False Claims Act Cases Continue to Be a Cash Cow for the Feds

Easy liability; High penalties; Private individuals willing to do the heavy lifting by bringing qui tam whistleblower lawsuits.

It is not hard to understand why few federal government ventures generate a more handsome return on investment than enforcement of the False Claims Act (FCA). After sagging a tad in recent years, FCA recoveries bounced back in fiscal year 2016, generating their third highest total in over a decade. As usual, most of that money came from the health care industry.

FCA Recoveries by the Numbers
Here are some of the key numbers from the year in FCA recoveries as reported by the U.S. Department of Justice (DOJ) on Dec. 14.

• $4.7 billion: Total FCA recoveries in FY 2016, the third highest since the government has been keeping track of these numbers;

• $2.5 billion: Total recoveries against health care providers in FY 2016—not including state Medicaid;

• $31.3 billion: Total FCA recoveries between 2009-2016;

• $4 billion: Average annual FCA recoveries between 2009-2016;

• $19.3 billion: Total FCA recoveries from health care providers between 2009-2016;

• $2.4 billion: Average annual FCA recoveries from health care providers between 2009-2016;

• 702: Total qui tam (whistleblower) lawsuits filed in FY 2016—an average of 13.5 cases per week;

• $2.9 billion: Total recoveries in qui tam lawsuits in FY 2016;

• $519 million: Total recoveries paid to whistleblowers in FY2016.

The biggest FCA recovery against a lab for the year was the $260 million paid by Millennium Health (formerly Millennium Laboratories) to settle allegations of billing Medicare for unnecessary urine and genetic tests and giving free items to physicians to induce referrals of costly tests.

Beyond the Numbers
The DOJ FY 2016 FCA report is noteworthy not just for the numbers but the enforcement trends it cites, including:

Voluntary Compliance: U.S. Health and Human Services Inspector General Daniel R. Levinson emphasized that the big dollar values belie the "collateral benefits" achieved via "voluntary observance of federal laws through corporate integrity agreements addressing compliance weaknesses and self-disclosures that encourage health care providers and other entities to voluntarily report suspected violations."

Executive & Individual Accountability: The DOJ also continued its determination to go after not just entities but the individuals running them in pursuit of the policy announced in the September 2015 Yates memorandum. Of the 11 individuals the DOJ cites as being held personally liable for alleged false claims in 2016, nearly half were connected with laboratory testing, including:

• Dr. Jonathan Oppenheimer, a former executive with a Nashville drug testing laboratory who agreed to a $9.35 million settlement;

• Gottfried and Mieke Kellerman, founders of Pharmasan Labs, Inc. and NeuroScience, Inc., who settled for $8.5 million;

• Dr. David G. Bostwick founder and former owner and CEO of Bostwick Laboratories, who entered into a $3.75 million settlement; and

• Dr. David Spellberg and Robert A Scappa, urologists who settled allegations of billing Medicare for medically unnecessary FISH testing.

Takeaway: The DOJ's reporting of FY 2016 fraud recoveries indicates large scale and individual enforcement efforts continue unabated and that laboratory testing is a fruitful target for enforcement agencies.