Despite the recent downward trend in DOJ healthcare industry settlements, the first quarter of 2024 saw many noteworthy False Claims Act (FCA) and civil healthcare fraud settlements related to alleged kickbacks, medically unnecessary services and equipment, pharmaceutical issues and Controlled Substances Act violations.

Below, we summarize Q1 2024 settlements of interest to healthcare providers and government contractors, broken out by sector and issue.

Anti-Kickback Statue (AKS) and Stark Law

• On March 12, New York York-Presbyterian/Brooklyn Methodist Hospital agreed to pay $17.3 million to resolve allegations that it paid unlawful kickbacks to physicians based on the number of referrals the physicians made for services at the hospital’s chemotherapy infusion center.  The agreement also resolves claims that physicians at the infusion center failed to adequately supervise chemotherapy services.  The hospital voluntarily self-disclosed the issues to the United States.

• On February 28, a Georgia-based clinical laboratory and its owner agreed to pay $14.3 million to resolve allegations that they paid volume-based commissions to contract sales representatives in exchange for their recommendations for medically unnecessary respiratory pathogen panels (RPPs) and urine drug tests, in violation of the AKS. The two parties agreed to cooperate with DOJ investigations of other participants in these alleged schemes. The owner and four others also pleaded guilty to criminal charges in connection with this scheme.

Laboratory Services and DME

• DME supplier Lincare agreed to pay $25.5 million to resolve FCA allegations that it paid kickbacks to beneficiaries and billed government payors for the rental of non-invasive ventilators (NIV) when the beneficiary did not use or no longer needed the device. In the agreement, Lincare admitted to continuing to seek monthly reimbursement for devices when it knew that patients were not using the devices.  Between January 2013 and February 2020, federal programs reimbursed as much as $1,400 per month for supplying NIV rentals to patients.

• A Missouri laboratory and three of its individual owners agreed to pay $13.6 million to resolve allegations that it billed Medicare for medically unnecessary polymerase chain reaction (PCR) urinalysis laboratory tests. The laboratory automatically performed and billed for more expensive urinary tract infection PCR tests, regardless of whether the doctor ordered it. As early as March 2020, physicians had expressed their concerns to the laboratory that these expensive tests had not been ordered and were not medically necessary. The settlement agreement excludes the laboratory and its individual owners from participating in Medicare for 15 years.

• A drug treatment facility and related laboratory agreed to collectively pay over $7.1 million to resolve FCA allegations that they submitted claims to Medicare and Kentucky Medicaid for medically unnecessary urine drug testing services. The treatment center agreed to pay $2.25 million and enter a Corporate Integrity Agreement (CIA) in connection with the settlement. The laboratory separately entered into an Agreed Judgment in the amount of nearly $5 million.

• A group of now-defunct DME companies that provided medical beds and related pressure support surfaces to federal healthcare program beneficiaries agreed to pay $2.1 million to resolve allegations of false billing, including for used beds as if they were new; upcoding certain support products to increase reimbursement; and billing travel time as repair time to make it a reimbursable expense.

Voluntary Self-Disclosures

Providers also continue to use the 2019 DOJ voluntary self-disclosure guidance, as showcased by the number of settlement agreements acknowledging self-disclosure actions and corresponding cooperation credit.

• Tampa-based H. Lee Moffitt Cancer Center & Research Institute Hospital Inc. (Moffitt) agreed to pay over $19.5 million to resolve FCA claims related to billing for items and services provided during research studies that were not eligible for reimbursement and should have been billed to non-government trial sponsors. In connection with the settlement, the United States acknowledged that Moffitt took a number of significant remedial steps entitling it to credit for cooperating with the government, such as initiating an independent investigation and voluntarily producing its findings to the government.

• A long-term care hospital agreed to pay over $18.6 million, plus interest, to resolve FCA allegations that it made false claims related to cost outlier payments from Medicare. The settlement was negotiated based on the hospital’s lack of ability to pay. Further, certain facility investors agreed to pay $12 million, plus interest, to resolve alleged Federal Debt Collection Procedures Act (FDCPA) violations for an alleged fraudulent transfer of money by the hospital to its investors.

• Penn State Health agreed to pay $11.7 million to resolve allegations that they submitted false claims to Medicare for Annual Wellness Visit services that were not supported by patients’ medical records. The multi-hospital health system self-disclosed the issue promptly after its discovery.

• A home healthcare agency operating in nine states agreed to pay over $9.9 million to resolve FCA allegations that it submitted false claims to the Energy Employees Occupational Illness Compensation Program (EEOICP) for services when the provider was not physically present in the homes of patients and allegations that it paid kickbacks to patients and families via a “friends and family program.” The settlement is based on the company’s financial condition and was reached after the company voluntarily disclosed the conduct.

Pharmaceutical and Pharmacy

• On February 29, opioid manufacturer Endo Health Solutions, Inc. agreed to pay $475.6 million to resolve allegations related to its marketing schemes and sale of opioid drugs targeted to providers that Endo knew was prescribing for non-accepted uses. The settlement payments will be paid as claims in the company’s ongoing bankruptcy proceedings.

• The government announced a $59 million settlement with eBay Inc., marking the first CSA settlement with an e-commerce company and the fourth-largest CSA settlement in history. The government alleged eBay did not comply with CSA requirements for record-keeping related to the sale of pharmaceutical manufacturing equipment that could be used to produce counterfeit pharmaceuticals, including pill presses, encapsulating machines, counterfeit molds, stamps, and dies. Many of the confirmed buyers were also successfully prosecuted in connection with trafficking illegal counterfeit pills. 

• In January, a Philadelphia pharmacy, its current and former owners, and the principle pharmacist agreed to collectively pay over $4.6 million to resolve FCA allegations that they billed government healthcare programs for prescriptions never dispensed and for high-cost formulations of specific medications when lower-cost formulations were actually dispensed. The owner and the pharmacist entered into integrity agreements with Health and Human Services Office of the Inspector General (HHS-OIG) as part of the agreement.

• On March 6, pharmaceutical manufacturer KVK Research Inc. agreed to pay $2 million to resolve allegations that it did not implement proper controls as required by current good manufacturing practice regulations, causing the company to introduce adulterated drugs into interstate commerce. The company also pleaded guilty to criminal charges that it introduced tainted drugs into interstate commerce in violation of the federal Food, Drug and Cosmetic Act and agreed to pay an additional penalty and forfeiture amount of $1.5 million. 

Paycheck Protection Program (PPP)

• Two Idaho healthcare clinics and their owners entered into a consent judgment of $2 million and admitted to violations of the FCA involving the clinics’ hiring vulnerable, compromised, and inexperienced medical staff who were then pressured into providing unnecessary and worthless care. The agreement also resolved unadmitted allegations that the clinic pressured providers to prescribe controlled substances, entered into an unlawful kickback scheme with a third-party laboratory, and falsely certified information in order to obtain forgiveness of a PPP loan worth more than $750,000.

• Hemp-derived products developer and seller Docklight Brands agreed to pay $989,438 to resolve FCA allegations that it improperly acquired a Paycheck Protection Loan from the U.S. Small Business Administration. The company was ineligible for the loan program because of its partnerships with cannabis businesses, which remain illegal under federal law.