In recent years, civil enforcement efforts involving the FCA have grown significantly. Today, the FCA impacts a vast array of businesses, as it is commonly used to redress false claims for government funds involving everything from government contracts to Medicare and Medicaid to federally insured mortgages.  The versatility and reach of the FCA has enabled DOJ to use this powerful enforcement tool to recover more than $20 billion during the last five years alone.

A review of several recent FCA settlements indicates that the DOJ continues to actively pursue FCA claims for a wide range of conduct and in a wide variety of industries.

Tenet Healthcare Corporation

  • Allegations of kickback payments in exchange for Medicaid patient referrals
  • More than $513 million dollars to resolve both allegations of criminal and civil liability

On October 3, 2016, Tenet Healthcare Corporation (Tenet), and two Atlanta-based subsidiaries, agreed to pay more than $513 million to resolve criminal charges and civil FCA claims related to allegations that the hospital chain paid kickbacks to prenatal healthcare clinics for patient referrals. Under the alleged scheme, the hospital paid the clinics kickbacks under the guise of contracts for translation and other various services.  The relator, who brought a civil suit against Tenet in 2009, will receive $84 million of the FCA settlement.  Notably, this is also the first case brought by DOJ through the assistance of the Criminal Division’s corporate healthcare fraud strike force.

Branch Banking & Trust Company

  • Allegations of falsely certifying compliance with U.S. Department of Housing and Urban Development requirements
  • $83 million settlement

On September 29, 2016, Branch Banking & Trust Company (BB&T) agreed to pay $83 million to resolve allegations that it violated the FCA by intentionally originating and underwriting unqualified mortgage loans insured by the U.S. Department of Housing and Urban Development’s (HUD) Federal Housing Administration (FHA) and failing to comply with quality control requirements. BB&T admitted that between January 1, 2006, and September 30, 2014, it certified loans for FHA insurance that did not meet HUD’s requirements for underwriting.  BB&T also acknowledged that, among other things, inadequate quality controls throughout that period allowed loans that had significant defects to receive FHA insurance even though the defects should have rendered them ineligible.  Despite recognizing the quality control shortcomings in a 2010 internal memorandum, BB&T did not implement remedial measures until after 2014.

Vibra Healthcare

  • Allegations of billing for unnecessary medical services
  • $32.7 million settlement

On September 28, 2016, DOJ announced that Pennsylvania-based hospital chain Vibra Healthcare LLC (Vibra) agreed to pay more than $32.7 million to resolve allegations that it violated the FCA by billing Medicare for medically unnecessary services. Between 2006 and 2013, Vibra allegedly admitted patients to five of its long-term care hospitals (LTCH) and one of its inpatient rehabilitation facilities who did not present any symptoms that qualified them for admission.  Moreover, Vibra allegedly extended patient stays at their LTCH facilities regardless of the medical necessity, ignoring, in some instances, discharge orders from their own clinicians.  This settlement resolved claims first brought forward in a qui tam action filed by a former health information coder at a Vibra hospital; he will receive more than $4 million from the settlement.

U.S. Healthcare Supply LLC and Oxford Diabetic Supply Inc.

  • Allegations of making unsolicited and inappropriate telephone calls to Medicare beneficiaries
  • $12.2 million settlement

On September 7, 2016, U.S. Healthcare Supply LLC and Oxford Diabetic Supply Inc., as well as its owners, agreed to pay $12.2 million to resolve allegations that they made unsolicited calls to Medicare beneficiaries in violation of the FCA. The suit alleged that the companies formed and controlled a fictitious entity called Diabetic Experts Inc. for the purpose of cold calling Medicare beneficiaries to sell them durable medical equipment.  The companies would then submit claims to Medicare for the equipment sold during the unsolicited phone calls.  The government asserted that the companies’ conduct violated the Medicare Anti-Solicitation Statute.

Jacintoport International LLC and Seaboard Marine Ltd.

  • Allegations of charging rates on USAID contract that exceeded contractually agreed upon caps
  • $1.075 million settlement

On August 1, 2016, it was announced that Jacintoport International LLC (Jacintoport) and Seaboard Marine Ltd. (Seaboard) entered into a $1.075 million settlement to resolve claims that the two entities violated the FCA in connection to a warehousing and logistics contract with the United States Agency for International Development (USAID). In 2007, Jacintoport was contracted by USAID to assist with the storage and redelivery of emergency humanitarian food aid.  The government lawsuit alleged that between January 2008 and October 2009, Jacintoport, under the supervision and control of Seaboard, charged ocean carriers rates for stevedore services that exceeded the cost cap set in the USAID contract.  Jacintoport allegedly passed the inflated charges on to USAID by lumping them into other costs for delivering humanitarian aid.  The relator, a shipping contractor who received an invoice from Jacintoport with excessive charges, will receive $215,000.  More importantly, the government’s decision to intervene in this matter shows the DOJ’s willingness to pursue enforcement actions notwithstanding the possibility of relatively small monetary recovery.

Key Takeaway

The above settlements reflect the breadth of conduct that can give rise to FCA claims, as well as the variety of industries that may be impacted by the FCA.   Regardless of size, industry or sophistication, it is imperative that a company’s compliance program includes both appropriate measures to guard against conduct that may give rise to FCA liability and the ability to quickly remediate any issues, big or small, that are discovered.