The first quarter of 2022 brought news of several noteworthy False Claims Act (FCA) settlements, including several settlements by physicians regarding arrangements deemed to be unlawful kickbacks and the first settlement under the Department of Justice’s Civil Cyber-Fraud Initiative.  This post summarizes key settlements of interest to healthcare providers and government contractors.

Physicians and Hospitals

• On January 12, six medical practices and their physician-owner agreed to pay more than $7.4 million to resolve liability under the False Claims Act for claims wrongfully submitted to federal healthcare programs for acupuncture treatment. The government alleged that because Medicare and the Federal Employees Health Benefit Program do not reimburse for acupuncture treatments, the defendants billed those procedures under an incorrect CPT code to receive payment. The defendants also agreed to a Corporate Integrity Agreement as part of their settlement.
• On January 20, seven Texas physicians and a hospital CEO agreed to pay a total of more than $1.1 million to resolve allegations that they violated the Anti-Kickback Statute and Stark Law. The physicians were alleged to have received illegal remuneration from management services organizations in exchange for ordering laboratory tests. The payments to the physicians were allegedly disguised as investment returns but were in fact based on the doctors’ referral volumes. The hospital CEO was also excluded from participation in federal healthcare programs for three years.
• On February 9, a New Hampshire hospital agreed to pay $3.8 million to resolve allegations that it violated the Anti-Kickback Statute and False Claims Act. The settlement resolved a qui tam suit brought by a physician formerly employed by the hospital, who alleged that the hospital provided unlawful remuneration in the form of free call coverage services to a cardiologist to induce patient referrals. The cardiologist who received the free call coverage referred millions of dollars in medical procedures and services to the hospital over the decade in which the free services were provided.
• On March 22, ten more Texas physicians and a healthcare executive agreed to pay a total of $1.68 million to resolve False Claims Act allegations arising from the same conduct addressed in the January 20 settlement with physicians and a hospital CEO (discussed above). These physicians were also accused of receiving kickbacks for referring laboratory testing and disguising the payments as investment returns.

Clinical Laboratories

• On February 4, the Northern District of California entered a consent judgment to resolve a qui tam action alleging that clinical laboratory Vibrant America LLC had violated the False Claims Act by participating in a kickback scheme. The suit alleged that physicians’ families were paid cash in exchange for physicians ordering blood tests. The United States and the State of California had previously declined to intervene. After extensive fact discovery and mediation, the lab agreed to pay $5.25 million to settle the case.
• On March 31, a North Carolina-based clinical laboratory settled allegations that it submitted false claims for medically unnecessary urinalysis drug tests. The lab paid $11.6 million and admitted in the settlement agreement that it had billed Medicare for unnecessary confirmatory drug tests. The government also alleged that the lab paid sales organizations based on the volume of drug test referrals, in violation of the Anti-Kickback Statute. The lab agreed to a five-year Corporate Integrity Agreement as part of the settlement.

Government Contractors

• On March 8, a global medical services provider agreed to pay more than $930,000 in part to resolve False Claims Act allegations regarding cyber fraud. The government alleged that the company contracted with the State Department to provide a secure electronic medical record system to store patients’ medical records and submitted claims for the costs of this work, but failed to disclose that it had not consistently stored patients’ medical records on a secure system. This was the Department of Justice’s first settlement under its Civil Cyber-Fraud Initiative, which was announced in October 2021. Read our analysis of the Civil Cyber-Fraud Initiative.
• On March 14, two freight carriers settled allegations that they fraudulently billed the United States under contracts with the Department of Defense to ship military freight. The government alleged the companies wrongfully billed delivery charges based on higher weights when, after reweighing the shipments, they knew that the actual weights were lower. The two companies agreed to pay a total of $6.85 million to resolve the claims, which were initially brought by a whistleblower who had worked for one of the companies.