andres-de-armas-103880-copy-300x200The Department of Justice (DOJ) for the Eastern District of California announced on July 7 that Wal-Mart Stores, Inc. (Walmart) paid $1.65 million to resolve accusations related to unlawful medical claims. This is an important suit as it demonstrates that the federal and state governments will go after large retailers for false claims. Pursuing whistleblower suits and securing government funds that were unlawfully obtained remains a top property for the DOJ.

Walmart’s False Claims

Through a qui tam suit brought by a former Walmart pharmacist in the Sacramento area, the California government learned that Walmart was allegedly submitting false claims to the state’s Medi-Cal program in order to increase reimbursements. Supposedly, Walmart would knowingly submit claims that were not supported by a proper and relevant diagnosis or documentation. More specifically, Walmart would submit reimbursement claims for Code 1 drugs that were not based on proper and pre-approved diagnoses. Medi-Cal only reimburses for Code 1 drugs if they were prescribed for approved diagnoses. If a Walmart pharmacy wanted reimbursement for a Code 1 drug for something else, it would need to submit a specific request with the reasoning for a non-approved use. Walmart pharmacists intentionally submitted claims without confirming the approved diagnosis and obtaining the necessary documentation or for non-approved uses.

jimi-filipovski-189724-copy-300x176There are currently two False Claims Act (FCA) qui tam cases against United Health Group (UHG) pending in the Central District of California. The cases are: U.S. ex rel. Benjamin Poehling v. UnitedHealth Group, Inc. and U.S. ex rel. Swoben v. Secure Horizons, et al. The cases were brought by James Swoben, who was previously an employee of Senior Care Action Network Health Plan and a consultant within the risk adjustment industry, and Benjamin Poehling, who was the former finance director of a UHG group that managed the insurer’s Medicare Advantage Plans.

The Qui Tam Cases Against UHG

On May 2, the U.S. intervened in the Swoben False Claims Act suit against UHG based on the allegations the insurer overcharged Medicare Advantage and prescription drug programs. In the DOJ’s complaint, it alleges the insurer knowingly ignored patients’ medical conditions to increase payments it received from Medicare and funded chart reviews to increase the risk adjustment payments it reviewed. However, any information the reviews uncovered regarding misdiagnoses were disregarded to avoid repaying Medicare.

daan-stevens-282446-copy-300x191The U.S. Department of Justice announced on June 28 that PAMC Ltd. and Pacific Alliance Medical Center Inc. have agreed to pay $42 million to settle allegations that they violated provisions of the False Claims Act. The two companies, which operate together as Pacific Alliance Medical Center in Los Angeles, allegedly had unlawful financial relationships with doctors.

Qui Tam Suit Against Pacific Alliance Medical Center

The qui tam lawsuit against the defendants was filed by Paul Chan, who was a manager with one of the defendant businesses. A qui tam suit is a civil lawsuit brought by a private citizen on behalf of the government. The private citizen, known as the relator during the suit, provides information regarding the claims that is not available to the public. If the government receives a settlement or jury award in relation to the relator’s allegations, then he receives part of the monetary recovery. In this case, Chan is set to receive more than $9.2 million.

rhema-kallianpur-275251-copy-300x200To encourage private citizens to come forward regarding fraud against the government, qui tam cases entitle the citizen, also called the relator, to a portion of any settlement or jury award that arises from his or her evidence and allegations. Individuals can bring qui tam cases under the federal False Claims Act when there is fraud against the federal government or can sue under a state-specific false claims act when the fraud is against the state. However, this award has sometimes led individuals to move forward qui tam suits for profit and not altruistic motives. There may be an even more profound issue when attorneys act as both the relator in a qui tam suit and their own lawyer.

Attorney-Relator Cannot Benefit Twice in Qui Tam Suit in Illinois

This issue came up in Illinois when an attorney brought hundreds of qui tam suits against retailer My Pillow Inc. for failing to collect and remit tax on products sold in Illinois. The attorney acted as both the relator in the suit as well as the attorney. This meant the attorney not only received a portion of the judgment against the company, but he also asked for attorney’s fees.

benjamin-child-90768-300x200Qui tam suits often make the news, though you may not be sure of what they are and why they matter. Qui tam suits have to do with fraud against the federal or a state government. In recent years, the U.S. and individual states have made a concerted effort to recapture the money that individuals and businesses have wrongfully obtained or kept from them. By learning more about qui tam suits, you may be better able to recognize fraud when you see it and understand what you can do with this concerning information.

Common Questions Regarding Qui Tam Suits

  • What is a qui tam suit? A qui tam lawsuit is a civil lawsuit brought by a private citizen on behalf of the federal or a state government. It is also known as a whistleblower lawsuit since the private citizen is blowing the whistle on illegal actions against the government.

jerry-kiesewetter-210547-copy-300x199The Department of Justice (DOJ) announced on June 7 that the U.S. is intervening in a qui tam suit against Los Angeles and CRA/LA, formerly known as the Community Redevelopment Agency of the City of Los Angeles, regarding allegations that the city and organization falsely certified that they were compliant with federal accessible housing laws to obtain grants from the U.S. Department of Housing and Urban Development (HUD). In short, the U.S. is joining a lawsuit that alleges the city and its agency unlawfully gained and misused federal funds. If the U.S. and whistleblowers are successful, the settlement or judgement could amount to millions of dollars.

An FCA Claim Against L.A.

The qui tam suit was brought under the False Claims Act (FCA) by Mei Ling, a Los Angeles resident who uses a wheelchair, and the Fair Housing Council of San Fernando Valley, (the Council), a local nonprofit. Ling and the Council provided evidence to the court that L.A. and CRA/LA repeatedly lied to HUD about building accessible housing for people with disabilities. Instead, the defendants used federal grants to build housing that violated Section 504 of the Rehabilitation Act and the Fair Housing Act. The whistleblowers also argue that the defendants violated their affirmative duty to provide people with disabilities fair and equal access to public housing.

claire-anderson-60670-copy-300x200The Ninth Circuit recently held that a whistleblower could not intervene in a False Claims Act (FCA) suit filed by the U.S. despite it being based on allegations the whistleblower previously made in a lawsuit that was dismissed. This is another a holding that shows relators in qui tam cases do not get second chances. If the FCA cases to which they are a party do not directly lead to a settlement or jury award, the whistleblowers cannot recover any compensation.

Background for the Decision

In 2009, John Prather filed a qui tam action against Sprint and others stating the businesses overcharged the U.S. for wiretapping services. As in all qui tam cases, the U.S. government has time to investigate the allegations and then choose whether to intervene and become a formal party to the case or not intervene. In this case, the U.S. did not intervene and later the district court dismissed the relator’s claim because it determined he was not an original source for the information that led to the allegations.

daniel-frank-201417-copy-300x200CareCore National, LLC and the U.S. Department of Justice entered into a settlement agreement, according to a May announcement. CareCore will pay $54 million to resolve a False Claims Act suit based on allegations it fraudulently billed government insurance programs. The business provides pre-authorization/pre-certification services to managed care plans. It determines whether diagnostic testing is medically reasonable and necessary for patients and should be paid for by health insurers. However, the allegations brought by a previous employee stated that CareCore did not follow its protocol and directed nurses to move forward with medical services that were not reviewed or medically necessary. This caused hundreds of thousands of inappropriate and unnecessary diagnostic tests to be approved and billed to Medicare and Medicaid.

Why the Whistleblower Came Forward

CareCore’s previous employee, John Miller, a licensed practical nurse, filed the qui tam suit against the business on behalf of the government. Miller acted as a clinical reviewer for the company and was required to assess whether a medical procedure met certain criteria for being approved. If the service was necessary and appropriate, it would be submitted to the insurance company for payment. Due to the high demand for its services, CareCore could not keep up. In response to the demand, it created the program known as Process As Directed (PAD). Through this program, clinical reviewers like Miller automatically approved prior authorization requests without a physician performing an independent review. This enabled CareCore to return more pre-authorization requests in a shorter period of time. PAD ultimately led to more than 200,000 deceptive authorizations between 2005 and 2013. Medicare and Medicaid paid for many of these unnecessary and fraudulently approved tests.

jimi-filipovski-189724-copy-300x176The U.S. Department of Justice and CVS Health Corp.’s Omnicare Inc. have settled a suit based on the federal False Claims Act for $8 million. Omnicare is the country’s largest nursing home pharmacy. It was formed in 1981 and acquired by CVS Health in 2015. Prior to this takeover, the U.S. Federal Trade Commission blocked Omnicare’s hostile takeover of competitor PharMerica. Had Omnicare purchased the business, it would have had 57% of the market share for long-term-care pharmacies. The most recent FCA settlement with the federal government is one in a long line of settlements based on fraudulent and unlawful claims to federal programs.

Omnicare’s Most Recent FCA Settlement

In a qui tam brought by Elizabeth Corsi and Christopher Ezzie in February 2014, it was alleged that Omnicare created and implemented an automated label verification system, which utilized a less specific drug code, “MEDID,” during the automated Stage II pharmacist verification process instead of a more specific National Drug Code (NDC). The result of this system was that the company submitted claims to Medicare and Medicaid for generic drugs different than those actually dispensed to patients. This created false claims to the federal government. The patient’s medication labels also had incorrect manufacturer or NDC information. Because of these issues, Omnicare could not properly track medication information or, if necessary, conduct a patient-level recall on drugs, putting patient safety at risk.

benjamin-child-17946-copy-300x200A radiation therapy center based in Lancaster agreed to pay $3 million to the federal government to resolve a claim that it committed healthcare fraud for close to 10 years. A qui tam suit based on the federal False Claims Act, filed by former employee Jared Shindler, alleged that Valley Tumor Medical Group submitted fraudulent bills to the federal Medicare, Medi-Cal, and TRICARE programs between Jan. 3, 2006 through Nov. 13, 2015. According to the whistleblower suit, radiation oncology treatments were provided to patients at Valley Tumor’s Ridgecrest location when no physicians were on site, which is required by federal law.

The Case Was Made Public April 20

While the lawsuit was filed in 2015, it was only recently unsealed. That is because qui tam cases are filed under seal so that the government has time to investigate the claim and determine whether to join the suit as a party or decline to join. During this time, the lawsuit must remain a secret from the public, including the defendant. If the relator or government leaks information about the existence of the suit, there can repercussions such as fines or the dismissal of the suit.