Caremark International late last week agreed to plead guilty and pay $161 million in criminal and civil fines to settle a federal kickback and fraud investigation of its former home infusion unit.
The settlement, stemming from a 4-year-old investigation, is one of the largest ever obtained in a healthcare fraud case. The largest to date was in the National Medical Enterprises psychiatric fraud case last year, in which NME agreed to pay $379 million.
Caremark agreed to plead guilty to two charges that it defrauded federal healthcare programs by making improper payments to induce physicians and other professionals to refer patients to Caremark. Settlement documents for each charge were filed late last week in federal courts in Minneapolis and Columbus, Ohio.
Under the plea agreement, Caremark agreed to cooperate in federal probes of individuals who may have been involved in illegal schemes. Although the settlement frees Caremark from civil and criminal liability, the government will continue to investigate individuals such as company officers and employees, as well as doctors and others who received kickbacks.
"Caremark acknowledges the improper conduct by certain employees, apologizes and takes full responsibility for the wrongdoing," C.A. Lance Piccolo, Caremark's chairman and chief executive officer, said in a written statement. The company had denied involvement in various schemes, and some Caremark officials, including Piccolo, previously predicted the company would be "vindicated" in court.
Gerald Stern, the Justice Department's special counsel for healthcare fraud, said at a Washington news conference that the $161 million in fines Caremark agreed to pay represented a greater sum than the revenues the company had gained from its illegal activities.
However, the company escaped a worse penalty of being excluded from the Medicare and Medicaid programs. As part of the agreement, HHS will not bar Caremark from those programs.
Stern said that had Caremark been convicted of the charges originally filed against it rather than agreeing to the settlement, the company would have been automatically barred from participating in Medicare and Medicaid for a minimum of five years.
The Northbrook, Ill.-based company agreed to pay $81.8 million in civil payments for the harm it caused to federal funding of government medical insurance programs. The agreement resolves all claims against the company stemming from fraudulent practices such as improper payments to induce referrals, submission of inflated bills to state Medicaid programs and waiver of copayments.
In addition, Caremark will pay $45 million to the states for their share of Medicaid and other programs.
The settlement also includes a $3.5 million civil penalty for Caremark's failure to keep accurate records at its pharmacies.
Caremark agreed to pay a criminal fine of $9 million in connection with the Minneapolis case and a criminal fine of $20 million in connection with charges filed in Columbus.
The company also will contribute $2 million to a Public Health Service grant program benefiting youths with AIDS or HIV, the virus that causes AIDS.
Caremark, once the leader in home infusion and alternate-site therapies, has sold its home infusion and Clozaril patient management businesses. The company recently has engaged in a rapid program of purchasing physician group practices, and now operates a network of more than 700 physicians and 300,000 HMO enrollees.
Caremark sold its home infusion arm to Denver-based Coram Healthcare for $310 million in cash and securities.
Last August a federal grand jury in Minneapolis indicted the company on charges of paying $1.1 million in illegal kickbacks to David Brown, M.D., in exchange for patient referrals. The trial for the remaining defendants of that case is slated for July 10.
A doctor in Columbus said to have ties to Caremark also was indicted last September for accepting money in return for patient referrals to a home infusion company, though the company was not named in the indictment (Sept. 26, 1994 p. 14).
The anti-kickback provisions of the 1977 Medicare and Medicaid fraud-and-abuse statutes bar any form of remuneration to induce patient referrals or the referral of any program business.
Caremark said it will take a special after-tax charge to earnings of $110 million in the second quarter ending June 30 to cover part of the settlement payments.
Caremark's net revenues for 1994 were $2.4 billion. Its home infusion business accounted for 18%, or $430 million, of total revenues.