Just how many ways are there for a hospital to try to slip some money to
a doctor to persuade him to refer the hospital some business? Oh, sure,
there’s your plain-vanilla “here’s some cash, quick,
hide it!” scheme. But as it turns out, hospitals and nursing homes
and assisted living facilities have become far more creative with ways
to pass money to physicians without alerting Medicare and Medicaid.
For example, two of the False Claims Act cases of 2014 involved manipulating
the price of medical products.
Congress passed the Stark Act to stop hospitals, pharmacies and other
companies from paying doctors for their referrals. The referral programs
created an obvious conflict of interest, because they gave doctors a reason
to refer patients for treatment and to prescribe medications based on
the doctors’ own self-interests, and not what was best for the patients.
Unfortunately, the fraud didn’t stop with the passage of the Act.
But at least it became illegal!
I’m a lawyer who represents healthcare and
Stark Act whistleblowers, and I am in the middle of cataloging just the healthcare fraud cases
related to the Stark Act that were settled or tried to a verdict in 2014.
Believe it or not, I’m just in part 5 of 7 blog entries!
Memorial Hospital – $8.5 million
A hospital in Fremont, Ohio, paid the Government $8.5 million to settle
allegations that it had violated the Stark Act. Because part of the fraud
related to Medicaid, which is partially funded by the states, the State
of Ohio received $600,830 of the amount. The acute care hospital was accused
of having “improper financial relationships” with a pain management
physician and an ophthalmologist. Per the Government, the ophthalmologist
was buying expensive ocular lenses at a low rate and then selling them
to the hospital at an inflated rate. The Government was vaguer about how
the hospital violated the Stark Act in its financial arrangement with
the pain management doctor, saying only that the two had a “joint
Omnicare, Inc. – $124.4 million
In June of 2014, Omnicare, Inc. and the Justice Department finally wrapped
up a settlement that had been in the works since 2013, when Omnicare first
disclosed the tentative settlement in an SEC filing. Approximately $8.24
million of the settlement for the False Claims Act case went to state
governments that had jointly funded the Medicaid claims.
Two different whistleblowers brought suit against the company, but under
the False Claims Act only the first received a portion of what the Government
won. Whistleblower Donald Gale, who had been the general manager of an
Omnicare pharmacy, got $17.24 million of the settlement. Gale had worked
at a pharmacy in Wadsworth, Ohio, and said in his lawsuit that Omnicare
was paying kickbacks to nursing homes.
According to Gale, the kickbacks were not direct payments, but instead
took the form of hefty discounts on prescription drugs that the nursing
homes purchased. Medicare pays nursing homes a flat fee for patients insured
under Medicare Part A. Omnicare gave the nursing homes a special daily,
or “per diem,” rate for drugs they bought for Part A patients.
Gale said the special rate was considerably below the fair market price
of the drugs the nursing homes actually were purchasing. In return, Omnicare
expected that the nursing home would order all of the prescriptions for
their Part D patients from Omnicare. Medicare pays for the drugs for Part
D patients, and of course was charged full price — with no special
daily rate — when it paid for prescriptions.
Gale was represented by my good friends at the Morgan Verkamp law firm.
Congratulations to them on a job well done.