a qui tam suit alleging improper billing by the clinical laboratory. The State, which filed a claim under California’s False Claims Act, will receive $1,842 under the settlement.  Mendez allegedly routinely billed Medicare for unnecessary complete blood counts and unnecessary manual white blood cell differen-tial tests when automated tests had already been performed and billed. Under the agreement, Mendez reportedly will have no author-ity over billing or coding decisions involving any federal health care program for five years.  The suit was brought by Kevin Spear, a former lab industry salesman.  The relator’s share was 17 percent. Phillips & Cohen (Washington, D. C.) represented the relator.

  

Horizon West, Inc.

In February 1999, Horizon West, Inc. agreed to pay $4 million to the Government to settle claims that it misclassified medical supplies and submitted inflated bills to Medicare for unallowable expenses.  Horizon, an owner and operator of numerous California nursing homes, billed Medicare for such unallowable items as tax preparation fees, gifts, flowers, cigarettes, lottery tickets, liquor for two company holiday parties, and items purchased from several department stores by the company president.  As part of the settlement agreement, Horizon agreed to implement a corporate integrity program, a compliance committee, written compliance policies for submitting Medicare billings, and a confidential disclosure program for its employees.  Horizon is headquartered in Rocklin, California.  HHS OIG conducted the investigation.  The Government was represented by Assistant U.S. Attorney Michael Hirst.

 

U.S. ex rel. Todarello v. Beverly Enterprises, Inc. (N.D. Cal.)

In February 2000, Beverly Enterprises, Inc. — the nation’s largest nursing home operator — agreed to pay the Government $170 million to settle a qui tam suit alleging that Beverly conducted a nationwide scheme to defraud Medicare.  The action was filed in 1995 by Domenic Todarello, who formerly headed a number of Beverly nursing homes in California and Arizona.  In a related settlement, Beverly subsidiary Beverly Enterprises-California, Inc. agreed to pay a criminal fine of $5 million, divest itself of 10 nursing homes, and plead guilty to mail fraud and false statement charges.  In addition, Beverly signed a Corporate Integrity Agreement with HHS. Beverly, which is headquartered in Ft. Smith, Arkansas, has 561 nursing homes in 32 states.  Beverly also operates assisted-living centers, home care centers, outpatient clinics, and physical rehabilitation therapy services.  According to DOJ,  from 1992 to 1998 Beverly billed Medicare for labor costs incurred in treating non-Medicare beneficiaries at its skilled nursing facilities across the country.  DOJ further alleges that Beverly prepared false documents, such as phony nurse sign-in sheets, to support its claims for payment, and that it provided subsidiary Beverly-California, Inc. with fabricated nursing cost figures designed to maximize profits and avoid detection by Medicare auditors.  The relator’s share of the civil settlement was 17 percent or $28.9 million.  The relator was represented by Francis Balint, Jr. of Bonnett, Fairbourn, Friedman & Balint and attorneys John Stoia, Jr. and Jeffrey Lawrence of Milberg, Weiss, Bershad, Hynes & Lerach (Los Angeles, CA).  The case was investigated by HHS OIG and the FBI.  The Government, in its civil case, was represented by Assistant U.S. Attorney Gail Killefer and Laurie Oberembt of the DOJ Civil Division.

 

Eisenhower Medical Center

In March 2000, DOJ announced that Eisenhower Medical Center of Rancho Mirage, California agreed to pay $1.3 million to resolve allegations of fraudulent Medicare billings for magnetic resonance imaging (MRI) and neurological diagnostic tests.  According to DOJ, most of the tests were performed on patients who responded to advertisements by Dr. Isaac Sultan, a neurologist with staff privileges at Eisenhower.  DOJ alleges that Dr. Sultan would diagnose every patient with the same disorder, radiculopathy, which would necessitate that the patient receive a battery of tests from Eisenhower.  Sultan would then perform the tests himself, but would do so after normal business hours and without other physicians present.  Sultan purportedly billed Medicare for far more tests than could normally be done in the amount of time claimed.  According to the Government, Eisenhower was aware of these practices but refused to discipline Dr. Sultan.  The matter was handled for the Government by Assistant U.S. Attorney Susan Hershman.

 

U.S. ex rel. Baylor v. Pomona Valley Hospital Medical Center et al. (C.D. Cal.)

 

In September 2000, DOJ announced that California Emergency Physicians (CEP) agreed to pay $1.2 million to settle a qui tam suit alleging that it overcharged for emergency room services.  CEP provides services at 46 hospitals and 15 urgent care centers in California.  According to the lawsuit, CEP physicians charged for higher levels of services in evaluating emergency patients’ conditions and managing their care than was actually provided.  The qui tam action was filed in 1998 by Trevor Baylor, the former Medical Records Director of Pomona Valley Hospital Medical Center.  HHS OIG and DCIS investigated the matter.  The relator’s share has not been finalized.  Paul Scott (San Francisco, California) represented the relator.  Assistant U.S. Attorney Kristine Blackwood represented the Government.

 

U. S. ex rel. Konrad v. LifeScan Inc. (N.D. Cal.)

 In December 2000, LifeScan Inc. agreed to pay $30.6 million to resolve a qui tam suit alleging that the California-based subsidiary of Johnson & Johnson filed false reports with the FDA. The company simultaneously pleaded guilty to three misdemeanor criminal charges and will pay a $29.4 million criminal fine for introducing into interstate commerce a misbranded medical device, failing to furnish appropriate notifications to the FDA, and submitting false reports to the FDA. According to the Government, between May 1996 and late 1997, LifeScan manufactured and distributed defective blood glucose monitoring devices which gave erroneous results to patients measuring their blood sugar levels. The qui tam suit arose from LifeScan’s failure to file medical device reports with the FDA advising it of the illnesses and injuries reportedly resulting from the defective device. According to DOJ, the reports the company did file with the FDA contained false, incomplete, or misleading information.  The qui tam suit was filed in 1997 by Robert Konrad and John Pumphrey, two former LifeScan employees. The relators’ share is 20 percent or $6.3 million. The Government was represented in the civil settlement by Assistant U. S. Attorney Joann Swanson.

  

U.S. ex rel. Krahel et al. v. Regents of the University of California (N.D. Cal.)

In February 2001, the University of California’s five medical schools agreed to pay $22.5 million to settle a qui tam suit alleging that the schools billed Medicare, TRICARE, and MediCal for services purportedly performed by faculty physicians when in fact those services were performed by residents alone with little or no supervision.  Assistant U.S. Attorneys Joann Swanson and Patricia Kenney represented the Government.

  

U.S. and State of California ex rel. Pieszak v. Glendale Medical Center et al. (C.D. Cal.)

In February 2001, Perinatal Medical Group (PMG) and Dr. Hugo Riffel agreed to pay $250,000 to settle a qui tam case alleging that PMG and Riffel billed for obstetric services at attending physician rates when in fact the services were performed by medical residents.  The portion of the lawsuit relating to the hospital, Glendale Medical Center, is still pending.  The qui tam action was brought by Dr. Caroline Pieszak, a resident in the OB/GYN program at Glendale from 1995 through 1996.  Assistant U.S. Attorney Faith Devine handled the matter for the Government.

 

U.S. ex rel. Baca v. Catholic Healthcare West, (E.D. Cal.)

In May 2001, Catholic Healthcare West and its subsidiary Mercy Healthcare Sacramento reportedly agreed to pay a total of $10.25 million to the Federal Government and the State of California to settle a qui tam suit alleging that the companies submitted false claims to Medicare, Medi-Cal and TRICARE.  California received $465,188 of the total settlement.  The Government alleged that Catholic Healthcare West billed for nonreimbursable annual physical exams, upcoded routine doctor referrals to more highly reimbursable consultations, upcoded evaluations and management office visits, and billed for undocumented laboratory work and ancillary services.  George Baca, the former executive director of patient services at Catholic Healthcare West, filed the qui tam lawsuit in 1998.  The relator’s share was approximately 17.6 percent or $1.85 million.  Charles J. Stevens of Stevens & O’Connell (Sacramento) represented the relator.  HHS OIG investigated the matter.  Assistant U.S. Attorneys Michael Hirst and Adisa Abudu-Davis represented the Government. 

 

U.S. ex rel. Woods v. Paracelsus Healthcare Corp., (C.D. Cal.)

In May 2001, Paracelsus Healthcare Corporation agreed to settle the Government’s FCA claim as part of the company’s bankruptcy reorganization. The total amount of the settlement of the Medicare fraud qui tam suit is approximately $5.1 million.  However, the Government is only likely to recover between $2 and $3 million as the pro rata share of its bankruptcy claim.  The suit alleged that Paracelsus gave Alliance Healthcare Corporation, a psychiatric services management company, free office space and inflated management and director fees to induce it to funnel patients to a Paracelsus hospital.  In addition, Paracelsus is alleged to have billed Medicare for nonreimbursable items such as patient transportation.  As part of the settlement, Paracelsus has agreed to implement a five-year corporate integrity agreement.  Mark Kleiman (Los Angeles) represented the relator.  HHS OIG investigated the matter.  Assistant U.S. Attorney Kristine Blackwood represented the Government. 

 

U.S. ex rel. Boyd v. Mercy Health Care Systems (N.D. Cal.)

In July 2001, DOJ announced that Mercy Health Care (Mercy) and its parent company Catholic Health Care West agreed to pay $2.9 million to settle a qui tam suit alleging that it knowingly kept overpayments inadvertently made by Medicare. The lawsuit alleged that in March 1993, Mercy received two written notifications from its Medicare contractor that Mercy had made an underpayment of $944,900 in 1992 and an overpayment $238,100 in 1993.  Instead of collecting the difference of $706,800, the Medicare contractor inadvertently paid Mercy that sum in 1993. The lawsuit also alleged that Mercy Healthcare filled false cost reports with the Medicare contractor that did not reflect the overpayments. The relator’s share is approximately 20% or $580,000.  HHS OIG investigated the matter.  Assistant U.S. Attorney Joann Swanson represented the Government.

 

U.S. ex rel. Cosens v. Catholic Healthcare West

In August 2001, DOJ announced that Catholic Heathcare West, which operates hospitals in California, Arizona, and Nevada, agreed to pay $10.75 million to settle a qui tam suit alleging that four of its hospitals unlawfully charged the Government for procedures using unapproved experimental cardiac devices.  According to DOJ, between 1987 and 1994 the hospitals sought reimbursement for the procedures although they knew that Medicare and TRICARE consider them non-reimbursable.  The Government has already recovered about $18 million in previous settlements with other hospitals accused of similar conduct.  The hospitals involved in the current settlement are Sequoia Hospital in Redwood City, California; Seton Medical Center in Daly City, California; Mercy General Hospital in Sacramento; and St. Joseph’s Hospital and Medical Center in Phoenix.  Kevin Cosens, a former medical device salesman, filed this qui tam action.  The relator’s share is approximately 20% or $2.15 million.

 

U.S. ex rel. McNall v. Covenant Care, Inc., (C.D. Cal.)

In November 2001, DOJ announced that Covenant Care, Inc. had agreed to pay $3.2 million to settle allegations that the health care company had overcharged Medicare for its nursing services at more than 35 nursing facilities it operates in California and other states.  The Government alleged that Covenant Care overbilled for nursing service hours by failing to keeping accurate records and by billing Medicare for services provided to non-Medicare patients.  Michael McNall, a former controller at Covenant, filed this qui tam action in 1998.  Lawrence Heller represented the relator.  The San Francisco Regional OIG for HHS investigated the matter.  Assistant U.S. Attorney Hong Dea represented the Government.

 

U.S. v. Lincare, Inc. (E.D. Cal.)

In December 2001, DOJ announced that Lincare, Inc. agreed to pay $3.15 million to settle allegations that it improperly billed Medicare for home oxygen therapy provided by the company’s centers in Chico and Redding, California.  The Government alleged that from 1995 through 1997 Lincare, in violation of a clear prohibition, repeatedly billed Medicare for home oxygen therapy provided to patients purportedly qualified for the procedure under tests that Lincare itself administered.  Medicare prohibits suppliers of home oxygen equipment to use their own tests to qualify patients for coverage because of their interest in the outcome of such tests.  HHS OIG investigated the matter.  Assistant U.S. Attorneys Andrea Gross and Courtney Linn represented the government.

 

U. S. ex rel. Razin v. Christus St. Joseph Hospital (C.D. Cal.)

In February 2002, DOJ announced that St. Joseph’s Hospital in Houston agreed to pay $1.56 million to settle allegations that the hospital failed to disclose an overpayment made by Medicare. The Government alleged that the hospital knowingly retained an overpayment of $798,000 for indirect medical education expenses. When the hospital discovered the overpayment, it wrote a letter to its consulting firm, Healthcare Financial Advisors (HFA) stating that it intended to keep the funds. Mark Razin, a former employee of HFA, filed this qui tam action. The relator’s share was approximately 25 percent or $392,250.  Stephen Meagher of Phillips & Cohen (San Francisco) represented the relator. HHS OIG investigated the matter. Assistant U. S. Attorney Wendy Weiss represented the Government.

 

PacifiCare Health Systems

In April 2002, DOJ announced that PacifiCare Health Systems had agreed to pay $87.3 million to settle allegations that the Santa Ana, California-based health insurer and its predecessor companies submitted false claims to the Office of Personnel Management.  The Government alleged that PacifiCare, through its subsidiaries, submitted inflated claims pursuant to contracts in effect between 1990 and 1997 under the Federal Health Benefits Program.  PacifiCare allegedly violated applicable regulations by charging the Government higher rates than similarly situated commercial customers.  In addition to resolving the Government’s claims, this settlement also resolves the qui tam claim brought by whistleblower Valerie Fletcher, a former PacifiCare employee, in 1998.  Ms. Fletcher will receive a relator’s share of roughly $3.5 million.  Bradley Weiss (Highland Park, Ill.) and Judson Miner of Miner, Barnhill & Galland, P.C. (Chicago) represented the relator.  OPM OIG investigated the matter.  Assistant U.S. Attorneys Rudolph Contreras and Doris Coles-Huff represented the Government, along with Daniel Spiro, Sondra Mills, and Sheryl Floyd of DOJ’s Civil Division.

 

U.S. ex rel. Singh-Khalsa v. California, (N.D. Cal)

In June 2002, DOJ announced that the State of California and the County of Los Angeles had agreed to pay $73.3 million to settle allegations that they submitted false claims to Medicare.  According to the Government, the state and county billed Medicare for services to minors without any basis for believing that they were financially eligible for Medicare.  In addition to mental health and family planning services, the claims covered treatment for sexual assault, substance abuse, and sexually transmitted diseases.  In addition to resolving the Government’s claims, this settlement also resolves a qui tam action brought by Gurubanda Singh-Khalsa, an employee of the Los Angeles Department of Mental Health.  The relator’s share is approximately $1.36 million.  Brandon Wisoff of Farella, Braun & Martel (San Francisco) represented the relator.  HHS OIG and the FBI investigated the matter.  Assistant U.S. Attorney Sara Winslow, along with Daniel Spiro of DOJ’s Civil Division, represented the relator.

 

U.S. ex rel. Cosens v. Scripps, (S D. Cal.)

In June 2002, DOJ announced that seven hospitals had agreed to pay more than $6.34 million to settle a qui tam suit alleging that they submitted claims to government health programs for nonreimbursable experimental cardiac devices between 1987 and 1994.  Two California hospitals owned by Scripps Health, Scripps Memorial Hospital in La Jolla and Scripps Green Hospital in San Diego, agreed to pay $3.8 million.  Two Pittsburgh hospitals owned by UPMC Health System, Presbyterian Hospital and Shadyside Hospital, agreed to pay $1.5 million.  INTEGRIS Baptist Medical Center of Oklahoma City agreed to pay $629,000; Hoag Hospital of Newport Beach, Cal. agreed to pay $305,000; and St. Joseph’s Regional Medical Center of South Bend, Ind. agreed to pay $107,000.  Kevin Cosens, a former medical device salesman, filed this qui tam action in 1994, naming more than a hundred hospitals as defendants.  Sixteen of those hospitals previously agreed to settlements totaling more than $29 million.  See 24 TAF QR 65.  The relator’s share in the current group of settlements is 20% or approximately  $1.26 million.  A number of suits against other hospitals are reportedly still under seal.  Donald Warren of the Warren & Benson Law Group (San Diego) represented the relator.  The HHS OIG investigated the matter.

 

U.S. ex rel. Noll v. Brotman Medical Center (C.D. Cal.)

In June 2002, DOJ announced that Brotman Medical Center had agreed to pay $9.75 million to settle a qui tam suit alleging that the Culver City, California hospital overcharged Medicare for rehabilitation services.  Brotman is operated by a subsidiary of Tenet Healthcare Corp.  The Government alleged that Brotman charged for rehabilitation services provided in beds that were not licensed for rehabilitation purposes, and that the hospital misrepresented the square footage of the rehabilitation unit and other units in Medicare cost reports.  William Noll, a former controller of Brotman, brought this qui tam action in 1998.  The relator’s share will be approximately $1.93 million or 19.8%.  Mary Inman of Phillips & Cohen (San Francisco) represented the relator.  HHS OIG investigated the matter with audit assistance from the Mutual of Omaha Insurance Company.  Daniel Spiro, Diana Younts, and Laurence Freedman of DOJ’s Civil Division represented the Government.

 U.S. ex rel. Kimball v. Mercy Healthcare Sacramento, (E.D. Cal.)

In June 2002, DOJ announced that Catholic Healthcare West and its affiliate Mercy Healthcare Sacramento had agreed to pay $8.5 million to settle allegations that they and their hospitals filed false cost reports with federal health insurance programs.  According to the Government, these entities kept two sets of books.  The first set was shown to government auditors, while the second or “reserve” set, which was kept hidden from the Government, identified the unallowable and inflated costs included in filed cost reports.  The Government alleged that the defendants established secret reserves of funds in order to repay the Government in case the unallowable costs were eventually discovered.  Joseph Kimball, a former reimbursement analyst with Mercy, filed this qui tam action in 1999.  The relator’s share is $2.48 million or approximately 29.2%.  Paul Scott (San Francisco) represented the relator.  The Government intervened twice in different portions of the case, once in 2000 and again in 2001.  HHS OIG and the DCIS investigated the matter.  Assistant U.S. Attorney Adisa Abudu-Davis represented the Government.

 

U.S. ex rel. Vaid v. Blue Cross of California, (C.D. Cal.)

In July 2002, DOJ announced that Blue Cross of California (BCC) and its parent company, WellPoint Health Networks, had agreed to pay the Government $9.25 million to settle a qui tam lawsuit alleging that between 1990 and 2000, BCC knowingly falsified data regarding its performance of cost report audits for Medicare. The complaint alleged that BCC, which is responsible for auditing cost reports submitted by hospitals and other Medicare providers, falsified audit activity dates to deceive the Government into believing that the company had performed more audit work than it actually performed.  Vipul Vaid, a former company auditor, filed the qui tam suit in 1997.  The relator’s share is 16.5% or $1.52 million.  Donald Warren and Phillip Benson of the Warren & Benson Law Group (San Diego & Los Angeles) represented the relator.  HHS OIG and the FBI investigated the matter. Assistant U.S. Attorney Cathy Ostiller handled the case for the government.

 

U.S. ex rel. Cosens v. Good Samaritan Hospital of Santa Clara Valley, (N.D. Cal.)

In July and August 2002, settlements occurred in eight different qui tam actions brought by Kevin Cosens, alleging that the defendant hospitals knowingly billed Medicare for experimental cardiac devices undergoing FDA clinical trials, in violation of a Medicare manual rule excluding coverage for such services as not reasonable or necessary.  In July, Presbyterian Hospital in Pittsburgh agreed to pay $1.5 million, Baptist Medical Center of Oklahoma agreed to pay $629,000, Daniel Freeman Hospital agreed to pay $250,000, and St. Joseph’s Regional Medical Center of Indiana agreed to pay $107,000.  In August, Beth Israel Hospital and New England Deaconess Hospital agreed to pay $3.2 million, Passaic Medical Center of New Jersey agreed to pay $760,000, Hackensack Hospital of New Jersey agreed to pay $314,000, and Good Samaritan Hospital of Santa Clara Valley agreed to pay $115,000.  Thus the Government’s total recovery in these eight cases was $6.875 million.  Cosens, a former medical device salesman, has brought similar actions against dozens of defendants.  To date, the Government has settled with 27 defendants for more than $40 million.  Don Warren and Phil Benson of the Warren & Benson Law Group (San Diego & Los Angeles) represented the relator.  The relator’s share in each case is 20%, for a total of $1.375 million for the eight cases.  HHS OIG investigated the matter.  David Cohen and Lani Remick of DOJ’s Civil Division handled these cases for the Government.

 

Lovelace Health Systems – Los Angeles

In December 2002, DOJ announced that Lovelace Health Systems had agreed to pay $24.5 million to settle Medicare fraud allegations.  The Government alleged that Lovelace Health Systems, a hospital and HMO owned by Cigna Corporation, submitted costs reports to Medicare that it knew contained unallowable costs.  Additionally, the Government alleged that the hospital set aside cash reserves in an amount equal to the unallowable costs in order to repay the Government in the event that the unallowable costs were detected.  Mark Razin, a former employee of Lovelace Health System’s cost report consultant, filed this qui tam action.  Stephen Meagher and Mary Inman of Phillips & Cohen, LLP (San Francisco) represented the relator.  HHS OIG, the U.S. Postal Inspection Service, and DCIS investigated the matter.

 

U.S. ex rel. Mak v. Knapp, (S.D. Cal.)

In January 2003, David Knapp reportedly agreed to pay $500,000 to settle allegations of health care fraud.  The Government alleged that Knapp, a San Diego-based physician, misrepresented the person rendering services at two dermatological clinics he owned.  Linda Mak, a physician employed by Knapp, filed this qui tam suit in 2000.  The relator’s share is $90,000 or 18% of the total recovery.  The FBI, HHS OIG, OPM OIG, and DCIS investigated this matter.

 

U.S. v. Wetsman (S.D. Cal.)

In May 2003, Dr. Herman Eric Wetsman reportedly agreed to pay $126,285 to the Government to settle allegations of Medicaid fraud.  The Government alleged that Dr. Wetsman billed for surgical nasal endoscopies that were either not performed or were upcoded from diagnostic nasal endoscopies.  HHS OIG and the FBI conducted the investigation.  Assistant U.S. Attorney Kathleen Clark handled the matter for the Government.

 

Tenet Healthcare (E.D. Cal.)

In August 2003, DOJ announced that Tenet Healthcare agreed to pay $54 million to resolve claims that it violated the FCA.  The Government alleged that between the period of January 1, 1997 and December 31, 2002, Tenet submitted claims to Medicare, Medicaid, and other federal healthcare programs for medically unnecessary open-heart surgeries.  This settlement is the largest recovery in a medical necessity fraud case.  $51.35 million will be paid to the federal Government, with the balance to be paid to the State of California.  The FBI, HHS OIG, and the Defense Criminal Investigative Service conducted the investigation into this case.  Assistant U.S. Attorney Michael Hirst represented the Government.

 

U.S. ex rel. Baylor v. Kerlan-Jobe Orthopedic Clinic, (C.D. Cal.)

In January 2004, DOJ announced that Kerlan-Jobe Orthopedic Clinic had agreed to pay $2.65 million to settle allegations that it defrauded Medicare and other federal health care programs for eight years.  The Government alleged the clinic and its physicians knowingly overbilled Medicare, Medi-Cal, the Department of Labor’s Office of Workers’ Compensation Programs, and the Department of Defense’s TRICARE program for office visits and outpatient procedures.  Trevor Baylor, former director of the clinic’s health information systems department, filed this qui tam action in 1998.  The relator’s share was approximately 21% or $556,500.  Paul Scott (San Francisco) represented the relator.  The USPS OIG and U.S. Department of Labor investigated the matter.  Assistant U.S. Attorney David Barrett represented the Government.

 

U.S. ex rel. Lopez v. Coast Plaza Doctors Hospital & Estate, (C.D. Cal.)

In February 2004, DOJ announced that a Los Angeles-area hospital and the estate of its former chief executive officer have agreed to pay $4.1 million to settle allegations of Medicare fraud.  The Government alleged Coast Plaza Doctors’ Hospital falsified expense account entries to receive Medicare reimbursements from 1994 to 1999.  Raul Lopez, the former CFO, filed this qui tam action in 1999.  The relator’s share was 17.5% or $718,000.  Salvatore Scarantino (Los Angeles) represented the relator.  HHS OIG investigated the matter.  Assistant U.S. Attorney Vipal Patel represented the Government.

 

U.S. ex rel. Jenkins v. Health Line Clinical Laboratories, (N.D. Cal.)

In April 2004, the DOJ announced that Health Line Clinical Laboratories (HLCL), Aramis Paronyan, and Natella Lalabekyan had agreed to pay $10 million to settle claims of Medicare and Medicaid fraud by federal and state governments. The Government alleged that HLCL and its employees defrauded Medicare by performing medically unnecessary blood tests from 1996 to 2003. Kim Jenkins and Timothy Mills, former HLCL salesmen, filed this qui tam lawsuit in 1998. The relators’ share was 20percent, or $2 million. Wayne Lamprey of Goodin, McBride, Squeri, Ritchie & Day, LLP (San Francisco) represented the relators.  HHS OIG and the FBI investigated the matter. Assistant U.S. Attorney Joann Swanson and Robert McAuliffe of the DOJ Civil Division represented the Federal Government. Deputy Attorney General Eliseo Sisneros represented the California state government. As part of the settlement, HLCL entered into a Corporate Integrity Agreement with HHS to ensure ongoing compliance.

 

U.S. v. Loma Linda University Faculty Practice Plan, (C.D. Cal.) –December 1, 2004

In December 2004, the DOJ announced that Loma Linda University Faculty Practice

Plan had agreed to pay $2.2 million to resolve allegations of Medicare fraud. The Government alleged that the faculty practice corporation submitted claims for services directly performed by faculty members, when in fact residents or interns had been personally involved in performing the services being billed to Medicare. The Government also alleged that the faculty practice corporation upcoded claims to charge for greater levels of service than provided. HHS OIG investigated the matter. Assistant U.S. Attorney Frank Kortum represented the Government.

 

U.S. ex rel. Salzman v. Fresno County, (E.D. Cal.) –February 14, 2005

In February 2005, the DOJ announced that Fresno County and the Fresno County Human Health System had agreed to pay $376,000 to settle allegations of Medicare fraud. The Government alleged that Fresno County billed Medicare for mental health services provided by caseworkers and other non-physician staff as though physicians had provided those services. Psychiatrists Dr. Barnett Salzman and Dr. Jerome Lance filed this qui tam action in August 2001. The relators’ shares have not yet been determined.  HHS OIG investigated the matter. Assistant U.S. Attorney Kirk Sherriff represented the Government.

 

U.S. v. Simi Valley Hospital and Health Care Services (C.D. CA) – July 19, 2005

In July 2005, the DOJ announced that Simi Valley Hospital and Health Care Services had agreed to pay $3.6 million to resolve future allegations of Medicare fraud. The government alleged that the hospital routinely upcoded Medicare claims for treatment of pneumonia cases from 1993 to 1998, classifying them as “severe respiratory infections”. Assistant U.S. Attorney Lisa Palombo represented the government.[Editor’s Note: The settlement in this case was reached without a complaint having been filed.]

 

U.S. ex rel. Razin v. Eisenhower Medical Center  –September 1, 2005

In September 2005, the DOJ announced that Eisenhower Medical Center in Rancho Mirage had agreed to pay $8 million to settle allegations of Medicare fraud. The government alleged that Eisenhower Medical Center’s cost reports included costs completely unrelated to patient care at the hospital. Mark Razin, a former consultant for Healthcare Financial Advisors, Inc. filed this qui tam suit in 1998. Mary Inman of Phillips & Cohen (San Francisco) represented the relator. Assistant U.S. Attorney Wendy Weiss represented the government.

 

U.S. ex rel. Campbell v. Tenet Healthcare, (E.D. CA) –November 15, 2005 

In November 2005, the DOJ announced that Tenet Healthcare Corp. had agreed to pay $32.5 million to settle allegations of Medicare fraud. The Government alleged that five doctors at Redding Medical Center performed unnecessary heart surgeries on more than 700 patients, often immediately following the first consultation with them. Former patient John Corapi and his friend Joseph Zerga filed the first qui tam lawsuit in 2002. Three days later, Redding internist Patrick Campbell filed his suit. The settlement obviates the need for a trial court review of Campbell’s claims by including Campbell as a whistleblower. The relator’s share was $2.7 million each for relators Corapi and Zerga, and $4.4 million for relator Campbell, or approximately 15% total.  David Rude of Clark & Rude (San Jose) represented the Campbell. HHS OIG, the Medical Board of California, and the FBI investigated the matter.  Assistant U.S. Attorney Michael Hirst represented the Government.

[Note: As part of the settlement, prosecutors agreed not to file criminal charges against the doctors in question. This settlement ends a three-year investigation that resulted in over half a billion dollars worth of settlements and fines.]

 

California v. Pleasant Care Corp. –March 9, 2006

In March 2006, California Attorney General Bill Lockyer announced that Pleasant Care Corp. had agreed to pay $1.35 million to settle negligent care charges.  The State alleged that Pleasant Care committed more than 160 regulatory violations over a 5-year period.  Under the settlement, Pleasant Care has agreed to hire more nursing staff and establish a whistleblower program that enables employees, residents or others to report mistreatment of residents. It also agreed to train its staff in such areas as wound treatment, preventing malnutrition and dehydration, and accurate record keeping.  Pleasant Care, which owns 30 nursing homes in California, agreed to pay a $1 million civil fine and reimburse the State $350,000 for investigation costs.

 

U.S. v. Tenet Healthcare (S.D. CA) –May 17, 2006

In May 2006, Tenet Healthcare agreed to pay $21 million and to sell off its Alvarado Hospital Medical Center in San Diego to settle government charges over alleged kickbacks to doctors. At issue was whether the Dallas-based company’s 311-bed Alvarado hospital and its former chief executive, Barry Weinbaum, violated criminal anti-kickback laws by funneling more than $10 million to physicians to increase admissions. Prosecutors argued that Alvarado’s relocation deals went beyond the bounds of legal relocation payments. They said the agreements conveyed more than $10 million in bribes to established physician groups to entice them to admit patients to the hospital. [Note: Tenet, Alvarado and a former hospital administrator have been tried twice on related criminal charges. Both trials ended in mistrials after jurors were unable to agree. The U.S. Attorney’s Office in San Diego has agreed not to pursue any more criminal charges.]

 

U.S. v. Tenet Healthcare Corp. –June 29, 2006

In June 2006, Tenet Healthcare announced a global settlement with the Department of Justice that included $900 million and the divestiture of nine hospitals. The monetary sum included $725 million to be paid incrementally and $175 million in payments that Tenet will not request from Medicare. The DOJ alleged that Tenet cheated Medicare through improper “up-coding,” abuse of the outlier system, and giving kickbacks to doctors. The fraud was investigated by the Department of Health and Human Services’ Office of Inspector General and its Office of Investigations in Santa Ana, CA, Office of General Counsel and Centers for Medicare and Medicaid Services; the Federal Bureau of Investigation; and Medicare Contractors Mutual of Omaha Inc. and IntegriGuard LLC. While DOJ has acknowledged that some of the allegations originated from qui tam suits, DOJ has not yet announced which suits were settled in this “global settlement.”

 

U.S. v. Beverly Enterprises Inc., (N.D. Cal.) –August 18, 2006

In August 2006, Beverly Enterprises Inc. agreed to pay the United States and the State of California $20 million to settle allegations against its former wholly owned subsid¬iary, MK Medical. Beverly has agreed to settle these allegations by paying $14,487,278 to the United States and $5,512,722 to the state of California. According to the claims, MK Medical submitted false claims for payment to the Medicare and Medi-Cal programs from 1998 until 2002, while Beverly owned the company. The subsidiary, a now-defunct wholesaler of durable medical equipment (DME), billed Medicare and Medi-Cal for DME provided to the programs’ beneficia¬ries without obtaining the proper claims and medical documentation. The investigation was conducted by the Justice Department’s Civil Division, the U.S. Attorney’s Office for the Northern District of California in San Francisco, the Office of Inspector General for the Department of Health and Human Services and the Federal Bureau of Investigation.

 

U.S.  v. Robert I. Bourseau, et al., (S.D. Cal.) –Sept. 29, 2006

Judge Robert Benitez of the U.S. Southern District Court of California ruled that hospital operators Robert I. Bourseau and Dr. Rudra Sabaratnam and their single-employee corporations, RIB Medical Management Services and Navatkuda Inc., were liable for more than $23 million dollars in damages for submitting false claims to Medicare. According to the verdict, Bourseau and Dr. Sabaratnam knowingly claimed false interest reimbursement from Medicare in the yearly cost reports of Bayview Hospital, which they controlled through their ownership of California Psychiatric Medical Services (CMPS). Numbering in the millions of dollars, these cost reports included CMPS bankruptcy fees, a fabricated lease expense, and unused square footage in the hospital.  This judgment stemmed from a complaint filed in May of 2003 by the U.S. Government on behalf of the Department of Health and Human Services, Centers for Medicare and Medicaid Services. The case is currently on appeal in the Ninth Circuit Court of Appeals. Assistant U.S. Attorney Robert Ciaffa of the Southern District of California handled the case for the U.S along with trial attorneys Robert McAuliffe and Geeja Gobena of the U.S. Department of Justice’s Civil Division.

 

U.S. ex rel. Diaz v. Lourdes Perez et al. (S.D.Cal.) –Oct. 16, 2006

Lourdes Perez, the owner and operator of Provident Home Health Services Inc. (PHHS), was sentenced to 46 months in prison for defrauding Medicare and was required to make payments of $6,127,374 to Medicare and $874,336 to the IRS to settle civil charges filed under the False Claims Act. Marietta Diaz, a former payroll clerk at Provident Home Health Services, filed a qui tam complaint in 2003 that alleged that Perez had hired marketers to recruit patients for her home health service without regard to medical necessity and then billed Medicare for the services provided. Additionally, Diaz indicated that Perez had provided illegal kickbacks to doctors to get more referrals for PHHS. Although few patients actually visited PHHS, Perez billed Medicare and Medicaid regularly for their visits. In little more than 18 months, Perez defrauded the government of over $40 million. This sentencing resolves the criminal charges against Perez. The civil charges were already settled in 2003, when Perez agreed to pay the government $33.8 million. Assistant U.S. Attorney Wendy L. Weiss handled the settlement agreement. TAF member Michael P. Brown of Phillips and Cohen represented Marietta Diaz. The investigation of PHHS is still ongoing and is being coordinated by the FBI’s Health Care Fraud Unit, the Criminal Investigation Division of the IRS, and the Department of Health and Human Services’ Office of the Inspector General.

 

U.S. ex rel Lee v. Horizon West Inc. et al., (N.D. Cal.) –Sept. 26, 2006

California-based healthcare company, Horizon West Inc. and its subsidiary Horizon West Healthcare Inc., agreed to pay the U.S. Government $14.7 million to settle allegations of fraud brought under the False Claims Act. Horizon West, which runs nursing home facilities throughout California and Utah, was accused of falsely inflating nursing hours spent on Medicare patients in a qui tam complaint filed in 2000 by Julia Lee, a former director of nursing at a facility which was acquired by Horizon. Under terms of the settlement, Horizon will identify and pay unallowable costs it submitted for reimbursment, as well as the overcharges and interest from these costs. The case was investigated by the U.S. Department of Health and Human Services, Office of the Inspector General and the FBI. Lee’s share of the settlement is currently being negotiated and Horizon will pay $99,693 to cover her attorney’s fees and costs. TAF member Donald R. Warren of Warren-Benson Law Group represented Julia Lee. Sara Winslow and Steven J. Saltiel of the U.S. Attorney’s Office for the Northern District of California and Suzette E. Gordon of the U.S. Department of Justice’s Commercial Litigation Branch, Civil Division represented the Government.

 

U.S. ex rel. Razin v. Jackson Memorial Hospital (C.D. Cal.) –Dec. 18, 2006

Jackson Memorial Hospital in Miami agreed upon a $14.25 million settlement to resolve allegations that it failed to return overpayments made by Medicare/Medicaid. Mark S. Razin, a former employee of the consulting firm, Healthcare Financial Advisors, filed a suit under the False Claims Act in 1998 contending that Jackson Memorial had submitted reimbursement claims for unallowable costs and had knowingly concealed overpayments from the government due to a calculation error on its 1989 cost report. Despite paying the settlement, Jackson Memorial Hospital denied any unlawful activity. The case was investigated by the Department of Health and Human Services, Office of the Inspector General. Wendy L. Weiss represented the U.S. and TAF member Michael P. Brown of Phillips & Cohen represented Mark Razin.

 

U.S. v. Greybor Medical Transportation Inc. (C.D. Cal.) –December 10, 2007

Boris Shpirt, the owner and operator of Los Angeles ambulance company, Greybor Medical Transportation, agreed to pay $6 million to the federal government to settle a civil suit brought under the False Claims Act alleging that Shpirt fraudulently submitted false claims for payment to Medicare. In addition to the $6 million, Shpirt will also relinquish a further $1 million in scheduled payments from Medicare. The settlement arose from a civil suit brought by the government under the False Claims Act, after a grand jury indicted Shpirt and his wife of criminal fraud charges. Shpirt was found guilty of multiple counts of fraud and was sentenced to 9 years in prison and is currently serving his sentence. His wife was sentenced to 18 months. Additionally, Shpirt and Greybor were required to pay $2.4 million in criminal restitution. According to the False Claims Act suit, Shpirt and Greybor submitted claims for reimbursement to Medicare, claiming that certain patients using their ambulance transport were ‘bed-confined’ even when they were not. Under this scheme, Shpirt was able to submit reimbursement claims for patients who were ineligible for Medicare reimbursement, since Medicare only reimburses for patients who are bed-confined and have no other means of transportation. Additionally, Boris Shpirt and Greybor also billed Medicare for patients individually, even when the patients used the ambulance at a single time. Assistant U.S. Attorney Abraham Meltzer of the U.S. Attorney’s Office of the Central District of California represented the U.S. The Civil Division of the Central District of California collected almost $1.2 billion in civil recoveries in FY2006, including over $1 billion under the False Claims Act.

 

Community Memorial Health System Settlement—December 19, 2007

Community Memorial Health System (CMHS) agreed to pay $1.52 million to the federal government to settle allegations that it violated the False Claims Act by submitting claims to Medicare which were prohibited under the Stark law. According to self-disclosures made by CMHS to the federal government, CMHS had entered into unlawful financial arrangements with physicians in which monetary gifts were exchanged for referrals. These monetary gifts took the form of interest-free loans, below market rents, gifts, and employment arrangements with the physicians’ family members. Such arrangements violate the Stark ‘anti-referral’ law and as such, claims submitted to Medicare as a result of such arrangements are not reimbursable. The investigation and settlement was handled by the U.S. Attorney’s Office for the Central District of California. CMHS did not admit any wrongdoing. Assistant U.S. Attorney Wendy Weiss represented the U.S.

 

HealthSouth Corporation Settlement—December 14, 2007

HealthSouth Corporation and two physicians agreed to pay the U.S. $14.9 million to settle allegations that HealthSouth submitted false claims to Medicare and violated the anti-kickback statute by paying unlawful kickbacks to physicians who referred patients to its hospitals, rehabilitation clinics, and ambulatory surgery centers. The settlement arose from disclosures made by HealthSouth in 2004 and 2005 to the U.S. Attorney for the Northern District of Alabama and the Office of the Inspector General for the Department of Health and Human Services (OIG) during a management change and an internal investigation. According to the disclosure, HealthSouth was involved in illegal financial relationships with the Alabama Sports Medicine and Orthopedic Center, the American Sports Medicine Institute, and two physicians—James Andrews and Lawrence Lemak—to whom kickback payments were made to induce referrals to HealthSouth facilities. HealthSouth will pay $14.2 million and the two physicians, James Andrews and Lawrence Lemak, will pay a total of $700,000. As part of the settlement HealthSouth will enter into a Corporate Integrity Agreement with the OIG of the Department of Health and Human Services. The case was investigated by the U.S. Attorney’s Office for the Northern District of Alabama, the U.S. Attorney’s Office for the Central District of California, the Civil Division of the U.S. Department of Justice, the OIG of the Department of Health and Human Services, and the FBI.

 

Orange County California Settlement—December 20, 2007

Orange County, California, agreed to pay $7 million to settle claims that its Health Care Agency violated the False Claims Act by billing Medicare for psychiatric evaluations that did not meet federal reimbursement requirements. The settlement arose from an investigation by the federal government of the Behavioral Health Services Division of Orange County’s Health Care Agency (OCHCA). The investigation found that between 1990 and 1999, OCHCA billed Medicare for self-administered methadone treatment for drug addicted patients—a practice not covered by Medicare. Additionally, OCHCA allegedly upcoded short office visits to more extensive office visits to receive a higher reimbursement from Medicare. As part of the settlement, OCHCA will enter into a Corporate Integrity Agreement with the Office of the Inspector General of the Department of Health and Human Services.

  

U.S. and the State of California ex rel. Davis v. San Mateo County Medical Center (N.D.CA. March 12, 2009)

San Mateo County Medical Center and San Mateo County recently agreed to pay the United States government and the State of California a settlement sum of $6,800,000 to resolve allegations for the submission of false claims and the omission of valid claims which stood in violations of the False Claims Act. San Mateo County, located in the Northern District of California, manages and owns the San Mateo County Medical Center (SMMC), a regional medical center. The SMMC is comprised of a public hospital, mental health center, and a mental disease treatment facility. The civil complaint, filed in August of 2006 by Ronald Davis, alleged that SMMC knowingly engaged in two primary methods of fraud at the expense of the federal government and the State of California. SMMC receives Disproportionate Share Hospital (DSH) payments yearly based in part on the available bed count within the medical center. Davis, a compliance officer with SMMC from 2000 until 2005, alleged that SMMC improperly inflated the bed count in order to receive a higher rate of payment for their DSH. Additionally, the allegations stated that SMMC purposefully neglected to report certain mental health services to the California State Department of Mental Health which resulted in the federal government paying in excess for ineligible services. As part of the settlement, SMMC and San Mateo County agreed to sign corporate integrity agreement in an effort to ensure future compliance with federal law and Medicare reimbursement provisions.

 

Tulare Healthcare: (C.D. Cal. July 27, 2009)

 Tulare Local Healthcare District, Tulare District Healthcare System and Tulare District Hospital (“Tulare”) agreed to pay more than $2.4 million to settle allegations that they violated the Stark Law, the Anti-Kickback Statute, and the FCA. The settlement stems from a qui tam suit that Mary Lucy Reimche, Tulare’s former CFO, filed in 2006. According to Reimche’s complaint, Tulare Healthcare provided prohibited remuneration to physicians who referred Medicare patients to Tulare Healthcare. The doctors who allegedly received prohibited remuneration from 2001 through 2007 were given rental arrangements at below-market rates, were able to purchase commercial real estate lots at below market value, and had debts forgiven. TAF members Mark Kleiman and Michael Hirst represented the relator, who received a $500,000 relator’s share. HHS-OIG investigated the case.

 

Warrick Pharmaceuticals/Schering Plough December 17, 2009 (California FCA)

Warrick Pharmaceuticals, a subsidiary of pharmaceutical giant Schering-Plough, agreed to pay the state of California $21.3 million to resolve allegations that the company deliberately overcharged Californias Medicaid (Medi-Cal) program, causing the program to overpay millions of dollars in pharmacy reimbursement for Albutrol and other drugs. Warrick had allegedly inflated the Average Wholesale Prices (AWPs) in its reports to California. Schering-Plough has paid more than $69 million to state and federal governments to resolve similar allegations, with more cases still pending. Relator Ven-A-Care of the Florida Keys, Inc. originally filed these and other FCA cases. TAF member Jim Breen represented the relator. The California Attorney General’s Bureau of Medi-Cal Fraud and Elder Abuse negotiated the settlement.

 

Robert Bourseau and Dr. Rudra Sabaratnam: (D.C.D. Cal. Jan. 25, 2010)

The United States, joined by the State of California, obtained a $10 million consent judgment against Robert Bourseau and Dr. Rudra Sabaratnam, former owners of City of Angels Medical Center, in Los Angeles, California. The consent judgment resolves a lawsuit alleging that Bourseau and Sabaratnam violated the False Claims Act and the Anti-Kickback Statute by directing a scheme whereby City of Angels would pay “recruiters” at homeless shelters in low income neighborhoods to bring homeless people to the medical center by ambulance for treatment, regardless of the patients’ true medical needs. City of Angels then allegedly billed Medicare and Medi-Cal for those services, many of which were medically unnecessary. In addition to the civil judgment, Bourseau and Sabaratnam pled guilty to criminal charges for violating the Anti-Kickback Act and both are awaiting sentencing. Another City of Angels executive, along with two of the center’s “recruiters” also pled guilty to similar charges.

The Justice Department’s Civil Division, the U.S. Attorney’s Office for the Central District of California, the California Attorney General’s Office, and the Office of Inspector General of the Department of Health and Human Services handled the investigation and civil lawsuit together.

 

Novartis Vaccines & Diagnostics and Chiron Corporation: (N.D. Cal. May 2, 2010)

Novartis Vaccines and Diagnostics Inc. and Novartis Pharmaceuticals Corporation agreed to pay the United States and various states a combined $72.5 million to resolve allegations that the companies—and predecessor Chiron Corporation—caused false claims to be submitted to federal health care programs for certain off-label uses of TOBI, a drug used to treat some cystic fibrosis patients. According to the Department of Justice, the settlement resolves allegations of fraud during the period of January 1, 2001 to July 31, 2006.

The settlement resolves a qui tam suit brought by former Chiron employees Robert Lalley, Courtney Davis, and Williams Manos. The three relators will receive a combined award of $7.825 million. Rene P. Tatro of Tatro Tekosky Sadwick LLP and Richard Doyle of Janssen Doyle LLP represented the relators.

The settlement was a result of a coordinated effort among: the Defense Criminal Investigative Service; the Commercial Litigation Branch of the Department of Justice’s Civil Division; the U.S. Attorney’s Office for the Northern District of California; the U.S. Department of Health and Human Services’ Office of Inspector General; the Office of Personnel Management, Office of Inspector General, the Department of Veterans’ Affairs, Office of Inspector General; the Federal Bureau of Investigation; the Food and Drug Administration; and the National Association of Medicaid Fraud Control Units.

 

Intercare Health Systems Inc.: (C.D. Cal. May 27, 2010)

Intercare Health Systems Inc., formerly City of Angels Medical Center, entered into a consent judgment with the United States and the State of California for $10 million to resolve allegations that they violated the False Claims Act and the Anti-Kickback Statute. From August 2004 through April 2008, City of Angels Medical Center allegedly paid illegal bribes to patient recruiters employed at homeless shelters to encourage referrals of Medicare and Medi-Cal patients. According to the Department of Justice, the investigation and civil lawsuit were handled collaboratively by the Civil Division of the Department of Justice, the U.S. Attorney’s Office for the Central District of California, the Attorney General’s Office of the State of California and the Office of Inspector General of the U.S. Department of Health and Human Services.

 

The Oaks Diagnostics, Inc.: (C.D. Cal. July 2, 2010)

The Oaks Diagnostics, Inc. (d/b/a Advanced Radiology) agreed to pay the United States $647,000 to settle allegations that it filed false claims with Medicare for unnecessary radiological tests. This settlement resolves a 2003 False Claims Act qui tam action filed by a former Advanced Radiology employee. The case was investigated by the Office of Inspector General of the Department of Health and Human Services and the Federal Bureau of Investigation.

 

National Cardio Labs LLC: (C.D. Cal. July 8, 2010)

National Cardio Labs LLC, an Orange County company that offered heart monitoring services, agreed to pay $3.6 million to settle allegations that the company, its manager, Adrienne Stanman, and her husband, Robert Parsons (a former manager), defrauded Medicare, Medicaid, and TRICARE, by knowingly submitting false healthcare claims to the federal health insurance programs between January 1998 and February 2004. The False Claims Act qui tam suit was originally filed in January 2004 by James Cast and Stanton Crowley, who will receive a $1,115,614 share of the federal government’s recovery.

 

Teva Pharmaceuticals: (July 26, 2010)

Teva Pharmaceuticals, an Israeli-owned generic drug company, agreed to pay the United States, as well as the States of Texas, Florida, and California a total of $169 million to settle allegations that the company defrauded Medicaid by allegedly setting and reporting inflated prices for medications dispensed by pharmacies and other providers, who were then reimbursed by state Medicaid programs. Texas will receive $51 million and Florida will receive $27 million. The remaining $90 million will be divided between the federal government and the State of California. The settlement was the result of a qui tam case filed by Ven-a-Care of the Florida Keys, which was represented by TAF member James J. Breen of The Breen Law Firm.

  

El Centro Regional Medical Center: (S.D. Cal. Aug. 25, 2010)

El Centro Regional Medical Center, a Southern California hospital, agreed to pay the United States $2.2 million to settle False Claims Act allegations that the hospital defrauded Medicare. The hospital was alleged to have fraudulently inflated its charges to Medicare patients in order to obtain larger reimbursements from the Federal healthcare program. The allegations were raised in a qui tam case filed by relator Pietro Ingrande, who is a former El Centro employee. Ingrande, who was represented by TAF members Vince McKnight and Altomease Kennedy of the law firm McKnight & Kennedy, LLC, will receive a $375,000 share of the government’s recovery.

In addition to the settlement agreement, the hospital agreed to enter into a Corporate Integrity Agreement with the Office of Inspector General, Department of Health and Human Services.

 

Saint John’s Health Center: (C.D. Cal. Aug. 25, 2010)

Saint John’s Health Center in Santa Monica, California agreed to pay the United States $5.25 million to resolve False Claims Act allegations of over-billing Medicare. The hospital had allegedly submitted false, inflated claims to increase Medicare “outlier payments” between 1996 and 2003.

According to the Department of Justice, the case was handled by the Civil Fraud Section of the United States Attorney’s Office, which received assistance from the Office of the Inspector General for the U.S. Department of Health and Human Services.

 

Christus Health Systems: (C.D. Cal. Oct. 6, 2010)

Christus Health Systems, a Texas-based hospital chain, agreed to pay the United States $970,987 to settle a False Claims Act qui tam action involving Medicare fraud. From 1988 through 2001, the company allegedly billed Medicare for ineligible costs and expenses and failed to disclose overpayments. This civil settlement resolves a 1998 qui tam action filed by Mark Razin, an employee of Healthcare Financial Advisors Inc.—a company that worked with hospitals on their cost reports to maximize Medicare reimbursement. Razin was represented by TAFEF member Mary A. Inman, a San Francisco attorney with Phillips & Cohen LLP.

 

Simi Valley Hospital: (C.D. Cal. Nov. 3, 2010)

Simi Valley Hospital agreed to pay the United States $5.15 million to resolve allegations that it filed fraudulent claims with Medicare. This settlement is the result of a 2001 qui tam suit filed by Timothy Field, a former hospital director. Field alleged that the hospital’s Behavioral Medicine Services unit knowingly submitted false claims to Medicare for chemical dependency and psychiatric patient services performed between 1991 and 1997. The hospital also allegedly paid a medical director $12,000 each month to work on a nonexistent program.

 

Ronald T. Lim: (E.D. Cal. Dec. 3, 2010)

Ronald T. Lim agreed to pay the United States $175,000 to settle allegations that he violated the Controlled Substances Act and the False Claims Act at his three pharmacies:

Lim’s Family Pharmacy, Susanville Family Pharmacy and Lim’s Shasta Lake Pharmacy. Lim allegedly submitted or caused to be submitted false claims for payment to Medicare and the California Medicaid Program for drugs that were not dispensed to beneficiaries.

 

Catholic Healthcare West: (E.D. Cal. Feb. 18, 2011)

Catholic Healthcare West agreed to pay the United States $9.1 million to settle allegations that seven of its hospitals—Community Hospital of San Bernardino, California; St. Bernadine Medical Center in San Bernardino, California; St. Elizabeth Community Hospital in Red Bluff, California; O’Connor Hospital in San Jose, California; Seton Medical Center in Daly City, California; St. Joseph’s Hospital and Medical Center in Phoenix, Arizona; and St. John’s Regional Medical Center in Oxnard, California—violated the False Claims Act by committing Medicare fraud. Three of the hospitals allegedly received overpayments due to Medicare processing errors, but did not return the funds when the errors were discovered; three other hospitals allegedly submitted inflated costs for their home health agencies and were subsequently overpaid; and one hospital claimed entitlement to additional funds for treating a high percentage of patients with end-stage renal disease for several years, including a period for which it was not eligible.

 

Laboratory Corporation of America (E.D. Cal. July 21, 2011)

Laboratory Corporation of America, also known as LabCorp, agreed to pay the State of California $49.5 million to settle claims that the company violated California’s False Claims Act by overcharging California’s Medicaid program and by giving doctors kickbacks for patient referrals. LabCorp was accused of charging laboratory tests at rates that exceeded the maximum amounts permitted by law. Additionally, LabCorp allegedly offered discounted or free testing to doctors, hospitals and clinics that referred Medi-Cal patients and other business to the labs. The allegations were brought by relators Hunter Laboratories, LLC and its CEO, Chris Riedel.

 

TriWest Healthcare Alliance Corp. (N.D. Cal. September 9, 2011)

Arizona-based TriWest Healthcare Alliance Corp. agreed to pay the United States $10 million to resolve allegations concerning the Department of Defense’s TRICARE medical benefits program. Between 2004 and 2010, TriWest allegedly signed letters of agreement with health care providers for service discounts and then failed to give TRICARE the benefit of the negotiated discounts. This settlement resolves a False Claims Act qui tam suit filed by four former TriWest employees: Judi Jerdee, Deborah Thornton, Linda Glassgow and Paige Fiorillo. The relators will receive a combined $1.7 million share of the federal recovery. 

 

CVS Caremark Corporation (Dec. 16, 2011)

CVS Caremark Corporation agreed to pay $19.9 million to Illinois, California, and Florida to settle three separate qui tam suits. The suits alleged that CVS Caremark defrauded the states’ prescription drug plans by reselling returned drugs, altering prescription orders to make them more expensive, and submitting false reports about prescription filling time. Of the $19.9 million settlement, almost $7 million will go to the State of California, with $4 million being paid to the State of Illinois, and $3 million going to the State of Florida. Attorneys Michael Leonard and TAFEF member Jonathan D. Lichterman of Meckler Bulger Tilson Marick & Pearson represented the relators. Walter Lack and Paul Traina of Engstrom, Lipscomb & Lack served as their co-counsel.