In the increasingly complicated world of heath care, the line between profit and illegality can become blurred.
It was the opinion of a South Carolina pharmacist and whistleblower that a company he dealt with crossed that line – an opinion seconded by the U.S. Department of Justice and validated by a $34.8 million settlement announced March 23.
Dr. Gibran Ameer worked for medical equipment suppliers that bought masks for patients suffering from sleep apnea from Philips Respironics Inc. Respironics provided free call center services to suppliers whose customers used its masks while charging a fee for those services to suppliers that sold masks made by competitors.
That looked like a kickback to Ameer, who sued under the False Claims Act, which allows whistleblowers to bring claims on behalf of the federal government and to share in recoveries. Ameer will receive $5.38 million of the $34.14 million paid by Respironics’ parent, Royal Philips NV, to the government. Another $660,000 will be paid to various state governments based on their Medicaid participation.
“It didn’t take long, looking into it, to realize how clear the kickback was,” said Columbia-based litigator Andrew Melling of McNair Law Firm, which represented Ameer in the lawsuit filed two years ago.
The Justice Department agreed, joining the lawsuit along with 29 states and the District of Columbia.
“Americans deserve to know that when they are prescribed a device to treat a serious health care problem, the supplier’s judgment has not been comprised by illegal payments from equipment manufacturers,” Benjamin Mizer, head of the Justice Department’s civil division, said in a statement.
Respironics maintains that its “Fit for Life” program, which ran from April 2012 to November 2015, offered a permissible bundled discount under industry safe harbor statutes. Melling rejected that argument out of hand.
“We knew enough to feel comfortable that none of these safe harbors applied to what was going on,” Melling said.
The government concurred, saying suppliers paid 99 cents a month for each patient with a non-Respironics mask who used the call center service, which regularly contacted sleep apnea patients to remind them replace masks and equipment. That shakes out to a supplier savings of $11.88 per year for each patient using a Respironics mask – $118,800 if a supplier had 10,000 patient customers.
“We’re talking about a nationwide issue, a nationwide kickback scheme. We’re not talking about one doctor’s office in Columbia,” Melling said. “It’s affecting thousands and thousands of patients, so the government gets interested.”
Issues aren’t always as clear-cut in an industry where regulations, for vendors such as Respironics and the health care providers who deal with them, have failed to keep pace with change, said Columbia-based consulting health care economist Lynn Bailey. Lack of clarity can create difficulty for industry professionals trying to sort out the legal complexities of the Affordable Care Act more or less on the fly.
“Part of the challenge that the industry faces is that there are a magnitude of regulations, and the regulatory environment is almost always conflicted,” Bailey said. “You don’t have the luxury of allowing a system that delivers care 24-7 to wait for something that is as complicated as how we dispense and price pharmaceuticals in the United States to settle out. You’ve got to keep going. So this is where it stands today. In another jurisdiction, you’re going to be getting a different message. And so it’s very difficult for providers who are really working very hard to comply with all of these different regulations to know what is the right thing to do.”
Melling is familiar with that frustration.
“We’re looking at a time where health care providers are having to operate with reduced reimbursement from all payer sources, and it really forces providers to try to maximize their reimbursements,” Melling said. “The way they do that – you have to be very cautious of crossing those lines. There’s a bit of a gray area with these safe harbors and what is allowed and what’s not allowed. Before health care providers do these rebate programs, (or) say we’re giving discounts, they really need to think it through to see if they’re crossing over the line between what’s legal and not legal.
“Everyone’s being forced to get creative and try to get the business through the door the best they can. Sometimes they overreach and these things result.”
Providers sometimes act on the knowledge available to them at the time, Bailey said, and hope things turn out for the best. “They play the percentages,” she said, and then if legal issues result, “they delay, delay, delay, and then settle. That’s how they do it. If you’re a manager, you’re trying to figure out, ‘Where is this all going to settle out?’ Sometimes you guess wrong and sometimes you’re just lucky. It makes providing health care more complicated.
‘Cost of doing business’
“Most providers do their absolute best to behave ethically and legally. Now the vendors? That’s a different story. They’re in the business to maximize their profits. And if they get caught, so be it. It’s just a cost to them of doing business.”
The government sought to quash that mindset in finding Respironics violated the Anti-Kickback Statute, which prohibits the knowing and willful payment of any remuneration to induce the referral of services or items that are paid for by a federal health care program, such as Medicare or Medicaid. Said U.S. Attorney Bill Nettles of the District of South Carolina in a Department of Justice release announcing the settlement: “This office has made a substantial commitment to combating fraud. Our commitment has made this district one of the leaders on behalf of whistleblowers. We hope that those who commit fraud will recognize that it is our goal to make the consequences more than just the cost of doing business.”
But while the Respironics outcome is satisfying to the plaintiffs, it represents a mere drop of resolution in the big-picture bucket of the trillion-dollar health care industry, Bailey said.
“This is really small,” she said. “That’s how big health care is. (Respironics) is like many things in health care. You’re only guilty if you get caught. They would have never caught it without somebody being (angry) and suing on this. There is so much cheating going on in health care. When you make something very, very complicated, it is easy to gain.”
Respironics’ gain turned out to be short-lived.
“Litigation, even standard litigation, takes several years often to reach a conclusion,” Melling said. “The case was fully resolved within less than two years. I was very pleased that not only was it a fairly quick recovery, but I think it was a substantial recovery. We felt very happy about the amount, but also it put a stop to the practice. Very much what was on the government’s mind is you want to stop a kickback from occurring.”
Published in the April 11, 2016, print issue.
Reach staff writer Melinda Waldrop at 803-726-7543.