LAB AND DIAGNOSTIC SERVICE PROVIDERS Several laboratory and diagnostic service providers settled allegations relating to AKS violations, with the alleged improper remuneration taking such forms as free report interpretation services, 53 sham research payments, 54 and salaries of employees of the referring provider. 55 Multiple other settlements in this sector of healthcare involved billing for medically unnecessary or duplicative services 56 and services provided or ordered without valid physician oversight. 57 BEHAVIORAL HEALTH Multiple behavioral health companies settled allegations related to billing for services provided by unlicensed or unqualified providers. 58 Other settlements resolved allegations of billing for medically unnecessary or upcoded services. In one such case, a healthcare company, two of its hospitals and an affiliated substance abuse treatment center agreed to pay over $10 million and enter a five-year CIA to resolve allegations that they submitted claims for medically unnecessary inpatient psychiatric admissions and claims tainted by AKS violations involving the provision of free long-distance van transportation to induce patients to use their facilities. 59 INDIVIDUAL PROVIDERS AND PRACTICE GROUPS The government continued its focus on individual actors and their roles in healthcare fraud schemes. This included a focus on credentialed healthcare providers, who the government views as important gatekeepers in relation to federal healthcare programs. In one notable case, a physician agreed to pay $2 million to resolve allegations that he prescribed controlled substances without a valid medical purpose, in violation of the Controlled Substances Act (CSA); many of those prescriptions were paid by Medicare and Medicaid, resulting in violations of the FCA. 60 That physician also pleaded guilty to related criminal charges and was excluded by CMS for at least 10 years. 53 https://www.justice.gov/opa/pr/eeg-testing-and-private-investment-companies-pay-153-million-resolve- kickback-and-false. 54 https://www.justice.gov/usao-sdca/pr/pain-management-organization-pays-51-million-settle-criminal- medicare-kickback. 55 https://www.justice.gov/usao-sc/pr/georgia-genetic-testing-laboratory-pay-200000-resolve-anti- kickback-statute-claims. 56 https://www.justice.gov/usao-ct/pr/healthcare-company-and-lab-pay-845k-resolve-federal-and-state- false-claims-act; https://www.justice.gov/usao-ma/pr/md-labs-and-its-co-founders-agree-pay-16-million- resolve-allegations-fraudulent-billing. 57 https://www.justice.gov/usao-nj/pr/california-genetic-testing-lab-agrees-pay-357584-resolve-false-claims- act-allegations; https://www.justice.gov/usao-de/pr/akumin-corporation-pay-us-over-700000-resolve- health-care-fraud-allegations; https://www.justice.gov/usao-nj/pr/virginia-diagnostic-testing-lab-agrees- pay-14-million-resolve-false-claims-act. 58 https://www.justice.gov/usao-ct/pr/connecticut-behavioral-health-clinician-group-pays-100k-settle- false-claims-allegations; https://www.justice.gov/usao-ct/pr/behavioral-health-provider-pays-273k- settle-improper-billing-allegations; https://www.justice.gov/usao-edwi/pr/milwaukee-area-community- support-program-facilities-agree-pay-390080-resolve-false; https://www.justice.gov/usao-edva/pr/ ndutime-youth-family-services-and-its-ceo-settle-false-claims-act-allegations-relating. 59 https://www.justice.gov/opa/pr/ohio-treatment-facilities-and-corporate-parent-agree-pay-1025-million- resolve-false-claims. 60 https://www.justice.gov/usao-edpa/pr/center-city-doctor-pleads-guilty-illegally-distributing-controlled- substances-and.
Three significant settlements in July 2021 reflected DOJ scrutiny of product quality and performance in the medical device space. Three medical device companies agreed to pay $22 million, $27 million and $38.75 million, respectively, to resolve claims that they had sold defective products. 48 Specifically, Avanos Medical, Inc., allegedly sold surgical gowns that did not meet the standards with which the gowns were labeled. St. Jude Medical, Inc., allegedly sold implantable defibrillators without disclosing that the devices’ batteries could lose power prematurely. And, Alere, Inc., allegedly sold defective blood coagulation monitors used by Medicare beneficiaries taking anticoagulant drugs. All three settlements highlight DOJ’s heightened attention to FCA violations that directly involve patient safety. Several significant settlements involved alleged failure to collect co-pays from Medicare beneficiaries. In May 2021, Incyte Corporation agreed to pay $12.6 million to resolve allegations that it channeled money through a foundation to fund co-pays for Medicare and TRICARE beneficiaries. 49 Incyte was the fund’s sole donor and allegedly pressured the foundation to fund co-pays for patients who were ineligible for assistance under the foundation’s own guidelines. In August, a mail-order diabetic testing supply company agreed to pay $160 million to resolve allegations that they paid kickbacks to patients by routinely waiving and failing to make reasonable efforts to collect Medicare co-payments, among other allegations. 50 The government continued to pursue cases involving alleged kickbacks. Three generic pharmaceutical manufacturers agreed to pay $447.2 million to settle allegations that they paid and received kickbacks through arrangements on price, supply and allocation of customers with other pharmaceutical manufacturers. 51 The government alleged that these arrangements were no more than price-fixing schemes. As part of the resolution, each of the companies also entered into a five-year CIA with HHS-OIG that includes unique internal monitoring and price transparency provisions. In addition, a medical device company agreed to pay $16 million to resolve FCA allegations that it made payments to a surgeon that were disguised as royalty payments for the surgeon’s contributions to two devices, but were actually made in exchange for his use and recommendation of the company’s devices, in violation of the AKS. 52
48 https://www.justice.gov/opa/pr/avanos-medical-inc-pay-22-million-resolve-criminal-charge-related- fraudulent-misbranding-its; https://www.justice.gov/usao-md/pr/st-jude-medical-agrees-pay-27-million- allegedly-selling-defective-heart-devices; https://www.justice.gov/usao-nj/pr/medical-device-companies- pay-3875-million-settle-false-claims-act-allegations. 49 https://www.justice.gov/usao-edpa/pr/pharmaceutical-manufacturer-agrees-pay-126-million-resolve- allegations-it-provided. 50 https://www.justice.gov/usao-mdtn/pr/mail-order-diabetic-testing-supplier-and-its-parent-company-agree- pay-160-million. 51 https://www.justice.gov/opa/pr/pharmaceutical-companies-pay-over-400-million-resolve-alleged-false- claims-act-liability. 52 https://www.justice.gov/opa/pr/medical-device-company-arthrex-pay-16-million-resolve-kickback- allegations.
NOTEWORTHY SETTLEMENTS BASS, BERRY & SIMS | 9
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