The US Department of Justice (DOJ) has announced the settlement of multiple False Claims Act actions against 55 hospitals and one manufacturer. The settlements (totaling more than $34 million and $1.9 million, respectively) alert employers to the DOJ's continued vehement prosecution of whistleblower claims across all industry sectors, and their often significant cost.
Employers should be aware that both actions were initiated by former employee whistleblowers who filed qui tam actions under the False Claims Act, in which the DOJ later intervened. Qui tam actions brought under the False Claims Act allow private citizens to file actions on behalf of the government for false claims, or fraudulent transactions, made under public contracts. The False Claims Act allows the whistleblowers, or relators, to share in any monetary judgments, settlements or government recoveries secured as a result of the lawsuit. Because of the possibility of reaping as much as 30 percent of a recovery under the False Claims Act, employees could forego internal complaint mechanisms in favor of filing these types of whistleblower lawsuits.
In an action against CyTerra Corporation (United States ex rel. Bartczak, et al. v. CyTerra Corporation, Civil Action No. 06-CA-10550-NMG), the DOJ claimed that the Massachusetts manufacturer had withheld cost or pricing data from the government during public contract negotiations. The False Claims Act whistleblower lawsuit was originally filed by two former CyTerra executives. Those whistleblowers will share $361,000 from the settlement amount.
The DOJ's settlements with 55 hospitals located in 21 states form part of a larger initiative combatting Medicare fraud related to kyphoplasty procedures, which are used to treat complications from osteoporosis and are frequently performed on an outpatient basis. Two former employees of Kyphon Inc., the corporation that first developed the kyphoplasty procedure and trains physicians in performing the procedure, initially filed False Claims Act whistleblower claims. The two whistleblowers will receive approximately $5.5 million as a result of the settlements.
In a related 2008 case, Medtronic Spine LLC, the corporation that had acquired Kyphon, Inc. in 2007, settled DOJ's allegations that it was defrauding Medicare by advising hospital providers to perform inpatient instead of outpatient kyphoplasty procedures for $75 million.
This latest settlement brings DOJ's total recovery to over $14.7 billion for False Claims Act recoveries since January 2009.