DTH Series: Why Your Organization Needs to Spend Money to Save Billions

Welcome to this week's post in our Deeper Than the Headlines blog post series.

In fiscal year 2016, the Department of Justice (DOJ) recovered $2.5 Billion through the False Claims Act from the healthcare industry. This is the amount that can be directly measured. DOJ stated in their announcement of this recovery amount that “just as important, the Department’s vigorous pursuit of healthcare fraud prevents billions more in losses by deterring others who might otherwise try to cheat the system for their own gain.”  Sometimes, this is referred to as the “ripple effect,” meaning a few big recoveries/enforcements, ripple outward, affecting even those organizations that don’t experience a formal enforcement action.

As compliance professionals know, sometimes it requires an enforcement action against a neighbor or peer organization to get an entity’s leadership on board with investing in pro-active compliance efforts. Like I’ve said in the past, an ounce of prevention is worth a pound of cure. The DOJ announcement highlighted major settlements adding to the $2.5 Billion amount. Some of these organizations are those that apparently ended up spending large amounts on the “pound of cure” as opposed to the “ounce of prevention.”

The Pharma and Medical Device sector represented the largest portion of the healthcare industry total by adding $1.2 Billion. Two of the major 2016 settlements were with:

• Wyeth and Pfizer Inc., which paid $784.6 million to settle allegations that the company did not appropriately report drug discount prices to government entities when those same discount prices were available to commercial customers. As a result, the government alleged it paid more for two particular acid reflux drugs than it should have.
• Novartis Pharmaceuticals paid $390 million to settle claims that it paid kickbacks to specialty pharmacies in exchange for those specialty pharmacies’ recommendations for two Novartis drugs.

Hospitals and clinics added $360 million to the total. One major settlement was:

Tenet Healthcare Corp., which paid $244 million to resolve allegations that it paid kickbacks in return for patient referrals. This also led to two of its subsidiaries to plead guilty to related charges and forfeited an additional $145 million.

In the laboratory space, Millennium Health (formerly Millennium Laboratories) paid $260 million to settle allegations that it billed for excessive and unnecessary urine, drug, and genetic testing and also that it gave free items to induce physicians to refer expensive and profitable lab tests to Millennium, in violation of the Anti-Kickback Statute and Stark Law.

Nursing homes and skilled nursing facilities added $160 million to the total. The largest settlement in this area involved the nation’s biggest contract therapy provider (Kindred Healthcare Inc). It paid $125 million to resolve claims that it had induced skilled nursing homes to submit false claims for rehabilitation services that were not reasonable, necessary, and skilled, or that weren’t provided at all. 

But the accountability did not end with organizations alone. As most of us know, the DOJ issued the Yates’ memo in September of 2015. This memo announced the DOJ’s future increased emphasis on individual accountability. 2016 clearly demonstrated this new-found emphasis and the following are some of those significant enforcements involving individual accountability:

• Dr. Asad Qamar, a cardiologist in central Florida. His settlement involved a combined value of $7.3 million for allegations of unnecessary procedures and kickbacks to patients.
• George Hepburn, founder and president of Dynasplint Systems Inc., paid $10.3 million for alleged inappropriate billing of splints in nursing homes.
• Dr. David Spellberg ($1.05 million) and Robert A. Scappa, D.O. ($250,000), urologists with 21st Century Oncology LLC. The allegations included medically unnecessary lab tests including tests for fluorescence in situ hybridization, or “FISH.”
• Former CEO of Tuomey Healthcare System, Ralph J. Cox III,  paid $1 million to resolve allegations of his involvement in the well-known Tuomey Medical Center case.

Throughout 2016, our blogs and webinars covered the details of almost all these cases, but it is interesting to reflect at the beginning of another year on exactly how much all these settlements add up to in the grand scheme of things. Recoveries of $2.5 Billion will definitely keep the government and whistleblowers engaged in False Claim Act cases and allegations.

The lesson for providers is to spend the time and money on an effective compliance program in 2017 so your organization and its individual executives are in a better position to prevent, detect, and correct noncompliance.

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