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False Claims Act Lawyer Discusses Bostwick Labs Case

I wanted to bring your attention to the case of United States Ex Rel Daugherty Bostwick Labs from the Southern District of Ohio.  On December 18, 2012, the United States District Court for the Southern District of Ohio denied a motion to dismiss that lawsuit that was filed under the False Claims Act alleging that a laboratory company and its founder and CEO defrauded federal healthcare programs and the healthcare programs of seven U.S. states and the District of Columbia by submitting false claims for reimbursement. In that case, the Relator alleged that the defendant submitted claims for services that were not ordered by a physician and provided illegal kickbacks to physicians to offer incentives to refer business to the defendant in violation of the Stark law and the Anti-Kickback Statute.  The Relator happened to be the president of a competing laboratory company but alleged that his company shared customers with the defendant and that some of those customers informed the Relator of the defendant’s alleged practices.  The government did not intervene in the suit.

One of the issues in the motion to dismiss was the public disclosure bar.  The corporate defendant argued that the Relator’s fraud claims were jurisdictionally barred because the claims were based on information that it had already been publicly disclosed.  In support of its argument, the defendant alleged that the Relator’s complaint relied on a letter the defendant general counsel sent to various providers informing them of a “loophole” they could exploit by billing government entities for a particular test even if it was not ordered by the treating physician, supposedly the same “loophole” that the relator alleged constituted an FCA violation.

Moreover, the defendant argued that several large laboratories met with governmental officials from the Centers from Medicare and Medicaid Services (CMS) to discuss the loophole and that the meeting constituted a public disclosure.  The defendant also pointed to several articles discussing the loophole and noted that another healthcare association and submitted a comment letter to the CMS on the issue and that the letter was a public disclosure since it was available on the CMS website.  After reviewing the defendant’s arguments, the court held that none of these purported public disclosures precluded the Relator’s claims.

First, the court held that since the general counsel’s letter did not meet the FCA’s definition of a public disclosure.  This was because the letter was not part of a criminal, civil, or administrative proceeding; was not included in a Congressional, administrative or GAO report, hearing, audit or investigation; and was not from the news media.  While the court held that the new articles were public disclosures and that the CMS meeting and letter to CMS were arguably public disclosures, they did not bar the relator’s suit since “substantially identity between the disclosures and the complaint does not exist” and therefore the allegations in the complaint could not have been based upon those public disclosures.

The Court summarized in its holding by restating the Relator’s analogy “A handbook describing how to crack a safe does not mean that the fact that a particular safe cracker robs backs is publically disclosed.”

The court also denied the motion to dismiss for failure to state a claim.  The defendant argued that even if the testing that was at issue was not ordered by a treating physician, the Relator could not show that any of the tests at issue were not medically necessary.  The defendant argued that the claims for reimbursement were not false because the tests were medically necessary.  The defendant pointed to a specific exception to the rule requiring a treating physician signature, but the court rejected defendant’s argument, agreeing with the Relator that the defendant’s argument challenged the Relator’s factual allegations which must be accepted as true at the motion to dismiss stage, the viability of the Relator’s cause of action itself.  It is anticipated that the defendant will file a motion for summary judgment on this issue after the close of proof.

The court similarly denied the motion to dismiss the claim that no action was properly pled on violation of the anti-kickback statute and the Stark law.  The court held that when the defendant submitted its application to participate in federal healthcare programs, it signed an agreement that included a certification stating that the defendant understood the payments under those programs were to be conditioned on compliance with applicable laws and regulations including Stark and the Anti-Kickback Statute.

Second, the court held that the Relator adequately pled the defendant’s illegal remuneration to doctors as the Relator detailed the arrangement whereby the defendant would provide value, in the form of competing various administrative tasks on behalf of physicians, offering physicians opportunities to bill the government for certain components of tests at a marked up price, and offering physicians discounts on private insurance business, in exchange for referrals to its laboratory.

The court finally denied the motion to dismiss for failure to plead fraud with particularity.  The court determined that the Relator’s fraud allegations were adequately pled as the Relator’s complaint was sufficient to put the defendant on notice of the Relator’s claims.  The court gave the defendant notice that the plaintiff should be allowed to conduct discovery on some of the specifics of the fraud, and held that the Relator’s failure to describe actual false claims was not fatal to his case as the court determined that the Relator’s allegations, taking as a whole and accepted as true would lead to strong inferences that the false claims were submitted to the government as a result of the defendant’s misconduct.

The court finally looked at the issue involving piercing the corporate veil.  The Relator countered that the corporate veil should be pierced and the FCA liability should attach to the individual defendant’s personally since the individual defendant also committed fraud on the government in the individual’s capacity and since its identity was inseparable from the corporate defendants with respect to the alleged fraud.  The court agreed with the Realtor finding that the Relator pled adequate facts from which the court could infer that the individual defendant personally participated in the alleged fraud and that the corporate defendant’s alleged fraudulent actions could be imputed to the corporate defendant.

If you have any knowledge about a similar cause of action involving improper medical benefits offered to the public, improper kickbacks received by doctors or healthcare providers, or similar alleged false claims, please contact us.

THE SCOPE OF FRAUD

Amazingly, some estimates have suggested that approximately 10% of the entire annual United States budget is lost to companies or individuals who are defrauding the government. The United States Federal budget for 2010 was $3.456 billion, meaning around $345.6 million was wrongfully wasted on fraud.

The entities defrauding the government do so in a variety of ways: Medicare or Medicaid fraud whereby they bill the government for services which they never provided or overbill for services that were provided; SEC Trading; Tax Fraud; TARP Fraud; Military/Defense contract fraud; Pharmaceutical Manufacturing;contract fraud involving any number of large government spending programs; or other types public benefit fraud.

HELPING THE PUBLIC.

As a whistleblower attorney, we are interested in speaking with persons willing to make known the truth about company practices and are willing to file a qui tam or whistleblower action. One area in particular we are interested in discussing are lawsuits involving medical device companies where the company is alleged to have overcharged, engaged in kickback programs, and the like. We will nevertheless investigate claims in a variety of areas.

Workers and persons all across the country witness actions at their work that may be unlawful or even corrupt. Unfortunately, some employees and workers feel that they will be fired, terminated, harrassed or punished if they report an unlawful or corrupt action. These reporters, however, are protected by the law as a Whistleblower and can receive compensation because of the False Claims Act or the Medicaid False Claims Act. If you have reported actions that may be fraudulent, then you should talk to a Whistleblower or qui tam lawyer about your facts.

Whistleblowers help the government to get back billions of dollars each year with the help of the False Claims Act. In fact, fraudulent Medicaid claims are also caught by whistleblowers having the Medicaid False Claims Act on their side. If you report a false claim or fraudulent action to the government, then the government will give you, the whistleblower, a part of the money that gets recovered. This is because of qui tam requirements. Qui Tam means that a person files a lawsuit for the king and also for him or herself. The phrase is qui tam pro domino rege quam pro se ipso in hac parte sequitur, or, “he who sues for the king as well for himself.”

These requirements and lawsuits were made popular during the Civil War when many people were getting away with fraudulent actions against the government. In 1986, the False Claims Act was amended to raise the total compensation given to people who reported fraudulent actions, or whistleblowers. If a whistleblower works with a lawyer then it may be possible for them to get three times the amount the government would get in damages and also get additional compensation for general fines.

TYPES OF CASES

The most common situations that could form the basis of a Qui Tam action include:

• Submitting a false or fraudulent record, bill or statement to the government in order to fraudulently obtain money such as reporting a medical service that was never performed for Medicare or Medicad;
• Conspiring with a third party to submit or present have a false or fraudulent claim to the government;
• Withholding property of the government with the intent to defraud or conceal the property from the government;
• Fraudulently buying property of the government from someone not authorized to sell that property; and
• Making a false statement to fraudulently avoid paying money to the government or to avoid delivering property to the government.

FOR HELP, PLEASE CONTACT US.

We help whistleblowers on a contingency basis, meaning there is no fee charged for our work unless there is a recovery. We also front any and all expenses. No matter where you are located — we will represent you. We will come to you, you will not have to come to us.

Attorneys in our firm and attorneys that we work with on Whistleblower, Qui Tam, False Claims Act cases have represented a host of persons making claims, for violations of federal tax law, Medicare law and more.

For more information, please contact our team of whitsleblower and qui tam attorneys today.

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