Lincare, Inc. Pays $5.25 Million to Settle False Claims Act Kickback Allegations

King & Spalding

On August 16, 2018, the DOJ announced that Lincare, Inc. (Lincare), a durable medical equipment (DME) provider of oxygen and other in-home respiratory therapy services, paid $5.25 million to settle allegations that it violated the False Claims Act and the Anti-Kickback Statute by offering illegal price reductions to Medicare Advantage beneficiaries.  Lincare is headquartered in Florida and has approximately 1,000 locations throughout the United States.

The settlement resolves allegations that from 2011 to 2017, Lincare “attempted to gain a competitive advantage in the market place by unlawfully waiving or reducing co-insurance, co-payments, and deductibles” for beneficiaries who participated in a Medicare Advantage Plan operated through Humana, Inc.  The complaint alleged that Lincare submitted false and fraudulent claims under Medicare Part C to various managed care plans in the form of HMOs and PPOs, who in turn were being reimbursed by CMS using federal funds.

The complaint alleged that Lincare embarked on its scheme in 2011 after Humana contracted with Apria Healthcare (Apria) to be its exclusive “in network” provider of DME.  Pursuant to that contract, Apria agreed to provide various DME at rates that were generally about 40 percent lower than those charged by Lincare.  Facing a significant loss of its business to Apria, Lincare allegedly began a scheme to “match in network benefits” by routinely reducing co-pays due from Medicare Advantage beneficiaries for DME supplied by Lincare, in violation of the False Claims Act and Anti-Kickback Statute.  For example, the complaint alleged that for a specific DME product, Apria would charge $60 with the insured paying an in-network benefit copay of 20 percent ($12) and Humana’s Medicare Advantage Plan paying the remaining 80 percent ($48).  Lincare charged $100 for the same product, but routinely reduced the “out of network” copay from the 30 percent required under Humana’s Medicare Advantage Plan to 13 percent ($13), roughly equivalent to Apria’s copay.  Meanwhile, Humana would still be paying 70 percent of Lincare’s higher charge ($70).  The complaint alleged that Lincare’s intent was to provide remuneration to Medicare Advantage beneficiaries to influence their decisions to purchase DME from Lincare, instead of Apria, despite the additional costs to the Medicare Advantage program. 

The settlement comes as a result of a whistleblower lawsuit filed by a former billing supervisor at Lincare in the U.S. District Court for the Southern District of Illinois and captioned United States ex rel. Brian Thomas v. Lincare Inc., Case No. 15-cv-00730-DRH.  DOJ announced that the whistleblower will receive $918,750 from the $5.25 million settlement proceeds.  The matter was handled by the U.S. Attorney’s Office for the Southern District of Illinois, the Justice Department’s Civil Division, and the OIG. 

A copy of the DOJ’s press release is available here.  A copy of the complaint is available here.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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