Trends & Analysis

• We have identified 33 health care–related qui tam cases that have been unsealed in whole or in part since the cases covered in our last Qui Tam Update. In addition, we have also identified one case in which the docket was unsealed after the Plaintiff informed the court of her intent to withdraw the action and submitted a redacted version of the complaint. Of these cases, four were filed within the last year. One case was filed in 2010 but only unsealed in April 2015; three cases were filed in late 2011 but only unsealed in March 2015; eight of the recently unsealed cases were filed in 2012; and the balance were filed in 2013 and 2014.

• These 33 cases were filed in federal district courts in 15 states, including seven each in courts in New York and Florida (predominantly in the Southern District of New York and the Southern District of Florida).

• The federal government has intervened in full in six cases and partially intervened in one other case. The federal government declined to intervene in 18 cases. A federal investigation remains ongoing in one case; and in one additional case, one state’s decision regarding intervention is still pending, while three other states and the federal government have already declined intervention. Three cases were voluntarily dismissed prior to government action on intervention. Due to a continuing seal of filings in three cases, it is not yet known whether intervention has occurred in those cases.

• Subject matter of claims:

  • Nineteen of the 33 recently unsealed cases involved both state and federal claims.

  • Claims for relief under state or federal anti-whistleblower retaliation provisions appeared in nine of the recently unsealed cases.

  • Three of the recently unsealed cases involved the same defendant (HCA Holdings, Inc.) and arose out of alleged conduct in Southern Florida. We highlight these cases below.

  • Many of the complaints allege misconduct involving “upcoding” and related billing practices, and the alleged provision of medically unnecessary services.

• The relators in about 75% of the unsealed cases were current or former employees of the defendants, including former executives.

Recently Unsealed Cases

United States ex rel. Bennett v. Biotronik, Inc., No. 2:14-CV-2407 (E.D. Cal.)

Complaint Filed: October 14, 2014

Complaint Unsealed: March 3, 2015

Intervention Status: The United States intervened on May 14, 2014, in a related case, No. 2:09-CV-03617-KJM-EFB (E.D. Cal.).

Claims: False claims pursuant to 31 U.S.C. § 3729, et seq. (and parallel state false claims acts) based on illegal kickbacks in violation of the Anti-Kickback Statute, 42 U.S.C. § 1320a-7b(b)

Name of Relator: Max Bennett

Defendant’s Business: The defendant manufactures and sells cardiovascular medical devices, including implantable devices like pacemakers and implantable cardiac defibrillators (“ICDs”).

Relator’s Relationship to Defendant: Former employee

Relator’s Counsel: Delaney Kester LLP

Summary of Case: The complaint charges that the defendant violated the Anti-Kickback Statute and False Claims Act by unlawfully using scientific studies to market its cardiac pacemakers and ICDs. Specifically, Biotronik purportedly conducted post-marketing clinical efficacy studies through a “pay to play” scheme in which physicians were paid hundreds of dollars per patient to enroll their patients in the studies, which would then drive product sales. Of the 16 studies allegedly conducted, the relator claims that only two had been requested by FDA, while the remaining 14 were purportedly “contrived” to give kickbacks to physicians. Results of some of the studies allegedly were never published. The studies were allegedly explicitly incorporated into sales plans, and the relator asserts that when he was employed at the company, his compensation as a business development specialist was “expressly tied” to achieving enrollment goals for three scientific studies.

Current Status: An initial scheduling conference has been set for July 16, 2015.

Reasons to Watch: This case provides a potential cautionary tale, in which potentially lawful activity – enrolling patients in clinical studies – may be found to be an illegal kickback in violation of the Anti-Kickback Statute and the False Claims Act where the company made payments to physicians to induce enrollment to drive product sales.

Also of note, in November 2014, just one month after this complaint was filed, the Department of Justice reached a settlement with Biotronik in a separate case in which the company agreed to pay the United States $4.9 million. That settlement resolved allegations under the False Claims Act that the company allegedly induced physicians in Nevada and Arizona to use Biotronik devices (or to continue to do so) by giving them expensive meals and inflated payments for membership on a physician advisory board. In its press release on the prior case, the Department of Justice emphasized its cooperation with the Department of Health and Human Services through the Health Care Fraud Prevention and Enforcement Action Team (HEAT) initiative to combat violations of the False Claims Act.

United States ex rel. Christopher Gentile v. HCA Holdings, Inc., No. 1:12-cv-20638 (S.D. Fla.) (“Gentile”)

United States, et al., ex rel. Charles Tomlinson v. HCA Holdings, Inc., et al., No. 3:12-cv-1172 (M.D. Tenn.) (“Tomlinson”)

United States ex rel. Thomas Bingham v. HCA, Inc., No. 1:13-cv-23671 (S.D. Fla.) (“Bingham”)

Complaints Filed: February 16, 2012 (Gentile); November 13, 2012 (Tomlinson); October 10, 2013 (Bingham)

Complaints Unsealed: February 23, 2015 (Gentile and Bingham); March 18, 2015 (Tomlinson)

Intervention Status: The United States declined to intervene on January 30, 2015 in Gentile and on January 7, 2015 in Bingham. The State of Florida, not involved in Gentile, declined to intervene in Bingham on March 4, 2015. In Tomlinson, the United States sought and received several extensions of time in which to determine whether to intervene, but the relator voluntarily dismissed his suit without prejudice before the United States or the State of Florida formally determined whether to intervene.

Claims: Gentile: Violations of the False Claims Act, including the submission of false claims and false statements, and the concealment of these false statements, (31. U.S.C. §§ 3729(a)(1)(A), (B), and (G))

Tomlinson: Violations of the False Claims Act, including submitting false claims and false statements, conspiring to submit false claims, and concealing the false statements (31. U.S.C. §§ 3729(a)(1)(A)-(C), (G)) and violations of the Florida False Claims Act (Fla. Stat. § 68.082(2)(a)-(c), (g))

Bingham: Violations of the False Claims Act, including the submission of false claims and false statements (31 U.S.C. §§ 3729(a)(1)(A)-(B)); violations of the Anti-Kickback Statute (42 U.S.C. § 1320a-7b(b)); violations of the Stark Law (42 U.S.C. § 1395nn); and violations of the Florida False Claims Act (Fla. Stat. § 68.082(2)(a)-(b))

Names of Relators: Christopher Gentile, Charles Tomlinson, and Thomas Bingham

Defendant’s Business: HCA Holdings, Inc. is a Delaware corporation with its principal place of business in Nashville, Tennessee. HCA Holdings owns and operates approximately 164 hospitals and 106 freestanding surgery centers in 20 states and in London, England, employing approximately 183,000 people worldwide. The other named defendants in Tomlinson are two individual doctors based in Florida and several Florida-based corporations that are all HCA subsidiaries. For the purposes of this summary, we refer to these defendants as “HCA.”

Relators’ Relationships to Defendant: Christopher Gentile is the Director of Professional Liability Claims at Health Care Indemnity, Inc. (“HCI”), a wholly-owned subsidiary of HCA Holdings, Inc. He has been employed by HCI since 1990 and continues to be employed there. Mr. Gentile is responsible for assessing and managing liability arising out of actual or alleged misconduct on the part of HCA and its hospitals and employees.

Thomas Bingham is a Certified General Real Estate Appraiser who works for a large medical office management firm. HCA is his employer’s client.

Charles Tomlinson is a Registered Nurse who claims to be licensed in California, Florida, and Georgia. Over a period of 14 years, Tomlinson allegedly worked in about 20 different cardiac catheterization laboratories, or “cath labs,” as a traveling nurse. From January 2000 to 2011, he worked at seven different HCA-owned hospitals as a contractor, while employed by All About Staffing, Inc. (“AAS”) as a “Cath Lab RN Traveler.” He worked as a contractor at the Florida defendant’s facility from August 2007 to June 2008.

Relators’ Counsel: Stearns Weaver Miller Weissler Alhadeff & Sitterson, P.A. (Gentile); Law Office of Jonathan Kroner and Warren Benson Law Group (Bingham); Hirst Law Group and Law Office of Mark Kleiman (Tomlinson)

Summary of Case: The first relator, Gentile, charges that HCA conducted unjustified, medically unnecessary diagnostic cardiac catheterizations and stenting procedures to treat coronary artery disease (“CAD”) that, according to the relator, did not exist or did not warrant such invasive medical procedures. The relator contends that HCA demonstrated a “corporate culture of disregard for Medicare regulations” and claims that HCA knew about these issues but did not appropriately address them or take steps to prevent continued “fraud.” The complaint goes into great detail regarding the unnecessary cath lab procedures conducted at HCA facilities known as Lawnwood Medical Center and Heart Institute and Regional Medical Center Bayonet Point. The relator claims that as a result of this alleged misconduct, HCA violated Medicare regulations and, accordingly, submitted false claims to the government.

The second relator, Bingham, alleges that HCA violated the federal and state false claims acts by paying remuneration to physicians to induce referrals in violation of the Stark Law (“Stark”) and Anti-Kickback Statute (“AKS”). Specifically, Bingham claims that HCA violated Stark and the AKS by implementing a complicated real estate scheme with land developers and landlords to lease medical office buildings on HCA-owned property to physician tenants. The complaint alleges two specific and detailed real estate “schemes” that provided remuneration to physicians and claims that, in doing so, HCA also violated an existing Corporate Integrity Agreement (“CIA”) entered into in December 2000. Of particular note, Bingham alleged a near-identical scheme in United Sates ex rel. Bingham v. HCA, No. 1:08-cv-71 (E.D. Tenn.), which was settled for $16.5 million.

The third relator, Tomlinson, asserts that the defendants submitted or conspired to submit false and fraudulent claims to the United States and the State of Florida for unnecessary medical procedures performed in HCA-owned hospitals in southern Florida. In particular, Tomlinson charges that HCA inserted unnecessary stents into more than 1,200 patients. Although short on details, the relator alleges that he witnessed several questionable medical procedures during which stents were inserted in patients in the cath lab at Lawnwood Medical Center. He further contends that he reported these unnecessary procedures to the Director of the Lawnwood Cath Lab, the recruiter at his employer, AAS, and the ethics officer for Lawnwood Medical Center, all to no avail. Shortly thereafter, the relator asserts that AAS declined to renew his contract.

Current Status: Both Gentile and Bingham remain open and unsealed in part. In Gentile, the amended complaint was filed on or about April 22, 2015 and remains sealed. The parties are moving forward with a general order on discovery objections and procedures filed on May 18, 2015. The Bingham case is also progressing, with a Joint Scheduling report due to the court on April 23, 2015. Tomlinson, however, voluntarily dismissed his complaint without prejudice on March 18, 2015, with the consent of the United States and the State of Florida.

Reasons to Watch: These three cases are of particular interest because they involve the same defendants and arise out of alleged conduct at the same facilities in Southern Florida. Both Gentile and Tomlinson include allegations of medically unnecessary cardiac cath procedures and stenting and appear to have arisen independently. Nonetheless, the government chose not to intervene in either case. Of note in Tomlinson, the relator attempted to expand the potential universe of defendants by naming as another defendant the health care staffing company that hired him, ostensibly under the theory that this entity conspired with the medical center defendant to present (or conceal the presentation of) false claims for reimbursement of unnecessary stenting procedures.

It is interesting that the government chose not to intervene in Bingham, despite the fact that the relator settled a similar claim for $16.5 million based on similar facts in another jurisdiction. Even so, the pending and settled Bingham cases illustrate the potentially long-lasting impact of entering into a CIA in connection with an FCA settlement. Any alleged failure to comply with a CIA can invite potential follow-on whistleblower litigation. Thus, CIAs should be carefully negotiated.

From a procedural standpoint, the Tomlinson case is also of interest because it presents an additional potential pitfall for qui tam defendants: disclosure by a relator of privileged communications. After the case was voluntarily dismissed and the complaint unsealed, the HCA defendants filed a motion asserting that the unsealed complaint disclosed information from an “internal investigation of cardiac catheterizations” conducted at Lawnwood Medical Center and “a confidential memo” written by an employee of an HCA affiliate in connection with the investigation. According to the defendants, a magistrate judge in a pending securities litigation had already held that this particular memorandum and related work product were “produced in anticipation of litigation” and could be withheld by the defendants. The defendants argued, and the district court agreed, that the original unsealed complaint should be replaced with a redacted version that did not disclose the privileged information. Nonetheless, the unredacted complaint was unsealed and remained publicly available for several weeks before the district court granted the defendants’ motion.