Settlement Reached in California Medicare Fraud Case

In recent years, as health care becomes more of a business than a service, there has been a steady increase in cases of health care fraud. Companies and individuals are manipulating the system for profit and Medicare fraud has become especially prevalent. These schemes are tough to identify and it often takes insiders willing to risk their careers to shed light on these operations. Our San Francisco whistleblowers law firm is proud to work alongside these brave individuals, protecting Medicare fraud whistleblowers from retaliation and helping them put an end to fraudulent practices that hurt us all.

The Alleged Fraud: Under-billing Clients to Cut Competition While Billing Medicare at Full Price cash2.jpg
Earlier this week, a California-based medical laboratory agreed to a settlement with the federal and state governments as well as two former employees. As reported by The San Francisco Chronicle, this agreement concludes a lawsuit brought by the state of California and the two former employees accusing the defendant corporation of cheating Medicare and Medi-Cal by billing the agencies at standard rates while simultaneously charging only cut-rate fees to their clients. More specifically the lawsuit alleged that the lab charged fees that were up to 80% less than their standard rate in exchange for the client’s commitment to use the company for future Medicare and Medi-Cal services. The defendant is Diagnostic Laboratories and Radiology (“Diagnostic”), a company that is the largest supplier of both X-ray and laboratory services to nursing homes on the West Coast.

Why are the alleged acts problematic? Providing deep discounts hurts competition by squeezing out smaller competitors, which also negatively impacts patient care. Further, the law provides that any such discounts should have also been passed on to the Medicare and Medi-Cal programs.

The Whistleblowers, the Litigation, and the Settlement
Jeffrey Hauser and Jon Willem Pasqua, two former employees who works in the sales office, said that they had previously attempted to bring attention to the questionable discount practices, but supervisors ignored them. The men then took on the role of whistleblowers, providing information to federal and state officials. Just prior to filing suit in February 2010, both Hauser and Pasqua were fired from their positions at Diagnostic.

The case against Diagnostic survived an initial attempt to get the judge to dismiss the claim and, until the settlement was announced, trial was set to begin next week. By its terms, the settlement provides $12.95 million to the federal government, $4.55 million to California, and separate payment to the lawyers for the two men who reported the fraud. Under the whistleblower provisions of the relevant laws, including the False Claims Act, Hauser and Pasqua are entitled to at least 20 percent of the federal and state settlement figures. This amount will either be decided by the judge or negotiated with the relevant government agencies.

Diagnostic released a statement suggesting it believes it would have prevailed in a jury trial but settled in order to avoid the time and expense of additional litigation. The company also emphasized that the settlement relates to practices that had been initiated by former owners. Overall, Diagnostic suggests the settlement will allow the organization to focus on its work of bringing health care services to the elderly.

Protecting Those Who Risk So Much To Protect Us All and Joining Their Fight
Medicare fraud hurts all of us. It misdirects taxpayer money and takes limited funds away from those who truly need the government services. Medicare fraud is also very hard to identify. While some might say the whistleblowers receive too much, we think it is important to remember there would be no case and no repayment of fraudulently obtained funds at all. These individuals risk their current job, and even their entire career, and their company connections, for the public good. We are proud to work with them as a California Medicare whistleblower’s law firm, using both our knowledge of health care and employment law matters to protect both the public and the brave whistleblower

See Related Blog Posts:
Fighting Fraud: Doctor Ordered to Pay $51 Million and Serve 151 Months for Medicare Fraud

Case Study: PharMerica Litigation, Medicare Fraud, and Pharmaceutical Law

(Photo by Nic McPhee)