Record-breaking $2.7 Billion Paid by Healthcare Providers in False Claims Act Cases

A couple of weeks ago, on February 22nd. the Department of Justice issued its annual statement regarding False Claims Act activity in FY 2023 (federal fiscal years run 10/1 to 9/30). “Settlements and judgments under the False Claims Act exceeded $2.68 billion in the fiscal year ending Sept. 30, 2023. The government and whistleblowers were party to 543 settlements and judgments, the highest number of settlements and judgments in a single year. Recoveries since 1986, when Congress substantially strengthened the civil False Claims Act, now total more than $75 billion.” The full statement is available here:

Of the total $2.7 billion, $1.8 billion related to healthcare fraud.  As a refresher, summarized, the False Claims Act as it applies to healthcare providers is as follows.

(a) Any person who (1) knowingly presents, or causes to be presented, to an officer or employee of the United States Government or a member of the Armed Forces of the United States a false or fraudulent claim for payment or approval; (2) knowingly makes, uses, or causes to be made or used, a false record or statement to get a false or fraudulent claim paid or approved by the Government; (3) conspires to defraud the Government by getting a false or fraudulent claim paid or approved by the Government;. . . or (7) knowingly makes, uses, or causes to be made or used, a false record or statement to conceal, avoid, or decrease an obligation to pay or transmit money or property to the Government, is liable to the United States Government for a civil penalty of not less than $5,000 and not more than $10,000, plus 3 times the amount of damages which the Government sustains because of the act of that person . . . . (b) For purposes of this section, the terms “knowing” and “knowingly” mean that a person, with respect to information (1) has actual knowledge of the information; (2) acts in deliberate ignorance of the truth or falsity of the information; or (3) acts in reckless disregard of the truth or falsity of the information, and no proof of specific intent to defraud is required.

A post I did last fall covers the fraud and abuse aspects of False Claims Act violations and provider risks.  There are also, numerous historical posts on this site on the same subject (False Claims Act).

When recoveries are made, the funds are returned to the program area where the abuse or fraudulent billing occurred (Medicare, Medicaid, Tri-Care, etc.). Typically, the cases are older than the year when the recovery took place.  In 2023, the mix of cases includes, and is heavily influenced by, Medicare Advantage recoveries.  Medicare Advantage is now the largest payer under Medicare, eclipsing fee-for-service.  Below is the list of Medicare Advantage actions.

  1. Cigna agreed to pay $172 million to resolve allegations that it knowingly submitted and failed to withdraw inaccurate and untruthful diagnosis codes for its Medicare Advantage Plan enrollees to increase its payments from Medicare. 
  2. Martin’s Point Healthcare agreed to pay $22.5 million to resolve allegations that it knowingly submitted inaccurate diagnosis codes for its Medicare Advantage Plan enrollees that were not supported by the patients’ medical records to increase reimbursements from Medicare.
  3. In addition to securing these settlements, the Justice Department continued to litigate a number of other cases involving the Medicare Advantage program, including actions against UnitedHealth Group, Independent Health Corporation, Elevance Health (formerly Anthem), and the Kaiser Permanente consortium.

Recoveries also occurred in cases which providers billed federal health care programs for medically unnecessary services and substandard care. The list of substandard care recoveries is below.

  1. Cornerstone Hospital Medical Center and related entities agreed to pay $21.6 million to resolve allegations that the former long-term acute care facility knowingly submitted claims for services performed by unlicensed and unauthorized students, and services that were not provided or effectively worthless.
  2. Smart Pharmacy, Inc. SP2 LLC, and Gregory Balotin agreed to pay at least $7.4 million to resolve allegations that they unnecessarily added the antipsychotic drug aripiprazole to topical compounded pain creams to boost federal reimbursement for the compounded creams and waived patient copayments. The government alleged that the defendants crushed aripiprazole pills approved for oral use and included them in compounded creams used topically for pain treatment, knowing that there was not an adequate clinical benefit.
  3. Saratoga Center for Rehabilitation and Skilled Nursing Care related entities, and operators and owners Leon Melohn, Alan “Ari” Schwartz, Jeffrey Vegh, and Jack Jaffa agreed to pay $7.1 million to resolve allegations that Saratoga Center delivered worthless services to residents, resulting in medication errors, unnecessary falls, and the development of pressure ulcers, and that the facility’s physical conditions deteriorated to such a degree that the facility did not consistently maintain hot water, have an adequate linen inventory, or dispose of solid waste.

Other cases involving recoveries concerning Opioid abuse in dispensing, kickbacks (improper incentives or fees paid for driving utilization under a federal payment program (Medicare, Medicaid, etc.), and other generalized fraud made up the balance of the healthcare recovery amounts for 2023.

For providers, the Cornerstone and Saratoga cases offer the most insight into False Claims Act jeopardy. The most common type of fraud/abuse risk I see is providers billing for substandard care services and/or, over-billing for care either not warranted or not substantiated by documentation and assessment.  With education, routine claims monitoring activities, these risks can be minimized.

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