March 2003

False Claims Act Recoveries
Exceed $1 Billion in FY 2002

Even without the inclusion of a tentative $631 million HCA settlement (see article below), 2002 marks the third straight fiscal year that False Claim Act recoveries exceed $1 billion, DOJ announced in late December. Health care fraud accounted for the overwhelming majority of these recoveries, totaling more than $980 million. According the DOJ, recoveries associated with suits brought by qui tam whistleblowers, including non-whistleblower claims resolved at the same time, accounted for almost $1.1 billion in settlement and judgment in fiscal year 2002.

According to the DOJ, among the Department's largest recoveries in fiscal year 2002 are:

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• $568 million from TAP Pharmaceuticals, a joint venture between Abbott Laboratories and Takeda Chemical Company. TAP allegedly conspired with doctors to bill Medicare for samples of the drug Lupron in violation of the Prescription Drug Marketing Act, paid kickbacks to providers to increase sales of Lupron, and inflated its pricing of the drug to further a scheme in which TAP and its provider customers overcharged Medicare and Medicaid.
• $87.3 million from PacifiCare Health Systems. The United States alleged that PacifiCare's subsidiaries submitted false claims under contracts with the Office of Personnel Management to provide health care benefits to federal employees under the Federal Employees Health Benefits Program. PacifiCare allegedly failed to charge OPM the most favorable rates charged to its commercial customers, as required under the contracts, and to disclose downward rate adjustments due OPM.
• $76 million from General American Life Insurance Company. General American was a Medicare Part B carrier in Missouri until December 31, 1998. Carriers process Medicare claims under contract with the Department of Health and Human Service's Centers for Medicare and Medicaid Services (formerly known as the Health Care Financing Administration). The United States alleged that General American improperly approved claims for federal Medicare funds and manipulated its quality assurance data to conceal its failure to process claims properly. In addition to the monetary settlement, General American agreed to stay out of the Medicare program for five years.
• $73.3 million from the State of California and the County of Los Angeles. The United States alleged that California and Los Angeles billed Medicaid for services provided to persons not eligible for Medicaid because they didn't meet the required standard of need.
• $29 million from Lifemark Hospitals of Florida, a subsidiary of Tenet Healthcare Corporation. Tenet and its subsidiary allegedly participated in a host of schemes including submitting false Medicare claims for home health services; for hospital services not rendered; for services provided by unskilled, unlicenced, or uncertified personnel; for services not ordered by a physician; and for services inadequately documented as required under the program.
• In another settlement, 139 hospitals owned and operated by Tenet paid the United States $17 million to resolve false claims allegations spanning several federally insured health care programs, including Medicare, Medicaid, TRICARE (covering military personnel and their families), and the Federal Employees Health Benefits Program.
• $21.5 million from Union Oil Company of California (Unocal) for allegedly underpaying the Department of Interior royalties owed for oil extracted from federal lands. Unocal was the last of 16 major oil companies to settle claims in four related qui tam actions in which more than $430 million was recovered by the federal government, plus an additional $10 million on behalf of Native Americans for similar losses suffered on tribal lands.
• $8.7 million from Intertek Testing Services Environmental Testing Laboratories. Intertek held contracts with the Air Force, Navy, Army Corps of Engineers, and Environmental Protection Agency to test air, liquid, and soil samples for hazardous substances. The settlement resolved claims that Intertek failed to perform tests as required by its contracts.
• $7.3 million from Lockheed Martin in two settlements. In the first, Lockheed Martin and BAE Systems Controls paid the United States $6.2 million to resolve allegations that Lockheed Martin, BAE, and their predecessors delivered over 1,300 accelerometer sensor assemblies that did not comply with contract specifications. The assemblies were components installed in the Navy F/A18 Hornet in the 80s and 90s to control the aircraft's rudder. The second settlement for $2.1 million resolved claims that the company's Tactical Systems Division, when still owned by Unisys, charged the government for unallowable bid and proposal costs on a series of defense contracts for the Trident Missile program.