Lecture16 F&A2011

Baruch College/Mount Sinai
School of Medicine
Program in Health Care
Administration and Policy

BUS9100
Lecture 16
Health Care Fraud and Abuse
Raymond R. Arons, Dr. P.H, M.P.H

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Baruch College/Mount Sinai School of Medicine
Program In Health Care Administration and Policy
BUS 9100: The Social and Governmental Environment
of the Business of Health Care

Lecture 16


Raymond R. Arons, Dr. P.H, M.P.H

The detection and elimination of health care fraud and
abuse is a top priority of federal law enforcement. Our
efforts to combat fraud were consolidated and
strengthened considerably by the Health Insurance
Portability and Accountability Act of 1996 (HIPAA).

HIPAA established a national Health Care Fraud and
Abuse Control Program (the Program), under the joint
direction of the Attorney General and the Secretary of
the Department of Health and Human Services (HHS),
acting through the Department's Inspector General
(HHS/OIG), designed to coordinate federal, state and
local law enforcement activities with respect to health
care fraud and abuse.

2 continued...

Copyright © 2011 Raymond R. Arons, Teaneck, NJ, USA

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During FY 2010, the Federal government won or
negotiated approximately $2.5 billion in judgments and
settlements, and it attained additional administrative
impositions in health care fraud cases and
proceedings.
The Medicare Trust Fund received transfers of
approximately $2.86 billion during this period as a
result of these efforts, as well as those of preceding
years; and another $683 million in Federal Medicaid
money was transferred to the Treasury separately

The HCFAC account has returned over $18.0 billion to
the Medicare Trust Fund since the inception of the
program in 1997.

3

In FY 2010, the Department of Justice (DOJ) opened
1,116 new criminal health care fraud investigations
involving 2,095 potential defendants. Federal
prosecutors had 1,787 health care fraud criminal
investigations pending, involving 2,977 potential
defendants, and filed criminal charges in 488 cases
involving 931 defendants.
A total of 726 defendants were convicted for health
care fraud-related crimes during the year. Also in FY
2010, DOJ opened 942 new civil health care fraud
investigations and had 1,290 civil health care fraud
matters pending at the end of the fiscal year.

4

The Department of Health and Human Services and the Department of Justice Health Care Fraud and
Abuse Control Program Annual Report For FY 2000
http://www.usdoj.gov/dag/pubdoc/hipaa00ar21.htm


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Case 2009-1


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Case 1 Durable Medical Equipment Fraud
After a five-week trial, a Federal jury in Miami convicted three
owners of two DME companies, a home health agency and an
assisted living facility which conspired to defraud Medicare of
more than $14 million for unnecessary medicine,
DME, and home health care services. Two defendants were
sentenced to 51-month terms of imprisonment, and the third was
sentenced to a 31-month prison term. Patients testified at trial
that they took kickbacks, were falsely diagnosed with chronic
obstructive pulmonary disease and prescribed unnecessary
aerosol medications, including commercially unavailable
compounds.
A fourth co-defendant who was a dermatologist, was also
convicted in a separate jury trial and was sentenced to prison for
41 months

5

Medicare Fraud Convictions Result in Prison Terms for Mother and Two Daughters

WASHINGTON – The owners of four Miami-based healthcare corporations were sentenced and
remanded to prison yesterday for their roles in schemes to defraud the Medicare program, Acting
Assistant Attorney General Matthew Friedrich of the Criminal Division and U.S. Attorney R.
Alexander Acosta of the Southern District of Florida announced today. Collectively, the three
defendants through their companies collected more than $14 million from the Medicare program
for unnecessary medicine, durable medical equipment (DME) and home health care services.
U.S. District Judge Cecilia M. Altonaga sentenced Maria T. Hernandez (Mayte), 50, to 51
months in prison; Marta F. Jimenez, 67, to 31 months in prison; and Maivi Rodriguez, 34, to 51
months in prison. All three were remanded into federal custody at the conclusion of the
sentencing. Hernandez and Rodriguez are the daughters of Jimenez. On March 7, 2008, after a
five week trial, a jury convicted Hernandez, Jimenez and Rodriguez on all charged counts,
including conspiracy to defraud the U.S. government, to cause the submission of false claims to
Medicare, and to solicit and receive kickbacks; and conspiracy to commit health care fraud.
Additionally, the defendants were found guilty of multiple counts of receiving kickbacks in
exchange for referring Medicare patients.
At trial, the jury heard testimony that Hernandez, Jimenez and Rodriguez controlled more than
60 Medicare beneficiaries for the sole purpose of defrauding Medicare through the businesses
they owned. Hernandez owned Action Best Medical Supplies Inc., a DME company. Jimenez
and Rodriguez owned Esmar Medical Equipment Inc., a DME company; A & A Medical
Services Inc., a home health care company; and M & M Comprehensive Inc., an assisted living
facility.


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Patients testified at trial that they were paid cash kickbacks in exchange for use of their Medicare
cards. Several of the patients lived in the assisted living facility owned by Jimenez and
Rodriguez. Patients testified that they knowingly took cash kickbacks, were falsely diagnosed
with chronic obstructive pulmonary disease and prescribed unnecessary aerosol medications,
including commercially unavailable compounds. Compounding refers to the process of a
pharmacist mixing the medication in the pharmacy, instead of purchasing it from a
pharmaceutical manufacturer. Trial testimony revealed that one of the men making the medicine
was trained as an auto mechanic without any education, training or experience manufacturing
medicine. In total, the co-conspirator pharmacies associated with Hernandez, Jimenez and
Rodriguez were paid more than $14 million between 2000 and 2003 based on the submission of
claims for medically unnecessary aerosols.
The case was prosecuted by Deputy Chief Kirk Ogrosky and Senior Trial Attorney John S.
Darden of the Criminal Division’s Fraud Section in Washington, D.C., with the investigative
assistance of the Department of Health and Human Services, Office of Inspector General and the
FBI. The case was brought as part of the Medicare Fraud Strike Force, supervised by the Fraud
Section of the Criminal Division and U.S. Attorney Acosta of the Southern District of Florida.
From investigations opened during the period of strike force operations between March and
October of 2007, federal prosecutors have indicted 82 cases with 142 defendants in South
Florida. Collectively, these defendants billed the Medicare program for more than $492 million.


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Case 2009-2


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Case 2 - Physician Fraud and Abuse
A physician and the administrator of an HIV infusion clinic
pleaded guilty for their roles in a $37 million infusion fraud
scheme.
The physician, who was sentenced to 84 months in prison,
admitted to approving approximately $26 million worth of
fraudulent medical bills, signing documents containing false
information about treatments purportedly provided to HIV
patients, and approving medically unnecessary treatments.
The clinic administrator, who was sentenced to serve 70 months
in prison, admitted to causing the submission of approximately
$11 million in false claims to the Medicare program, paying health
care kickbacks, and committing health care fraud.

6

Miami Physician and HIV Clinic Administrator Plead Guilty for Their Roles in a $37
Million Medicare Fraud Scheme
Miami physician Ronald Harris, M.D., and Miami resident Mariela Rodriguez each pleaded
guilty today to defrauding the Medicare program in connection with a $37 million HIV infusion
fraud scheme, Acting Assistant Attorney General Matthew Friedrich of the Criminal Division
and U.S. Attorney R. Alexander Acosta of the Southern District of Florida announced.
Harris pleaded guilty to conspiracy to commit healthcare fraud and three counts of submitting
false claims to the Medicare program before U.S. District Judge Cecilia M. Altonaga. In his plea,
Harris admitted that he wrote false prescriptions for HIV infusion treatments while serving as the
medical director for two medical clinics, Physicians Med-Care and Physicians Health. Both
clinics purported to provide HIV infusion services to Medicare beneficiaries. Harris admitted
that beginning in August 2002 and continuing through March 2004, he conspired with others to
defraud the United States, to cause the submission of false claims to the Medicare program, to
pay health care kickbacks and to commit health care fraud. Harris also admitted to submitting
false claims.
According to information contained in plea documents, Harris admitted that between August
2002 and March 2004 he served as the medical director of Physicians Med-Care and Physicians
Health, two Miami HIV infusion clinics that were owned and controlled by Carlos and Luis
Benitez, and that were operated for the purpose of committing Medicare fraud. Prior to August
2002, Harris had no prior experience with infusion therapy for HIV patients. During his
employment with Physicians Med-Care and Physicians Health, Harris admitted he approved
approximately $26.2 million worth of fraudulent medical bills, signed documents containing


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false information about treatments purportedly provided to HIV patients and approved medically
unnecessary treatments. According to information in the plea documents, the Medicare program
paid approximately $17.5 million in fraudulent bills as a result of Harris' conduct.
Rodriguez pleaded guilty before U.S. District Judge Federico Moreno to conspiracy to commit
health care fraud and one count of making false declarations to a federal grand jury. In her plea,
Rodriguez admitted that she administered an HIV infusion clinic named Saint Jude Rehab
Center, a Miami HIV infusion clinic that was owned and controlled by Carlos and Luis Benitez,
and that was operated for the purpose of committing Medicare fraud. Similar to Physicians Med-
Care and Physicians Health, Saint Jude purported to provide HIV infusion services to Medicare
beneficiaries.
Rodriguez admitted that she served as an administrator of Saint Jude between June 2003 and
November 2003, during which time she submitted false claims to the Medicare program for HIV
infusion treatments. Rodriguez further admitted that beginning in June 2003 and continuing
through November 2003, she conspired with others to defraud the United States, to cause the
submission of false claims to the Medicare program, to pay health care kickbacks and to commit
health care fraud. Rodriguez also admitted to making false statements in her testimony before a
federal grand jury. Between June 2003 and November 2003, Saint Jude submitted approximately
$11.3 million worth of fraudulent bills to the Medicare program for HIV infusion services that
were never provided and services that were medically unnecessary. As a result of this conduct,
the Medicare program paid approximately $8.2 million in fraudulent bills. Sentencing for both
Rodriguez and Harris has been scheduled for Nov. 4, 2008.

In a related case, Carlos and Luis Benitez, as well as their brother Jose Benitez, were indicted on
June 11, 2008, for their role in a $110 million HIV infusion fraud and money laundering scheme.
The indictment alleges that Carlos, Luis and Jose Benitez were the masterminds of a massive
HIV infusion fraud operation throughout south Florida involving at least 11 clinics and that they
laundered the proceeds of their crimes. Also according the indictment, Carlos and Luis Benitez
were the true owners of Physicians Med-Care, Physicians Health and Saint Jude. All three
Benitez brothers remain fugitives.
The cases were prosecuted by Hank Bond Walther, John K. Neal and Nathan Dimock of the
Criminal Division's Fraud Section, and investigated by the FBI and the Department of Health
and Human Services, Office of Inspector General. The cases were brought as part of the
Medicare Fraud Strike Force, supervised by Deputy Chief Kirk Ogrosky of the Criminal
Division's Fraud Section and U.S. Attorney Acosta of the Southern District of Florida. Strike
Force prosecutors have indicted 82 cases involving 142 defendants since Strike Force operations
began in March 2007. Collectively, these defendants committed more than $492 million in
Medicare fraud.


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Case 2009-3


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Case 3 - Physician Fraud and Abuse
A Michigan dermatologist was sentenced to 10 years and
6 months in prison and ordered to pay $1.3 million in
restitution and a $175,000 fine following a jury trial
conviction for health care fraud.
The dermatologist falsely informed patients that they had
cancer and performed unnecessary procedures when, in
fact, laboratory results indicated that their tissue
specimens were benign. In addition, the defendant billed
for unnecessary follow-up office visits, claiming that
beneficiaries had developed postoperative infections,
such as impetigo, a disease rarely seen in adults.
Finally, the dermatologist reused single-use needles and
sutures without proper sterilization and failed to properly
sterilize surgical equipment used in procedures. HHS/OIG
assisted the local health department in informing patients
of their possible risk of contracting a blood-borne
pathogen, such as hepatitis B or C or HIV, because of his
7 unsanitary medical practices.

GRAND RAPIDS -- When they found out a Grand Rapids doctor might have exposed them to hepatitis and HIV,
many of his patients were scared. When they learned Dr. Robert Stokes' habit of reusing sutures, hypodermic needles
and other instruments without proper sterilization did not violate any criminal law, their fear turned to anger. Press
Photo / Adam BirdSupporting the drive: Hastings Mayor Bob May endorses criminal sanctions.

"Something's got to be done," said Bob May, the mayor of Hastings who was treated by Stokes for skin cancer. "It should be legally improper to
do what he did, as well as morally. We cannot allow these doctors to do this to the public." Stokes, a dermatologist, was sentenced last December
to 10 1/2 years in federal prison for insurance fraud, not for potentially exposing thousands of patients to life-threatening infections. Investigators
could find no federal law against his practice of reusing surgical materials and instruments intended for one-time use. State law provides only
civil, not criminal, penalties. The state board that licenses osteopathic physicians revoked Stokes' license in March, the strongest penalty available
under current law, said Ray Garza, director of the health regulatory division of the state Department of Community Health. Stokes can apply for
reinstatement in five years, Garza said, although, barring a successful appeal, he likely will still be in prison.

Continue reading "Patients of jailed doctor Robert Stokes join push for dirty-needle penalties" »

Dr. Robert Stokes, a licensed and board-certified dermatologist, was sentenced to 10 years and 6 months in prison and ordered to pay $1,315,682
in restitution and a $175,000 fine following his jury trial conviction for health care fraud. The evidence at trial showed that Dr. Stokes falsely
informed patients that they had cancer and performed unnecessary procedures when, in fact, laboratory results indicated that their tissue
specimens were benign. In addition, he used fraudulent billing schemes, including upcoding surgical procedures to receive higher reimbursement
rates and billing for follow-up office visits for which he was not entitled to reimbursement. Dr. Stokes justified the unnecessary office visits by
claiming that beneficiaries had developed postoperative infections, such as impetigo, a disease rarely seen in adults. During trial preparation, it
was discovered that Dr. Stokes reused single use needles and sutures without proper sterilization and failed to properly sterilize surgical
equipment used in procedures. OIG assisted the local health department in informing patients of their possible risk of contracting a blood-borne
pathogen, such as hepatitis B or C or HIV, because of his unsanitary medical practices.


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8

EAST GRAND RAPIDS -- The expansive estate of Dr. Robert Stokes finally has sold, but the new owners won't be moving in. The five-acre
Reeds Lake property, 2905 Bonnell Ave. SE, is in foreclosure. It was purchased at a Kent County sheriff's sale by mortgage-holder Fifth Third
Bank for $1.39 million, according to county records. That rock-bottom price is only slightly more than its state equalized value, which is about
half of market value. The price also is more than 80 percent lower than its original record-breaking asking price of $7.7 million.

The foreclosure is yet another chapter in the saga of the mansion and the man who owned it. The former dermatologist now sits in federal
prison, convicted in 2007 of health care fraud. It was the most expensive listing in Kent County ever when it hit the market in November 2007.
After it failed to sell at two auctions, earlier this year the price was dropped to $2 million. There is more than $40,000 in unpaid property taxes
and the federal government has a lien on the property connected to Stokes' legal issues. Joe Schmitt, auctioneer for Masterbid Inc., said he never
worked harder to sell a property only to lose money on the deal. He launched an international marketing effort and held live and silent auctions
-- all fruitless. "We really overextended ourselves, and we were unable to sell it," he said. "A lot of it had to do with the Dr. Stokes' relationship
with the community. It was horrible." The 14,000-square-foot home now sits vacant. A Consumers Energy shut-off notice is tucked in the front
door. Spring landscaping is yet to be done. Alicia Beyer, the real-estate agent who first listed the property in 2007, is working with the bank to sell
it. "We have it listed on 149 different Web sites -- national as well as international," she said. While traffic remains strong, the voyeuristic interest
is still so prevalent prospective buyers must be approved for a minimum $2 million purchase price, said Beyer, who owns Beyer Realty. "They
can offer less, but they must be approved for $2 million," she said. Businessman J.C. Huizenga was one of the bidders at the live auction last
February, but he said he is not interested anymore. "I wasn't looking for a place to live in," Huizenga said. "I was looking for an opportunity. "Any
time there is an auction, sometimes there is an opportunity." He would not reveal how much he bid, but did say it was "much less than $3 million."
Neighbors expressed surprise the home was in foreclosure, but they hope someone moves in. It has been "kind of a circus," said Mike Redman,
who lives across the street. "It will be nice to get it behind us and get some good neighbors and just get it going. We'll be happy when it's done."
Beyer said marketing the property has been her "most complicated deal," but she remains optimistic. "Flowers are starting to blossom. The buds
are coming out on the trees," she said. "We'll get the property spiffed back up, and we'll keep our fingers crossed."


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Case 2009-4


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Case 4-Phamacutical Fraud
Cephalon, Inc., entered a global criminal, civil, and administrative
settlement under which the company agreed to pay a total of
$425 million plus interest; plead guilty to a misdemeanor violation
of the Federal Food, Drug and Cosmetic Act; and enter into a
comprehensive 5-year CIA with HHS/OIG.
The civil settlement resolves allegations filed in four separate qui
tam cases, which alleged that Cephalon promoted the drugs
Actiq, Gabitril, and Provigil for “off-label” uses (that is, uses other
than those approved by FDA). Cephalon’s off-label promotional
practices involved a variety of techniques, including training its
sales force to disregard restrictions of the
FDA-approved label and promote the drugs for off-label uses. In
addition to the $375 million civil settlement, Cephalon entered
into a criminal plea agreement with the United States under which
it will pay $50 million.

9

Board of Directors of Cephalon, Inc.

10

Board of directors Dennis L. Winger, Frank Baldino, Vaugn M. Kailian, William P. Egan, Charles, A. Sanders.
Kevin E. Moley, Gail R. Wilensky, PhD, Marilyn Greeacre


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Attorney General's News Release September 30, 2008 Nixon will recover $3.8 million in
Medicaid fraud case against Pennsylvania pharmaceutical company.
Jefferson City, Mo. - Attorney General Jay Nixon today said his Medicaid Fraud Control Unit
will recover more than $3.8 million for taxpayers under an agreement with a Pennsylvania
pharmaceutical company that marketed three of its drugs for uses not approved by the Food and
Drug Administration and rewarded some doctors who frequently prescribed the drugs. As a result
of the scheme, Nixon said, the three drugs made by Cephalon Inc. were prescribed more often
than they normally would have been, and Medicaid programs in Missouri and the other states
paid too much in reimbursement for the drugs. Under an agreement in principle that resolves
allegations of off-label marketing, Cephalon will pay a total of $375 million in damages and
penalties to Missouri, the federal government and the 49 other states. The company also agreed
to plead guilty to a criminal charge in federal court in Pennsylvania and pay a $50 million
criminal fine. Nixon said the Missouri share of the settlement is $3,813,757. With this recovery,
Nixon's Medicaid Fraud Control Unit will have recovered more than $120 million for taxpayers
in Medicaid fraud cases. "Working in concert with the Attorneys General of other states and with
the federal government has enabled us to ensure that Missouri taxpayers are not shortchanged by
fraudulent practices," Nixon said. "This case was another example of stopping fraud and abuse
against Medicaid and taxpayers." Cephalon, based in West Chester, Penn., engaged in the off-
label marketing of these drugs: Actiq, approved by the FDA to treat severe pain from cancer.
Cephalon marketed the highly addictive narcotic beyond oncologists to general practitioners and
internists. Gabitril, approved as an anti-epileptic drug to treat seizures. Cephalon marketed it for
conditions including depression, anxiety, Tourette's syndrome and chronic pain. Patients who
were not suffering from seizures subsequently experienced seizures as a result of taking the drug
to treat other conditions. Provigil, approved to treat narcolepsy and sleep disorders. Cephalon
marketed it for a wide variety of other conditions including fatigue, depression, multiple
sclerosis, schizophrenia, Parkinson's disease, chronic fatigue syndrome, anxiety, neuropathic
pain, and attention deficit/hyperactivity disorder in children. Provigil became one of Cephalon's
best-selling drugs.
Cephalon's off-label marketing campaign included subsidizing the production and dissemination
of reports favorable to off-label uses, having a sale program with incentives to sales staff to
promote off-label uses, and rewarding high-prescribing doctors with grants, speakerships and
perceptorships. Cephalon also sponsored Continuing Medical Education (CME) programs to
fund expensive vacations for physicians, and disseminated off-label promotional literature to
physicians at these CMEs. In addition, Cephalon has entered into a Corporate Integrity
Agreement with the U.S. Department of Health and Human Services, Office of Inspector
General, to ensure its compliance in the future. The Missouri case was brought by the Attorney
General's Medicaid Fraud Control Unit, which Nixon established in 1994. The unit has authority
under state law to investigate and prosecute, both civilly and criminally, allegations of fraud
against Missouri's Medicaid program.


Lecture 16 16

Gail Wilensky, Director, Cephalon, Inc

11

GAIL WILENSKY is an economist and a senior fellow at project HOPE, an international health
foundation. Dr. Wilensky serves as a trustee of the Combined Benefits Fund of the United Mine Workers
of America and the National Opinion Research Center, is on the Board of Regents of the Uniformed
Services University of the Health sciences (USUHS) and the Visiting Committee of the Harvard Medical
and Dental Schools. She recently served as president of the Defense Health Board, a Federal advisory to
the Secretary of Defense, was a commissioner on the World Health Organization’s Commission on the
Social Determinants of Health and co-chaired the Dept. of Defense Task Force on the Future of Military
Health Care. She is an elected member of the Institute of Medicine and has served two terms on its
governing council. She is a former chair of the board of directors of Academy Health, a former trustee of
the American Heart Association and a current or former director of numerous other non-profit
organizations. She is also a director on several corporate boards.


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Case 2009-5


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Case 5-Phamacutical Fraud
Merck and Company (Merck), Inc., agreed to pay $399 million plus
interest to resolve allegations that Merck failed to properly include
discounts on Vioxx (no longer marketed), Zocor, and Mevacorin in the
“best prices” reported to CMS under the Medicaid drug rebate program
and, as a result, underpaid rebates owed to the States and overcharged
entities that purchased Merck products under the 340B Drug Pricing
Program.
The United States alleged that Merck sales representatives induced
physicians to use its drug products by making, among other forms of
illegal remuneration, payments that were disguised as fees for training,
consultation, or market research.
Merck agreed to this settlement at the same time it settled a matter in
Louisiana, involving similar discounted pricing programs offered to
hospitals for another Merck drug, Pepcid. Through both settlements,
Merck agreed to pay a total of $649 million plus interest. Merck further
agreed to enter into a 5-year CIA with HHS/OIG that includes corrective
measures to address its conduct in both cases.

12

Richard T. Clark, CEO & President, Merck &
Co

13

Merck CEO Richard Clark says company plans to keep N.J. research facilities
By Susan Todd/The Star-Ledger
November 04, 2009, 5:18PM


Lecture 16 19

AP FILE PHOTOIn a 2005 file photo Richard T. Clark, CEO & President, Merck & Co., speaks
during an interview at the corporate headquarters in Whitehouse Station.There was something
like awe in Merck Chief Executive Officer Richard Clark’s tone as he talked about the
completion of his company’s mega merger with Schering-Plough. The merger, which combined
two of the state’s most venerable drugmakers, officially propelled Clark to the helm of the
second-largest pharmaceutical company in the world this morning. "It was just incredible
bringing these two companies together,’’ Clark said during a telephone interview. "I think this
merger will be unlike any others in the industry based on that synergy and communality of our
cultures.’’
In March, Merck stunned the pharmaceutical industry when it announced plans to buy Schering-
Plough for $41.1 billion. The deal came on the heels of another mega-merger: Pfizer’s plan to
buy Madison-based Wyeth for $68 billion. Pfizer completed its acquisition of Wyeth last month.
With Schering-Plough incorporated into its folds, Merck has 106,000 employees — roughly
14,000 of them are in New Jersey — in more than 140 countries. The company has 15 drugs in
late-stage development — it was Schering-Plough’s rich pipeline that drove Merck’s ambitions
from the start.
Clark said the company intends to keep the research facilities in Rahway and Kenilworth. "They
are very important research sites,’’ Clark said of the two locations. "There is very specific
research work that we need to keep in place." The Whitehouse Station corporate campus will
continue serving as the company’s global headquarters. Clark said early on he set a strategy to
meld the best of the two companies together. "I hand-picked the integration leaders to make sure
they believed in my objectives,’’ he said. "I rolled up my sleeves every day and worked with my
leadership team to ensure that we actually kept to the standards.’’
Merck & Company has agreed to pay more than $650 million to resolve allegations that the
pharmaceutical manufacturer failed to pay proper rebates to Medicaid and other
government health care programs and paid illegal remuneration to health care providers to
induce them to prescribe the company's products, the Justice Department has announced.
The allegations were brought in two separate lawsuits filed by whistleblowers under the qui tam,
or whistleblower, provisions of the False Claims Act. Not only is the combined recovery in these
two cases one of the largest healthcare fraud settlements ever achieved by the Justice
Department," said Attorney General Michael B. Mukasey, "it reflects our continuing effort to
hold drug companies accountable for devising pricing schemes that deliberately seek to deny
federal health care programs the same lower prices for drugs that are available to other
commercial customers." H. Dean Steinke, a former Merck employee, alleged in his suit filed in
Philadelphia that Merck violated the Medicaid Rebate Statute in connection with its marketing of
its drugs Zocor and Vioxx. (Zocor is a cholesterol lowering drug and Vioxx, pulled from the
market by Merck in September of 2004, was used for the treatment of acute pain and in the
treatment of arthritis.) Merck allegedly offered deep discounts for the two drugs if hospitals used
large quantities of those drugs in place of competitors' brands.
The Medicaid Rebate Statute requires that drug manufacturers report their "best prices" and other
cost information to the government in order to ensure that Medicaid obtains the benefit of the
same discounts and price concessions that other purchasers enjoy. An exception to this rule
allows manufacturers to exclude from the prices they report any discounted prices that are


Lecture 16 20

"nominal" in amount. Merck improperly termed as "nominal" the prices it offered to hospitals to
boost their sales and excluded those discounts from the prices it reported to the government.
Steinke's suit further alleged that from 1997-2001, Merck had approximately fifteen different
programs used by its sales representatives to induce physicians to use its many products. These
programs primarily consisted of excess payments to physicians that were disguised as fees paid
to them for "training," "consultation" or "market research." In fact, the government alleged that
these fees were illegal kickbacks intended to induce the purchase of Merck products. Merck
agreed today to pay $399 million plus interest to settle the Medicaid Rebate as well as the
kickback allegations.
In a separate suit filed by physician William St. John LaCorte in New Orleans, it's alleged that
Merck had established a marketing scheme in which it provided substantially reduced prices for
its Pepcid products once the hospitals agreed to primarily use the drug instead of a competitor's.
(Pepcid is used to reduce stomach acid and to treat heartburn and acid reflux.) Merck allegedly
offered these incentives to hospitals in order to obtain the benefit of spillover business when
patients would continue to purchase Pepcid once he or she was discharged. Merck improperly
termed as "nominal" the prices it offered to hospitals to boost the sales of Pepcid, excluded those
discounts from the prices it reported to the government, and thus effectively denied the
government the benefit of these lower prices. Merck agreed today to pay $250 million plus
interest to settle these allegations. Under the two settlement agreements, the federal government
will receive more than $360 million, and forty-nine states and the District of Columbia over
$290 million. In addition, Mr. Steinke will receive $44,690,000 from the federal share of the
settlement amount and an additional $23.5 million from the states. Similarly, Dr. LaCorte will
receive a share of the proceeds from the federal and state settlement amounts under their
respective qui tam statutes.
"Our health insurance programs rely upon the integrity of health providers, including
pharmaceutical manufacturers, when they report to the government programs which reimburse
their products and services with scarce funds," said Patrick L. Meehan, U.S. Attorney for the
Eastern District of Pennsylvania, whose office led the investigation of the Steinke matter.
"Particularly in the wake of Hurricane Katrina, it is critical that precious government resources
not be lost to fraud and abuse," said Jim Letten, the U.S. Attorney for the Eastern District of
Louisiana, whose office led the investigation of the LaCorte matter. "This office is dedicated to
prosecuting pricing fraud so that healthcare dollars go to help the most vulnerable of our citizens
-- the disabled and the poor." "The Office of Inspector General has a strong record of pursuing
violations in the Medicaid drug rebate program and is working closely with Federal and State
law enforcement to hold accountable pharmaceutical companies engaged in illegal practices
resulting in Medicaid fraud," said Daniel R. Levinson, Inspector General of the Department of
Health and Human Services. Today's settlement was the result of close cooperation between the
Justice Department, state attorneys general and other law enforcement entities including
Medicaid Fraud Control Units, and the Office of Inspector General of the Department of Health
and Human Services. As part of the resolution of these two cases, the Department of Health and
Human Services Office of Inspector General (HHS-OIG) and Merck have entered into a five-
year Corporate Integrity Agreement to ensure that such improper conduct does not occur in the
future.
Merck Board of Directors


Lecture 16 21

Richard T. Clark
Chairman of the Board, president and chief executive officer, Merck & Co., Inc. New Merck director since November 3, 2009

Leslie A. Brun
Chairman and chief executive officer, Sarr Group, LLC (investment holding company). Non-executive chairman, Automatic Data Processing, Inc.
Director, Philadelphia Media Holdings, LLC, and Broadridge Financial Solutions, Inc. New Merck director since November 3, 2009

Thomas R. Cech, Ph.D.
Director, Colorado Institute for Molecular Biotechnology, University of Colorado. New Merck director since November 3, 2009

Thomas H. Glocer
Chief executive officer, Thomson Reuters Corporation (information and services company for businesses and professionals). Director, Thomson
Reuters Corporation, Partnership for New York City. New Merck director since November 3, 2009

Steven F. Goldstone
Retired chairman and chief executive officer, RJR Nabisco, Inc. Managing partner, Silver Spring Group (private investment firm). Non-executive
chairman, ConAgra Foods, Inc. Director, Greenhill & Co., Inc. New Merck director since November 3, 2009


Lecture 16 22

William B. Harrison, Jr.
Retired chairman of the board, JPMorgan Chase & Co. (financial services). Director, Cousins Properties Incorporated and Lincoln Center for the
Performing Arts. New Merck director since November 3, 2009

Harry R. Jacobson, M.D.
Vice chancellor, Health Affairs, Emeritus (since June 2009), Vanderbilt University. Non-executive chairman, CeloNova BioSciences, Inc.
Director, HealthGate Data Corporation, Ingram Industries, Inc. and Kinetic Concepts, Inc. New Merck director since November 3, 2009

William N. Kelley, M.D.
Professor of Medicine, Biochemistry and Biophysics, University of Pennsylvania School of Medicine. Director, Beckman Coulter, Inc., GenVec,
Inc., and Polymedix, Inc. New Merck director since November 3, 2009

C. Robert Kidder
Chief executive officer, 3Stone Advisors LLC (private investment firm). Director, Chrysler Group LLC and Morgan Stanley. New Merck director
since 2005


Lecture 16 23

Rochelle B. Lazarus
Chairman, Ogilvy & Mather Worldwide (advertising and marketing communication company). Director, General Electric, New York Presbyterian
Hospital, American Museum of Natural History and World Wildlife Fund. New Merck director since November 3, 2009

Carlos E. Represas
Chairman, Nestle Group Mexico. Director, Bombardier Inc. and Vitro S.A. de C.V. New Merck director since November 3, 2009

Patricia F. Russo
Former chief executive officer and director, Alcatel-Lucent. Director, Alcoa, Inc., and General Motors. New Merck director since 1995

Thomas E. Shenk, Ph.D.
Elkins Professor, Department of Molecular Biology, Princeton University. Director, Cell Genesys, Inc., and CV Therapeutics, Inc. New Merck
director since November 3, 2009

Anne M. Tatlock
Retired chairman of the board and chief executive officer, Fiduciary Trust Company International (global asset management services). Director,
Fortune Brands, Inc., and Franklin Resources, Inc. New Merck director since November 3, 2009


Lecture 16 24

Samuel O. Thier, M.D.
Lead director of the board. Professor of Medicine and Health Care Policy, Emeritus, Harvard Medical School. Director, Charles River
Laboratories, Inc. New Merck director since November 3, 2009

Craig B. Thompson, M.D.
Director, Abramson Cancer Center and Professor of Medicine, University of Pennsylvania School of Medicine. Chairman of the Medical Advisory
Board, Howard Hughes Medical Institute. Member of the Advisory Board, M.D. Anderson Cancer Center. New Merck director since 2008

Wendell P. Weeks
Chairman and chief executive officer, Corning Incorporated (technology company in telecommunications, information display and advanced
materials industries). Director, Corning Incorporated. New Merck director since November 3, 2009

Peter C. Wendell
Managing director, Sierra Ventures (technology-oriented venture capital firm). Chairman, Princeton University Investment Company. New Merck
director since November 3, 2009


Lecture 16 25

Case 2009-6

.


Lecture 16 26

Case 6-Phamacy Fraud
CVS Caremark Corporation (CVS) agreed to pay
$36.7 million and enter into a 5-year CIA with
HHS/OIG to resolve its liability based on allegations
that it fraudulently overcharged Medicaid programs in
23 States by improperly switching drugs it dispensed.
Specifically, the Government and relator alleged that
CVS dispensed ranitidine (generic Zantac) capsules
rather than tablets in order to increase its
reimbursement from Medicaid. As a result of
dispensing and billing Medicaid for capsules, CVS was
reimbursed, on average, four times what it would have
been reimbursed had it dispensed tablets.

14

CVS Caremark President and CEO Thomas M.
Ryan.

15

Board of Directors
Edwin M. BanksFounder and Managing Partner of Washington Corner Capital Management, L.L.C. C.
David Brown IIChairman of the Firm of Broad and Cassel, a Florida law firm David W. DormanNon-
Executive Chairman of the Board of Motorola, Inc. Kristen E. Gibney WilliamsFormer executive of the
Prescription Benefits Management Division of Caremark International, Inc. Marian L. HeardPresident
and Chief Executive Officer of Oxen Hill Partners William H. JoyceFormer Chairman of the Board and


Lecture 16 27

Chief Executive Officer of Nalco Company Jean-Pierre MillonFormer President and Chief Executive
Officer of PCS Health Services, Inc. Terrence MurrayFormer Chairman of the Board and Chief
Executive Officer of FleetBoston Financial Corporation C.A. Lance PiccoloChief Executive Officer of
HealthPic Consultants, Inc. Sheli Z. RosenbergFormer President, Chief Executive Officer and Vice
Chairwoman of Equity Group Investments, L.L.C. Thomas M. RyanChairman of the Board, President
and Chief Executive Officer of CVS Caremark Corporation and CVS Pharmacy, Inc. Richard J.
SwiftFormer Chairman of the Board, President and Chief Executive Officer of Foster Wheeler Ltd.

In March 2008, CVS Caremark Corporation agreed to pay $36.7 million ($21.1 million to the federal
government and $15.6 million to 23 states) to settle claims that from 2000-2006, the company illegally
switched patients from the tablet form of the drug Ranitidine (generic Zantac) to a capsule form in order
to increase Medicaid reimbursement. A whistleblower initiated the lawsuit in 2003 and received more
than $4.3 million as his share of the settlement.[14] In its press release, the Government announced,
"[s]witching medication from tablets to capsules might seem harmless, but when that is done solely to
increase profit and in violation of federal and state regulations that are designed to protect patients,
pharmacies must know that they are subjecting themselves to the possibility of triple damages, civil
penalties and attorney fees. . . . These penalties, coupled with the willingness of insiders to report fraud,
should deter such misconduct, but when it doesn't, the result in this case and others serve notice that we
will aggressively pursue all available legal remedies."[15]

United States et al., ex rel. Bernard Lisitza v. CVS Caremark Corp. (N.D. Ill.)—March
18, 2008
Retail pharmacy corporation CVS Caremark agreed to pay $36.7 million to the U.S., the Medicaid
participating states, and the District of Columbia to settle allegations that it overbilled Medicaid for a
widely used antacid drug, by switching patients from the standard generic drug for a more expensive
version. According to allegations made in a qui tam suit filed in 2003 by relator Bernard Lisitza,
CVS had purposefully and unlawfully switched patients from the tablet form of Ranitidine, which is
generic Zantac, to a much more expensive capsule version in order to increase its reimbursement
from Medicaid. Because the capsule version costs two to four times more than the tablet form of the
drug, CVS was able to bill Medicaid for millions more than it was eligible to receive. Relator
Bernard Lisitza learned of this fraudulent scheme while working as a temporary receiving pharmacist
in Illinois. Of the $36.7 million recovered in the settlement, $21,060,535 will go to the federal
government and $15,639,464 will go to the Medicaid participating states, including Illinois,
California, Delaware, Florida, Hawaii, Louisiana, Massachusetts, Nevada, Tennessee, Texas,
Virginia, and the District of Columbia. As his share of the recovery, Lisitza will receive $3,580,291.
TAF members Michael Behn and Linda Wyetzner of Behn & Wyetzner represented Lisitza. Assistant
U.S. Attorney Linda A. Wawzenski represented the


Lecture 16 28

Case 2009-7


Lecture 16 29

Case 7- Hospital Fraud
Staten Island University Hospital (SIUH) paid nearly
$89 million in a global settlement resolving allegations
that it defrauded Medicare, Medicaid, and TRICARE.
The global settlement resolves two separate qui tam
lawsuits and two Government investigations.
As part of the global settlement, SIUH also entered
into a 5-year CIA with HHS/OIG In the first lawsuit, the
Government’s investigation alleged that SIUH
submitted claims for payment for treatment provided to
patients in beds for which SIUH had received no
certificate of operation from the New York State Office
of Alcoholism and Substance Abuse Services and
concealed the existence of those beds from that office.
SIUH paid nearly $12 million to the United States and
nearly $15 million to the State of New York.
16

Staten Island University Hospital (SIUH)
In the second lawsuit, the investigation alleged that
SIUH knowingly used incorrect billing codes for certain
cancer treatments performed at the hospital, and thus
obtained reimbursement for treatment that was not
covered by Medicare or TRICARE. SIUH will pay $25
million to settle this lawsuit.
Additional conduct self-disclosed by SIUH was
resolved prior to the filing of the lawsuits. Pursuant to
HHS/OIG’s Self-Disclosure Protocol, SIUH agreed to
nearly $36 million for reporting

17


Lecture 16 30

Staten Island hosp to repay 89M in fraud case
invovling doctor who coerced George Harrison
BY GLENN BLAIN
DAILY NEWS ALBANY BUREAU
Monday, September 15th 2008, 11:31 PM
ALBANY - A cancer doctor accused of forcing ex-Beatle George Harrison to sign a guitar on his
deathbed left Staten Island University Hospital a costly legacy.
In a mammoth settlement of Medicaid andMedicare fraud charges, the hospital Monday agreed
to repay state and federal governments $88.9 million. Part of the settlement covers work done
by Dr. Gilbert Lederman's radiation oncology department. "This was a hospital that sought to
exploit the Medicare program and obtain millions of dollars in payments that it was not entitled
to," said Richard Reich, lawyer for federal whistleblower Elizabeth Ryan, who brought the first
case against Lederman and the hospital. In a statement, the hospital said the settlement "closes
the chapter" on several ongoing investigations and that funds are budgeted to pay for it. "We
want to assure our patients and the communities we serve that SIUH will continue to deliver the
same high-quality care that has enabled us to win coveted national awards," the statement said.
Of the $88.9 million, $25 million is to settle claims that the hospital fraudulently billed Medicare
for stereotactic body radiosurgery cancer treatments, which are not covered by Medicare. Ryan,
the widow of a Staten Island University cancer patient, brought the case under the federal False
Claims Act. She got $3.75 million. Federal prosecutors are still pursuing a case against
Lederman. Telephone calls to Lederman's lawyer were not returned. Lederman, who no longer
works at Staten Island University, treated Harrison there before he died of brain cancer in
November 2001. Olivia Harrison, the ex-Beatle's widow, accused him of coercing Harrison into
autographing his son's guitar and signing autographs for his two daughters. Olivia Harrison
dropped a suit against Lederman after he agreed to destroy the guitar and the autographs.

Read more: http://www.nydailynews.com/news/2008/09/15/2008-09-
15_staten_island_hosp_to_repay_89m_in_fraud.html#ixzz0heF48682
The Doctor Can't Help Himself
When the notorious cancer doctor Gil Lederman cadged an autograph from a dying
George Harrison, the world was appalled.But as Lederman scrambles to salvage his
reputation, the very nature of his experimental practice has come under attack.
• By Andrew Goldman
• Published May 21, 2005


Lecture 16 31

(Photo credit: Eugene Richards)

On an evening in mid-November 2001, Gil Lederman made a judgment call that would bring
him the kind of fame that even he had never dreamed possible. A bespectacled cancer doctor
with an Alfred Kinsey fade haircut, Lederman was already something of a local celebrity; his
distinctive nasal monotone had been heard for years on New York talk-radio stations, promoting
his revolutionary cancer treatment, fractionated stereotactic radiosurgery, at Staten Island
University Hospital. But Lederman’s fame—as a kind of Dr. Zizmor of radiation oncology—
paled in comparison with that of his patient, George Harrison, who was lying in a rented house
near the hospital, dying of lung cancer that had invaded his brain.

Though he’d been treating Harrison for only about a month, Lederman thought they had bonded
enough to warrant an unconventional house call. “I feel like a brother to him,” the doctor
confided to another physician at his hospital. So, as any man with an ailing sibling would do,
Lederman showed up that night on Harrison’s doorstep with his three children in tow, so that
they might say hello and good-bye to Uncle George, who was leaving the next morning for
California, where he would die two weeks later.

That night has become something of an outer-borough Rashomon. Depending on whose version
you believe, Lederman either had a touching visit with Harrison or bullied a dying man in a
declining mental state into creating a valuable piece of rock-and-roll memorabilia. The Harrison
camp claimed as follows: Lederman showed up uninvited and instructed his 13-year-old son,
Ariel, to strum a song on his Yamaha electric guitar. When the performance was over, Lederman
put the guitar in Harrison’s lap and asked him to sign it. “I do not even know if I know how to
spell my name anymore,” responded an exhausted Harrison. “C’mon, you can do this,” said
Lederman, guiding his hand and spelling his name aloud: G-E-O-R-G-E H-A-R-R-I-S-O-N.

Lederman insisted to friends that Harrison invited the children over and happily signed the
guitar. The shaky scrawl of the signature itself is inconclusive—it could have been written under
duress or simply signed by a willing star on a great deal of medication. Nevertheless, once the
Harrison estate sued the doctor for $10 million and the press got their mitts on the legal


Lecture 16 32

complaint, Lederman became a popular tabloid target. At the peak of the frenzy, he was labeled a
“ghoul” and a “scumbag.” “Page Six” even ran a cartoon depicting him chasing Keith Richards
with a pen and guitar. “I’m not on my deathbed!” Richards yells.

It seemed like the ultimate disgrace for a Harvard-trained, triple board-certified physician who
should have been amassing yacht money or doing Lasker Award–quality research at that point in
his life. Then again, Lederman’s behavior at Harrison’s deathbed wasn’t a complete surprise to
those who’d been watching his curious approach to his career. “My sense of the guy is that he’s
just somebody who doesn’t get it,” says a prominent radiation oncologist who’s met him on
several occasions. “His social skills aren’t there.” But it turns out that questionable manners may
be the least pernicious of Lederman’s sins. The doctor is now facing half a dozen multi-million-
dollar civil suits, some of which accuse him of bilking terminal cancer patients by luring them
with promises of a miracle cure.
As Dr. Lederman waxed on about his mother, George Harrison, according to a source, spoke
three measured words: “Please...stop...talking.”

Lederman’s defenders claim that the Harrison matter has turned a caring, innovative physician
into the kind of wounded game that trial lawyers love to hunt. “Lederman prides himself on
taking the most challenging cases that nobody else wants, cases where patients have not been
given any hope whatsoever. He’s not offering them a cure but an option,” says Andrew Garson,
an attorney who defended Lederman in two previous malpractice cases and believes the recent
spate of lawsuits stems from his client’s bad press. Even a judge weighing a recent change-of-
venue request acknowledged that Lederman had been through the ringer. His decision played off
Harrison’s “Something”: “Something in the folks he treats / Attracts bad press like no other
doctor.”

But others contend that the Harrison case was just a symptom of Lederman’s larger pathology of
being singularly unable to grasp right and wrong when dealing with the fragile emotions of
desperately ill people. “The real issue with Gil is the following,” says Jay Loeffler, chief of
radiation oncology at Massachusetts General Hospital. “Is he a genius, far ahead of his time? Or
is he a scoundrel?”

Lederman grew up a bookish Jew surrounded by the flinty Protestants of Waterloo, Iowa. His
Ukrainian-immigrant grandfather had started a small clothing concern called Lederman’s
Western Outfitters, where young Gil earned a nickel an hour. (This explains the geeky scientist’s
incongruous fondness for Western shirts and ornate cowboy boots.) He decided he wanted to be
a doctor when he was 12 years old. It was 1966, the year the Beatles released Revolver, and his
older brother was nearly killed by a drunk driver. “At that moment I decided that I wanted to
help people,” he says.

He trained in three specialties—internal medicine at the University of Chicago–Michael Reese
Hospital, then medical oncology and radiation oncology at Harvard—and at the age of 34
became the director of Staten Island University Hospital’s radiation oncology department.
Though it’s rare for a doctor who’s never practiced full-time to be the director of a program, it
wasn’t exactly a prestige post. Before Lederman’s arrival in 1987, the radiation oncology


Lecture 16 33

department was just what you’d find in most community hospitals; that is, if you lived on Staten
Island and your kid needed radiation, you’d wait about five seconds before driving to Sloan-
Kettering or New York-Presbyterian. The department had a single aging cobalt machine and saw
only eleven patients a day.

The ambitious new director set out to change that. Lederman forged a close relationship with
then–hospital CEO Rick Varone, and, over the next decade, persuaded the administration to buy
five linear accelerators, at $1.8 million a pop. In 1991, Lederman became the first doctor in New
York to offer brain radiosurgery. Unlike standard radiation treatment, which irradiates a large
field around a cancer, exposing healthy tissue to low doses of toxic radiation, radiosurgery is
designed to zero in on the tumor. Finely shaped radiation beams are sent into the head from
many different directions, with the full dose concentrated where they intersect. The upshot is that
larger doses can be trained on the cancer, while healthy tissue is minimally affected. Lederman
describes it with an elegantly simple metaphor: “Imagine a plum in a bread box . . . Radiosurgery
can hit the plum without attacking the bread box.”

Still, the machines were worth nothing unless they had bodies to aim at, so Lederman started
spreading the gospel of radiosurgery, for which he charged about $18,000 per round of
treatment. “My feeling was, if you have a new treatment, then people should learn about it,” he
says. “We were educating people.” There were radio ads, cable-television spots, Internet
advertising, and presentations at the hospital. Lederman also went on tour, traveling to Italy,
England, Israel, and many other countries to speak to prospective patients and examine their CT
scans on the spot.

CEO Staten Island Hospital-Anthony Ferreri

18

Heart Society's annual Wine Festival & Casino Night


Lecture 16 34

Added by Melinda Gottlieb on September 17, 2009 at 9:48 AM
Dr. Dennis Bloomfield, left, Angelina Malerba, owner of Angelina’s Ristorante, and Staten Island
University Hospital CEO Anthony Ferreri share a moment at the Staten Island Heart Society’s annual
Wine Festival and Casino Night at Angelina’s in Tottenville. The event was presented by Aida’s World of
Liquors. STATEN ISLAND ADVANCE/HILTON FLORES ----- Dr. Dennis Bloomfield, Angelina
Malerba (Angelina's Ristorante), SIUH CEO Anthony Ferreri. The Staten Island Heart Society's annual
Wine Festival & Casino Night at Angelina's Ristorante...presented by Aida's World of Liquors.

Read more: Gil Lederman's Dubious
Career http://nymag.com/nymetro/health/features/10817/#ixzz0heGUavhf


Lecture 16 35

Case 2009-8


Lecture 16 36

In Connecticut, Yale-New Haven Hospital entered into
a civil settlement agreement with the Government in
which it will pay approximately $3.8 million to resolve
allegations that it violated the FCA. These allegations
involved charges to Medicare for infusion therapy,
chemotherapy administration and blood transfusion
services.
During the time-period at issue, Medicare only allowed
payment for one unit of infusion therapy and
chemotherapy administration per patient visit, and one
unit of blood transfusion services per day.

19

To set forth the commitment of the University of Miami to compliance with (1) the federal
False Claims Act, 31 U.S.C. § 3729, et seq.; (2) the Florida False Claims Act, Fla. Stat. §§ 68.081
– 68.092; and (3) state Medicaid plan amendments promulgated to comply with Section 6032
(Employee Education About False Claims

Yale University has entered into a civil settlement
agreement with the federal government in which it will
pay $7.6 million to resolve allegations that it violated
the False Claims Act and the common law in the
management of federally-funded research grants
awarded to the university between January 2000 and
December 2006.
The grant awards were made by approximately 30
federal agencies and entities, including NIH, NSF,
DOE, DOD, and NASA.

20 continued...


Lecture 16 37

The investigation focused on allegations involving two types of
mischarges to federal grants. Both types of mischarges arose as
violations of the basic principle that recipients of federal grants
are allowed to charge to each grant account only “allocable”
costs, which are costs that relate to the specific objectives of that
grant project.

The first allegation involved cost transfers and the requirement that
costs transferred to a federal grant account must be allocable to
that particular grant account. The settlement resolves allegations
that some Yale researchers at times improperly transferred
charges to a federal grant account to which those charges were
not allocable. Researchers allegedly were motivated to carry out
these wrongful transfers when the federal grant was near its
expiration date and they needed to spend down the remaining
grant funds. Federal regulations require that unspent grant funds
be returned to the government.
21

The second allegation involved salary charges and the
requirement that charges to federal grant accounts for researcher
time and effort must reflect actual time and effort spent on a
particular grant. It was alleged that some Yale researchers
submitted time and effort reports, for summer salary paid from
federal grants, that wrongfully charged 100 percent of their
summer effort to federal grants when, in fact, the researchers
expended significant effort on unrelated work.

Researchers allegedly were motivated to carry out these wrongful
salary charges by the fact that they are not paid their academic-
year salary by Yale during the summer. The only salary received
by these researchers during the summer was the result of the
effort they charged to federal grants. Absent the alleged grant
mischarges, the researchers would not have been paid.

The $7.6 million payment comprises two components: $3.8
million in actual damages for the false claims, and $3.8 million
assessed as penalties for the false claims

22


Lecture 16 38

Yale-New Haven Hospital

20

21


Lecture 16 39

President and CEO of Yale New Haven Hospital

22

Marna P. Borgstrom, of Guilford, has been named president and chief executive officer of Yale-New Haven Hospital and Yale New Haven Health System
succeeding Joseph A. Zaccagnino who will retire on September 30 after a distinguished 35-year career.

Borgstrom, a 26-year employee of Yale-New Haven Hospital, has served as the
hospital's executive vice president and chief operating officer since 1993. Her
appointment is effective October 1, 2005.
"Marna Borgstrom has been a dedicated and talented leader at Yale-New Haven Hospital for more than 25 years," said Marvin K. Lender, chairman of the
Yale-New Haven Hospital board of trustees. "Her leadership skills and commitment are evident to all who meet her. She was the unanimous choice of both
the search committee and the full board of trustees."

Prior to being named executive vice president and chief operating officer, Borgstrom served as the senior vice president of administration from 1992-1993.
From 1985 to 1992, she served as vice president of administration. Borgstrom joined Yale-New Haven Hospital in 1979 as an administrative fellow. She
also served in a number of administrative roles during her career at Yale-New Haven Hospital. She is the first woman to be named as president and CEO of
the hospital and the health system.

"We have great confidence in Marna's leadership," said Julia M. McNamara, chair of the Yale New Haven Health System board of directors. "Her talent
and personal qualities, as well as her experience and knowledge of this health system will allow for a seamless transition and her vision will set the stage
for a strong future."

As executive vice president and chief operating officer of Yale-New Haven Hospital, Borgstrom has been responsible for the system's $850 million
operating budget and she has served as the primary liaison with the Yale University School of Medicine. During her career, Borgstrom directed the
completion of the $51 million South Pavilion renovation and the construction of the $156 million Yale-New Haven Children's Hospital, as well as the
opening of the Shoreline Medical Center in Guilford.

In her role as executive vice president of the Yale New Haven Health System, Borgstrom has overseen a system with more than 1,500 licensed beds and a
combined operating budget of more than $1.3 billion at Yale-New Haven, Bridgeport and Greenwich hospitals. The largest health system in the state of
Connecticut, Yale New Haven Health System was created in 1995 and in addition to its three primary members, maintains a contractual relationship with
Westerly Hospital in Rhode Island.


Lecture 16 40

"Yale University enjoys a strong and mutually beneficial relationship with the entire Yale New Haven Health System," said Richard Levin, president of
Yale University. "We have the utmost confidence in Marna Borgstrom's ability to bring together the resources in all of our institutions to advance our
mission as one of the nation's premiere academic medical centers and health care systems."

Borgstrom received a Master of Public Health degree in hospital administration from the Yale University School of Medicine and a bachelor's degree in
human biology from Stanford University. She and her husband, Eric, have two sons.

Yale New Haven Health System (YNHHS) is the leading health care system in Connecticut with approximately 12,000 employees. YNHHS - through Yale-
New Haven, Bridgeport and Greenwich hospitals and their affiliated organizations - provides comprehensive, cost effective, advanced patient care
characterized by safety, quality and service.

Yale-New Haven Hospital is a 944-bed, not-for-profit hospital serving as the primary teaching hospital for the Yale School of Medicine. Yale-New Haven
was founded as the fourth voluntary hospital in the U.S. in 1826 and today, the hospital complex includes Yale-New Haven Children's Hospital and Yale-
New Haven Psychiatric Hospital, with a combined medical staff of about 2,400 university and community physicians practicing in more than 100
specialties.

Reporters: For more information on this release, contact Vin Petrini, (203) 688-2612.

Return to: News Release Index


Lecture 16 41

Case 2009-9


Lecture 16 42

Lester E. Cox Medical Centers, a health care system
headquartered in Missouri, has paid $60 million and
entered into a 5-year CIA with HHS/OIG to settle
allegations that it paid doctors at a local physician group
for referrals, and billed Medicare for the services resulting
from those referrals, in violation of the Anti-Kickback and
Physician Self-Referral statutes

20

PUTATIVE CLASS ACTION AGAINST LESTER E. COX MEDICAL CENTER
PURSUANT TO FAIR DEBT COLLECTION PRACTICES ACT

If you received a letter or telephone call from Ozark Professional Collections after August 10,
2002 attempting to collect a debt you may be part of a potential class action against Lester E.
Cox Medical Center (also known as Cox Hospital). During this time period, Lester E. Cox
Medical Center attempted to collect its debts under the registered fictitious name “Ozark
Professional Collections”. In doing so, Cox Hospital failed to disclose that no such entity
existed, but instead Ozark Professional Collections was merely a division of Lester E. Cox
Medical Center. Cox misled its patients so they would assume that their account was being
turned over to an independent “collection agency.” This is a clear violation of the Fair Debt
Collection Practices Act, 15 U.S.C. §1692 K.CLICK HERE TO READ THE LAW .

Cox told patients with accounts due that unless payment was received they would be turned over
to a “collection agency.” If no payment was made, Cox stopped writing or calling people under
its own name and instead did so as Ozark Professional Collections. If a debtor asked who owned
or operated Ozark Professional Collections, the debt collectors refused to answer these
questions. In fact, the employee manual for Ozark Professional Collections specifically told its
customer service representatives not to answer questions regarding the nature, ownership or
operation of Ozark Professional Collections. As a result, the patients who owed debts to Lester
E. Cox Medical Center assumed that they had been turned over to an independent collection
agency rather than merely another division of Cox Hospital to collect its debt.

In a similar case, United States District Judge, Dean Whipple, has held that this constitutes a
clear violation of the Fair Debt Collection Practices Act. Judge Whipple stated:


Lecture 16 43

“In the present case it is painfully obvious from the record that Cox Medical Centers is a creditor
who, in the process of collecting its own debts, uses a name other than its usual business name—
namely “Ozark Professional Collections”—to indicate that a third party is attempting to collect
its debt. Indeed, OPC deliberately tries to avoid telling consumers that it is a division of Cox
Medical Centers. Consequently, Cox Medical Centers is a debt collector in the eyes of the
statute. Daley v. Povena Hospital, 88 F.Supp. 2d 881 (N.D.Ill 2000) (holding hospitals using its
own employees for in-house collection under a misleading “doing business as” designation liable
under the FDCPA).”

“The Court now turns to whether Cox violated the FDCPA’s provisions. Naturally, in light of the
above ruling and the facts, the Court finds that by sending two collection letters to the
Huntsman’s on OPC letterhead, Cox committed two violations of §1692e(14). Therefore, the
Court grants Defendants summary judgment on Count IV.” CLICK HERE TO READ THE
COURT JUDGMENT

So, if you have received a collection letter or telephone call from Ozark Professional Collections
on or after August 11, 2002, you have a claim against Lester E. Cox Medical Center for violating
the Fair Debt Collection Practices Act.

A potential class action lawsuit has been filed on behalf of all individuals who received a
collection communication from Ozark Professional Collections on or after August 11, 2002.
CLICK HERE TO READ THE CLASS ACTION COMPLAINT . While the court has not
yet been asked to certify the lawsuit as a class action, we are registering potential class members
so that if and when the court does certify the class to proceed we will have already begun the
process of identifying class members. If you would like to register as a potential class member
please use the CONTACT US form on this website. CLICK HERE TO CONTACT US . It
asks for basic information such as your name, address, telephone number, e-mail address, and
account information with Cox Medical Center. It also asks for the date of any communications
with Ozark Professional Collections (OPC) requests that you send us a copy of any
communications you have had with Ozark Professional Collections and any related bills from
Lester E. Cox Medical Center, if you have them.

There is no cost or obligation to register as a class member or to participate in the class action, if
and when it is certified. In turn, if the class is not certified we may pursue certain individual
claims at our option, but reserve the right not to proceed with other claims if we determine it is
not feasible to do so. If you have any questions regarding this matter, you may contact us at our
toll free number 1/800-444-7552. For further information regarding the law firms and the
lawyers who are pursuing this potential class action, please click below to be connected to their
respective websites. Thank you for your interest and we look forward to


Lecture 16 44

Hospitals/Facilities Clinics & Physicians

Cox South Find a Physician/Clinic
3801 S. National Ave. Search by region, specialty or physician name to
Springfield, MO 65807 find the physician that best meets your health care
needs.
563-bed hospital, full-service care facility at the
heart of the "Medical Mile" in south Springfield. CoxHealth owned and operated clinics
A directory of clinics organized by clinic name.
Cox North
1423 N. Jefferson Ferrell-Duncan Clinic
Springfield, MO 65802 A directory of physicians organized by specialty

72-bed facility, and the original site of the 1906
The Clinic at Walmart
opening of Burge Hospital, which has become
Walk-in services for basic care is available through
CoxHealth.
CoxHealth at local Walmart stores.

Cox Monett
Helpful Information
801 Lincoln Ave.
Monett, MO 65708
Maps, Directions & Parking
Easy-to-use maps and directions to get you where
25-bed critical access hospital serving Monett, Mo.,
you need to be in the city, on our campuses or
and the surrounding counties.
inside a specific building.

Cox Walnut Lawn
Construction Updates
1000 E. Walnut Lawn
Please check here for current and future
Springfield, MO 65807
construction projects at CoxHealth, as well as
updates to parking, building entry and navigation
A 102-bed extension of the Cox South campus that
related to these projects.
offers Rehabilitation Services, Wound Healing and
Urgent Care.
Phone Numbers
Frequently called phone numbers for CoxHealth.
Cox Surgery Center
960 E. Walnut Lawn

New facility that provides a centralized location for
most outpatient surgeries.

Urgent Care
1000 E. Primrose

CoxHealth Adult and Pediatric Urgent Care
locations are your one-stop facilities for non life-
threatening illnesses and injuries.


Lecture 16 45

Case 2009-10


Lecture 16 46

The University of Pennsylvania Health System (UPHS)
paid $3.5 million to resolve allegations that UPHS had
erroneously submitted separate and distinct Medicaid
payment claims for blood transfusions on bills that had
more than one unit per day.
Further, UPHS allegedly submitted fraudulent claims
associated with office visits for new patients, as well
as fraudulent claims for infusion therapy. UPHS is the
20th hospital to settle under the 3-year-long
“Operation Vampire” project, aimed at uncovering
hospitals' erroneous Medicare claims associated with
blood transfusions. Including this case, Operation
Vampire recoveries total approximately $12.5 million.

30

University of Pennsylvania Health System

31


Lecture 16 47

CEO Pennsylvania Health System

32

Left to Right: Ralph Muller, CEO of the University of Pennsylvania Health System; Penn President Amy
Gutmann; and Raymond and Ruth Perelman cut the ribbon to mark the official opening of the Perelman
Center for Advanced Medicine at Penn while Dr. Arthur Rubenstein, Executive Vice President of the
University of Pennsylvania for the Health System and Dean of the School of Medicine looks on.


Lecture 16 48

Case 2009-11


Lecture 16 49

Lester E. Cox Medical Centers, a health care system
headquartered in Missouri, has paid $60 million and
entered into a 5-year CIA with HHS/OIG to settle
allegations that it paid doctors at a local physician
group for referrals, and billed Medicare for the services
resulting from those referrals, in violation of the Anti-
Kickback and Physician Self-Referral statutes

22

Lester E. Cox Medical Centers
Our MissionAbout CoxHealth
CoxHealth's Mission is to improve the health of the communities we
serve through quality health care, education and research.
and Cox Medical Centers
Lester E. Cox Medical Centers’ Mission is to provide
compassionate, quality health care, health education and
research consistent with available financial resources. Health
care will be provided without prejudice and regardless of the
patient’s ability to pay.
and Cox Monett
Cox Monett's mission is to improve the health status of our
community by providing high quality health care, education and
wellness, through value and convenience with a personal touch.

27


Lecture 16 50

Robert H. Bezanson President and CEO

28

For 28 years, I have been fortunate to be a part of the legacy and the vision of CoxHealth. As COO, my
perspective has been one concerned with operations and tactical decisions. Now, as president and CEO,
my view has expanded to include an even larger focus, including strategic planning and how CoxHealth
can better serve you – our valued customer.
One of the many ways in which CoxHealth is working to achieve this goal, is by offering you health
information in real time with coxhealth.com. If you are new to the community, or are unfamiliar with all
CoxHealth has to offer, I know you’ll enjoy our Web site.
At coxhealth.com you’ll find the latest information available in both national and local health care news,
useful information about virtually any health topic or disease, and details about the services CoxHealth
can provide you.
We welcome your feedback! If you have questions, don’t hesitate to Contact Us, and we’ll do our best to
serve you.
Robert H. Bezanson
President and CEO


Lecture 16 51

Case 2009-12


Lecture 16 52

HealthSouth and two physicians paid $14.9 million to settle
allegations that they submitted false claims to Medicare and paid
illegal kickbacks to physicians who referred patients for care in
HealthSouth hospitals, outpatient rehabilitation clinics, and
ambulatory surgery centers.
HealthSouth paid $14.2 million and agreed to amend its CIA with
the HHS/OIG to address kickback issues. Two orthopedic
surgeons paid $450,000 and $250,000 respectively to resolve the
Government’s claims against them.
The settlement resolves claims made by HealthSouth to Medicare
for patients referred by the two surgeons when the company had
financial relationships with the physicians, their former sports
medicine and orthopaedic clinic, and their research and training
foundation, that violated the Anti-Kickback and Physician Self-
Referral Statutes..

23


Lecture 16 53

Case 2009-13


Lecture 16 54

Amerigroup Corporation paid $225 million, and
entered into a 5-year CIA with HHS/OIG, to resolve
False Claims Act claims that it systematically avoided
enrolling pregnant women and unhealthy patients in
their Medicaid managed care program in Illinois.
Amerigroup was paid by the United States and the
State of Illinois to operate a Medicaid managed care
health plan to provide health care to low income
people. Amerigroup was required by law to enroll all
eligible beneficiaries.
As reported last year, a federal Court in Chicago
entered a judgment in 2007 against Amerigroup for
$144 million in damages and $190 million in penalties.
Amerigroup appealed that judgment and this
settlement resolves that appeal

24


Lecture 16 55

Case 2009-14


Lecture 16 56

Case 14- Medical Device Fraud
Medtronic Spine LLC, the corporate successor to
Kyphon Inc., paid the United States $75 million and
entered into a 5-year CIA with HHS/OIG to settle FCA
allegations that it, through a seven-year marketing
scheme, caused hospitals to bill Medicare for certain
kyphoplasties performed on an inpatient basis rather
than less costly and clinically appropriate outpatient
kyphoplasty treatment.
The kyphoplasty procedure is a minimally-invasive
surgery used to treat compression fractures of the
spine caused by osteoporosis, cancer or benign
lesions.

25


Lecture 16 57

Case 2009-15


Lecture 16 58

Case 15-Nursing Home Fraud
In Pennsylvania, the Court approved a Consent Order
resolving a Complaint for Injunctive Relief against Holland
Glen, a residential treatment nursing facility for respirator
dependent children. I
n that complaint, the United States alleged that Holland Glen,
which was licensed only as a community group home for
mentally disabled persons, not as a nursing facility, defrauded
the United States by providing substandard nursing care or
failing to provide nursing care, including failure to respond to
respiratory alarms, failure to comply with physician orders for
pulse oximeters, failure to prevent severe bed sores, and
failure to administer medications properly.

26 continued...

Case 15-Nursing Home Fraud
According to the complaint, Holland-Glen’s services substantially
departed from generally accepted professional standards of care,
thereby exposing patients to significant risk and, in some cases,
to actual harm. Many of the 20 to 30 residents at the facility
require ventilators and are fed through feeding tubes. Most of the
child-residents require around-the-clock medical attention.
The Consent Order granted permanent injunctive relief including:
the appointment of an independent manager of all facilities
owned by Holland Glen; that Holland Glen will comply with the
quality of care standards contained in the federal nursing home
facility regulations (never before applicable to a children’s facility);
and that the temporary monitors would continue to monitor the
care. The Consent Order also barred Holland Glen’s
President/CEO and Board of Directors from any management or
oversight roles.

27


Lecture 16 59

Cases 2009-16-25


Lecture 16 60

Tenet Healthcare Corporation
Tenet Healthcare Corporation, operator of the nation’s
second largest hospital chain, agreed to pay the
United States more than $900 million for billing
practices that were alleged to be unlawful in lawsuits
filed by whistleblowers.
Under the agreement, Tenet, which is headquartered
in Dallas but operates dozens of hospitals throughout
the United States, will pay a total of $900 million over
a 4-year period, plus interest, to resolve various types
of civil allegations involving Tenet’s billings to
Medicare and other Federal health care programs.

5 continued...

http://www.usdoj.gov/dag/pubdoc/hcfacreport2006.pdf

Edward Kangas, Tenet, Chairman of the Board,
Retired Chairman and Chief Executive Officer Deloitte
Touche Tohmatsu. Mr. Kangas served as Global Chairman
and Chief Executive Officer of Deloitte from 1989 to
2000. Mr. Kangas is a director of four other public
companies, Eclipsys Corporation, Electronic Data Systems
Corporation, Hovnanian Enterprises, Inc., and Intuit, Inc. In
addition, he is a board member of the National Multiple
Sclerosis Society and serves as a trustee of the Committee
for Economic Development.
Mr. Kangas is currently a member of the board of trustees of
the University of Kansas Endowment Association and a
member of the University of Kansas Business School Board
of Advisors.

6 continued...


Lecture 16 61

Trevor Fetter, President and Chief Executive
Officer Fetter, has served as President and Chief
Executive Officer of Tenet Healthcare Corporation
since September 2003. Fetter received his
bachelor’s degree in economics in 1982 from
Stanford University and a master’s degree in
business administration in 1986 from the Harvard
Business School. He began his career with Merrill
Lynch Capital Markets, where he concentrated on
corporate finance and advisory services for the
entertainment and health care industries. In 1988
he joined Metro-Goldwyn-Mayer, Inc., where he had
a broad range of corporate and operating
responsibilities, rising to Executive Vice President
and Chief Financial Officer.
7 continued...

20 months ago: This undated photo released by Tenet Healthcare Corporation shows chief executive
officer Trevor Fetter. Fetter got compensation the company valued at $9.8 million last year, according to
an analysis of a regulatory filing Monday, April 2, 2007. The bulk of compensation for Trevor Fetter
came in stock and options awards, which had an estimated value of $7.4 million when they were granted.
Fetter was paid a salary of nearly $1.1 million, non-equity incentives of about the same size, and
$276,596 in other compensation, mostly use of company's aircraft. :
www.daylife.com/photo/01S60aK3dd3nI


Lecture 16 62

J. Robert Kerrey, Tenet Director
President, New School University former United
States Senator. Mr. Kerrey has been President of
New School University in New York City since
January 2001. Prior to becoming President of New
School University, Mr. Kerrey served as a U.S.
Senator from the State of Nebraska from 1989 to
2000. Prior to his election to the U.S. Senate, Mr.
Kerrey was Governor of the State of Nebraska from
1982 to 1987 Prior to entering public service, Mr.
Kerrey founded and operated a chain of restaurants
and health clubs. He is also a director of the
Concord Coalition. Mr. Kerrey holds a degree in
Pharmacy from the University of Nebraska.

8 continued...

http://people.forbes.com/profile/j-robert-bob-kerrey/36557

Floyd D. Loop, M.D. Tenet Director
Former Chairman and Chief Executive Officer The Cleveland
Clinic Foundation. Dr. Loop retired as the Chief Executive
Officer and Chairman of the Board of Governors of The
Cleveland Clinic Foundation in October 2004, a position he held
for fifteen years. He currently serves as a consultant to the
Foundation. Before becoming the Foundation’s Chief Executive
Officer in 1989, Dr. Loop was an internationally recognized
cardiac surgeon. He practiced cardiothoracic surgery for 30
years and headed the Department of Thoracic and
Cardiovascular Surgery at The Cleveland Clinic from 1975 to
1989. Dr. Loop is a director of one other public company,
Intuitive Surgical, Inc. He is also a director of Noteworthy Medical
Systems, Inc., Passport Health Communications, Inc. and Visible
Assets Inc

.
9

www.science.purdue.edu/.../2005/FLoop.asp


Lecture 16 63

Hospital Fraud
St. Barnabas Health Care System, the largest health
care system in New Jersey, paid $265 million to
resolve allegations that nine of its hospitals
fraudulently increased charges to elderly patients to
obtain enhanced Medicare reimbursement for outlier
claims.
The United States alleged that between October 1995
and August 2003, Saint Barnabas and nine of its
hospitals purposefully inflated charges for inpatient
and outpatient care to make these cases appear more
costly than they actually were, and thereby obtained
outlier payments from Medicare that they were not
entitled to receive.

10 continued...

http://www.usdoj.gov/dag/pubdoc/hcfacreport2006.pdf

St. Barnabas Health Care System

11

Attending the Monmouth Medical Center capital campaign donor thank your reception included (from
left to right): Frank J. Vozos, MD, executive director of Monmouth Medical Center; Tammy Snyder
Murphy, chair of the Monmouth Medical Center Foundation Board of Trustees; Judi Dawkins, past chair
of the Foundation Board; Ronald J. Del Mauro, president and CEO of the Saint Barnabas Health Care


Lecture16 F&A2011

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