In New York, major healthcare fraud is civilly and criminally prosecuted by the Northern, Southern, Eastern and Western District United States Attorney’s Offices and the State’s own Medicaid Fraud Control Unit.
The federal government often accomplishes this task with the assistance of the New York Medicaid Fraud Control Unit (MFCU). Both entities are, in turn, often assisted in their efforts by the bravery and actions of whistleblowers.
Modeled after the federal False Claims Act, the New York False Claims Act was originally enacted on April 7, 2007 and permits private citizens to bring actions on behalf of the State of New York to recover treble damages and civil penalties. New York Local Finance Law, Article 13, Sections 187 et seq. The liability provisions of the New York False Claims Act, Section 189, provide that it is unlawful for any person who:
(a) knowingly presents, or causes to be presented, to any employee, officer or agent of the state or local government, a false or fraudulent claim for payment or approval;
(b) knowingly makes, uses, or causes to be made or used, a false record or statement to get a false or fraudulent claim paid or approved by the state or local government;
(c) conspires to defraud the State by getting a false or fraudulent claim allowed or paid.
Completed False Claims Act cases originally brought in New York federal court include cases against:
Novartis Pharmaceuticals Corporation (“Novartis”), which agreed to pay $632 million to settle False Claims Act violations in or about July, 2020. The settlement pertained to the use of three foundations as conduits to pay Medicare copayments for patients taking Gilenya and Afinitor. In this first settlement, Novartis agreed to pay $51.25 million to resolve allegations that it illegally paid the copay obligations for patients taking its drugs. The second settlement, in the amount of nearly $592 million, Novartis resolved allegations that it made payments to physicians in the form of kickbacks to induce healthcare providers to prescribe the Novartis drugs Lotrel, Valturna, Starlix, Tekturna, Tekturna HCT, Tekamlo, Diovan, Diovan HCT, Exforge, and Exforge HCT.
ResMed Corporation, a manufacturer of durable medical equipment located in San Diego, California, who agreed to resolve five False Claims Act cases in the total amount of $37.5 million An announcement in January 2020 by the U.S. Attorney’s Office for the Eastern District of New York explained the FCA allegations that ResMed paid kickbacks to DME suppliers as well as sleep labs in violation of the Anti-Kickback Statute. Among the improper remuneration ResMed provided was the following: (a) DME companies were provided with free telephone call center services and patient outreach for patients with sleep apnea; (b) Sleep labs were provided with free and below-cost masks and diagnostic machines; including free installation of the machines; (c) Guaranteed interest-free loans that DME suppliers received from third-party financial institutions for purchasing ResMed equipment; and (d) free “ApneaLink”, a home sleep testing device.
Life Spine Inc. resolved a False Claims Act kickback case which took the form of millions of dollars in remuneration to induce surgeons to use Life Spine’s spinal implants, devices, and equipment. The covered conduct involved kickbacks between 2012 and 2018, which took the form of consulting fees, royalties, and intellectual property acquisition payments to high volume prescribers. These surgeons were specifically targeted by the company. When the surgeons’ usage decreased, they would be contacted by senior sales managers of the company who would urge them to use Life Spine products more frequently. The U.S. Attorney for the Southern District of New York handled the case for the Government, ultimately resulting in a 2019 $6 million settlement.
Citigroup Inc.’s Travelers Insurance Co. and United Healthcare Insurance Co. agreed to pay $20.6 million to settle allegations of Medicare fraud. The Government alleged that Travelers and United Healthcare received excessive reimbursements by over-billing Medicare in order to get performance-incentive payments. United Healthcare was alleged to have continued the improper billing practices after assuming Travelers’ contracts. Under the settlement, Travelers paid $10.9 million and United Healthcare paid $9.7 million.
Staten Island University Hospital (SIUH) agreed to pay a total of $88.9 million to settle allegations that the Hospital was intentionally defrauding the United States through a variety of means. Miguel Tirado, the former head of chemical dependency services at SIUH, brought both a United States and state of New York qui tam complaint alleging improper billing of inpatient detoxification treatment. In another complaint, a widow of a former cancer patient treated at SIUH claimed that SIUH knowingly used erroneous billing codes to be reimbursed for non-reimbursable cancer treatments. SIUH was the only hospital providing the specific treatment and as such, was not eligible for reimbursement from Medicare or TRICARE. Rather than using the correct billing codes for this treatment, SIUH allegedly fraudulently used billing codes which would, in fact, receive reimbursement. Elizabeth Ryan, the relator in this case, received $3.8 million as her share of the settlement recovery. Two smaller settlements were borne out of allegations that SIUH purposively overstated its resident count as well as treated psychiatric patients in unlicensed beds. The aggregate result of these four allegations was settlements totaling $88.9 million with whistleblowers shares totaling $9.9 million.
Beth Israel Medical Center agreed to pay $72 million to settle False Claims Act allegations of Medicare fraud. The Government alleged that the hospital was using Medicare funds to improperly pay for everything, from basic administrative overhead to methadone maintenance, from fundraising and marketing to employee housing and parking. Former Financial Executive Najmuddin Pervez filed this qui tam suit in 2001. The relator’s share was $15 million, or approximately 20%.
Montefiore Medical Center had agreed to pay $12 million to settle allegations that it improperly retained Medicare overpayments. The Government alleged that Montefiore improperly retained $5.6 million in Medicare overpayments for graduate medical education and failed to pay $4.2 million in installments to repay an $8.5 million overpayment. The relator in this case was represented by Nolan, Auerbach & White.
New York University Medical Center agreed to pay the Government $15.5 million to settle a qui tam suit alleging that it submitted false information in connection with indirect costs associated with federally sponsored research grants and contracts. The suit was filed by Emmanuel Roco, a former Medical Center employee. The settlement represented the largest ever by a university for over-recovery of indirect costs associated with federally sponsored research. According to DOJ, NYU Medical Center negotiated and obtained an inflated indirect cost rate by providing false information in several areas, including supplying dollar figures for voluntary cost sharing different from amounts reflected in Medical Center internal documents and consultants’ reports, and submitting duplicate claims for the same utility costs in its research related indirect cost proposals and in hospital institutional cost reports submitted for Medicare reimbursement. Duplicate claims were also alleged to have made for certain environmental services costs in separate indirect cost proposals submitted by NYU Medical Center and New York University. Other alleged violations related to the inclusion of certain unallowable expenses involving entertainment and capital interest, overstatement of housekeeping expenses based on budgeted instead of actual costs, inconsistent allocation of the indirect and direct costs of certain activities and departments, and use of an outdated space survey which resulted in over-allocation of costs. While the false submissions pertained to grants and other agreements, the settlement also resolved the Medical Center’s indirect cost rate.
Quest Diagnostics and its subsidiary, Nichols Institute Diagnostics (NID) paid $262 million to resolve civil and criminal allegations that it manufactured, marketed and sold faulty diagnostic test kits to laboratories across the country until 2006. These kits produced false-positive test results, which caused doctors to present false claims to Medicare, Medicaid, the VA, and TRICARE. In addition to the civil settlement, NID paid a $40 million criminal fine and entered into a Corporate Integrity Agreement with HHS OIG. The settlement came as a result of a qui tam suit that relator Thomas Cantor filed in 2004. Cantor is president and CEO of a lab that bought NID’s faulty kits.
Medtronic Spine LLC, formerly known as Kyphon, Inc., agreed to pay $75 million to the U.S. to settle claims that it defrauded the government by overcharging Medicare for a type of spinal surgery procedure. The settlement resulted from a qui tam case filed by two former employees of Kyphon. The relators, Charles Bates and Craig Patrick, alleged that Kyphon had engaged in an unlawful marketing scheme for seven years to sell medical equipment and devices used in kyphoplasty—a minimally invasive spinal surgery used to treat compression fractures of the spine caused by osteoporosis, cancer, or lesions.
Staten Island University Hospital (SIUH) and CHAPS Community Health Services, Inc. (CHAPS) paid $76.5 million to settle allegations of Medicaid fraud. The Government alleged that SIUH and CHAPS fraudulently billed at 21 different part-time clinics by inflating their hours of operation and regulatory compliance.
Jazz Pharmaceuticals Inc. plead guilty to felony misbranding charges and agreed to pay $20 million to the federal government to settle criminal and civil charges that its subsidiary, Orphan Medical, defrauded the federal government by illegally marketing and misbranding its sleep medication, Xyrem, for off-label uses. Although Xyrem was only approved by the FDA for treatment of severe drowsiness and cataplexy caused by narcolepsy, Orphan Medical criminally misbranded and illegally marketed the drug for other uses. The civil and criminal settlement arose from a qui tam complaint filed in the Eastern District of New York by Shelley Lauterbach, a former sales representative of Orphan Medical. In the complaint, the relator alleged that Orphan Medical had violated the False Claims Act by causing doctors to submit non-reimbursable claims to Medicare and Medicaid by marketing Xyrem for off-label uses. Among the off-label uses marketed by Orphan were fatigue, insomnia, weight disorders, depression, bi-polar disorder, and Parkinson’s disease. Orphan Medical not only promoted off-label uses of Xyrem through sales representatives, but also paid a psychiatrist, Philip Gleason, to give speeches around the country about its supposed efficacy in these uses. Xyrem has been commonly used as a recreational drug and has been classified by the HHS as a potential ‘date rape’ drug. Abuse of the drug can have severe consequences, including dependence, seizures, coma, and sometimes death.
Young Adult Institute, Inc. paid the United States and the State of New York $18 million to settle allegations that, from 1999 through 2010, the company submitted false consolidated fiscal reports that inflated the costs of certain residential facilities as a means to receive Medicaid funding to which it was not entitled.
“The firm has a great team of brilliant minds that work together.”James Conrad, Former Director of Program Integrity at CMS, and Former FBI Health Care Fraud Analy