15 Fraud and Abuse Cases Making Headlines in 2010

The beginning of 2010 has been marked by numerous fraud and abuse investigations, cases and settlements. Here are 15 notable cases from the last six months.

1. Health Alliance of Greater Cincinnati and Christ Hospital kickback investigation settlement.
The Health Alliance of Greater Cincinnati and The Christ Hospital in Mount Auburn, Ohio, agreed to pay $108 million in May to settle claims they violated the Anti-Kickback Statute and the False Claims Act. The organizations were accused of illegally paying physicians in exchange for referring cardiac patients to The Christ Hospital, a former member hospital of the Health Alliance of Greater Cincinnati. The government further alleged that cardiologists were rewarded with a percentage of time at the hospital's Heart Station based on their contributions to the hospital's yearly gross revenues, and these physicians could earn additional income for treating patients at the facility. The government claimed The Christ Hospital's use of Heart Station panel time to induce lucrative cardiac referrals violated the federal Anti-Kickback Statute and further alleged the claims submitted by The Christ Hospital to Medicare and Medicaid as a result of this illegal kickback scheme violated the False Claims Act.

2. Tuomey Hospital Stark Act violation guilty verdict. A federal jury found Tuomey Hospital in Sumter, S.C., part of Tuomey Health System, guilty in April of violating the Stark Act for providing kickbacks to physicians in return for referrals at the hospital. Federal prosecutors alleged that beginning in 2004 the hospital violated federal healthcare law by offering part-time and other employment contracts to physicians that exceeded fair market value and were nothing more than vehicles to reward referrals. Federal prosecutors also alleged Tuomey violated the False Claims Act by submitting claims resulting from referrals that violated self-referral law. However, the jury dismissed this claim, clearing the hospital of Medicare fraud charges. Tuomey was ordered in June to pay the federal government $44.9 million plus interest — and may face a new trial on an alleged False Claims violation. The case is reflective of both increased efforts by hospitals to align with physicians and increased efforts by the federal government to assure such arrangements comply with the Stark and Anti-Kickback statutes.

3. Los Angeles' City of Angels Medicare fraud consent judgement.
Intercare Health Systems, formerly doing business as Los Angeles' City of Angels Medical Center, agreed to a $10 million consent judgment in May to resolve a civil lawsuit against Intercare by the United States and the state of California for a Medicare and Medi-Cal fraud scheme, according to a U.S. Department of Justice news release. City of Angels was accused of violating the False Claims Act and Anti-Kickback Statute by paying illegal kickbacks to recruiters employed at Los Angeles homeless shelters to deliver homeless patients by ambulance to the hospital for medical treatment regardless of whether their clients in fact needed or requested such treatment. City of Angels would then bill the Medicare and Medi-Cal programs for a variety of medical services allegedly rendered to the homeless patients, many of which were not medically necessary.

4. Kyphoplasty-related false claims allegation settlements. Nine hospitals in seven states agreed to pay the United States more than $9.4 million in May to settle allegations that they submitted false claims to Medicare related to kyphoplasty procedures performed between 2000 and 2008, according to a U.S. Department of Justice news release. The hospitals were accused of performing kyphoplasty, a minimally invasive procedure used to treat certain spinal fractures, as an inpatient procedure in order to increase Medicare billings when many of the cases could have been performed on a less-costly outpatient basis. The top-paying hospitals were Ball Memorial Hospital in Muncie, Ind., which paid $1,995,431, Huntsville (Ala.) Hospital, which paid $1,992,756 and Palmetto Health in Columbia, S.C., which paid $1,861,083.

5. Robert Wood Johnson University Hospital Hamilton $6.35 million Medicare fraud settlement. Robert Wood Johnson University Hospital Hamilton (N.J.) agreed to a $6.35 million settlement in March to resolve allegations that it inflated charges to Medicare patients to obtain higher reimbursements from the federal program. Medicare provides supplemental outlier payments for cases that involve unusually high costs to providers. Two whistleblower lawsuits against the Hamilton hospital alleged it inflated charges to obtain these supplemental outlier payments for cases that were not overly costly and that should not have been eligible for outlier payments. The federal government intervened in the lawsuits in Jan. 2008. As part of the civil settlement, the whistleblowers received $1.1 million of the settlement amount.

6. Five-Physician Sacramento Medicare fraud scheme.
Five physicians and six others were indicted by a grand jury in June for their roles in running an alleged $5 million Medicare fraud scheme. From Feb. 2006-Aug. 2008, physicians and staff at three clinics in and around Sacramento, Calif., allegedly billed Medicare more than $5 million in fraudulent claims for treating patients who were not sick. Vardges Egiazarian, MD, the alleged leader of the scheme, admitted healthy patients were paid $100 per visit in exchange for allowing the clinic to bill for its services. In some cases, services were billed for dates when the beneficiary was deceased, according to the report. Dr. Egiazarian and another physician at the clinic, Derrick Johnson, MD, pleaded guilty last year. Dr. Egiazarian was sentenced in November to six-and-a-half years in prison and required to pay $1.5 million in restitution. A grand jury extended healthcare fraud charges to five additional physicians and six others who knowingly committed healthcare fraud.  

7. Christiana Care whistleblower kickback claims settlement. Christiana Care Health System in Wilmington, Del., agreed to pay $3.3 million in March to settle claims made by a whistleblower that the health system allegedly paid kickbacks to neurologists for referring patients to its Wilmington hospital. According to the charges, Christiana Care overpaid physicians at Neurology Associates for in-hospital readings of EEGs allegedly as a "reward" for referring patients to the hospital. The court documents noted the payments were part of a contract dating to 1989, prior to the enactment of the current Stark Act and Delaware Anti-kickback Statute. Christiana Care denied any wrongdoing in the case and settled to avoid lengthy legal action. The whistleblowers in the lawsuit were a group of physicians from a competing neurology group and will receive $190,000 in the settlement.

8. Brookhaven Memorial Hospital Medical Center Medicare fraud settlement. Brookhaven Memorial Hospital Medical Center, on Long Island, N.Y., agreed to pay $2.92 million plus interest to settle allegations that the hospital inflated charges to obtain supplemental outlier payments. The U.S. Justice Department intervened in the suit and alleged the hospital defrauded Medicare by inflating its charges to Medicare patients to obtain the supplemental reimbursements, also called outlier payments. These payments are intended for cases in which the cost of care is unusually high, but the cases for which Brookhaven received outlier payments were not extraordinarily costly and should not have merited them, the government alleged. Under the civil settlement, the whistleblower received $613,000 plus interest, out of the proceeds.

9. Health Alliance and Ohio hospitals anti-kickback investigation.
The Health Alliance of Greater Cincinnati, two of its member hospitals — Fort Hamilton Hospital and University Hospital — and University Internal Medicine Associates agreed to pay the United States $2.6 million in June to settle claims that they violated the Anti-Kickback Statute and the False Claims Act. The groups allegedly participated in a scheme to refer patients to UIM Associates in return for the practice providing coverage for Fort Hamilton's limited cardiology services. Under state law, Fort Hamilton could only perform the interventional cardiology procedures if it participated in a particular clinical trial involving those procedures. UIM Associates allegedly offered to provide the interventional cardiology coverage that Fort Hamilton needed for the clinical trial, but only if the hospital agreed to refer cardiology patients and procedures to the physician group on a preferential basis. The government contended that the preferential referral arrangements sometimes resulted in patients being transferred to University Hospital, or being seen by cardiologists with University Internal Medicine Associates, rather than the hospital or cardiologist of their choosing.

10. New York's Oswego Hospital $2.1M settlement for alleged Stark violations.
Oswego (N.Y.) Hospital agreed to pay more than $2.1 million to the Office of Inspector General for the United States Department of Health and Human Services and the New York State Office of the Medicaid Inspector General to settle allegations that it violated the Stark Law. Oswego Hospital voluntarily contacted HHS and the state Medicaid program in March 2008 when it was discovered that a number of the hospital's business transactions from 2002 to 2007 may not have complied with Stark Law.  The hospital has since implemented policies and procedures to ensure that all hospital transactions comply with Stark Law.

11. Former Massachusetts Hospital executive $500,000 kickback scheme.
Former Beverly Hospital associate vice president Paul Galzerano was indicted in July in a bribery and kickback scheme that brought him nearly $500,000 in profits. Prosecutors said that Mr. Galzerano solicited and received kickbacks and bribes from contractors on a $50 million expansion project. Two contractors on the hospital project submitted inflated proposals for work on the hospital and paid the difference to Mr. Galzerano through payments on his mortgage and credit card bills, prosecutors allege. Mr. Galerzano also removed antiques, including a $10,000 century-old grandfather clock, paintings and other valuables, from the hospital and put them in his home, which he planned to sell. Mr. Galzerano was indicted along with three contractors. He and his co-defendants are scheduled to be arraigned in Salem Superior Court on July 22.

12. Texas state representative's Medicaid fraud scheme. Texas State Representative Tara R. Rios Ybarra, DDS; Diana Woo Paparelli, DDS; and Colbert J. Glenn, DDS, were indicted in June on charges that they allegedly illegally referred Medicaid beneficiaries to a Gary Morgan Schwarz, DDS, MSD, a McAllen, Texas dentist. The three dentists were charged together on a 22-count indictment. State Sen. Rios Ybarra was charged with three of the counts, which allege that she referred Medicaid beneficiaries to Dr. Schwarz in return for 15 percent of all Medicaid payments made to him for the referred beneficiaries. Dr. Paparelli and Dr. Glenn were charged similarly with three counts of the indictment. All three defendants surrendered themselves to U.S. Marshals and each currently faces prison time and a fine of up to $25,000 for each count if convicted. In late June, Sen. Ybarra was in federal custody awaiting an initial court hearing.

13. Michigan Neurologist false diagnosis accusation. Yasser Awaad, MD, a Dearborn, Mich.-based pediatric neurologist was accused in June of diagnosing patients with epilepsy when in fact the patients were healthy in order to increase the volume of tests he performed at Oakwood Hospital & Medical Center in Dearborn. A lawsuit by seven patients against Dr. Awaad and Oakwood accused Dr. Awaad of misdiagnosing patients because his earnings were tied to procedure volume. Patients diagnosed with epilepsy undergo regular testing to monitor their condition. The hospital denied tying Dr. Awaad's compensation to volume.

14. UT Southwestern's fraudulent billing charges. Federal investigators announced in June plans to further examine the billing practices at Dallas' University of Texas Southwestern Medical Center and Parkland Memorial Hospital, after previous investigations discovered the hospitals had billed the government for services provided by faculty physicians when they were performed by unsupervised residents. Internal audits have identified failure by the UT Southwestern to prevent fraud and to comply with billing laws, in spite of a decades-long investigation and several internal memos encouraging faculty physicians to ensure residents were not fraudulent in their billing practices, according to the report.

15. Federal intervention in qui tam suit against Georgia's Satialla Regional Medical Center.
The United States intervened in a False Claims Act lawsuit in April alleging that Satilla Regional Medical Center in Waycross, Ga., and Najam Azmat, MD, submitted claims for medically substandard and unnecessary services to Medicare and Medicaid. Specifically, the complaint alleged, among other things, that the defendants submitted claims for medical procedures performed by Dr. Azmat in Satilla's Heart Center that the physician was neither qualified nor properly credentialed to perform. As a result, at least one patient died and others were seriously injured. The complaint stated that Satilla placed Dr. Azmat on staff even after learning that the hospital where he previously worked had restricted his privileges as a result of a high complication rate on his surgical procedures. The complaint also stated that after Dr. Azmat joined the Satilla staff, the hospital management allowed him to perform endovascular procedures in the hospital's Heart Center even though he lacked experience in performing such procedures and did not have privileges to perform them.

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