In May 2009, U.S. Attorney General Eric Holder and Health and Human Services (HHS) Secretary Kathleen Sebelius announced the creation of the Health Care Fraud Prevention and Enforcement Action Team (HEAT). Since then, whistleblower actions against healthcare entities have increased dramatically. HEAT has its own website, www.stopmedicarefraud.gov, created by HHS and the Department of Justice (DOJ). In addition to news about successful prosecutions, the site contains extensive information about “how to spot, stop and report Medicare fraud,” including a highlighted “Report Medicare Fraud” box at the top containing 1-800 numbers and a special e-mail address. HEAT also holds regional summits in various parts of the country. Not to be outdone by the government, plaintiffs’ lawyers have also been trolling for potential whistleblowers to bring these types of lucrative lawsuits against hospitals and other healthcare-related employers. A Google search using the term “healthcare whistleblower” brings up dozens of lawyers’ websites and advertisements. One toward the top of the list exhorted readers to “Claim your Share for Helping Fight Fraud on the Government!”

These efforts seem to be producing results. As we reported in a recent blog, in 2010 the federal government won or negotiated a record $2.5 billion in health care fraud judgments and settlements against hospitals and other healthcare-related entities. The judgments and settlements are announced in government press releases, which include the amount of the awards to be paid to the whistleblowers, and generally receive wide coverage in the business and healthcare media. This publicity – which is repeated on plaintiff counsel websites – stimulates additional lawsuits.

For example, in the Fall, the DOJ issued a press release announcing a $750 million dollar settlement with GlaxoSmithKline for the sale of adulterated drugs in violation of the Food, Drug and Cosmetic Act, causing the submission of false or fraudulent claims to Medicaid or purchases of adulterated drugs by Medicaid and other federal agencies. In its statement the DOJ declared, “This settlement is part of the government's emphasis on combating health care fraud.” The resolution of the case included a criminal fine and forfeiture totaling $150 million and a civil settlement under the False Claims Act and related state claims for $600 million. The DOJ’s press release also made sure to state that the whistleblower in the case, a former global assurance manager for the company, will receive $96 million of the settlement funds. In fact, some news headlines focused exclusively on this huge bounty.

Other large settlements against healthcare institutions that have garnered headlines involved alleged unlawful kickbacks. The Health Alliance of Greater Cincinnati and one of its former member hospitals, The Christ Hospital, entered into a $108 million settlement agreement in a case involving claims that they paid unlawful kickbacks to doctors for referring cardiac patients to the hospital. The government alleged that the hospital limited the opportunity to work at an outpatient cardiology testing unit to cardiologists who referred cardiac patients to The Christ Hospital. In addition, cardiologists whose referrals contributed at least two percent to the hospital’s annual gross revenue were rewarded with a corresponding percentage of time at the outpatient unit, where they had the opportunity to generate additional income for treatments at the unit and follow-up procedures. The whistleblower in the case, who will receive $23.5 million, was a cardiologist who formerly worked at The Christ Hospital.

And it is not just hospitals that are vulnerable to kickback claims. Earlier this year, St. Jude Medical, Inc., which develops medical devices, entered into a $16 million settlement with the government for allegedly using post-market studies and a device registry as a vehicle to pay physicians kickbacks to induce them to implant St. Jude pacemakers and defibrillators. The whistleblower in the case, a former St. Jude technician, will receive $2.6 million.

Medicare kickback cases also often result in criminal convictions and jail time for the individuals involved. In a recent case involving payment of illegal kickbacks for referrals of homeless people for unnecessary treatment billed to Medicare and Medi-Cal, the Chairman of the Board of a now defunct Los Angeles hospital was ordered to pay $4.1 million and sentenced to 37 months in federal prison.

The DOJ and HHS are also investigating hospital stays and second-guessing hospital decisions regarding admissions and patient classification. For example, earlier this month, the DOJ announced a $1.9 million settlement with Rex Healthcare, a 655-bed hospital in Raleigh, N.C., for submitting claims to Medicare for minimally-invasive procedures that the hospital classified as inpatient admissions. The government claimed the procedures should have been performed on a less costly outpatient basis. The suit was originally initiated by two whistleblowers who were employed by the manufacturer of a device used in one of the procedures.

Similarly, El Centro Regional Medical Center in California agreed to pay $2.2 million dollars to resolve claims that it billed Medicare for short inpatient admissions that the government claims should have been billed as “observations” on an out patient basis. The whistleblower in the case, a former Medical Center employee, will receive $375,000 as his share of the recovery.

In this new climate, the time for healthcare companies to take action to assure compliance with applicable federal and state laws is now, before the government comes knocking. Development and enforcement of robust compliance and anti-retaliation policies as well as properly conducted compliance audits and rigorous internal investigations to root out fraud and violations of law and company policy are just some of the steps companies can take to reduce the risk of serious whistleblower cases.