As predicted, health care fraud enforcement under the False Claims Act (“FCA”) continues to be a top priority for the Department of Justice (“DOJ”). In fiscal year 2021, the DOJ obtained more than $5.6 billion in settlements and judgments from civil cases involving fraud and false claims against the government, more than $5 billion (or nearly 90%) of which related to the health care industry. That is nearly three times as much as the $1.8 billion recovered from the health care industry in 2020 and nearly twice the $2.6 billion recovered in 2019.
Notably, over $1.6 billion of the 2021 fiscal year recoveries arose from lawsuits filed by private citizens (known as whistleblowers or “relators”) under the qui tam provisions of the FCA. Successful relators are entitled to a percentage of the final judgment or settlement, and in fiscal year 2021 the government paid out $237 million to FCA qui tam relators. For example, in a settlement DOJ announced on March 7, 2022, a qui tam relator received approximately $4.9 million as part of the resolution of FCA allegations he filed against pharmaceutical company Mallinckrodt ARD LLC. Not surprisingly, the number of lawsuits filed under the qui tam provisions of the FCA has grown significantly, with 598 qui tam suits filed this past year—an average of over 11 new cases every week.
As expected, the opioid crisis continues to be a focus for DOJ, and the largest FCA settlements in the past year resulted from significant resolutions with prescription opioid manufacturers. As part of a $600 million global resolution of criminal and civil liability, Indivior Inc. and Indivior PLC agreed to pay $209.3 million to the federal government to resolve civil allegations that the companies, among other things, promoted the opioid addiction treatment drug Suboxone to physicians who were writing prescriptions that were medically unnecessary and were often diverted. However, the DOJ’s opioid epidemic work is not limited to only large corporations or to solely recovering government funds under the FCA. For example, a former Delaware doctor, Patrick Titus, was sentenced on March 1, 2022, to 20 years in prison for unlawful drug distribution. According to court documents and evidence presented at trial, Titus unlawfully distributed or dispensed a variety of powerful opioids outside the usual scope of professional practice and not for legitimate medical purposes.
Additionally, along with the increase in the use of telehealth services, the DOJ has increased scrutiny of these services. Although there are not yet public cases surrounding the explosion in telehealth services resulting from the COVID-19 pandemic, the DOJ has been scrutinizing other telehealth arrangements. For example, last year Kelly Wolfe and her company, Regency, Inc., agreed to pay $20.3 million to resolve allegations that they violated the FCA. According to court documents, Wolfe and Regency established hundreds of durable medical equipment company fronts, which then provided unlawful kickbacks to physicians through telemedicine companies. In another case, two Florida men agreed to pay at least $4 million to resolve allegations that they violated the FCA by engaging in schemes to generate prescriptions for compounded drugs and refer those prescriptions to pharmacies in exchange for illegal kickbacks. Jack Lee Stapleton and Jack Hunter Stapleton owned a marketing business which procured prescriptions by paying telemedicine providers who prescribed expensive compounded drugs without ever seeing the patients or conducting any meaningful medical examination. We can expect continued focus on telehealth claims in the future, especially as COVID-19 related telehealth fraud comes to light.
The DOJ is also scrutinizing allegations relating to manipulation of Medicare’s managed care program. For example, Sutter Health paid $90 million to resolve allegations that it knowingly submitted unsupported diagnosis codes for certain patient encounters, resulting in inflated payments to be made to the Medicare Advantage Plans and Sutter Health. In addition, Kaiser Foundation Health Plan of Washington paid $6.3 million to resolve allegations that it submitted invalid diagnoses and received inflated payments as a result.
Given the time and energy DOJ is devoting to FCA recoveries in the health care industry in particular, those in the industry must continue to be cautious. Industry players should continue to conduct in-depth risk assessments, and to update, implement, and train staff on robust compliance plans and policies, in an effort to minimize the risk of an FCA claim.
