Health Care Fraud Qui Tam Lawsuits Net Millions for Whistleblowers

Washington, DCAs the federal government recoups billions of dollars from fraudulent healthcare providers, so do whistleblowers who have filed qui tam lawsuits. According to the New England Journal of Medicine on 5/13/10, 90 percent of health care fraud cases are currently qui tam actions initiated by whistleblowers on behalf of the government.

From 1996 to 2005, qui tam lawsuits amounted to more than $9 billion in recoveries. One recent qui tam lawsuit alleged that a number of hospitals overcharged Medicare between 2000 and 2008 by performing kyphoplasty, a minimally invasive back procedure, on an expensive inpatient basis rather than a less costly outpatient procedure. Hospitals can increase their profits by filing larger claims with Medicare for inpatient stays. To date, the government has recovered $20 million from 18 hospitals. Whistleblowers Chuck Bates and Craig Patrick were employees of Kyphon Inc., which sold the equipment and materials used to perform kyphoplasty.

In another recent qui tam action, Endoscopic Technologies paid $1.4 million for falsely marketing its surgical ablation devices to treat atrial fibrillation, for which the device was not approved by the FDA. The whistleblower will receive $210,000.

The False Claims Act (FCA) became an official law in the early 1860s to deter defense contractors from taking advantage of government needs at the cost of the taxpayers. During the Civil War, contractors defrauded the government by selling horses and mules in bad health, rancid food rations, and faulty weapons, among other things. But it was a little known act until the government created financial incentives for whistleblowers—private citizens were able to bring frauds to the government's attention and reap millions of dollars in the process.

In 1999 the New York Times reported that that Medicare spending had dropped for the first time in the history of the program and federal efforts to "rein in fraud" have been at least partially responsible for the decline. But the government's battle began officially in 1993 when the Department of Justice announced that healthcare fraud would be top priority. Since that time, the government has used the FCA aggressively to investigate many health care providers, including the following:

• Managed care organizations


• Clinical laboratories


• Pharmaceutical companies


• Chains of hospitals and nursing homes


• Physician practices


• Home health agencies


• Medical equipment suppliers


• Entities that assist plans and providers with health care transactions such as billing companies and Medicare carriers

Under the FCA, whistleblowers, also known as relators, are eligible to receive 15 to 25 percent of the recovery. Some recoveries in the 1990s by whistleblowers include:

$678,584 in 1999 to Louis Mueller with Walgreen Company, the retail pharmacy chain, after Mueller filed a False Claims Act case reporting that Walgreen billed Medicaid the full amount for prescriptions that were only partially filled.

$903,899 in 1998 to Francine Mettevelis and Rhea Jones received for reporting that Charter Behavioral Health Systems - Orlando billed Medicare for medically unnecessary psychiatric care for elderly patients with severe dementia, Alzheimer's Disease and other organic brain disorders.

$3.2 million to the estate of Teresa Semtner after Semtner brought a suit against Emergency Billing Services, disclosing the company's practice of upcoding the claims of its clients.

$4 million to George Denoncourt as part of the settlement of his allegations that the State of New York was overcharging the federal government under various Social Security Act programs, including Medicaid.

$9.8 million in 1999 to Donald McLendon, the former Vice President of Olsten Corp., as part of a settlement of his allegations that Olsten charged Medicare for unallowable, sales and marketing costs.

$21 million + to private plaintiff as part of a $140 million civil settlement with Health Care Service Corporation, for exposing that this Medicare carrier had submitted false information to the Health Care Financing Administration, failed to process claims in accordance with HCFA's guidelines, and failed to process correspondence and reviews in a timely manner.

$5.87 million in 2002 to the US paid by Eckerd Corporation, a national retail pharmacy chain, to resolve allegations that Eckerd dispensed partial prescriptions due to insufficient stock, but billed for the full quantities prescribed for beneficiaries of Medicaid and other government health insurance programs.

Under the FCA, the US government may sue violators for treble damages (three times the government's loss) plus $5,000 to $10,000 per false claim. If the whistleblower has enough evidence, the False Claims Act can be used in just about any scheme to cheat federal government health programs, and amply compensate the whistleblower. The act has a provision against retaliation by any former employer.