Twelve-Year Litigation Put to Bed

The University of Pittsburgh Medical Center (UPMC) paid $38 million to settle a whistleblower-initiated—aka “qui tam”—False Claims Act (FCA) suit earlier this month, ending more than a decade of investigation and litigation. The whistleblowers, three UPMC clinicians, initially brought suit in 2012, alleging UPMC and 13 of its neurosurgeons falsely billed Medicare for medically unnecessary or overly complex procedures and reaped resulting bonus compensation. UPMC settled related allegations in 2016 for $2.5 million.

At the heart of the whistleblower’s claims was the allegation that UPMC incentivized the neurosurgeons to perform their procedures at UPMC facilities by providing base pay and productivity bonuses that resulted in total compensation “well-above fair market value.” According to the whistleblowers, the arrangement led to higher total compensation for the neurosurgeons and increased revenues for the hospital system.

The whistleblowers claimed the incentive scheme violated the Physician Self-Referral Law, commonly known as the Stark Law, which prohibits physicians from referring patients to receive certain designated health services payable by Medicare or Medicaid from entities in which the physician (or an immediate family member) has a financial relationship. A violation of the Stark Law can serve as the basis for a violation of the FCA. In court filings prior to the settlement, UPMC asserted that the compensation and bonus packages paid to physicians were industry standard.

FCA cases brought under the Act’s whistleblower provisions, like the case against UPMC, are initially filed under seal—meaning the whistleblower’s complaint is not publicly available or even served on the defendant accused of fraud or false claims. The sealed period allows the Department of Justice (DOJ) to investigate the claims. At the conclusion of its investigation, DOJ must decide whether to join the whistleblower’s case or “decline” to intervene in the matter, leaving the whistleblower to litigate the unsealed case on her own—and potentially obtain a substantially increased bounty for her efforts.

Even where DOJ chooses not to participate in a FCA case, the government remains the “real party in interest,” and maintains important rights.

For example, DOJ:

• May later intervene in the action on a showing of good cause;
• May move to dismiss or settle the suit, even over the whistleblower’s objection;
• Must approve any settlement; and
• Determines the whistleblower’s share of any recovery.

In UPMC’s case, after investigating for more than four years, DOJ chose to partially intervene, settling claims relating to physician services in 2016. As to the whistleblowers’ remaining claims—those resulting in the recent $38 million settlement—DOJ declined to join in the litigation. Because DOJ did not intervene in the recently settled claims, the whistleblowers will receive approximately $11 million of the total settlement, with the government collecting the remaining $27 million. Notably, the $38 million settlement is believed to be one of the largest FCA settlements based on Stark Law violations where the DOJ declined to intervene.

If you have any questions regarding False Claims Act investigations or litigation, please contact Enforcement Insider Editors Rosie Dawn Griffin (rgriffin@feldesman.com) and Mindy B. Pava (mpava@feldesman.com) or call 202.466.8960. Be sure to also check out our Enforcement Insider blog to stay up to date on the latest enforcement actions and court decisions of interest to federal grantees and other recipients of federal funding.