In June 2018, Healogics, Inc., the nation’s largest provider of advanced chronic wound care services, agreed to pay to up to $22.51 million to resolve False Claims Act (FCA) allegations that, from 2010 to 2015, it caused wound care centers to submit claims to Medicare for medically unnecessary and unreasonable hyperbaric oxygen (HBO) therapy. Healogics manages almost 700 hospital-based wound care centers where HBO therapy is provided. HBO therapy is a modality wherein a patient’s full body is enclosed in a pressurized chamber and exposed to high concentrations of oxygen. Medicare covers the therapy only when used to treat certain conditions (e.g., diabetic foot ulcers) and only when administered in certain circumstances (e.g., after no measurable signs of healing for prior 30 days of treatment with standard wound therapy).

Pursuant to the settlement agreement, Healogics paid $17.5 million and could pay an additional $5.01 million if its earnings exceed certain levels over the next five years. Healogics also agreed to enter into a five-year Corporate Integrity Agreement with the U.S. Department of Health and Human Services, Office of Inspector General (HHS-OIG) as part of the resolution.

Qui Tam Lawsuits against Healogics

The settlement agreement constitutes the final chapter for Healogics in defending against three FCA qui tam lawsuits filed in 2014 and 2015. The allegations resolved by the settlement agreement originated from two of those three qui tam actions. While each of the qui tam suits included allegations of medically unnecessary HBO therapy billed to Medicare, their procedural paths and circumstances were quite different and noteworthy:

• U.S. ex rel. Arnold v. Healogics, Inc., No. 14-cv-1064 (M.D. Fla.)

In Arnold, filed in 2014, the relators alleged that Healogics engaged in three separate schemes:

1. performing unnecessary Trans-Cutaneous Oxygen Measurements (TCOM), or misrepresenting the results of TCOMs, to justify the provision of HBO therapy;
2. providing more HBO therapy than is reasonable or necessary to patients with a bone infection; and
3. billing for medically unnecessary and unreasonable wound debridement procedures. The relators were a safety director and hyperbaric tech for Healogics at two wound care centers.

In September 2015, the government filed notice of its election to decline intervention “at that time” in the action. In October 2015, the relators voluntarily dismissed their lawsuit, and the government consented to the dismissal.

• U.S. ex rel. Van Raalte v. Healogics, Inc., 14-cv-283 (M.D. Fla.)

In Van Raalte, filed in 2014, the relators alleged that Healogics:

1. pushed employees and contractors to manipulate patients’ diagnoses or wound classifications to support treating patients with unnecessary HBO therapy;
2. directed that all patients receive a TCOM even when not medically necessary to increase revenue and justify the provision of HBO therapy; and
3. billed for unnecessary debridements, or for surgical debridements when less expensive selective debridements were actually performed.

Two relators were physicians who worked at four Healogics-affiliated wound care centers, and the other relator was the program director of one of those four centers.

In September 2015, the government filed notice of its election to decline intervention “at that time” in the action. Unlike the relator in Arnold, the relators proceeded forward in litigation against Healogics. In May and December 2016, the district court dismissed the relators’ Second Amended Complaint and Third Amended Complaint, respectively, for failure to plead with particularity under Federal Rule of Civil Procedure 9(b). In 2017, the relators appealed the second dismissal to the U.S. Court of Appeals for the Eleventh Circuit. While the appeal was pending, the parties agreed to the June 2018 settlement, which fully resolved the Van Raalte matter.

• U.S. ex rel. Wilcox. v. Healogics, Inc., 15-cv-1510 (M.D. Fla.)

In Wilcox, filed in 2015, the relator alleged that 58 defendants – including Healogics, hospitals and wound care centers that partnered with Healogics, and physicians staffing the centers – billed Medicare for HBO therapy that was medically unnecessary and/or unreasonable, that was supported by exaggerated patient diagnoses or inflated wound classifications, or that failed to comply with Medicare coverage requirements. The relator also alleged that the defendants billed for wound debridement procedures without adequate documentation. The relator was the Director for Research and Quality for Medical Affairs at Healogics. In that position, he allegedly conducted analyses and quality review studies of several hundred Healogics-affiliated wound care centers and purportedly based his qui tam allegations on the results of, and the company’s response to, his analyses and studies.

In June 2018, following its investigation of the relator’s allegations, the government partially intervened for purposes of settlement as to the allegations against Healogics regarding the provision of medically unnecessary and unreasonable HBO therapy. The government declined to intervene as to all other defendants and allegations, and the relator subsequently dismissed those remaining claims.

Notably, the settlement agreement does not provide on its face for any payments to the Van Raalte relators, stating that the Wilcox relator will receive 19% of all payments from the settlement.

HHS-OIG Auditing of Hyperbaric Oxygen Therapy Claims

The Healogics settlement comes in the wake of the February 2018 HHS-OIG audit report of outpatient claims for HBO therapy services paid by a single Medicare administrative contractor over a two-year period, from which HHS-OIG estimated potential overpayments at $42.3 million during the audit period. Specifically, HHS-OIG’s Office of Audit Services reviewed 120 sampled outpatient claims paid by Wisconsin Physicians Services Government Health Administrators (WPS). HHS-OIG determined in the audit that 85% of the claims did not comply with Medicare requirements for HBO therapy, resulting in an overpayment of $300,789.

Following the audit report, HHS-OIG recommended that WPS (1) notify the providers responsible for the non-sampled claims “so that those providers can investigate and return any identified overpayments,” and (2) “identify and recover any improper payments for HBO therapy made after the audit period.”

The audit was part of HHS-OIG’s FY2017 Work Plan, in which it announced a new work plan item for the Office of Audit Services to conduct reviews to determine whether Medicare payments related to HBO claims were reimbursed in accordance with Medicare requirements.

In light of the HHS-OIG’s Work Plan and audit report, providers of HBO therapy should ensure that they maintain clear and detailed documentation in the clinical record supporting medical necessity. Best practices for such documentation includes providing an accurate description and diagnosis of the patient’s medical condition (and appropriate testing to establish the diagnosis) that supports the medical necessity of HBO therapy at the outset, as well as documentation regarding the patient’s progress and response to HBO therapy (i.e., measurable signs of healing) to justify continued treatment.

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