Health care fraud: DOJ recovered $1.7B in false claims cases in 2022

The health care industry has the dubious distinction of being responsible for more than three-fourths of all False Claims Act settlements and judgments in the fiscal year that ended last September 30.

Of the more than $2.2 billion reported by the U.S. Department of Justice, more than $1.7 billion involved drug and medical device manufacturers; durable medical equipment; home health and managed-care providers; hospitals, pharmacies; hospice organizations and physicians. This total represents only recoveries from federal losses, although in many cases, the department was instrumental in recovering additional amounts for state Medicaid programs.

The department reported settling high-profile cases in several health care categories:

Medicaid. The Medicaid program provide health care coverage to millions of Americans, including some of the nation’s most vulnerable populations, and is funded jointly by states and the federal government.

• Mallinckrodt ARD LLC (previously Questcor Pharmaceuticals Inc.) paid $260 million to resolve separate allegations related to its drug H.P. Acthar Gel, which is approved to treat, among other things, acute exacerbations of multiple sclerosis and infantile spasms. The government alleged that the company knowingly underpaid rebates to the Medicaid program by improperly designating Acthar as a “new drug” as of 2013, as opposed to a preexisting drug for which Mallinckrodt had significantly raised the price in previous years.
• Gold Coast Health Plan, a county-organized health system in California. and three of its providers paid a combined total of $70.7 million to resolve claims that they knowingly submitted or caused the submission of false claims to California’s Medicaid program in connection with the “Adult Expansion” population that was created by the Patient Protection and Affordable Care Act.

Unnecessary services and substandard care. The department pursued and resolved matters in which providers billed federal health care programs for medically unnecessary services. This practice not only wastes taxpayer funds but also can expose patients to harmful procedures and treatments or cause them to forego other potentially more effective treatments.

• American Health Foundation provided grossly substandard services that failed to meet required standards of care in various ways, including by failing to follow appropriate infection control protocols and not maintaining adequate staffing levels.
• Providence Health & Services Washington, a health care and hospital system operating in seven western. states, paid $22.7 million to resolve allegations that it billed federal health care programs for medically unnecessary neurosurgeries.
• Eargo Inc., which sells and dispenses hearing aid devices directly to customers nationwide, paid $34.37 million to resolve allegations that it submitted or caused to be submitted claims containing unsupported hearing loss-related diagnosis codes to the Federal Employees Health Benefits Program.

Medicare Advantage. The department pursued cases alleging that organizations participating in the Medicare Advantage program knowingly submitted or caused the submission of inaccurate information or knowingly failed to correct inaccurate information about the health status of beneficiaries enrolled in their plans to increase reimbursement. This past year, the department intervened in one case against Cigna and continued to litigate a number of other cases, including actions against UnitedHealth Group Independent Health Corp., Elevance Health (formerly Anthem) and the Kaiser Permanente consortium.

Related: Labcorp to pay $19M to whistleblowers to settle ‘blood draw’ kickback lawsuit

Drug pricing. The department filed suit to protect TRICARE, the federal health care program providing insurance for active-duty military personnel, retirees and dependents. The department sued Professional Compounding Centers of America Inc., which sells active pharmaceutical ingredients and other products and services to compounding pharmacies. The complaint alleges that the company reported fraudulent and inflated average wholesale prices for its ingredients that bore no relationship to the actual prices at which it sold those ingredients to its pharmacy customers.

Kickbacks. The department filed a complaint against two laboratory CEOs, a hospital CEO, six physicians and other individuals and entities, alleging False Claims Act violations based on patient referrals in violation of the Anti-Kickback Statute and the Stark Law. It also alleged that defendants caused claims to be improperly billed to federal health care programs for medically unnecessary laboratory testing.

In a case pursued by a whistleblower, the pharmaceutical company Biogen Inc. paid $843.8 million to resolve allegations that the company offered and paid kickbacks, including in the form of speaker honoraria, speaker training fees, consulting fees and meals, to physicians who spoke at or attended company programs in connection with its multiple sclerosis drugs.

The False Claims Act imposes triple damages and penalties on those who knowingly and falsely claim money or knowingly fail to pay money owed to the United States. The act serves to safeguard government programs and operations that provide access to medical care, support the military and first responders, protect American businesses and workers, help build and repair infrastructure, offer disaster and other emergency relief, and provide many other critical services and benefits.

“Protecting taxpayer dollars by preventing fraud and abuse is a critical priority for the Department of Justice,” Principal Deputy Assistant Attorney General Brian M. Boynton said. “The large number of settlements and judgments this past year demonstrates that the False Claims Act remains one of the most important tools for ensuring that public funds are spent properly and advance the public interest.”