The most recent report by the U.S. Department of Justice (DOJ) on its recoveries under the federal False Claims Act (FCA) (see “Fraud Statistics—Overview, October 1, 1986 – September 30, 2018”) made it quite clear that the federal government continues to seek to combat fraud by health care providers against federal health care programs such as Medicare, Medicaid, and TRICARE.

And there seems to be no shortage of health care fraud to fight.

Recent settlements and civil fraud lawsuits brought by the DOJ or in which they have intervened in New York illustrate the breadth of fraudulent actions that providers continue to take as well as the importance of whistleblowers and watchful government investigators in the ongoing efforts to protect the federal programs.

This column surveys a half dozen recent actions taken by U.S. Attorneys in New York against health care providers under the FCA. These cases highlight some of the themes, such as problems with billings, kickbacks, reimbursement eligibility, and the like, that often arise and that lead to health care providers who allegedly engage in these activities being brought into court.

Billing

Consider the recent $2 million settlement of a civil fraud lawsuit brought under the FCA that the U.S. Attorney for the Southern District of New York reached with Metropolitan Retina Associates, an ophthalmology practice with offices in Brooklyn and Manhattan, and Dr. Kenneth Felder, the owner of Metropolitan Retina.

As part of the settlement, Metropolitan Retina and Felder admitted that they frequently submitted claims to Medicare and Medicaid for fluorescein angiograms that lacked any diagnostic or medical value because the images were distorted or were taken from angles that made it impossible to evaluate the patients' conditions.

Moreover, according to the settlement, Metropolitan Retina and Felder admitted that Medicare or Medicaid would not have paid for these procedures had they known that the fluorescein angiograms lacked any diagnostic or medical value.

They also admitted that they frequently submitted claims to Medicare and Medicaid for ultrasounds of the eye that either were not performed or were not supported by any medical record documentation, and that Medicare and Medicaid would not have paid for these ultrasounds had they known that the ultrasounds either were not performed or were not supported by documentation in the medical records.

The defendants also admitted that, as a result of billing for the medical procedures described above, they received substantial reimbursement from Medicare and Medicaid to which they were not entitled.

Unapproved Drugs

Another New York ophthalmologist, without admitting any wrongdoing, recently agreed to a $6.9 million settlement of a civil fraud suit under the FCA with the U.S. Attorney for the Eastern District of New York.

The settlement resolved allegations that, in contravention of Medicare regulations and in violation of the FCA, Dr. Mark Fleckner administered certain pharmaceutical products that he had purchased overseas, which the U.S. Food and Drug Administration (FDA) had not evaluated or approved for use in the United States (the Unapproved Drugs). According to the government, these products included aflibercept (Eylea) and ranibizumab (Lucentis), which Fleckner used to treat patients who had wet, age-related macular degeneration or other diseases and conditions of the eye.

The government contended in particular that from at least July 1, 2014 to June 27, 2017, Fleckner purchased the Unapproved Drugs because they were less expensive than drugs that were approved by the FDA for marketing in the United States. Medicare reimburses physician-administered drugs at a set rate based on the average sales price of the respective FDA approved, physician-administered drug in the United States. Therefore, as alleged by the DOJ, Fleckner was able to profit from the “spread” between the reimbursement rates he received based on FDA-approved drugs and the lower amounts he paid for the Unapproved Drugs. The government contended that the Unapproved Drugs were not eligible for reimbursement by Medicare. See Press Release, “Board Certified Ophthalmologist Agrees to Civil Fraud Settlement in Medicare Fraud Investigation.”

Services

In another recent FCA settlement in the Eastern District of New York, a Staten Island-based health care service, Centers Plan for Healthy Living, agreed to pay more than $1.6 million to settle civil fraud allegations that it billed Medicaid for services that it did not provide to Medicaid beneficiaries. See Press Release, “Staten Island-Based Health Care Service Agrees to Pay More than $1.6 Million to Settle False Claims Act Suit Alleging Fraudulent Billing Practices.”

The government alleged that, from April 2013 through December 2015, Centers Plan fraudulently enriched itself at the expense of Medicaid by knowingly and systematically submitting false claims for payment to Medicaid. According to the DOJ, Centers Plan improperly enrolled into its managed long-term health care plan individuals who were actually only eligible for social adult day care or transportation services.

The government also contended that Centers Plan failed to dis-enroll members from its managed long-term health care plan who were no longer receiving qualified community-based long-term care services.

The allegations were brought to the government's attention through the filing of a complaint pursuant to the FCA's qui tam or whistleblower provisions.

Licenses, Inducements

In the Northern District of New York, Oviatt Hearing and Balance, with audiology practices in Syracuse, Camillus, Manlius, and Oswego, New York, recently agreed to pay more than $566,000 to resolve allegations that it violated the FCA by falsely billing the federal government for services rendered by unlicensed individuals and by inappropriately providing gift cards and other inducements to Medicare and TRICARE beneficiaries. See Press Release, “Audiology Practice with Locations Throughout Central New York to Pay More Than $566,000 to Settle False Claims Act Claims.”

The government alleged that Oviatt violated the FCA in two respects.

First, according to the government, Oviatt allowed unlicensed individuals, while working alone with no licensed audiologist or other qualified provider onsite, to perform audiology examinations on federal health care program beneficiaries. Oviatt then submitted claims for payment for those examinations to Medicare and TRICARE that falsely identified licensed audiologists as the rendering providers, according to the government.

Second, as alleged, Oviatt offered and provided kickbacks in the form of improper inducements to federal health care program beneficiaries so that they would come to Oviatt where services billable to the federal government were available. The inducements allegedly included entering beneficiaries into a contest for a free iPad, and offering beneficiaries free Butterball turkeys, $15 Visa gift cards, $15 Dunkin Donuts gift cards, and $30 Omaha Steaks gift cards.

As part of the settlement, Oviatt admitted that (1) on various occasions from July 2011 through January 2018, it offered and provided improper inducements in the form of gift cards, gift checks, iPads, and similar promotions to federal health care program beneficiaries, and (2) on various days from January 2016 through November 2016, it allowed two unlicensed individuals, who were alone in the office and unsupervised, to perform audiology tests on federal health care program beneficiaries and then billed those services to Medicare and TRICARE as though they had been rendered by a licensed provider.

This was another case triggered by a whistleblower lawsuit filed under the FCA's qui tam provisions.

Improper Rates

The U.S. Attorney's Office in the Northern District, and the New York State Attorney General's Office, recently reached a settlement with Dermatology Associates of Central New York, under which it agreed to pay $811,196.88 to resolve allegations that it violated the federal and New York FCAs by knowingly billing the federal and state governments for medical services at a higher rate than appropriate.

According to the allegations, from March 2009 through February 2015, Dermatology Associates generally operated six days a week for several hours each day, but a physician was physically present in the office suite on a more limited basis. Nevertheless, the governments contended, Dermatology Associates caused its billing company to submit thousands of claims for payment to Medicare, Medicaid, and TRICARE for services that were rendered by non-physician practitioners (NPPs), such as physician assistants and nurse practitioners, but improperly identified one of Dermatology Associates' physician owners as the rendering or supervising provider on days when no physician was in the office.

Dermatology Associates admitted that the practice caused its billing company to submit claims for services rendered by NPPs as though such services had been provided or supervised by a physician on more than 200 days that the physicians were traveling outside of New York State. Dermatology Associates further acknowledged that some of the NPPs who treated Medicaid clients during this period were not credentialed to do so in New York and, in such circumstances, the uncredentialed providers were billed in a physician's name.

The settlement agreement resolved a whistleblower lawsuit filed under the qui tam provisions of both the federal and New York FCAs.

Medical Devices

Finally, the Northern District also was the location where a medical device manufacturer, AngioDynamics, agreed to pay the United States $12.5 million to resolve allegations that it caused health care providers to submit false claims to Medicare, Medicaid, and other federal health care programs relating to the use of two medical devices, LC Bead and the Perforator Vein Ablation Kit (PVAK).

Here, the government alleged that, from May 2006 through December 2011, AngioDynamics served as the U.S. distributor for Biocompatibles plc, the manufacturer of LC Bead, and marketed LC Bead for use as a drug-delivery device in combination with chemotherapy drugs. According to the government, AngioDynamics personnel routinely claimed that this particular use of LC Bead, which the FDA had twice declined to approve, was “better,” “superior,” “safer,” and “less toxic” than alternative treatments, even though there was insufficient clinical evidence to support the truthfulness of these claims.

The government also alleged that AngioDynamics was aware that many insurers declined to provide coverage for certain LC Bead procedures and, as a result, instructed health care providers to use inaccurate billing codes when submitting claims for such uses.

In addition, AngioDynamics settled allegations that it caused false claims to be submitted to federal health care programs in connection with the use of the PVAK, later renamed the 400 micron kit. The PVAK was FDA-cleared only for use in treating superficial veins, and, in 2011, AngioDynamics requested that the FDA clearance include the treatment of perforator veins. However, the FDA informed the company that the treatment of perforator veins constituted a new indication for which safety and efficacy were unknown.

The government contended that, as a result, AngioDynamics voluntarily recalled the PVAK and re-issued the product under a new name, the 400 micron kit, that did not refer to the unapproved use of treating perforator veins. Notwithstanding the recall and rebranding, certain AngioDynamics personnel, as part of a continued campaign to market the device to treat perforator veins, falsely represented to providers that Medicare would cover this use despite Medicare coverage restrictions to the contrary, the government asserted. See Press Release, “Medical Device Maker AngioDynamics Agrees to Pay $12.5 Million to Resolve False Claims Act Allegations.”

Conclusion

The federal FCA is an important tool for fighting fraud by providers against federal health care programs. When the DOJ brings or intervenes in these actions, pressure is put on all providers to play by the rules, helping to cut down waste and abuse to the benefit of the federal government's pocketbook and program beneficiaries.

Evan H. Krinick, managing partner of Rivkin Radler, can be reached at [email protected].