$10 million settlement ends fraud case
Years after a whistle-blower first took on the unenviable task of trying to stop rampant Medicare billing fraud, the bell has finally tolled for Transworld Healthcare in New York City — to the tune of $10 million. The official settlement was unsealed recently.
Christopher Piacentile, a New Jersey businessman, filed a qui tam suit on behalf of the United States under the False Claims Act, alleging that Transworld engaged in a massive kickback scheme in order to generate patient referrals. Piacentile was awarded $1.35 million for his efforts. Attorney Mitch Kreindler of Phebus & Winkelmann in West Chester, PA, was Piacentile’s primary attorney.
"My client became aware of illicit activities, and instead of looking the other way, he took a stand and used an important tool — the False Claims Act — which empowers citizens to stop fraudulent activities against the government," says Kreindler. "In the process, he has helped to stop practices which promote escalating medication prices and put people in potential danger."
Illicit marketing schemes uncovered
Transworld, which distributes a variety of unit-dose medications through subsidiary companies, agreed to pay $10 million to the U.S. government to settle the suit. Most of the medicines involved were pre-mixed, unit-dose respiratory medications, such as albuterol, which is widely used by asthma sufferers.
Piacentile uncovered evidence of illicit marketing schemes and kickback arrangements used by RespiFlow, a Jacksonville, FL-based subsidiary of Transworld, and other Transworld-related entities. He brought the matter to the attention of the government and filed suit under the False Claims Act in October 1997 in the Eastern District of Pennsylvania. In September 1999, the case was transferred under seal to the U.S. District Court for the Eastern District of Texas in Sherman.
Suit alleges payment for patient referrals
Piacentile’s suit alleged that Transworld engaged in the systematic defrauding of Medicare and other government-funded health insurance programs by claiming or causing excessive reimbursements as part of a nationwide marketing scheme. Specifically, the suit claimed that Transworld improperly induced patient referrals by paying kickbacks to durable medical equipment suppliers and physicians in exchange for patient referrals, boasting that the kickbacks "could be a gold mine" for the recipients. Also, the suit alleged that Transworld routinely waived co-insurance payments for Medicare beneficiaries.
Disguised as "marketing fees," Transworld allegedly paid up to $750 in kickbacks to durable medical equipment suppliers and physicians for single patient referrals. Once the referral was made, no additional work was required of the referral source. Transworld paid the kickbacks in small increments each time a patient received a medication shipment. Transworld subsidiaries used a similar kickback program in the promotion of diabetic, urological, urinary, tracheal, ostomy, enteral, and surgical supplies and products.
"This was a clear kickback operation with substantial ramifications," Kreindler says. "Transworld wanted patients to use their products, and they were willing to buy’ such patients by paying others. By all accounts, they were successful on both counts. As a result, the Medicare program incurred extra, fraudulent costs, and a potentially dangerous situation involving the oversupply and overutilization of drugs was created."
In False Claims Act suits, the government, complainant (known as the "relator"), and attorneys only receive a financial benefit if a recovery is made from the company committing the alleged misconduct.
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