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Report Medicare Fraud: How to report Medicare or Medicaid fraud for a whistleblo

Report Medicare Fraud


How to report Medicare or Medicaid fraud for a whistleblower reward


By Joel D. Hesch, Esq.


Copyright © 2017 by Joel D. Hesch, Esq.


All rights reserved. No part of this book may be reproduced in any form or by any electronic or mechanical means without permission in writing from the publisher and author, except by a reviewer, who may quote brief passages in a review.



Disclaimers. The views expressed by the author are his own personal beliefs. This book should not be construed as legal advice. Each case is unique and must be evaluated on its own merits. Past amounts of recoveries do not guarantee future rewards. You should consult an attorney experienced with the Department of Justice Whistleblower Reward Program, before deciding whether to file for a reward.


Table of contents


Why report Medicare or Medicaid fraud?

Two ways to report Medicare fraud

Reporting Medicare fraud to DOJ for a reward

Reporting Medicare fraud to CMS without a DOJ reward

More details about the DOJ Reward Program

The Four F Factors to receiving a DOJ reward

Other guidance and FAQ to filing for a reward

Amount of rewards: How much will I get?

How much does it cost to hire an attorney?

What to expect from your attorney

How long it takes to get a DOJ reward

Why DOJ rejects cases

Personal risks for reporting Medicare fraud

The need for selecting the right attorney to evaluate your DOJ reward case

How to ask Mr. Hesch to file your DOJ reward application

Examples of Medicare Fraud

Bullet list of examples of Medicare fraud

Pharmaceutical fraud

Medicaid Rebate Fraud by drug companies

Off-Label Promotion by drug companies

Kickbacks by drug companies

Adulterated drugs

Long Term Acute Care Hospital (LTACH) fraud

Upcoding fraud

Home Health Care fraud

Stark fraud by physicians

Medicare Advantage Risk-Adjustment fraud under Medicare Part C

Clinical laboratory fraud

Unbundling fraud

Unreasonable costs of goods or services fraud

Fraud by Medicare fiscal intermediaries, carriers, and others

About Joel D. Hesch, Esq.




Why report Medicare or Medicaid fraud?


Medicare fraud affects us all. Ten percent of all Medicare and Medicaid (collectively referred to as Medicare) funds spent by the federal government are lost due to fraud. Because the government is spending $650 billion a year under the Medicare program that means $65 billion a year is lost to Medicare fraud. It’s no wonder why we have a national health care crisis!


That’s also why I wrote this book. I worked in the Department of Justice (DOJ) Whistleblower Reward office in Washington D.C. for over 15 years and worked on cases recovering $1.5 billion. I’ve seen and combatted fraud first hand and know what it takes for a whistleblower to successfully report Medicare fraud. I left DOJ and formed The Hesch Firm, LLC to exclusively represent whistleblowers nationwide to help them report fraud against the government. I’m now sharing my insights so that together we can curb Medicare fraud.


First, book explains how to report Medicare fraud the correct way in order to get the attention of the government and ensure that an investigation takes place.


Second, this book puts fraud-doers on notice that the public is fed up with Medicare fraud and is now armed with information on how to report it. Given that there are sizable monetary rewards being offered by the Department of Justice (DOJ) for reporting Medicare fraud, there is a strong incentive for whistleblowers and law firms to take a stand. The more whistleblowers step forward to claim rewards, the less likely companies will try to cheat because they will finally realize that they can’t get away with it anymore.


The money stolen by those cheating Medicare comes out of your pocket, as a faithful citizen and taxpayer. Worse yet, for every dollar lost to Medicare fraud is one less dollar available for our elderly or disadvantaged citizens that need health care. Are you willing to put up with that or do you want to do something about it?


It’s time to put an end to fraudulent Medicare claims! Here’s how you can be part of the solution.


This book is provides step-by-step instructions for reporting Medicare fraud, either for a reward or anonymously. It outlines in detail the Department of Justice (DOJ) Medicare Reward program as well as how to report fraud directly to the Centers for Medicare & Medicaid Services (CMS). It is your one resource for all you need to know about reporting Medicare fraud.


Let’s begin.


Two ways to report Medicare fraud


There are two ways to report Medicare fraud. They are drastically different, with different ways of reporting and different results. This book explains both methods, and describes the pros and cons of each. It also walks your through both methods with detailed instructions on how to apply for a significant reward.


The first method is to report Medicare fraud under the U.S. Department of Justice (DOJ) whistleblower reward program. The second is to report fraud directly to the Centers for Medicare & Medicaid Services (CMS), which is part of the Department of Health and Human Services (HHS) and oversees the Medicare and Medicaid programs.


Although both offers rewards, the DOJ program mandates that the reward must be between 15% and 30% of the amount recovered and does not have a cap. The average reward under the DOJ program for Medicare fraud is $690,000, with some rewards topping $150 million. On the other hand, reporting fraud directly to CMS has a $1,000 limit on rewards. There are other significant differences between the DOJ and CMS reward programs beyond reward amounts, which are discussed in the next chapters.



Reporting Medicare fraud to DOJ for a reward


Because CMS, which runs the Medicare and Medicaid programs, only catches a small amount of Medicare fraud, Congress passed a law known as the False Claims Act (FCA) requiring the Department of Justice (DOJ) in Washington, D.C., to create a Whistleblower Reward Program. The FCA mandates that DOJ pay whistleblowers that properly report Medicare fraud between 15 and 30 percent of what it recovers—based on the whistleblower’s information—no matter how large the recovery is. So far, the largest reward in a single case has topped $150 million. The government wins too, because it gets to pocket the 70 to 85 percent of the rest of the funds collected back. Today, over three-fourths of all government fraud cases are whistleblower reward cases. Thus, DOJ is counting on you to bring Medicare fraud cases for a DOJ reward.


The DOJ reward program goes like this. Assume a health care provider cheats Medicare by $10 million. If you properly follow the steps in reporting it, your reward will be between $1.5 million and $3 million and the government gets to keep $7 to $8.5 million. Now that is a great return on investment for the government because without the whistleblower, it would not have been aware of the fraud or recovered anything back.


Many whistleblowers don’t want rewards, but simply to put an end to Medicare fraud. That is a great attitude. However, there actually are some very good reasons to apply for a Department of Justice (DOJ) whistleblower reward.


First, the only way to ensure that the government not only opens an investigation, but also assigns a DOJ attorney to evaluate your allegations is to apply for a reward under the DOJ reward program. To be eligible for a DOJ reward, the FCA requires that a whistleblower (through counsel) file a complaint in federal court alleging the fraud and serving the complaint on the U.S. Department of Justice. By law, DOJ must investigate every single complaint filed under the FCA reward statute. That means that a DOJ attorney is assigned to evaluate the allegations and determine if they have merit and if DOJ should take over the suit and pursue the fraud allegations. But if you don’t file for a reward, often there is not a DOJ attorney assigned.


Second, by using a whistleblower attorney to represent you, you are more likely to put together a more compelling description of the fraud and get the attention of the assigned DOJ attorney. Think about it this way, if you were a DOJ attorney assigned to investigate Medicare fraud, wouldn’t it matter to you if the attorney submitting the reward application had prior experience working at DOJ or had successfully obtained rewards under the DOJ reward program? The attorney signing and filing the FCA complaint is putting their reputation on the line by certifying that they investigated the allegations of Medicare fraud. That’s also why the DOJ reward program requires that you use an attorney to file for a reward. Your attorney will investigate the Medicare fraud allegations and prepare a complaint and statement of material evidence in support. DOJ relies on these documents to determine the scope of its investigation and how many resources to assign.


Third, by law, DOJ must inform your attorney of the results of the FCA investigation of the Medicare fraud allegations. But this is only true if you file for a reward under the DOJ program. In those cases, your attorney regularly communicates with the DOJ attorney, and can offer to assist in the investigation, such as helping DOJ draft subpoenas, review documents, and conduct legal research.


In short, the only way to ensure that anyone in the government even opens a case is to file for a reward under the DOJ reward program. Also, under the DOJ reward program, you will learn of the results of the DOJ investigation and receive a portion of the amounts collected—assuming your attorney properly filed the FCA complaint. Later chapters provide more details about applying for a reward under the DOJ reward program and answer frequently asked questions (FAQ).


Here are the pros and cons of filing for a DOJ reward:



p<>{color:#000;}. DOJ must assign an attorney to investigate your allegations

p<>{color:#000;}. You can choose your attorney to file for the reward

p<>{color:#000;}. Your attorney works with DOJ and urges it to take the case

p<>{color:#000;}. Your attorney works on a contingency basis and cover all costs

p<>{color:#000;}. DOJ must keep your attorney informed of the status and results of the investigation

p<>{color:#000;}. Your attorney can pursue the case even if DOJ declines to take action

p<>{color:#000;}. You receive between 15% and 30% if you properly file, with no cap on the amount



p<>{color:#000;}. It takes a long time and much energy to provide detailed information

p<>{color:#000;}. Your name will eventually be made know for reporting the fraud


[If at any time reading this book you are ready to ask Mr. Hesch to review your Medicare fraud allegations in complete confidence and ask him to consider filing for your DOJ reward, there is a chapter entitled, How to ask Mr. Hesch to file your DOJ reward application.]



Reporting Medicare fraud to CMS without a DOJ reward


If you do not want a DOJ reward and you do not want to have an attorney help you investigate or report the fraud, then you can contact CMS directly to report Medicare fraud. You can even call a CMS hotline or fill out a form anonymously.


The biggest benefit of reporting fraud this way is that it is easy and quick. However, the downside is that you won’t know if the government ever even opened an investigation and the government has no duty to contact you or let you know the status or results of the investigation. The only way to ensure that an investigation is opened and pursued is to apply for a reward under the DOJ program, as outlined above.


At the same time, not everyone is willing to become a whistleblower or spend the amount of time it takes to put together a full description of the fraud. Later chapters also explain the risks in reporting Medicare fraud. In addition, sometimes the fraud is too small for an attorney to take the case. Many of the most experienced Medicare Fraud attorneys, such as Mr. Hesch, require that the amount of Medicare fraud be at least $5 million to represent you. That’s because attorneys take whistleblower reward cases on a contingency basis. If the amount of fraud to the government is less than $5 million, it might not be worth it to the attorney to take the case. Therefore, there is a proper time to contact CMS directly.


Here is what the CMS website instructs you to do to report fraud directly to it:

Call us at 1-800-MEDICARE (1-800-633-4227).


Report it online to the Office of the Inspector General (https://oig.hhs.gov/fraud/report-fraud/index.asp).


Call the Office of the Inspector General at 1 800 HHS TIPS (1 800 447 8477). TTY: 1 800 377 4950.


Here is what CMS describes as its reward program and requirements:


You may be eligible for a reward of up to $1,000 if:

p<>{color:#000;}. You report your suspected Medicare fraud. The allegation must be specific, not general.

p<>{color:#000;}. The suspected Medicare fraud you report must be confirmed as potential fraud by the Program Safeguard Contractor, the Zone Program Integrity Contractor, or the Medicare Drug Integrity Contractor (the Medicare contractors responsible for investigating potential fraud and abuse) and formally referred as part of a case by one of the contractors to the Office of Inspector General for further investigation.

p<>{color:#000;}. You aren’t an “excluded individual.”

p<>{color:#000;}. The person or organization you’re reporting isn’t already under investigation by law enforcement.

p<>{color:#000;}. Your report leads directly to the recovery of at least $100 of Medicare money.

The incentive reward can't exceed 10% of the overpayments recovered in the case or $1,000, whichever is less. If multiple individuals qualify for a reward, the reward is shared among them. If you want to know more about the Incentive Reward Program, call 1-800-MEDICARE.


For more information about reporting fraud directly to CMS, see the CMS website at:


[+ https://www.medicare.gov/forms-help-and-resources/report-fraud-and-abuse/report-fraud/reporting-fraud.html+]


Here are the pros and cons of reporting Medicare fraud to CMS instead of DOJ:



It is easy to call a hotline or report the fraud directly to CMS

You can remain anonymous

CMS offers a reward of up to $1,000



The government does not need to open an investigation

The government does not need to tell you the results of its investigation

You cannot obtain a DOJ reward simply by reporting fraud to CMS

The amount of a CMS reward is limited to $1,000



More details about the DOJ Reward Program


Under the DOJ reward program, there is a very specific process for filing a Medicare whistleblower complaint. If you do not follow every step you won’t be eligible for a DOJ reward. It begins by having your attorney file a Medicare whistleblower complaint and serving it upon DOJ. But this is not the same thing as calling a hotline or even sending DOJ a letter outlining the fraud. In fact, even if you trigger the investigation that leads to a health care provider repaying misused funds, the government cannot pay a reward unless you follow each and every step in properly filing a Medicare whistleblower complaint under the DOJ reward program.


The next several chapters take you step-by-step through the entire process, including the factors DOJ considers when investigating allegations and paying rewards, as well as how to find an attorney to represent you. Later chapters address common Medicare fraud schemes where DOJ pays significant whistleblower rewards.




The Four F Factors to receiving a DOJ reward


If we distill the DOJ Reward Program down into its core components, there are four factors necessary for a whistleblower to gain the attention of DOJ and receive a reward. I call these key elements the Four F Factors:


p<>{color:#000;}. Filing first

p<>{color:#000;}. Format is fundamentally correct

p<>{color:#000;}. Fraud under a federal program, such as Medicare

p<>{color:#000;}. Funds are forfeited


If a single one of these F Factors is missing, you won’t receive a DOJ reward. That doesn’t mean, of course, that having all Four F Factors will guarantee you a reward. The Four F Factors simply have the greatest impact upon whether DOJ looks favorably upon your case. Knowing how to enhance these factors should greatly help you develop a winning submission and take a bite out of Medicare fraud.


Filing first


Congress has decided that only one whistleblower is eligible to receive a DOJ reward for each particular instance of fraud. To avoid subjectively deciding which person provided the most helpful information, the FCA reward statute favors paying the first person to file the FCA complaint.


It is this simple: If someone else already filed a FCA complaint on the same fraud allegation, you won’t be eligible for a reward. By the same token, if you file a proper complaint first, you won’t have to share your reward with anyone else. Of course, if a company is cheating in more than one way, there can be multiple rewards paid for each fraud scheme.


In some instances, the First to File rule has resulted in a race to the courthouse. However, you must guard against the temptation of rushing the application process. This first F Factor is only one of several barriers to becoming a successful whistleblower. It will do you little good to be the first to file an action, only to be rejected a year later when flaws surface. That’s because DOJ declines 75 percent of the reward applications because they are filled with flaws or don’t meet all of the other requirements.


Racing too hard to beat a hypothetical whistleblower can actually thwart your overall chance of receiving a reward. Still, you should not delay in contacting experience Medicare whistleblower reward counsel to begin the process of preparing a timely and quality application.


It is also worth repeating that the only way to receive a reward is to file a FCA complaint through legal counsel. My heart breaks each time I receive an email from a whistleblower that reads in the news that the government just settled a $100 million case based upon their information, but they never knew that they had to file for a reward. No one in the government will tell you to file for a reward, because they cannot give you legal advice. I just wished they had read this book and contacted an experienced whistleblower attorney before the case was over. If they had, they may have received rewards of over $20 million. It’s too late to ask for a reward once the DOJ case is over or if another whistleblower jumps in line ahead of you.


Format is fundamentally correct


As indicated earlier, many people incorrectly think that they simply need to call an agency hotline to be eligible for a DOJ reward. However, to qualify for the huge rewards available under DOJ’s program, your attorney must actually bring a civil lawsuit on behalf of DOJ alleging in detail that someone violated the False Claims Act. This is not something that can be done overnight.


There are two other important things to do besides filing a FCA complaint. Your attorney should notify the government that you have allegations of Medicare fraud. Your attorney must also provide the government with a “written disclosure of substantially all material evidence and information” in your possession relating to the allegations.


More than one whistleblower has been ruled ineligible for a reward for failing to scrupulously follow these procedures. They are in fact more than mere technical requirements. The complaint and statement of material evidence serve the purpose of inviting DOJ to team up with you and your attorney. Remember, the ultimate goal is to enlist DOJ to take the case and use its resources to recover the Medicare funds wrongfully obtained by the defendant.


Hundreds of applications are filed each year and only those that shine make it to the top of DOJ’s pile. Thus, as explained in later chapters, it is important to find an experienced attorney who will help you evaluate the viability of your case before going further. They must then work cooperatively with DOJ.


Often out of inexperience, many whistleblowers and their attorneys fail to present persuasive evidence in their applications. I cannot overstate the importance that the application must be compelling to persuade the DOJ attorney to champion the case. Don’t fall prey to relying upon an inexperienced attorney who files a poorly prepared application. Of course, there is no guarantee that your application will be rewarded, regardless of your attorney’s efforts. But be sure to find an attorney who has significant experience working at DOJ or with the DOJ Reward Program—someone who will also actively help you determine whether you meet these criteria and direct you in gathering additional support prior to filing if you don’t.


Fraud under a federal program, such as Medicare


The third F Factor is that the whistleblower must allege (and DOJ ultimately prove) that actionable fraud occurred under the Medicare program or another federal contract or program. There are two important elements here.


1. You must go beyond mere suspicion and actually show that the claims were false.


2. You must establish that the federal government was harmed by the fraud in a manner that can be quantified monetarily.


The DOJ reward program only applies to fraud against the federal government. It does not extend to fraud against insurance companies, even for health care fraud against private health care insurance entities. But it does apply to Medicare fraud, Medicaid fraud, and fraud against any other government health care program. (For details about how to obtain a reward report other types of fraud against the government besides Medicare/Medicaid fraud, visit the following website created by Mr. Hesch: www.HowToReportFraud.com. That website shows you how to report fraud against any of the other 20 federal programs.)


Funds are forfeited


This F Factor is often overlooked, but is crucial to your hopes of receiving a meaningful whistleblower reward and to curbing Medicare fraud. Simply stated, the fraud-doer must repay the ill-gotten Medicare money or there is no reward.


Whistleblowers receive a percentage of the actual recovery in the case. That means that if the amount DOJ recovers from a wrongdoer is small, your reward will be small. Conversely, as the amount DOJ collects grows, so does your reward. In fact, there is no cap on the amount of a reward. Some whistleblowers have received $150 million because DOJ recovered six times that amount from the defendant. To obtain a $2 million reward, you can expect that the defendant will have to repay $10 million.


Be mindful that if DOJ perceives your case as a small dollar suit, it may not be received with excitement. DOJ has limited resources to spend on investigations, so it may put more time into larger cases. For instance, don’t expect DOJ to spend $100,000 litigating a case where it thinks it may recover $100,000 or even $1 million. On the other hand, don’t let an attorney persuade you to allege that the case is worth millions, when it obviously to experienced counsel that it is not. Only inexperienced attorneys think they can fool DOJ into chasing after small cases by pretending they are large. In the process, you lose total credibility by overstating the case. If DOJ cannot trust your allegations of damages, why would you expect them to believe your allegations of fraud? It is very hard to earn back lost trust.



Other guidance and FAQ to filing for a reward


The next chapters cover some frequently asked questions, such as how reward amounts are determined, how to hire an attorney on a contingency basis, how long it takes to get a reward, why DOJ turns cases away, and other risks of being a whistleblower. You will also learn how to contact an attorney or even ask Mr. Hesch to consider your case. Later chapters list examples of Medicare fraud.


Amount of rewards: How much will I get?


One of the questions most frequently asked by would-be whistleblowers is “How much of a reward will I get?” There is no simple answer, but I can give you some insights. First, I will share the average amount of rewards, and then address three main factors that will determine the actual size of any DOJ reward.


First, let’s discuss the average rewards under the DOJ reward program. You might be surprised to learn that the average size of a Medicare whistleblower reward is $690,000. Of course, that does not mean you will receive that as a reward, or any reward, for that matter.


Here is how that number is calculated. DOJ keeps track of statistics on its reward program. According to DOJ, during a 30-year period of the reward program (1987 through 2016), there have been 6,683 Medicare/Medicaid fraud cases in which rewards have been paid. The total amount of rewards paid to these whistleblowers was $4 billion. Yes, that’s right. So far, DOJ has paid over $4 billion in whistleblower rewards for reporting Medicare and Medicaid fraud! When you divide that amount by the number of rewards paid, it amounts to $690,000 average. But there are dangers in using averages. There have been several $100 million rewards paid and also some rewards of under $100,000. That means for every reward over $1 million there has to be ones under $1 million for there to be an average of $690,000.


Second, here are the three most important factors in determining the size of a DOJ reward:


p<>{color:#000;}. the amount DOJ recovers from the defendant

p<>{color:#000;}. the statutory range your case falls within

p<>{color:#000;}. the level of contribution made by you and your attorney.


Predicting your reward is very difficult, especially for a layperson or an inexperienced FCA attorney. This book will not attempt to predict your particular award because each case is unique and very fact specific. Nevertheless, based on working at DOJ in the whistleblower reward office for over 15 years, I will share insights into the process and how each of the three factors fit together.


The amount DOJ recovers


The single largest factor for determining the amount of a reward is how much DOJ collects from the defendant. It is the biggest ingredient because, by law, the amount of the reward must be a percentage of the funds actually recovered in the case. The amount of funds that DOJ receives from the defendant is known as the “base amount” or proceeds upon which a reward is calculated. The following example illustrates the role and importance of the base amount.


Assuming that the reward percentage is a constant at 17 percent, consider the effect of the overall reward depending on the size of the base amount (which is how much DOJ collects).


Base Rate Reward

$ 500,000 17% $ 85,000

$ 5,000,000 17% $ 850,000

$50,000,000 17% $ 8,500,000


The reward amount rises in proportion to the base size. A bigger base is always better.

Let’s increase the rate from 17% to 19% and examine the impact.


Base Rate Reward

$ 500,000 19% $ 95,000

$ 5,000,000 19% $ 950,000

$ 50,000,000 19% $ 9,500,000


Did you notice that the increase of two percent in the rate or whistleblower share percentage, while not seemingly insignificant, is comparatively small compared to the dramatic rise in the overall reward for a larger base? You are ten times better off receiving 17 percent of $5 million ($850,000 reward) than 19 percent of $500,000 ($95,000 reward). The point is that your reward will be largely dependent upon the base amount DOJ collects.


The statutory ranges of rewards


The next step is determining which level or range of rewards your case falls within. The most typical is when the government intervenes in the DOJ reward case and the defendant pays a certain amount to DOJ, either through a settlement or according to a judgment by the court. The False Claims Act states that when DOJ takes a case the whistleblower is entitled to at least 15 percent, but not more than 25 percent, of the proceeds, depending upon the extent to which they substantially contribute to the prosecution of the case.


Another range of rewards applies to declined cases, where DOJ elects not to take the case, but the whistleblower’s attorney proceeds to prove the fraud anyway. Under the FCA, your attorney can proceed without DOJ and act as a private attorney general. However, the odds of winning in a declined case are much lower than when DOJ takes the case. But in those instances where the whistleblower settles or wins the lawsuit after DOJ declines, the amount of the reward increases to between 25 and 30 percent. The whistleblower, of course, must not only be willing and able to proceed alone, but must also actually collect the funds from the defendant in order to recover a reward in a declined case.


Just how much of a reward will you receive? It is always risky to give averages because there are so many factors involved. But here goes: The average award paid by DOJ is approximately 17.5%. To get more than that, your attorney has to do a lot of convincing with DOJ. Again, there are a lot of factors to determine where on the continuum between 15 and 30 percent your case lands.



How much does it cost to hire an attorney?


Another common question is “How much does it cost to hire an experiences FCA whistleblower reward attorney?” Because DOJ reward cases often take years to complete and there is no guarantee of a reward, the most common way to hire an attorney is to agree to give them a percentage of the reward. This is known as a contingency fee.


The rate of contingency fees, however, can vary greatly. Although attorneys generally don’t publicize their rates, expect the rate for an experienced Medicare reward attorney to charge 40 percent of the amount of a reward paid to a whistleblower. Some firms, however, have been known to charge 50 percent.


While the rate certainly affects how much you will receive, you should not select your attorney based upon the lowest contingency rate charged. Any attorney can hold himself out as qualified to do virtually any area of the law, whether it is personal injury, antitrust law, or Medicare fraud reward work. You will want to inquire into their background and experience. Conversely, do not make the mistaken assumption that the firm with the highest rate is better than one charging a more average rate. Most people tend to associate cost with value, but this assumption is not always justified. For instance, if you found a firm willing to take the case on a one-third cut rate but they did not convince DOJ to take the case, you will get zero reward.


What you may not know about attorney fees is that the DOJ whistleblower program permits your lawyer to collect from the defendant their attorney fees and costs incurred in the case. These fees will not reduce your DOJ award. They are collected by your lawyer directly from the defendant over-and-above the base amount DOJ recovers from the defendant. In other words, after a defendant pays DOJ a settlement amount, your lawyer will bill the defendant an additional amount for fees and costs. These fees are in addition to the contingency rate you pay your lawyer from the reward. Don’t expect to get a portion of these fees. They go to your attorney and are not part of the contingency arrangement. Your reward consists of the amount DOJ pays you, less the contingency fee percentage paid to your lawyer.


Don’t begrudge these additional fees your lawyer receives from the defendant. Your attorney will be battling against some of the largest and best law firms in the country trying to keep a fraud-doer from repaying the government. As Abraham Lincoln said, “A lawyer’s time and advice are his stock in trade.”


By taking your case, your attorney is giving up the opportunity to work on other matters at his normal billing rate. Considering that DOJ declines 75 percent of all Medicare fraud cases, your attorney is risking much to take your case. In addition, included in these costs are amounts of out-of-pocket expenses incurred, such as deposition fees and outside consultants and experts. In a normal case, the client would bear these costs.


The good news is that you keep 60% of the DOJ reward without having to expend any out-of-pocket costs assuming your attorney offers a true contingency fee rate.



[If at any time reading this book you are ready to ask Mr. Hesch to review your Medicare fraud allegations in complete confidence and ask him to consider filing for your DOJ reward, there is a chapter entitled, How to ask Mr. Hesch to file your DOJ reward application.]


IRS Form 1099 and tax consequences


What are the tax consequences of receiving a DOJ reward? Not surprisingly, a whistleblower reward is taxable income. Whenever DOJ pays a reward to a whistleblower, it issues to the whistleblower an IRS Form 1099. DOJ lists the full amount of the reward it paid out under the case.


The form is also sent by DOJ to the IRS listing the whistleblower as the recipient of the reward. However, on October 22, 2004, Congress passed a law stating that the whistleblower may deduct from the amount listed in the Form 1099 the amount of the contingency fee paid to your attorney so that you are only taxed on the net amount received. Because tax issues are complex and subject to change, it is a good idea to contact an experienced tax accountant or advisor before relying on any regulations that have been true in the past. This is something you can typically wait to do until a settlement is imminent and your attorney is negotiating an amount of the reward with DOJ.


The next chapter outlines the general role and duties and shows why your attorney is worth their contingency fees.




What to expect from your attorney


As you weigh the decision whether to file for a DOJ reward and agree to give 40% contingency to your attorney, consider all that will be required from your attorney to prepare a proper filing and follow the case to conclusion. Below are examples of the legal work to expect from your attorney during each aspect of the DOJ Reward Program.


As you can imagine, each of these tasks requires significant experience and skill with the DOJ reward program. It will also require some effort by you, as well as staying power. You and your attorney will be earning your DOJ reward. Below are the roles of your attorney.


Pre-Filing Stage

• listening carefully to your story

• creating an investigative plan to build a solid DOJ reward application

• analyzing whether you can meet all of the requirements of the program

• helping you weigh personal risks against potential rewards

• evaluating who should be named as defendants

• calculating the loss to the government

• creating a custom-tailored and convincing complaint and statement of material evidence

• choosing where to file the case

• filing and serving the complaint upon the government


Pre-DOJ Intervention

• preparing you, as the whistleblower, for a DOJ interview

• helping DOJ gather facts and conducting legal research

• creating damage models and calculations

• meeting with DOJ to assist it in making an intervention decision


Post-DOJ Intervention

• addressing discovery issues raised by defendant

• preparing you for your deposition

• responding to motions by defendant



• assisting DOJ in determining a fair amount of settlement

• assisting DOJ in negotiating with defendants

• discussing settlement terms


Amount of Reward

• negotiating a fair reward amount with DOJ

• presenting valid reasons supporting increases in the rate beyond the minimum.


This listing all of the time and effort by your attorney also validates why your attorney works on a contingency case, charges 40% of the reward, and only takes cases where a significant reward is possible. The good news is that your 60% share of a reward of $5 million would be $3 million. Not bad considering that you have no out of pocket costs if you hire an attorney on a true contingency basis.



How long it takes to get a DOJ reward


Another common question is “How long will it take to get a DOJ reward?” Again, every case is unique, but most cases take two years or longer by the time DOJ collects funds back and pays a reward. Many large cases have taken six years, such as when the reward is $5 million or more.


The average amount of time a case remains under seal, which means before the defendant is served with the complaint, is about two years. But even after serving the complaint, it can take another year or longer for the case to settle. Because the reward is based upon the amount collected, the reward cannot be paid until DOJ collects the funds from the wrongdoer. Thus, it can take anywhere from 1 to 6 years to get a DOJ reward. Because every case is different, there are no hard and fast rules. But for large rewards, expect it to be a few years minimum.


Time tables


The first point of confusion stems from the fact that the law provides DOJ with 60 days to make a decision about a reward case. That is true. But DOJ may ask the court for extensions upon the showing of good cause. Essentially, DOJ will file a series of motions providing the court with reasons why it cannot finish its investigation in 60 days or even 6 months. Courts regularly grant DOJ’s request for more time, and for good reason. After all, it is the government that is the real party in interest in these cases, not the whistleblower. In some instances, the seal has remained in place for up to six years.


While waiting for a DOJ decision, there are things your attorney can do. They should keep informed. As long as progress is being made, time is not your enemy. Rather than simply complain to DOJ, your attorney should be asking what help he can provide, such as drafting document requests, performing legal research, and calculating damages.

You may be wondering why it takes so long. That is a fair question. As you consider what goes into the government’s investigation, you’ll begin to appreciate that there is ample reason for seemingly slow pace. For instance, a prior chapter listed all of the duties of your attorney in a DOJ reward case. In short, there are no shortcuts to receiving a significant reward.




Why DOJ rejects cases


DOJ turns away more reward applications than it takes. From a pure statistical point of view, DOJ turns away 75% of applications. There are several reasons why DOJ turns away cases, and an experienced Medicare fraud reward attorney can help you evaluate if you have the right type of a case and work hard to position you to put your case in the best light so that it is properly evaluated by DOJ. Here are some of the more common reasons why DOJ rejects cases.


The lack of documents


DOJ has never collected millions of dollars from an entity cheating Medicare without documents. In fact, documents are the heart of a Medicare fraud case. In my experience, DOJ gets more interested in Medicare fraud allegations when the whistleblower supplies DOJ with copies of key internal company documents that the whistleblower obtained through their normal duties working for the company. It is much harder to convince DOJ to issue a subpoena or assign investigators to do interviews without receiving documents from the whistleblower at the outset of the case. Of course, you should talk to your attorney about whether to copy documents and what types of documents to copy.


Why are documents so important? It is rare for a defendant to simply admit to wrongdoing and offer to repay millions of dollars. In virtually every fraud case I handled at DOJ, someone lied or suffered from intentional amnesia when questioned about the allegations. Yet, the one thing that never lied or conveniently “forgot” was the internal company documents created at the time of the events in question.


Documents also support your allegations. Remember, because you get a portion of the amount DOJ collects, the defendant will argue that you are biased or making it up just to get a reward. Documents provide the corroboration needed to not only win the case, but get DOJ more interested in issuing subpoenas or interviewing witnesses.




At times, DOJ turns away a case because it has limited resources and can only work hard on so many cases at a time. There are many Medicare reward applications filed each year and DOJ has only so many attorneys working in the reward office. Certain judgments must be made upon the potential merits of a case. That begins with how specific the whistleblower’s complaint is regarding the scope of the fraud, whether there are documents attached, and how well it is presented to DOJ. Certainly every compliant gets a fair shake, but obviously some deserve and receive more attention than others. Rather than stew about this fact, hire quality counsel and present your case in a manner demonstrating it is worthy of the time and resources necessary to win a big fraud case.


Size of the case


A common problem with many complaints is that they fail to show any actual loss or damages to the federal government. Most simply say that the loss is in the millions or that it is substantial. Very little effort or time, however, is spent on discussing precisely how Medicare or Medicaid was actually harmed and how this harm can be quantified.

This deficiency sometimes is the result of the whistleblower’s attorney being unfamiliar with Medicare program and, as a result, not knowing how to calculate the loss. Often, inexperienced whistleblower reward counsel brings fraud cases to DOJ in which there are little or no damages to the government. The whistleblower is chasing a dead end.

Think about this issue in another way: If you cannot provide evidence of specific damages, what amount of reward do you hope to receive? Fifteen percent of nothing is nothing.


Facts of the case


There are a variety of other reasons why the whistleblower’s facts may warrant DOJ turning down a case.


First, the facts are often just flat out insufficient to state a claim. That’s why you need an honest appraisal from an experience attorney.


Second, a significant problem with many cases is that they do not show that the defendant knew the claim was false. Absent guilty knowledge, there is no violation of the Act. Innocent mistakes and honest disputes simply are not actionable under the False Claims Act. Remember, statute is fraud based. It does not cover every situation where there is a mere overpayment. The government needs and depends upon your inside information. Don’t file a reward complaint without it.


Third, many applications also fail to meet one or more of the Four F Factors and procedural and substantive requirements of the False Claims Act, such as failing to allege a required element of the law in the complaint or failing to plead the details of the fraud, such as the who, what, where, when, and why? If the complaint does not set forth allegations that establish fraud, how much weight should DOJ give it? The cure is to enlist qualified counsel before filing suit; someone who can identify what is missing and create a plan for obtaining it.


Last, a remarkable number of complaints look as if they have been slapped together without careful thought or examinations. If the complaint your attorney drafted is obviously a pastiche of generic allegations, why would you expect DOJ to put two years of effort into something you and your counsel didn’t care enough about to tailor to the case at hand? Similarly, a poorly worded complaint cannot help but give DOJ the impression that the underlying facts and allegations most likely reflect the same slipshod quality. There are many Medicare reward complaints filed each year fighting for the attention of DOJ Civil Fraud lawyers. It is inevitable the DOJ attorneys will take most seriously the reward application that are obviously professional, well-informed and thoroughly prepared.


Statute of Limitations (time limits)


There is another limitation you should know about. The False Claims Act contains a statute of limitations that bars allegations that are older than ten years. In some instances, the limitation is only six years. If your claim is older than the applicable statute of limitations, the company will not need to repay the funds; therefore, you cannot recover a reward. Therefore, it is important to know when the false claims were submitted and only allege fraud within 10 years from when you file for a reward.


Personal risks for reporting Medicare fraud


Before filing for a DOJ reward is the time to assess whether the potential rewards outweigh the risks. This section outlines some of the key risks, allowing you to move forward with both eyes open. Of course, there is no safer or better way of assessing the risk than through a confidential conversation with an experienced attorney.


Your name will be made known


One of the most significant risks you face is that your name will eventually be made known. Unlike an anonymous tip to CMS, to claim a reward under the DOJ whistleblower program, your attorney must file a lawsuit on behalf of the United States.


Your name goes into the caption, which reads something like this:


United States, ex rel. [Your Name], Plaintiffs, versus [Company Name], Defendant.


Initially, the complaint will be sealed. During that period both your name and that of the defendant will kept from the public. At some point, however, DOJ will ask the court to unseal the complaint. Once unsealed, the whole world can access the case. If DOJ intervenes, it will serve a copy of the complaint upon the defendant with the same caption.


The government has a policy against keeping cases permanently under seal. Therefore, even if the government declines and you drop the case, it is likely that the defendant will be able to get a copy of what you filed.


The effect may extend beyond your current employer. Although times are changing, being labeled a whistleblower can negatively affect your reputation in some industries. Some companies may not want to hire someone who has filed a lawsuit against their employer. Therefore, you’ll definitely want to think through this risk and hire seasoned counsel to advise you before filing a complaint.


Time and energy


Another risk is that filing a lawsuit will require much of your time, energy, and emotional investment. Before filing, you must ferret out the facts and help your attorney put together a convincing case showing that there was fraud and that it resulted in a significant loss to the federal government. You’ll also be called upon to help with issues at various times throughout the entire time a case is ongoing. It can add up to many hours.


Although it is hard to quantify, the emotional stress that goes along with being a party to a lawsuit is incredible. It’s constantly on your mind. Even before the case is made public, you will have an emotional ride. For instance, because FCA reward cases must be filed under seal, you cannot talk to anyone about it until the seal is lifted, perhaps two years later. The need to stay silent about something so important to you can result in discouraging feelings of loneliness and isolation.


After a case is unsealed, you will be able to discuss the case, but your energy and emotions will be further taxed. You may worry about what others think about you. You may face new challenges at work or home. If you are working for the company being sued, you may find that they ask your co-workers to find fault with your work performance.


The legal requirements can be wearing as well. It is never fun to have your deposition taken. If the case does not settle before or at the time that DOJ intervenes, the lawyers for the defendant will certainly take your deposition. You may be asked questions under oath for an entire day. Although you will be accompanied by your attorney and given reasonable breaks, it won’t be a pleasant experience.

Risk of retaliation


The FCA whistleblower law has a special provision that permits special damages to an employee who was “discharged, demoted, suspended, threatened, harassed or discriminated” because of assisting in a whistleblower case or investigating whether to bring a fraud case. The False Claims Act permits not only reinstatement, but permits two times the amount of back pay, plus other costs, and attorneys fees. Of course, to rely upon the remedies in these statutes, you would have to file a suit to be reinstated and collect these penalties.


There is a good reason why Congress needed to include this type of a provision: it is not unusual for wrongdoers to consider retaliation against whistleblowers. The fact that there is a rule requiring double damages may not be enough to prevent retaliation. It is possible to lose a job or be passed over for promotion, regardless of pointing out to your employer that you think their conduct has violated the whistleblower law.


Even if the treatment does not amount to retaliation, you may find it uncomfortable to stay at your job. You could be ostracized or given mundane work. The loss of employment is a real issue to consider before filing a DOJ reward case. It is also possible that a defendant would file a slander lawsuit against a whistleblower. Although truth is a defense to slander and libel, it can be upsetting and costly to litigate.


Risk of paying attorney fees and costs


The FCA whistleblower law provides that, if the government declines to intervene and the whistleblower still proceeds with the case, the court may award the defendant reasonable attorneys fees and expenses, if the defendant wins the case and your claim was “clearly frivolous, clearly vexatious, or brought primarily for the purposes of harassment.” Again, this does not mean simply losing the case, but acting with improper motives. In addition, this risk can be totally avoided if the whistleblower agrees to drop the case if DOJ does not take it over. That is the safest course of action. It is followed 80 percent of the time by whistleblowers. This is another reason why you need to hire experienced FCA reward counsel that not only knows of the risks but how to avoid many pitfalls.

The odds are against you


Based upon statistics, the odds are against you receiving a reward. First, DOJ declines to take over 75% of applications. In those instances, your attorney may still proceed, but that only happens about 10 to 20 percent of the time due to other risks outlined in this book.


The good news is that the likelihood of a reward goes up dramatically if DOJ intervenes in your case. DOJ wins almost every case it takes.


In addition, the amount of a reward might not be as high as you hope. Although the average reward amount is reported to be $690,000, other statistics paint a different picture. The reason the average amount is so high is that there have been several rewards of $100 million. For every $100 million jackpot, there are some under $100,000. Actually, the “mean” or “median” reward amount is probably closer to $250,000. You will also need to pay your attorney and taxes out of the reward amount. That’s why The Hesch Firm only takes cases where the fraud is $5 million, which would put the reward at about $1 million.


The point is that you cannot judge your case based upon statistics. And your decision to file should not be based solely upon whether you might get $250,000 versus $20 million. The new breed of whistleblowers desire to see the right thing done. They accept the patience and resolve needed to team up with DOJ in seeing justice prevail.


What you need most at this point is not more statistics, but the honest appraisal from an experienced whistleblower attorney. Ask your attorney to evaluate the risks based upon your facts and to provide you with the reasons for his estimates of whether DOJ may intervene and what the case might be worth.


Money doesn’t buy happiness


Many people play the lottery hoping to cash in so they can kiss their jobs goodbye. They dream of a blissful life the winnings are supposed to provide. You may have similar goals in mind when deciding whether to file a DOJ reward case. However, as the old saying goes, “Money doesn’t buy happiness.” If you were to interview everyone who received a million dollar reward or won a lottery, very few would say they are truly happier today.

Reporting fraud may be the right thing to do, but that does not mean becoming rich will bring peace to your life. There are simply greater things in life than wealth, such as family, country, and God. In short, there is a high cost to be paid — certainly emotionally and perhaps financially — for blowing the whistle. Also, if you treat the case as a lottery ticket, you won’t invest the time and energy needed to win.


Perhaps the best reason to report fraud is not to obtain a reward, but to satisfy a feeling inside that shouts, “I cannot just look the other way.” Following your conviction is the best medicine for enduring the risks associated with standing up and reporting fraud.

In sum, weigh your decision carefully. Seek solid legal and practical advice from your attorney. In the end, however, the decision must be your own.


The need for selecting the right attorney to evaluate your DOJ reward case


DOJ wants you to file a Medicare whistleblower complaint if you have specific details of significant Medicare or Medicaid fraud, and it wants to pay you a reward. However, by law, a reward can be paid only if you follow the exacting procedures contained in the False Claims Act statute as outlined in this book.


If you are not sure if you have the right type of a case to file for a DOJ reward or you simply want an honest appraisal of your potential case, you should contact an attorney in confidence to evaluate your case. You can do this in privacy. You don’t need to file a DOJ reward case simply because you contact an attorney to evaluate your case. In addition, under ethical rules for lawyers, the information you provide to them is protected by the attorney client privilege, even if you don’t end up hiring them or never file for a reward. In addition, the information you provide to an attorney cannot be used for any other purposes.


Selecting the right attorney is probably one of the most important aspects of receiving a reward and minimizing risks. It can be challenging to find one that is right for you. You will want to select someone you trust, who allows you to feel comfortable asking questions. You also want to select someone you believe knows how to investigate the false claims, determine whether you have a claim, and present it convincingly to DOJ. There are many subtleties to address and pitfalls to avoid in the selection process. Your attorney will need to prepare a solid application to gain DOJ’s initial interest. They will need to work closely and directly with DOJ in a cooperative relationship throughout the process, culminating in negotiating a fair reward. Be sure your attorney understands the policies of the DOJ Reward Program, the practical procedures of DOJ, and the workings of the governmental agency or program where fraud occurred.


Not only should you select someone who has worked for DOJ in the reward office or has significant experience winning cases under the DOJ reward program, but it is important to select an attorney you feel comfortable with. The case may take years to complete, so you will want to select someone who can realistically provide you with estimates and solid advice. You also want to feel like the attorney has your interests at heart, not just an opportunity to share in a reward you might obtain.


The next chapter shows you how to contact Mr. Hesch to evaluate your DOJ reward case.


How to ask Mr. Hesch to file your Medicare whistleblower complaint

Mr. Hesch and his team of attorneys would be pleased to review your information in complete confidence and help you determine if you have the right kind of information to receive a significant DOJ reward and file your Medicare whistleblower complaint.


This section explains the criteria The Hesch Firm, LLC uses to evaluate potential reward cases and how to contact Mr. Hesch directly to ask him to consider your case.


Two Requirements


Please note that The Hesch Firm does not handle whistleblower cases where the amount of fraud is under $5 million. Otherwise, the reward will be less than $1 million and is not worth the risks. In addition, Mr. Hesch does not take cases from whistleblowers that did not work for the entity that committed the Medicare/Medicaid fraud.


How to Contact Mr. Hesch


If you worked for the company committing the fraud and the amount of overbilling to the government was $5 million, please contact Mr. Hesch at the link contained at his website:








Below is a list of the five items of information you must provide in order for Mr. Hesch to be able to respond to you. However, please do not include the name of the company engaged in fraud.


p<>{color:#000;}. Explain in detail the fraud allegations. [Please be specific and very detailed in describing the fraud, but without mentioning the name of the wrongdoer.]

p<>{color:#000;}. Estimate how much money the government wrongfully paid out. [Do your best to estimate damages and indicate how you came up with it. If you have trouble, then at least describe the size of the entity, how many offices they have, the costs of the goods or services that are fraudulent, and the percentage of the population that receive Medicare or Medicaid.]

p<>{color:#000;}. State whether (and what type of) documents you have to help prove the fraud.

p<>{color:#000;}. State whether you still work for the entity. [If you left, state when you left and why.]

p<>{color:#000;}. State whether you talked to another attorney about reporting the fraud? [If so, state the status of your communications with other attorneys.]


The Hesch Firm will treat your information confidential. The law also treats your communication with Mr. Hesch as protected and privileged during the time you are contacting legal counsel to seek to obtain representation. Mr. Hesch will not use your information for any other purposes than determining if he can represent you even if you decide not to hire him or file for a reward.


The reason Mr. Hesch needs this information upfront is to initially gauge the nature, size and strength of your case. The information you provide in the contact form will facilitate any future discussion you have with his law firm. After The Hesch Firm reviews your email, they will contact you. The first contact with you will be by email, so be sure to use an email address that you will check and that it is private. [Do not use an email associated with your employer.]


Mr. Hesch will endeavor to personally review every form submitted to his website that contains the requested information and will send you an initial email either arranging for a telephone interview by himself or one of the trusted attorneys working with him on Medicare fraud reward cases or explaining that it is not the type of case he can represent you. Again, the initial contact form can be found at www.ReportMedicareFraudWeek.com or at www.HowToReportFraud.com for other types of fraud.


The last section of this book, entitled About Joel D. Hesch, Esq., contains more information about the qualifications of Mr. Hesch and lists the Medicare fraud cases he worked on both as an attorney for the U.S. Department of Justice (DOJ) for 15 years and now in private practice exclusively representing whistleblowers. As shown in that section, the reward cases Mr. Hesch worked on total over $1.7 billion.




Although we will treat the information as confidential, the transmission of any information is not intended to create, and receipt does not constitute, an attorney client relationship. Even if you submit information to The Hesch Firm, that does not make us your lawyer. Instead, we will use your information to investigate the matter and determine whether we can and will represent you in bringing your whistleblower case. Only once we both sign a written agreement will we actually become your lawyer and advocate. A fraud case can take a number of years from start to finish and it can be expensive for a lawyer to take a case. Therefore, we conduct a thorough analysis of cases and we do not accept every case. It may take time to evaluate your questionnaire, and we may be busy on other matters at the time you send your information. If our time constraints do not fit your needs, you may wish to discuss your matter with another attorney.



Examples of Medicare Fraud


The next several chapters list or discuss examples of the ways entities cheat Medicare/Medicaid. First, there is a general bullet list of examples of fraud. Second, there are detailed descriptions of many of the main categories of fraud. The ways companies cheat are endless. Simply because the fraud you are aware of is not listed does not mean you won’t get a reward. You can ask Mr. Hesch and his law firm to consider in confidence your allegations, as outline in the prior chapter.


Bullet list of examples of Medicare fraud


Below is a bullet listing of ways hospitals, doctors, and other health care providers cheat under Medicare, Medicaid and other government health care programs. These are just samples, but there are many other ways companies cheat Medicare.


p<>{color:#000;}. charging for tests, services or supplies not actually provided

p<>{color:#000;}. stating falsely how many hours were spent (e.g., routinely adding 30 minutes)

p<>{color:#000;}. charging for tests or services not really needed (e.g., routine ordering of blood work, frequently requesting a full panel of tests where only one or two are needed, or providing psychotherapy to people with Alzheimer’s disease)

p<>{color:#000;}. lying about any work or service performed

p<>{color:#000;}. upcoding (e.g., patient really has “bronchitis,” but Medicare is knowingly billed for treating “pneumonia”)

p<>{color:#000;}. billing for unallowable or unreasonable costs of goods or services

p<>{color:#000;}. overstating how much it cost to obtain an item

p<>{color:#000;}. billing for routine supplies (e.g., band-aids, lubricants, irrigation solutions, gloves, slippers, prep kits, towels, monitors, humidifiers, oxygen [by the hour], anesthesia circuits, elbow or heel pads, masks, electrodes for ECG, and foam head rests)

p<>{color:#000;}. charging incremental nursing services (e.g., IV starts, and stat or monitor charges)

p<>{color:#000;}. unbundling services billed to Medicare (e.g., billing for individual tasks that really are part of one larger procedure)

p<>{color:#000;}. receiving or paying kickbacks for client referrals or to use particular products

p<>{color:#000;}. cost report fraud (e.g., including unallowable or unreasonable costs in hospital cost reports

p<>{color:#000;}. billing for samples of drugs the hospital or doctor received for free

p<>{color:#000;}. claiming ambulance costs for routine or nonemergency travel

p<>{color:#000;}. using unskilled or unlicensed workers

p<>{color:#000;}. charging for investigational tests

p<>{color:#000;}. disguising advertising or marketing costs as other costs



Pharmaceutical fraud


Pharmaceutical companies are among the greatest violators committing Medicare and Medicaid fraud and the DOJ reward program is designed to hold them accountable. If you bring a whistleblower case against a pharmaceutical company, your reward could be far in excess of the average reward. In 16 just pharmaceutical fraud cases DOJ recovered $4 billion and paid about $800 million in rewards, some of which topped $100 million to a single whistleblower.


The four primary pharmaceutical fraud schemes consist of:


1. Medicaid Rebate Fraud

2. Off-Label Promotion

3. Kickbacks

4. Adulterated Products


Each of these areas of fraud is separately describe in the next sections.



Medicaid Rebate fraud by drug companies


In 1990, Congress passed a law known as the Medicaid Rebate Statute. The statute is designed to ensure that the federal government does not overpay for drugs supplied to Medicaid program beneficiaries. Essentially, the law requires pharmaceutical companies to give Medicaid patients the lowest price or best price a drug company offers to anyone.


The law is focused upon the drug manufacturers, not local pharmacy stores. All pharmaceutical companies want to participate in Medicaid. To do so, a drug company must agree to keep track of the lowest or “best price” charged for each of its drugs sold to private customers. At the end of each quarter, the pharmaceutical company must give Medicaid a rebate equal to the difference between what it charged Medicaid for each drug supplied to millions of Medicaid recipients and the best price to its other customers for the same drug. The rebates due from pharmaceutical companies are generally worth millions of dollars a quarter.


To illustrate how the system works, let’s say that Acme makes a leading pain killer and sells that drug to hospitals, distributors, and local drug stores for an average of $1.00 per pill. Because of the volume of their orders, some large hospitals, such as Big Hospital Chain, only pay $0.75. Each quarter, Acme must tell Medicaid the discounted price it accepted from its “best price” customer.


For years, Acme has reported the $0.75 price it gives Big Hospital Chain. Under the Medicaid Rebate program, Acme must send Medicaid a quarterly rebate between the difference of the $1.00 it charged Medicaid patients for the drug and the lowest price of $0.75 that Big Hospital Chain paid. If Acme sells 1 million pills to Medicaid patients nationwide per quarter, the rebate owed to Medicaid is $250,000 per quarter. Acme does not dispute that it owes this rebate to Medicaid and pays it.


Here is where the fraud starts. A large wholesale chain store named Biggest Hospital tells Acme that it wants even a better discount than $0.75. It promises to exceed the orders Acme receives from Big Hospital Chain, if it is allowed to pay $0.50 for the drug. Acme tells Biggest Hospital it cannot give that steep a discount because it would have to pay $500,000 per quarter to Medicaid in rebates, instead of $250,000. Biggest Hospital is not sympathetic. It threatens to buy the drug from Acme’s competitor. To avoid this, Acme agrees to charge Biggest Hospital $0.50 for the drug by using a hidden discount. For Medicaid records, the price remains $0.75, but Acme hides the price difference by giving Biggest Hospital discounts on other drugs and making a generous “donation” to the hospital for doctor training. Acme does not tell Medicaid that its true best price was $0.50, and thereby pays only $250,000 in rebates per quarter, as before, rather than the full $500,000. This is fraud.


If someone files a DOJ reward application showing that the true best price of the drug was $0.50, they would be entitled to a share of the $250,000 per quarter that Acme should have reported to Medicaid based upon the sale to Biggest Hospital. This adds up fast, especially if the fraud extends over several quarters or for years. For a six year period, the fraud amounts to $6 million. In actuality, many of the Best Price fraud cases are in the hundreds of millions of dollars.


Below are other variations of Medicaid best price fraud.


Bundling fraud


Pharmaceutical companies go to extreme lengths to disguise their true best prices. For instance, many drug companies offer group discounts when you buy two or more drugs. This is known as “bundled sales.” It is such a familiar practice that you may have assumed it was done for the benefit of the customer. Instead, bundled sales are used in an attempt by the company to select for itself how to spread the discount over several products. This is not usually done for the benefit of the purchaser, but as a way of concealing true prices in order to minimize best-price reporting. In other words, the company wants to cheat Medicaid, and hence you and I who fund Medicaid through our taxes.


Some fraudulent programs work like this: If a hospital agrees to buy Drug X for $1.00, it gets Drug Y for $0.50. Remember, the hospitals have purchasing departments that are buying large quantities of many types of pills from the same pharmaceutical company. The hospital is interested in the total price for all drugs from the supplier, and not necessarily just the lowest price on any one drug sold. The question is, what price must the drug company report as its best price for Drug X and Drug Y?


On its face, you might assume it can report Drug X at $1.00 and Drug Y at $0.50. However, because there is so much gaming of the system, Medicare has a rule that states that a drug company does not get to decide for itself how to apply discounts when multiple drugs must be bought together. Rather, Medicaid lists requirements to average the discounts across the drugs. Think about it this way, what if it only sold 3 pills of Drug X and 30,000 of Drug Y. Would it be fair for the company to artificially state the price of the package deal? Again, the purchasing hospital doesn’t care how the drug company identifies the price of each drug on its invoice. It is looking only at the total price paid for all the drugs. That is why the government requires a drug company to spread the discount evenly between the two products, based upon the sales volume of each drug using a formula supplied by the government.


Here is an example. Assume there is a discount of $1.50 for the two drugs bought together and the volume is the same, the company must assign $0.75 to each drug instead of treating the discount as $1.10 for one drug and $0.40 for the other. If there is a lopsided volume between the two drugs, then the discount must be proportioned accordingly. This is the fairest way of determining the true price of a drug — rather than allowing a company to game the system by arbitrarily setting the combined discount, simply as a way of avoiding paying a rebate to Medicaid.


It may turn out that the true price for Drug X is $0.75 and the price for Drug Y is $0.75. The specific amount only matters if the company reports a best price for Drug X as more than the true price. Companies have been known to bundle many drugs together in a manner that they know will conceal best prices. The fraud occurs when the company does not use the formula set by the government for spreading the discount evenly between products rather than trying to push the lion’s share into the one drug they choose in order to give the false impression that one drug did not actually set a new best price.

The amount of the rebate owed to Medicaid is very significant because the best price reported was $0.75 for sales to Big Hospital Chain or $0.50 for any sales to Biggest Hospital. This scheme often results in tens of millions of dollars in fraudulent underpayment to Medicaid.


The government is actively pursing these types of cases. Whistleblowers have already stepped forward in reporting that over 100 drugs have been part of this fraud scheme.


Nominal pricing program fraud


Another scheme many large pharmaceutical companies engage in is misusing a nominal pricing program.


What started as a good policy of the government rewarding drug companies for helping the poor has been totally misused by pharmaceutical companies. The government knew that sometimes drug companies act with charity and basically give away pills for $0.01 each to nonprofit entities, such as clinics in low-income communities. Not wanting to punish charity, the government created an exception to the best price rules for Medicaid rebates. If the discount for a pill is more than 90 percent off of the regular price, it is considered a “nominal price.” A nominally priced drug is exempt from the Medicaid Rebate Program. Drug companies, however, sometimes abuse this exception by inappropriately calling their steep discounts to large or best customers a “nominal price.”

The fraud scheme works like this. Assume the regular price (known in the industry as “average manufacture price” or “AMP”) for Drug X is $1.00. This is the price a small pharmacy would pay for the drug. A fraudulent company may offer a different price to large chain stores. It may sell Drug X to Biggest Hospital for $0.09 — a discount of 91 percent below the AMP.


If this were a legitimate sale, the company would not have to report it to Medicaid. In other words, if the company had truly sold its drug for a discount of more than 90 percent to one customer, it would technically meet the definition of “nominal price,” despite the fact that the sale did not meet the true purpose of the statute, this is a loophole. However, the pharmaceutical company cannot generally afford to work within this small loophole, so it devises schemes that make it appear that they sell the drug for 90 percent off, when in fact they don’t.


Naturally, the drug company does not want to sell Drug X to a large hospital for 91 percent off the AMP. So it devises a bundling scheme where it appears on paper that Drug X is being sold to Biggest Hospital for $0.09, but only if the hospital agrees to buy other drugs — on which the drug company does not give as steep a discount. In other words, both the hospital and the drug company each look to the bottom line price for the combined drug products being sold, but yet treat the discount as occurring in just one product.


Think of it this way, if the drug company gave the hospital a 33 percent discount on three drugs, it likely would set best prices on all three and need to pay millions in Medicaid rebates. But if on paper it treats the same sale of three drugs as a 91 percent discount on Drug A, and no discount on Drugs B and C, the overall discount would be the same. Yet the drug company would not report any discounts. The discount for Drug A would be a non-reportable best price and the other drugs would not have discounts.


The nominal price scheme is simply another twist on bundling sales. As you now know, when multiple drugs are bundled together as part of a marketing scheme, the discount must be applied uniformly between them, according to Medicaid regulations. The company attempts to avoid this problem by not shipping the drugs in the same box. Since the agreement with Biggest Hospital is secret and the drugs are not shipped together, the company denies that they are bundled and fails to divide the discount between them.

Since Biggest Hospital must buy two or three drugs to receive the $0.09 price on the first drug, the drugs are considered “bundled.” When the Medicaid formula for bundled drugs is applied, the price for the first drug is really $0.25, not $0.09. Therefore, the drug is not exempt from reporting as the “best price” drug, not a “nominally priced” drug. The drug company would need to repay millions of dollars, and the whistleblower entitled to between 15 and 25 percent.


Other best price violations


Concealing the lowest sales price is the most common scheme for a Medicaid Rebate case, but there is yet another type of rebate fraud.


If a pharmacy company lies about its average manufacture price (AMP), it is cheating in exactly the same way as if it lies about the lowest sales price. This is because the Medicaid Rebate Statute has a complex formula for determining rebates owed to the states and federal government. The amount of the rebate is based in part upon the AMP. Therefore, each quarter, a pharmaceutical company is required to tell Medicaid both its best price and AMP price for each drug.


In simplest terms, the amount of the rebate is the difference between the AMP and best price. Therefore, if a company lies by telling Medicaid that its AMP was lower than it was, it cheats by the difference between the true AMP and the reported AMP. For instance, assume that Acme reports that its AMP was $0.80. However, its true AMP was $1.00. This means that it cheats Medicaid out of $0.20 rebate for every pill sold. Just like lying about best prices, the damages add up quickly because the drug manufacturers sell so many pills.


While at DOJ, I worked on a case much like this and DOJ recovered $100 million. This is a ripe area for reporting fraud because it is hard for the government to detect absent inside information from a whistleblower. Given the potential large rewards, more and more people are stepping forward.



Off-label promotion by drug companies


Another significant area of pharmaceutical fraud is where the manufacturer promotes “off label” uses of its drugs. This type of fraud occurs when a pharmaceutical company receives Food and Drug Administration (FDA) approval of a drug for a specific use, but later promotes another unapproved use.


Some drug companies seek to reap large profits by only asking the FDA to test and approve the drug for a limited area of treatment, but then promote the drug in treating other illnesses, outside of its testing and approval. Since FDA testing is intended to determine the safety and effectiveness of a drug for a particular use, federal laws naturally prohibit drug companies from suggesting alternative uses of approved drugs without going through FDA’s approval process for each proposed use.


Suppose the FDA approves the drug X-cite to be used in the treatment of epilepsy. However, as soon as the drug receives FDA approval, the pharmaceutical company begins to contact psychiatrists to promote the use of X-cite in the treatment of depression. Other fraud cases where DOJ rewarded whistleblowers include pharmaceutical companies promoting a topic skin medicine or fungicide for treating diaper rash and a promoting a painkiller for treating cancer.


Sometimes, the hard part about these cases is proving that the pharmaceutical company actually promoted such off-label uses. It is not enough to merely show that some doctors prescribed X-cite to treat depression. You must show that the drug company targeted doctors and encouraged them to use the drug for an off-label use. That’s where the whistleblower fits in and why they receive such large rewards. DOJ needs inside knowledge about these practices by pharmaceutical companies.


It is important to note, however, that the FDA rules do not prohibit a medical doctor from prescribing drugs outside of their labeled use. Therefore, you cannot get a reward for reporting that a doctor or hospital prescribed a drug for an off label use. Only the pharmaceutical company is prohibited from promoting off label use. Be mindful that the drug company will try to conceal its promotion of off-label uses. Internal documents often are the key to proving an off-label violation. In addition, there is one exception. If a doctor writes an unsolicited letter to the pharmaceutical company asking questions about the potential use of a drug, it may note some other potential uses. But, the letter must not be prompted by the pharmaceutical company.


If you know of such a practice, however, it is worth your time to investigate. DOJ has reached settlements in the billions dollars against pharmaceutical companies for promoting off-label use. Recently, one case alone exceeded $700 million.



Kickbacks by drug companies


Prescription drugs are expensive to consumers, but they yield huge profits to pharmaceutical companies. To get doctors or hospitals to prescribe theirs, many drug makers have resorted to paying kickbacks. As hard as it is to imagine, that is going on. In fact, many doctors have gotten so used to the system that they frequently demand them.


But don’t expect payments to be labeled “kickback” or for cash to be handed under the table. No, the game today is much more sophisticated. Today, kickbacks are disguised in many ways, such as educational grants (i.e. flying the doctor to Hawaii to attend a seminar), research grants (i.e. paying the doctor to do some so-called research, which rarely amounts to anything), or some other form of a consulting contract (i.e. paying the doctor to do some small amount of work for a large amount of money). Doctors are also paid to participate in studies (again where little work is required for large fees) or to be on a board or committee, which rarely meets. You get the picture.


Only your imagination is the limit to the ways kickbacks are hidden. However, they are still kickbacks. If you have knowledge of a significant kickback scheme and can help the government prove it, the regulations are clear that they are illegal. DOJ won’t turn down a solid kickback case.



Adulterated drugs by drug companies


An emerging area of pharmaceutical fraud is adulterated products. While you might think that this is limited to using ingredients that are dangerous, think again! The FDA has strict rules and requirements that apply to every drug manufacturer. Before a drug is approved, the pharmaceutical company must not only test the drug and prove its effectiveness, but it must establish tight manufacturing procedures and controls. Once approved, the company may not deviate from that strict process. Any changes must be pre-approved by the FDA.


If a company skips steps or does not conduct each required manufacturing test and protocol, the drug is technically altered or “adulterated.” In other words, if a company tells the FDA that it will use sterile labs and certain processes, then chooses not to use them because they are expensive, the drugs are nonconforming. The FDA treats them as adulterated. Medicare and Medicaid have rules that prohibit paying for adulterated products. Therefore, if a manufacturer significantly deviates from the approved process, it is not eligible to sell the drugs to the government.


Consider this example. Sleep-Tight sought FDA approval to make and sell a drug to help people sleep at night. Sleep-Tight was concerned that the FDA may not approve the new drug. Therefore, in its application to the FDA, Sleep-Tight included many exacting manufacturing checks and controls to ensure the safety of the product. It provided the FDA with a detailed manufacturing plan to demonstrate that the drugs would be made in the same manner as those tested. Based upon the submission, the company received FDA approval.


After making the drug for a year, however, the company slacked off in its manufacturing procedures to save costs. As with most medicines, the dose must be carefully controlled or the drug can result in medical complications. The executives at Sleep-Tight knew this, but reasoned that because the manufacturing process was running smoothly they eliminated some quality control steps.


Jason, a quality control representative at Sleep-Tight, complained to his supervisor when he was told to skip some quality control steps. He was told to shut up and just do his job. Recognizing the danger, as well as the fraud, Jason contacted an attorney and filed for a DOJ reward.


Sleep-Tight sought to defend the allegations by arguing that the drugs had worked as planned and, therefore, the government got what it paid for. It even hired a testing company to show that the drug was made correctly, despite less stringent quality control. The FDA disagreed. It pointed out that its approval was based on the drug being made in the specific manner spelled out in the application. The FDA took the position that, even if an approved drug were tested and found to contain the right combination of ingredients, it was adulterated if important testing and quality control steps were not conducted.


DOJ took over Jason’s case and convinced a court that the manufacturing steps that had been skipped were essential. The court ruled that the drugs were adulterated because they had not been manufactured according to the terms of the FDA approval. Sleep-Tight was ordered to repay Medicare and Medicaid $200 million. Jason received a reward of $35 million.


Adulterated DME devices


Adulteration is not limited to drug manufacturers, but also applies to durable medical equipment (DME) devices, such as motorized wheelchairs and pacemakers. DME manufacturers must strictly comply with all approved manufacturing requirements. If important steps are skipped, the DME devices are treated as adulterated. Again, Medicare and Medicaid will not pay for adulterated products, and the company could be liable for damages for every item sold. In a recent study in Florida, one-half of the DME companies did not meet the minimum standards for eligibility to submit bills to Medicare.

Of course, just as with adulterated drug allegations, the complaint must allege that the skipped steps were material and not some minor process. Expect that DOJ and a judge examining this type of a case will use common sense when deciding if the company adulterated a product. The court will not apply a strict liability analysis.



Long Term Acute Care Hospital fraud (LTCH) Fraud


During 2002, Medicare began paying long term acute care hospitals (LTCH or LTACH) on a prospective payment system (PPS), which is called LTACH-PPS. Under LTACH-PPS, Medicare pays a fixed or set price to long-term acute care hospitals. Because patients staying long term at a hospital can cost more than the stay for patients at general hospitals, Medicare pays a higher rate to LTACH’s, provided they meet the requirements of being a long-term acute care hospital. Specifically, the LTACH must have an average inpatient length of stay for Medicare patients greater than 25 days. LTACHs that fail to exceed the 25-day rule for Medicare patients must repay Medicare the higher rates. This can mean millions of dollars.


LTACH Fraud: Extending Stays


Many long-term acute care hospitals engage in fraud schemes to make it appear that they meet the 25-day average stay when they really do not. For instance, they keep many patients longer than medically necessary just to pad their numbers of days. In other words, administrators purposefully delay in creating discharge plans. They may even lie to family members, claiming the doctor wants them to stay a few more days. They also delay in contacting nursing homes or hospice facilities where the patient is supposed to go just to keep them longer in their hospital.


LTACH Fraud: Interrupted Stays


Other long term care hospitals engage in fraud schemes to bill more costs to Medicare by circumventing the “interrupted stay” regulation, which does not pay LTACH’s more funds if they discharge patients for less than 10 days before readmitting them. The purpose of this rule is to prevent a LTACH from transferring a patient to another provider just to bring them back so they can bill more. For instance, suppose Jane Doe is admitted to LTACH for an illness that she is expected to be in the hospital for 30 days. (Note: a LTACH does not get paid for days after the allowed length of stay. But if after 10 days away, it can readmit the patient and keep billing.) If on day 28, Jane develops a condition requiring intensive care, she is properly transferred to an ICU hospital. Assume Jane gets better in 8 days and should go back to the LTACH. But, the LTACH will not get paid more if she returns in less than 10 days, so the LTACH blocks the admission by stalling and refusing to allow the patient to be transferred back until 10 days passed. This is fraud, and the LTACH must repay the extra billing submitted to Medicare.



Upcoding fraud


Many hospitals and health care provides cheat Medicare or Medicaid by upcoding their bills. Medicare and Medicaid typically reimburse providers using a prospective payment system (PPS). For instance, if they use the code for bronchitis, they get paid a set amount of money regardless of how much the treatment cost. However, if they use the code for pneumonia, they get paid a higher PPS amount because it generally costs more to treat that condition. Under upcoding fraud, a hospital or health care provider creates a scheme where they decide to use a higher paying code to cheat and collect more money.


The government pays significant rewards for reporting upcoding fraud to whistleblowers who know of intentional schemes to purposefully upcode the condition or treatment provided to patients under the PPS system.




Home Health Care fraud


Medicare Home Health Care reimbursement requires “homebound” status. Medicare pays benefits to those who are homebound, which means that they are generally confined to their homes, including certain medical services provided at home. This means that a person is confined to the home except for infrequent or short absences or trips for medical care.


In addition, not all home health care services are covered by Medicare. To be reimbursable by Medicare, the home health care provider must also show that the Medicare recipient or beneficiary is in need of one of the following medical services: skilled nursing, physical therapy, continuing occupational therapy, or speech language pathology.


Home health care “Plan of Care” fraud


The amount of payment to a Home Health Agency (HHA) depends upon what home health resource group (HHRG) the Medicare patient is classified. The HHRG group assignment is based upon things such as the diagnosis and the functional capacity and service use. Basically, more is paid for patients with more severe medical conditions because that requires more home visits and more home provided Medical services.


To be covered by Medicare, any home health service must be provided under a “plan of care,” established by a doctor. If the doctor or physician does not determine that the Medicare patient is homebound and also review and sign a plan of care, it is likely Medicare home health care fraud. The plan of care is also important because Medicare only covers home health care services that are established to be medically necessary, properly documented, and authorized by a physician. If the home health care goes beyond 60 days, there must be a re-certification by the physician.


Some home health care providers cheat Medicare by providing home health care services when the patient is not home bound. The elderly are often pawn in this fraud, because the home health care providers offer to do the medical services at home. It is not wrong or the fault of the Medicare beneficiary to accept offers to receive medical services at home, but the home health care provider knows that they cannot bill for the home provided services.


Home health care kickback fraud and assisted living facility fraud (ALF fraud)


Two common fraud schemes by home health care companies are (1) paying a doctor a kickback, either financially or through other benefits, to certify the Medicare patient as homebound, or (2) forging the physician’s signature or otherwise using false data or certifications.


The forms of kickbacks are often disguised, such as trips or speaking fees. In addition, a form of a kickback or Stark violation is when the home health care company has an ownership interest in assisted living facility (ALF) and the home health care company provides home health care services at the assisted living facility (ALF). It is Medicare fraud for a home health care company or provider to have an assisted living facility (ALF) self-refer Medicare patients to a related entity.


There are many other forms of Medicare fraud associated with assisted living facility (ALF) in connection with home health care services.


Fraudulent billing for home health care services not provided or rendered


Another form of home health care fraud is billing for services not provided. Some home health care providers bill for making 3 visits a week but only go to the Medicare recipient’s home 2 times a week. Other home health care fraud schemes include billing for services that they do not perform. They may provide one service, but claim to provide three services.




Stark fraud by physicians


Another federal law, called the Stark Statute, addresses the propriety of any financial relationship that a physician or other health care provider can have with companies that provide health care items or services. It makes it illegal for doctors to self-refer their patients to companies they have an ownership interest. For instance, a doctor cannot refer a patient to a hospital, testing center, lab company, or physical therapy entity in which the doctor co-owns or has a financial interest. This is because when a doctor partly owns the company it is referring patients to, there is an incentive for the doctor to order tests that aren’t really medically needed.


The Stark Statute makes it illegal for doctors/physicians to refer Medicare or Medicaid patients to any company that it has a financial relationship, including part ownership, an investment interest or any other type of compensation arrangement.


By law, the entire billing to Medicare must be repaid even if services were provided. Therefore, the amount of fraud adds up quickly when a doctor refers patients to a company that is part owns.



Medicare Advantage Risk-Adjustment fraud under Medicare Part C


Health care companies that sponsor or provide Medicare Advantage and PACE plans often develop schemes to cheat Medicare by millions of dollars a year.


Medicare Part C or Medicare Advantage is the managed care version of Medicare. The government (CMS) awards Part C contracts to private insurance carriers to administrate Part C or Medicare Advantage plans (including PACE plans). Based upon the number of patients and the severity of illnesses for the covered population, CMS pays the insurance carrier a pre-set rate often referred to as a monthly capitation fee.


CMS uses risk scores to determine how much a carrier or sponsor is paid for each member of a plan. Risk scores assign a value based on the services expected to be provided to those included in the plan. For instance, an individual whose family has a history of heart attacks or a prior illness would have a higher risk score than an identical individual without a family history. The higher the risk score of plan members, the more the company is paid for that member’s plan.


CMS pays the carrier or plan sponsor an amount based solely on the number of members enrolled at each risk score, and not the actual services received by the beneficiaries. Because payment is based on risk score, carriers are tempted to artificially create a higher risk score.


Examples of risk score fraud under Medicare Advantage Program or PACE plans


Carriers or plan sponsors use a variety of schemes to defraud Medicare Part C. Here are some of the common schemes.


p<>{color:#000;}. Upcoding diagnoses to exaggerate the severity of the condition (i.e. claiming that they are sicker than they are) in order to inflate the risk score and increase the capitation rate

p<>{color:#000;}. Using “chart audits” or “chart reviews” or “chart mining” to find places to add diagnosis or upcode diagnosis, i.e. an administrator changes or adds codes to patient files instead of based upon medical doctors merely to increase the risk score

p<>{color:#000;}. Giving employees bonuses or other incentives to upcode

p<>{color:#000;}. Telling coders to go beyond the doctor’s documented diagnoses and add other diagnoses based on reading the medical charts (i.e. if a patient took a certain medications or test, add a diagnosis that often goes with such medication despite the fact that this patient did not have such illness)

p<>{color:#000;}. Conducting a mock risk adjustment data validation (RADV) audit – and failing to submit to CMS any delete codes or errors spotted.



Clinical laboratory fraud


The Medicare program only pays for lab tests and services that are “reasonable and necessary for the diagnosis or treatment of illness or injury.” Clinical laboratories defraud Medicare in several ways.


Lab test panel fraud


Labs sometimes cheat by conducting and billing for multiple tests (often referred to as test panels), when only one of the tests within the panel was really needed. In other words, when only one test is needed the lab checks the blood or urine for many different conditions. A doctor can order one test or can choose from various panels of tests on the same blood or urine sample. It is usually cheaper per test to do the full panel. But the full panel costs considerable more than just one test. Therefore, doctors should only order a single test if just one test is needed and a full panel of testing if multiple tests are needed.


The labs often fool a doctor into ordering a full panel of tests by using confusing forms, when the doctor misses the fine print which hides that a full panel is being ordered instead of the one test needed. Other times, a lab might bribe a doctor into routinely


Lab unbundling fraud


Labs also cheat Medicare by “unbundling.” This is when the lab or the doctor ordering the lab tests bills separately for components of a related group of procedures or tests. In other words, even though a full panel of tests was or should have been ordered, the doctor either orders them separately at the higher rate or bills the full panel tests individually so that they can bill more than the cost of the less expensive panel of tests.


Other lab fraud


Labs also have other schemes, such as double billing for the same tests or billing for tests not actually done. In addition, if a doctor has ownership interest in the lab, it violates the Stark statute, which are improper self-referrals similar to paying kickbacks for selecting a company.


Lab fraud schemes have been carried out by lab companies that provide blood tests, urine tests, or drug tests.



Unbundling Fraud


Many hospitals and health care provides cheat Medicare or Medicaid by unbundling their services. Medicare and Medicaid typically reimburse providers using a prospective payment system (PPS). For instance, if they perform an appendectomy, they receive a set price amounting to the average cost for that procedure regardless of how much the procedure actually cost. However, some hospitals and health care provides commit Medicare or Medicaid fraud by separating out the costs from the procedure to bill them separately because the total PPS payments for each separate task amounts to more money than the total procedure. It is like selling the government a car, but not charging the price of a new car, but charging the government the price you would pay if you bought each part of the care at an auto supply store, which would be double or triple the price you would pay to buy the car.



Unreasonable costs of goods or services fraud


Medicare and Medicaid reimburse hospitals, nursing homes and other health care providers for reasonable costs of goods or services. Unfortunately, many cheat Medicare and Medicaid by charging for tests or services not really needed. For instance, some health care providers will routinely order tests that are not necessary. For instance, some hospitals routinely order x-rays or of blood work for all Medicare patients regardless of why they came to see the doctors. Others order full panels of blood or lab tests where only one or two are needed. Similar fraud schemes take place by those providing mental health services, such as therapy sessions by providing psychotherapy to people with Alzheimer disease who are not able to benefit from the treatment.


Fraud by Medicare fiscal intermediaries, carriers, and others


Many agencies hire companies to oversee programs or contracts. Because these companies have contracts with the federal government to oversee federal programs, they are liable for their own fraudulent billings. This is especially true for the Medicare program. The government hires large companies known as Fiscal Intermediaries (FIs) and Carriers, to run Medicare and make distribution of billions of dollars a year. Sometimes, the FIs and Carriers end up committing fraud themselves. However, they are not liable for making mistakes in paying claims under the program.


In one case, a FI settled a case for $74 million to resolve allegations that it exaggerated its collection efforts in an attempt to improve its scores in government evaluations. Another time, a Carrier paid DOJ $76 million to settle allegations that it had manipulated data used by the government to judge its performance. The whistleblower in that case received $14 million.





About Joel D. Hesch, Esq.


After spending more than 15 years as a Trial Attorney in the DOJ whistleblower reward program office in Washington, D.C. – and helping recover $1.5 billion in the process – Joel Hesch realized he could serve as a powerful advocate and ally for whistleblowers looking for justice and putting an end to Medicare fraud.


Armed with the knowledge and experience he gained while working for the Department of Justice, Mr. Hesch founded The Hesch Firm, LLC in 2006. Since then, The Hesch Firm has been a staunch nationwide advocate for whistleblowers in their fight against Medicare fraud and helping them file for rewards.


Mr. Hesch graduated in the top of his law school class from The Catholic University of America. Today, his passion for education continues as he teaches and mentors law students. Mr. Hesch is a member of the American Bar Association, the State Bar of Washington, D.C., and the State Bar of Maryland. He has been admitted to the Supreme Court of the United States, United States Court of Federal Claims, United States Tax Court and the D.C. and Maryland District Courts. Joel and his firm now represent whistleblowers throughout the country.


Joel has been lauded time and time again for his efforts to combat fraud. Early in his career, he was selected to join an elite team of Department of Justice attorneys to pursue the then-largest whistleblower case in history, and ultimately helped recover $641 million from a hospital chain. For his contributions to the case, Mr. Hesch received a Special Commendation Award for outstanding service. Joel also received several other awards while at DOJ.


Representative Cases


The total of Mr. Hesch’s whistleblower fraud cases under the DOJ reward program amounts to over $1.7 billion in False Claims Act (FCA) judgments or settlements and paid out over $265 million in whistleblower rewards. The following are examples of some of the Medicare whistleblower fraud cases Joel Hesch has worked on while at the Department of Justice in Washington, D.C. and currently in private practice representing whistleblowers.


p<>{color:#000;}. $641 million recovery against the nation’s largest chain of hospitals that allegedly defrauded Medicare under a wide variety of cost report fraud and other schemes, in which $120 million was paid to whistleblowers (1)

p<>{color:#000;}. $250 million settlement with a large pharmaceutical company for allegedly overcharging Medicaid for drugs, with the whistleblower receiving nearly $40 million (2)

p<>{color:#000;}. $126 million case where a pharmaceutical company allegedly failed to report the lowest or “best price” of its drugs sold to private companies, a price which the government was entitled to receive under the Medicaid Rebate statute, and the whistleblower received over $12 million (3)

p<>{color:#000;}. $65 million settlement with a home health care company, in which the whistleblower received $12.35 million (4)

p<>{color:#000;}. $40 million settlement of allegations that companies were manufacturing, marketing and selling knee replacement devices that had not been approved by the U.S. Food and Drug Administration (FDA), in which the whistleblower received over $7 million (4)

p<>{color:#000;}. $34 million judgment where a clinic paid illegal kickback payments to recruiters, who in turn paid people to show up at the clinic who were not eligible for Medicare or Medicaid and did not require medical services, in order for the clinic to bilk government health care programs (4)

p<>{color:#000;}. $24 million settlement with a long term acute care hospital chain (LTCH or LTACH) for allegedly admitting patients who did not meet the Medicare criteria for admission to a long term acute care hospital, in which the whistleblower received $4.85 million (4)

p<>{color:#000;}. $8 million settlement against a Long Term Acute Care Hospital (LTACH), in which the whistleblower received over $2 million (4)


To ask Mr. Hesch to represent you, see the chapter How to ask Mr. Hesch to file your DOJ reward application. You can also visit his websites:










1. Mr. Hesch spent 2,000 hours on that case, working primarily with a team of 8 other DOJ Civil Fraud Section attorneys on the Medicare cost report fraud allegations. Of the settlement, the cost report fraud portion was valued at more than $350 million. The total amount of rewards paid to the whistleblowers under the combined cases was $120 million.


2. Mr. Hesch was one of two DOJ attorneys assigned to this case. Mr. Hesch spent hundreds of hours investigating the allegations and began settlement negotiations with the drug company prior his departing DOJ. The case settled after he left the government.


3. Mr. Hesch provided limited support on the case before the defendant agreed to settle, but was specifically assigned to the case to determine how much of a reward to pay the whistleblower. The federal portion of the case was $75 million and the state Medicaid portion was $51 million.


4. The Hesch Firm represented the whistleblower.




This e-book is for information only. It should not be viewed as containing legal advice. Each case is unique and needs to be evaluated by an experienced attorney. While we treat information you send to us confidentially and use it to determine if we will be willing and able to become your attorney, when you provide us with information we do not become your attorney. Until we both sign a written agreement, we do not represent you and have not agreed to do so. In addition, past results do not guarantee future results.

Report Medicare Fraud: How to report Medicare or Medicaid fraud for a whistleblo

Medicare fraud affects us all. Ten percent of all Medicare funds are lost due to fraud. Because the government spends $650 billion a year on Medicare that means $65 billion a year is lost to Medicare fraud. It’s no wonder why we have a national health care crisis! That’s also why I wrote this book. I worked in the Department of Justice (DOJ) Whistleblower Reward Office in Washington D.C. for over 15 years and worked on fraud cases recovering $1.5 billion. I’ve seen and combatted fraud first hand and know what it takes for a whistleblower to successfully report Medicare fraud. I’m now sharing my insights so that together we can curb Medicare fraud. First, book explains how to report Medicare fraud the correct way in order to get the attention of the government and ensure that an investigation takes place. In fact, there are two very different ways of reporting Medicare fraud, with two very different results. Second, this book puts fraud-doers on notice that the public is fed up with Medicare fraud and is now armed with information on how to report it. Given that there are sizable monetary rewards being offered by the Department of Justice (DOJ) for reporting Medicare fraud, there is a strong incentive for whistleblowers to take a stand. The more whistleblowers step forward to claim rewards, the less likely companies will try to cheat because they will finally realize that they can’t get away with it anymore. This book provides step-by-step instructions for reporting Medicare fraud, either for a reward or anonymously. It outlines in detail the Department of Justice (DOJ) Medicare Reward program as well as how to report fraud directly to the Centers for Medicare & Medicaid Services (CMS). It is your one resource for all you need to know about reporting Medicare fraud. The book also answers questions such as: Amount of rewards: How much will I get? How much does it cost to hire an attorney? What to expect from your attorney How long it takes to get a DOJ reward Personal risks for reporting Medicare fraud The average DOJ reward is $690,000, and the largest reward in a single case has topped $150 million. The government wins too, because it would never have known about the fraud without the help of whistleblowers. Today, over three-fourths of the government’s Medicare fraud cases are DOJ whistleblower reward cases. Thus, the government is counting on whistleblowers to bring Medicare fraud cases to DOJ and receive a reward in the process. It’s time to put an end to fraudulent Medicare claims! Here’s how you can be part of the solution.

  • ISBN: 9781940011097
  • Author: Joel Hesch
  • Published: 2017-08-03 22:05:18
  • Words: 17658
Report Medicare Fraud: How to report Medicare or Medicaid fraud for a whistleblo Report Medicare Fraud: How to report Medicare or Medicaid fraud for a whistleblo