Healthcare companies made no billion-dollar payouts to settle fraud complaints in 2014, leading some industry observers to suggest that the era of megabuck settlements may be waning.
Settlement payouts between government investigators and healthcare companies shrank to $1.8 billion last year from $4.5 billion in 2013, according to the latest data from risk-management firm Navigant Consulting. While there were 78 settlements that came in at over $1 million in 2014, or nearly 5% more than the previous year, the average settlement amount dipped 61% to $23.1 million.
DaVita Healthcare Partners paid the largest settlement in 2014, a $400 million federal penalty to settle allegations that DaVita paid kickbacks to doctors to gain referrals for its dialysis clinics. But that settlement was well below the top-ranked $2.2 billion penalty paid by Johnson & Johnson in 2013 to settle claims that it engaged in off-label marketing of prescription drugs Risperdal, Invega and Natrecor.
Experts say lower settlement amounts may be a sign that huge payouts are drying up. “The low-hanging fruit cases are gone,” said Zack Buck, assistant professor of law at Mercer University's Walter F. George School of Law.
Federal scrutiny is likely to shift from drug and device companies to healthcare systems, hospitals, physician practices and doctors who allegedly provide unnecessary care, Buck said. The Justice Department is keeping a close eye on stent and implantable cardioverter-defibrillator placements and other high-cost procedures.
Easier access to Medicare claims data has allowed investigators to target places where utilization is high, signaling potentially unnecessary care or procedures. However, unnecessary care cases can be difficult to prove, Buck noted, because providers can argue they are meeting patients' needs.
One factor leading to the decline in billion-dollar cases may be major drug companies' decisions to rein in aggressive sales tactics that led whistle-blowers and government investigators to file illegal marketing charges against them. Last year, the typical “large” drug company settlement was in the $100 million to $200 million range.
However, not all experts believe healthcare companies have changed their ways. There's little price competition in healthcare because doctors and hospitals are the intermediaries that determine which drugs and devices are purchased, said Patrick Burns, co-director of the Taxpayers Against Fraud Education Fund, a not-for-profit organization that works closely with trial lawyers who represent whistle-blowers.
“Companies love to talk about compliance programs, but for the most part, these programs are jokes,” Burns said. “Companies are not looking to hire Sherlock Holmes to ferret out fraud. Fraud is a profit center, and it's one that management knows all about.”
Last year's settlement downturn could reverse itself at any time, experts say. Government officials estimate the actual amount of healthcare fraud dwarfs the amount agencies recover in any given year. Fraud and abuse cost between $82 billion to $272 billion a year, according to a 2012 RAND Corp. study.
