Wound Care Company to Pay up to Nearly $23 Million to Settle Multiple Whistleblower Actions Alleging Wound Care Fraud

On Wednesday, June 20, 2018, the Department of Justice announced that Healogics, Inc., a Jacksonville, Florida-based company that manages nearly 700 hospital-based wound care centers across the country has agreed to pay up to $22.51 million to settle allegations that it violated the False Claims Act by knowingly causing wound care centers to bill Medicare for medically unnecessary and unreasonable hyperbaric oxygen (“HBO”) therapy.  In a separate settlement, announced on the same day, Healogics also agreed to pay nearly $400,000 to resolve another False Claims Act case that alleged Healogics improperly billed government healthcare programs for Evaluation & Management visits.

Whistleblowers Are Rewarded for Alerting the Government to Fraud

The allegations resolved in the $22.51 million settlement were originally brought in two separate whistleblower, or qui tam, lawsuits. The two cases that led to this settlement were consolidated into one action in U.S. District Court for the Middle District of Florida.  One lawsuit was filed by a former Director for Research and Quality for Medical Affairs at Healogics and a separate lawsuit was filed by two doctors and a former program director who worked at Healogics-affiliated wound care centers.  These lawsuits were filed under the qui tam provisions of the False Claims Act, which permit private citizens with knowledge of fraud against the government to bring an action on behalf of the United States and to share in any recovery.  Under the False Claims Act, the government can recover up to three times the amount of money that the defendants defrauded the government and as well as civil penalties between $5,500 and $11,000 for each false claim for payment the defendants made to the government.

The False Claims Act also provides that the whistleblowers, known as relators, who originally file a case are entitled to 15-30% of the government’s recovery. The whistleblowers that brought the respective cases against Healogics, resulting in the $22.51 million settlement, will receive up to $4,276,900.

Medically Unnecessary Hyperbaric Oxygen Therapy Defrauds Medicare

HBO therapy is a service covered by Medicare that is used to treat chronic wounds by exposing the entire body to oxygen under increased atmospheric pressure.  However, for Medicare to pay for HBO therapy, a patient must meet certain criteria demonstrating that HBO therapy is medically necessary or even helpful in healing the patient’s wounds.  The settlement resolves allegations that from 2010 through 2015, Healogics knowingly submitted or caused the submission of false claims to Medicare for medically unnecessary or unreasonable HBO therapy.

Healogics Will Also Pay Nearly $400,000 in a Separate Settlement Regarding Improper Coding

In a separate and non-consolidated settlement, announced on the same day — June 20, 2018 — Healogics also agreed to pay $398,162.69 to resolve another False Claims Act case that was pending in the Northern District of Iowa.  This settlement is related to allegations that Healogics submitted claims to Medicare, Medicaid and Tricare using a code known as Modifier 25 to signify that a separate evaluation and management service was performed on the same date as another procedure when no such separate service was actually performed.

Similar to the HBO therapy settlement, this case originated when private citizen filed a qui tam lawsuit alleging Healogics was defrauding government health care programs.  The private citizen in that case will receive $91,577.42 as their percentage of the government’s recovery.  Furthermore, the False Claims Act provides that a defendant must also pay a successful whistleblower’s attorney fees incurred in pursuing a False Claim Act case.  In this case, Healogics has agreed to pay the whistleblower’s law firm an additional $48,694.37 in fees.

Using the False Claims Act to Protect Patients and Prosecute Wound Care Fraud

Commenting on the Florida Settlement, Special Agent in Charge Shimon R. Richmond of HHS OIG stated: “[w]hen greed is the primary factor in performing medically unnecessary health care procedures on Medicare beneficiaries, both patient well-being and taxpayer funds are compromised.”  With a growing expansion of for-profit wound care companies, such as Healogics, moving into consultant roles with hospital based wound care centers, monitoring and enforcing the necessity of wound care procedures is an important issue for the Department of Justice and concerned private individuals with knowledge of wound care fraud.

Frohsin Barger and Walthall would like to thank and congratulate the government officials and agencies who achieved this settlement including the Department of Justice Civil Division’s Commercial Litigation Branch, the United States Attorney’s Office for the Middle District of Florida, and the Department of Health and Human Services Office of Inspector General.  Further, we would like to thank and congratulate the whistleblowers and their counsel, the law firms of Morgan & Morgan, Kelley Drye & Warren LLP, Rouse Law PC and Brady & Associates.

To learn more about the False Claims Act click here

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