Medicare Fraud Lawsuit Settled for $17.5 Million

Company Accused of Kickbacks Settles Medicare Fraud Lawsuit for $17.5 Million

medicare fraud
On Thursday, September 26th, the Department of Justice announced that Diagnostic Laboratories, the largest supplier of laboratory and x-ray services to nursing homes on the West Coast, settled a $17.5 million Medicare fraud lawsuit.

The California-based company was accused in the Medicare lawsuit of violating the False Claims Act, giving kickbacks for referrals from mobile lab and radiology services. These kickbacks were then billed to Medicare and Medi-Cal, California’s Medicaid program. Diagnostic Laboratories also allegedly took advantage of the Medi-Cal reimbursement system by billing services at standard rates to the government healthcare programs, but offering discounted rates to participating nursing homes. These rates went as low as 80% below the lab’s normal rates, according to the whistleblower lawsuit.

The Medicare fraud deal allowed nursing homes, which are almost always for-profit, to maximize their profits by providing in-patient services at a lower cost. Diagnostic Laboratories, meanwhile, had a steady stream of outpatient referrals which they could directly bill to Medicare and Medi-Cal. Offering discounted rates to generate referrals is prohibited at both the state and the federal level.

The two Medicare fraud whistleblowers in this case were Jon Pasqua and Jeff Hauser, who worked in Diagnostic Laboratories’ sales office. When they discovered the questionable billing practices, both men went to supervisors first, and were reportedly ignored; they then took their Medicare fraud concerns to state and federal officials, and were subsequently fired.

They decided to file a Medicare fraud whistleblower lawsuit in February 2010.

False Claims Act Protects Medicare Fraud Whistleblower Lawsuits

Medicare and Medicaid are government-sponsored health care programs that help the needy and the elderly cover health care costs associated with aging and disability. These programs are hugely important for people living on a fixed income, so it is incumbent upon doctors to honestly report costs both to patients and to the government.

Unfortunately, not all health care providers are honest in their assessments. Some health care providers defraud the government, in violation of the False Claims Act, by overbilling for services, double billing, or billing for services not provided. The False Claims Act imposes liability on persons or corporations that defraud the government – and this includes doctors, hospitals, and nursing homes.

The False Claims Act provides protection for those who report agencies or individuals who are defrauding the government. These lawsuits are called whistleblower, or qui tam, lawsuits.

Under the qui tam provision of the False Claims Act, the relator (plaintiff) files an action on behalf of the U.S. Government. The Act allows a wide variety of people and entities to file a qui tam action.

The whistleblower must have first-hand knowledge of the fraud. However, as an incentive for reporting the fraud, whistleblowers are eligible for 15-25% of any recovered damages.

The Strom Law Firm Protects Medicare Fraud Whistleblowers in South Carolina

Common whistleblower actions include:

  • Medicare fraud,
  • defense contractor fraud, and
  • other kinds of fraud against state or federal government

Qui tam lawsuits have been, and continue to be, a very effective and successful tool in combating government procurement and program fraud.

Bolstered by amendments passed by Congress in 1986, the law has armed private citizens who have independent and direct knowledge of fraud, with a weapon to prosecute government contractors and others who are defrauding the Government.

If you have first-hand knowledge of government fraud occurring at your place of employment or your doctor’s office, including Medicare fraud, the attorneys at the Strom Law Firm can help protect your rights. In order to help the government provide the best possible services, Medicaid and Medicare fraud must be reported as soon as possible. The attorneys at the Strom Law Firm understand the complexity of qui tam and whistleblower suits, and we offer free, confidential consultations to discuss the facts of your case. Contact us today.803.252.4800

About Pete Strom

Defending criminal charges including drug crimes, DUI, CDV, mail fraud, wire fraud, bank fraud, computer crimes, money laundering, and juvenile crimes, Pete also handles Federal and State investigations. Representing individuals in Civil Matters including Class Actions, Personal Injury, Qui Tam Actions, Defective Products, Nursing Home Neglect, and Professional Licensing Defense cases. Joseph Preston “Pete” Strom, Jr., the managing partner at Strom Law Firm, L.L.C., has been fighting for justice since 1984.

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