US Department of Justice’s False Claims Act Recoveries Reach a Record $5.7 Billion in Fiscal Year 2014

Health Care Industry Recoveries Decline by $300 Million

Interestingly, although combating health care fraud continues to be a major priority for the DOJ, FY 2014 saw the first year-over-year decline in such recoveries since 2008. Civil health care fraud False Claims Act settlements and judgments accounted for $2.3 billion in recoveries — a substantial haul, but less than the DOJ reported $2.6 billion in health care fraud settlements and judgments in FY 2013. Substantial health care fraud recoveries in FY 2014 included:

• Johnson & Johnson’s $1.1 billion settlement to resolve allegations it promoted prescription drugs Risperdal, Invega, and Natrecor for “off label” uses not approved by the Food and Drug Administration (FDA), which were then reimbursed by federal health care programs, and that it paid kickbacks to physicians and to a large provider of pharmaceuticals to nursing homes and long-term care facilities.

• Home health service provider Amedisys Inc.’s $150 million settlement to resolve allegations it billed Medicare for medically unnecessary services and violated the Anti-Kickback Statute.

• Multiple settlements with, and judgments against, hospitals totaling $333 million, including Community Health Systems Inc.’s $98.15 million settlement to resolve allegations it billed federal health programs for inpatient services that should have been provided as outpatient services, and Halifax Hospital Medical Center and Halifax Staffing Inc.’s $85 million settlement to resolve allegations it violated the False Claims Act and Stark Law.

Financial Institutions Drive Record Recoveries

The record recovery in FY 2014 was driven largely by settlements with major financial institutions related to conduct arising out of the housing and mortgage crisis. Bank of America Corporation ($1.85 billion), JP Morgan Chase ($614 million), and U.S. Bank ($200 million) each inked deals to resolve civil False Claims Act liability. In total, the financial industry paid out $3.1 billion in False Claims Act settlements this past year.

Whistleblower Activity Remains Constant

The DOJ report also shows that the number of whistleblower False Claims Act suits filed in FY 2014 was similar to the number of suits filed in FY 2013, with more than 700 whistleblowers filing complaints under seal pursuant to the False Claims Act’s qui tam provisions. These provisions allow private individuals, called “relators,” to bring suit on behalf of the federal government and share in the recoveries. Like in FY 2013, False Claims Act lawsuits initiated by relators resulted in more than half of all False Claims Act recoveries in FY 2014 (nearly $3 billion), and the government paid $435 million in relator’s-share awards in FY 2014. From 2009 through FY 2014, the government has paid more than $2.47 billion in whistleblower awards, highlighting the substantial financial incentives for would-be whistleblowers to report fraud to the government.

Health Care Recoveries Already Substantial in FY 2015

Although it is difficult to predict what FY 2015 has in store, the DOJ’s health care fraud focus already has resulted in substantial False Claims Act health care fraud recoveries in the first quarter of FY 2015. This includes DaVita Healthcare Partners, Inc.’s $350 million settlement to resolve allegations it violated the False Claims Act after paying kickbacks to induce the referral of patients to its dialysis clinics and Extendicare Health Services Inc.’s $38 million settlement to resolve allegations it violated the False Claims Act by billing federal health care programs for effectively worthless or unnecessary services. Given the DOJ’s continued mandate to ferret out potential health care fraud and the False Claims Act’s substantial financial incentives for successful whistleblowers, we see no decline in the filing of False Claims Act cases or the DOJ’s announcement of enormous recoveries in sight.

Arent Fox’s False Claims Act team will continue to monitor False Claims Act enforcement actions, courts decisions, and settlements.  If you have any questions or need assistance, please contact David S. Greenberg, D. Jacques Smith, or Linda A. Baumann in our Washington, DC office; Connie A. Raffa or Jill A. Steinberg in our New York office; Thomas E. Jeffry Jr. or Mary Carter Andrues in our Los Angeles office; or the Arent Fox professional who normally handles your matters.