Off-Label Audits Pharmaceutical Fraud Attorneys

Nolan Auerbach & White are experienced Pharmaceutical Fraud Attorneys helping courageous whistleblowers.

In the broadest sense, Hospital Fraud can be broken down into three areas: hospital inpatient fraud, hospital outpatient fraud, and cost report fraud. Within those broad areas, there are many ways in which a hospital system can run afoul of the False Claims Act, whistleblower cases exposing this system-wide fraud is increasing in numbers.

Inpatient services must be medically necessary and constitute an appropriate level of care. In particular, claims for patient admissions must be medically necessary, and implicit within the payment is that patient discharges are not premature. Claims for inpatients must also avoid upcoding, unbundling of services, and contain duplicates.

With outpatient claims, the intentional manipulation of code assignments to maximize payments and avoid National Correct Coding Initiative (NCCI) edits constitutes fraud. Unintentional misapplication of NCCI coding and billing guidelines may also give rise to overpayments or civil liability for hospitals that have developed a pattern of inappropriate billing.

The Outpatient Prospective Payment System (OPPS) rules require hospitals to submit claims for all OPPS services provided at the same hospital, to the same patient, on the same day, unless certain conditions are met. The submission of multiple claims for OPPS services delivered to the same patient on the same day may violate the False Claims Act.

Patient transfers to certain post-acute care settings for certain designated Diagnosis Related Groups (DRGs) must be properly coded so that a hospital will receive a per diem transfer payment, rather than the full DRG payment, or the False Claims Act may be violated. Inappropriate transferring of patients between the host hospital and a hospital-within-a-hospital also runs afoul of the False Claims Act. Other outpatient hospital fraud, for example, can take the form of falsely coding hospital-affiliated entities and clinics, as “provider-based.”

Cost report fraud can include improper reporting of “pass-through” new technology and drugs, including costs not related to organ acquisition, and false calculations with regard to graduate medical education (GME) and indirect graduate medical education (IME) costs.

The OIG’s Supplemental Compliance Guidance for Hospitals highlights some additional recognized areas that have an increased risk of fraud.  These include Relationships between hospitals and physicians including referral sources.  Financial relationships with referring physicians must fit squarely within statutory or regulatory exceptions to the Stark law or “face significant financial exposure.” Compliance with Stark laws is mandatory so there is “significant financial exposure” for hospitals that fail to comply.  A particular area of concern involves medical director agreements wherein physicians staff outpatient hospital departments and at the same time use hospital space, equipment or personnel to conduct their private practices.  Arrangements that involve, “conditioning privileges on a particular number of referrals or requiring the performance of a particular number of procedures beyond volumes necessary to ensure clinical proficiency, potentially raise substantial risks under the [anti-kickback] statute.”  Exclusive contracts with hospital-based physicians such as radiologists, pathologists and anesthesiologists involving certain “reasonable administrative or limited clinical duties directly related to the hospital based professional services” (including participation in an on-call rotation) at a reduced or no charge can be permissible only if such free services reasonably reflect the value of the exclusivity conferred on the physicians.

OIG also remains suspicious of joint ventures.  Central to the OIG’s:”… remuneration from a joint venture [e.g. dividends, profit distribution] might be a disguised payment for past or future referrals to the venture or to one or more of its participants.”  At a time when physicians wish to invest in and make referrals to ancillary service providers such as diagnostic labs, medical office buildings, or hospital ownership, the OIG views such arrangements as potential vehicles for impermissible referrals.

Kathleen Hawkins

Dignity Health
$37 million

Kathleen Hawkins, RN MSN, had been employed by Defendant, Catholic Healthcare West (CHW) for approximately 6 years when she decided she had had enough of trying to change the hospital system from within.

CHW, a California not-for-profit corporation that operated hospitals in California, Arizona, and Nevada, was at the time the eighth largest hospital system in the nation and the largest not-for-profit hospital provider in California.


Joe Strom

Johnson & Johnson
$184 Million

Joe Strom contacted us in 2005. We were very grateful that he did. We immediately formed an all-star legal team and a process to stop a very harmful pharmaceutical marketing strategy. It was this process we set into motion that ultimately returned hundreds of millions of dollars to the U.S. Treasury, and a portion of that, very well-deserved, into Joe’s bank account.

Joe told us a very troubling story about the off-label promotion of a pharmaceutical drug for patients who already suffered from chronic heart failure.


Bruce A. Moilan Sr.

$27 Million

Bruce Moilan was a seasoned hospital systems expert by the time he contacted our Firm. At the time he decided to file his qui tam lawsuit, he was employed by South Texas Health System as a System Director for Materials Management. In this position, he oversaw $24 million in annual purchases of supplies and equipment and helped determine budget, reduction and cost analysis throughout the contract bidding and negotiations process. His job was to insure proper implementation for purchasing, receiving and management of inventory, for McAllen Hospitals, L.P.


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