Medicare, Medicaid Net $2.3 Billion in Health Care Fraud Recoveries in 2014

The U.S. Department of Justice (DOJ) obtained a record $5.69 billion in settlements and judgments from cases involving fraud and false claims against the government in the fiscal year ending September 30, the federal agency announced in a report Thursday. Of that total, $2.3 billion was recovered from health care-related frauds. 

FY 2014 marked the fifth straight year the DOJ has recovered more than $2 billion in cases involving false claims against federal health programs like Medicare, Medicaid and TRICARE, the health program from the military.

“This steady, significant and continuing success can be attributed to the high priority the Obama Administration has placed on fighting health care fraud,” the DOJ said in a written statement. 

Contributing to this success largely resulted from the creation of the Health Care Fraud Prevention and Enforcement Action Team (HEAT) created in 2009 by Attorney General Eric Holder and former Health and Human Services Secretary Kathleen Sebelius.

Through this coordination, from January 2009 through the end of FY 2014, the DOJ used the False Claims Act to recover $14.5 billion in federal health care dollars—most of the recoveries relating to fraud against Medicare and Medicaid.

Home health services yielded significant recoveries, though the department did not disclose the total recovery amount for the sector. 

Specifically, the DOJ spotlighted the $150 million settlement paid by Amedisys, Inc. (NASDAQ: AMED) in April to resolve allegations that it billed Medicare for medically unnecessary services, for services to patients who were not homebound and for violations of the Anti-Kickback Statute.

An investigation by the Securities and Exchange Commission yielded no enforcement action to be taken against Amedisys. 

The pharmaceutical industry accounted for a substantial part of the $2.3 billion in total health care claims recoveries. 

Global health care giant Johnson & Johnson (NYSE: JNJ) and its subsidiaries, Janssen Pharmaceuticals and Scios, paid $1.1 billion to resolve False Claims Act allegations related to the prescription drugs Risperdal, Invega and Natrecor.

The government alleged that J&J promoted the drugs for uses not approved as safe and effective by the U.S. Food and Drug Administration. Because the company allegedly marketed the drugs for uses not covered by federal health care programs, J&J’s promotion of the drugs caused physicians and other health care providers to submit “hundreds of millions of dollars” in alleged false claims against Medicare, Medicaid, TRICARE as well as other federal health care programs, DOJ stated.

In addition to the federal civil settlement, J&J paid more than $600 million in civil claims for state Medicaid programs and $485 million in criminal fines and forfeitures, making this $2.2 billion resolution of the government’s claims one of the largest health care fraud settlements in U.S. history.

The government also alleged that J&J paid kickbacks to physicians and to Omnicare, Inc. (NYSE: OCR), the nation’s largest provider of pharmaceuticals to nursing homes and long-term care facilities. 

In a separate settlement, the government recovered $116 million from Omnicare, resolving allegations that the company engaged in a kickback arrangement with skilled nursing facilities to incude the facilities to select Omnicare as their pharmacy provider, a violation of the Anti-Kickback Statute.

In addition to recovering $116 million in federal claims, the government also recovered $8.2 million that will go to states that jointly funded the Medicaid programs impacted by the company’s conduct. 

As widespread were the recoveries in the health care sector, the DOJ recovered an unprecedented $3.1 billion from banks and other financial institutions involved in making false claims for federally insured mortgages and loans.

“Without the tremendous talent and dedication of the public servants who worked tirelessly to bring these matters to settlement or judgement, the nearly $6 billion in recoveries we announce today would not have been possible,” said Acting Assistant Attorney General Joyce Branda for DOJ’s Civil Division in a written statement Thursday.  

Written by Jason Oliva