Government healthcare fraud recoveries slide

The U.S. Justice Department is reporting it recovered the lowest amount of money from healthcare fraud cases in any year since 2009, according to new government data.

The decline is largely due to the absence of major drug industry settlements, and doesn't reflect an easing of DOJ scrutiny of healthcare fraud, experts say.

“The recoveries are still high, and there's still a real focus at the Department of Justice on these cases,” said Jennifer Weaver, a partner at Waller Lansden Dortch & Davis who represents providers, after noting she's not seeing any decrease in healthcare fraud cases and that many are still under seal, or confidential.

The DOJ pulled in more than $1.9 billion from healthcare fraud settlements and judgments in 2015, according to the department. That's down from $2.4 billion in 2014, and a record-setting $3 billion in 2012. The $1.9 billion recovered this year makes up more than half of the $3.5 billion the government recouped from fraud cases across all industries.

Whistle-blowers earned $330 million from healthcare fraud cases this year. In successful False Claims Act cases, whistle-blowers are entitled to a percentage of what the government recovers.

Two of the largest healthcare recoveries this year were from dialysis provider DaVita Healthcare Partners. DaVita agreed in May to pay $450 million to settle allegations that it overbilled Medicare and Medicaid for drugs it wasn't fully using. DaVita Chief Legal Officer Kim Rivera said at the time that settlement was in its stakeholders' best interest.

DaVita then agreed in October to pay $350 million to settle allegations that it paid kickbacks to doctors for referrals to its dialysis clinics. DaVita said at the time “there was no intentional wrongdoing.”

Hospitals also paid nearly $330 million in settlements and judgments in 2015, according to the department. That includes $216 million recovered this past fiscal year from more than 450 hospitals that settled with the government as part of a years-long investigation related to the suspected overuse of implantable cardiac defibrillators.

Other hospital settlements involved allegations of improper physician compensation arrangements in violation of the Stark law. They included the government collecting $118 million from Adventist Health System and $69.5 million from North Broward Hospital District. North Broward did not admit to any wrongdoing and Adventist said in a statement it regretted certain oversights and has improved monitoring and business practices.

Sara Lord, a partner at Arnall Golden Gregory and a former assistant U.S. attorney who now represents providers, said the decline in dollars this year may be the result of a decline in the number of massive settlements with pharmaceutical companies, which helped push the totals higher in recent years.

For instance, in 2013, Johnson & Johnson and several of its subsidiaries agreed to pay $1.1 billion to settle allegations that it promoted certain drugs for uses not approved by the FDA, which led physicians and hospitals to submit hundreds of millions of dollars in false claims to the federal government. Subsidiary Janssen pleaded guilty to a single misdemeanor violation of the Food, Drug and Cosmetic Act, but otherwise Johnson & Johnson denied the civil allegations.

“I certainly don't think it reflects a decline in interest on the part of the government in pursuing healthcare cases, but I think the arena is shifting slightly,” Lord said. “Some of the larger targets or companies have already settled.”

It's also possible that the gargantuan settlements in recent years have prompted more caution from the industry.

“Other companies sit up and take note and they start to look at their policies and practices in light of what they're seeing,” Lord said. “We may also be starting to see the effects of that kind of education.”

Also notable in 2015 was the highest-ever recoveries from healthcare fraud cases in which the government did not intervene. When whistle-blowers bring cases against companies and the government chooses not to get involved, the cases are generally less successful.

Yet this year, the government recovered $468 million from cases in which it declined to intervene—a figure nearly three times the amount of the previous annual record for recoveries in such cases. The $450 million settlement with DaVita in June is believed to be the largest settlement in a healthcare False Claims Act case on which the government took a pass.

“There is no question that there is an uptick in non-intervened cases moving forward,” said Marc Raspanti, a partner with Pietragallo Gordon Alfano Bosick & Raspanti who represents whistle-blowers and is former government prosecutor.

Raspanti said the increase might be because of a lack of resources or a lack of desire to pursue them on the government's part. That's unfortunate, he said, because he believes government involvement is key to the success of more whistle-blower cases.

“The practical problem is these cases are very complex, they're very sophisticated, they're often against very powerful healthcare entities that are getting bigger every day,” Raspanti said.