Keller Grover LLP attorney Kate Scanlan recently appeared on a podcast with her client Kathy Ormsby, the whistleblower behind a lawsuit against Sutter Health that was settled last year for a record $90 million.

In the podcast, Ms. Ormsby describes the frustration and worry after uncovering what she believed was fraud at her workplace and learning her employer would not take steps to correct it. She also discusses how she trusted Ms. Scanlan to take her case.

You can listen to the entire Fraud in America podcast, hosted by Jeb White, president of Taxpayers Against Fraud, here. Ms. Scanlan is also a member of TAF and Chair of the Public Education Committee working to educate potential relators about whistleblower laws and how they work.

Ms. Ormsby alleged in her complaint that Sutter defrauded the government as part of its Medicare Part C program, known as Medicare Advantage, through the submission of inaccurate and unsupported medical information that artificially inflated the reimbursement Medicare provides for Sutter’s Medicare Advantage patients. She also alleged that Sutter and its affiliate defrauded the government by claiming its patients were treated for conditions they either did not have or were not treated for, which increased their risk scores and how much the government reimbursed Sutter for their care.

The $90 million payout by Sutter Health represented the largest False Claims Act settlement against a hospital system involving allegations of fraud on the Medicare Advantage program, and the second-largest reported Medicare Advantage fraud settlement ever.

On the podcast, Ms. Ormsby says she “literally fell out of my chair” when she was working for Sutter and discovered fraud while conducting an audit.

“Why it matters so much to me was they received money to take care of patients that were sick, and these patients weren’t sick,” she said. “From the best of my recollection, 70 percent of the patients I looked at had a stroke every year for four years. … I mean, it doesn’t take a rocket scientist to know people don’t have strokes year over year, they usually die.

“I went in and I looked at the records, and it was one after the other, after the other, after the other. And it was the same for fractures and cancer. 

“And so, Sutter was getting all this money to manage all these poor people (who really didn’t have these conditions). This is taxpayers’ dollars.”

Ms. Ormsby, a coder certified by the American Association of Professional Coders, described the resistance she faced from Sutter management for doing her job.

“They started asking questions like ‘Why are you looking back? Why are you looking at old stuff?’” she said.

Ms. Ormsby had told Sutter staff that she was required to look back if errors had been found.

“My certification says … you have to look both ways, you have to do the right thing, and if you see something that’s wrong, you need to look back and make sure that there isn’t a trend. … And if it has been going on, what are you going to do to correct it?’

“I kept sending emails and going to meetings with vice presidents and saying, ‘Hey, this is what’s going on here. You need to send this money back.’ 

“My boss gave me a phone call and she said ‘You and your team are to immediately stop coding. I want no more auditing taking place. Period.’”  

Worried she would lose her certification if the fraud was uncovered by investigators and it appeared she had something to do with it, Ms. Ormsby looked for legal help.

“I started Googling ‘What do you do when you see fraud?’” she said.

Ms. Scanlan’s name came up. Ms. Ormsby gave her a call and explained her situation.

“I’ve reached out to Medicare. I’ve documented absolutely everything from the day I started. And I said, ‘What do I need to do to protect myself?’” she recalled. “And (Ms. Scanlan) said, ‘Wow, we need to talk. Are you free this week? This is a whistleblower case. The way you protect yourself is to report this to the government’ … That’s how it started.”

Ms. Scanlan says they “hit it off like a house on fire right from the first call.” 

“Every single turn,” Ms. Scanlan said, “I would ask Kathy a question and she’d be like, ‘Hold on a second.’ And then she pulled out a document with evidence that answers whatever the question was. That was really, really important.”

The biggest hurdle for Ms. Ormsby was maintaining the seal in the case, which prevented her from telling her friends and family about the lawsuit she had filed, and then being interviewed by the government.

“It’s extremely stressful because obviously I couldn’t talk to anyone or tell anybody what was going on,” she said.

Ms. Ormsby described passing through a metal detector at the courthouse the day she went to her first interview with the U.S. Attorneys.

“That was one of the most stressful things that happened that day,” she said, “because I felt like ‘Wow, this is what it feels like to be a criminal’ and I’m like, ‘No, I’m not a criminal. You know, I’m doing the right thing.’”

Ms. Scanlan said what Ms. Ormsby was able to accomplish through her whistleblower case was significant not just for financial accountability, but for healthcare accuracy.

“Kathy was finding inaccuracies in these patients’ medical records … If we have learned nothing during the pandemic, it is that people are evaluating your risk of disease based on your comorbidities,” Ms. Scanlan said, “and if your health records are not accurate, you are not going to get the best quality care …

“I think that that is a critical message out of this, is that we all need accurate records and accurate documentation.”

Medicare currently covers about 56 million people, almost one-fifth of the U.S. population, and the number of beneficiaries on Part C in 2023 is expected to approach 50 percent of that number as open enrollment continues.

As Ms. Ormsby’s case shows, government programs of this size present an opportunity for large-scale fraud. If you are a coder with information about fraud in Medicare Part C, contact Keller Grover for a confidential, free consultation. We can advise potential whistleblowers about the best path forward from the very beginning, helping minimize the impact of reporting, protect rights and achieve the best possible outcome for the situation.

Whistleblowers have played a role in helping uncover billions of dollars in COVID-19 recovery fraud, and it appears the government thinks there’s a lot more to claw back.

The statute of limitations for civil and criminal fraud enforcement on the Paycheck Protection Program and the Small Business Administration’s COVID-19 Economic Injury Disaster Loan programs were recently extended to 10 years after President Biden signed two bills into law in August. 

“Anyone who defrauded these critical relief programs must be held accountable,” said U.S. Rep. Nydia M. Velázquez (D-N.Y.), chairwoman of the Committee on Small Business. “These bipartisan bills will ensure law enforcement agencies have the time they need to bring fraudsters to justice.”

The PPP, an $813.7 billion program, provided fully guaranteed SBA loans for eligible small businesses, individuals, and nonprofits adversely impacted by the pandemic. PPP loans can be forgiven if used as required by the law – eligible expenses included payroll, rent, utility payments, and other limited uses.

Borrowers completed applications including good faith certifications, submitted them to lenders for approval, and once approved, the SBA issued a loan number and the lender disbursed the approved funds. Because borrowers submitted information to banks on applications, they can face bank fraud charges for using false documents or securing loans on false pretenses.

That’s what happened to a 53-year-old California man convicted in a $27 million PPP fraud scheme in March. According to federal prosecutors, he submitted 27 PPP loan applications to four banks, claiming he had eight companies, each with 100 employees and an average monthly payroll of $400,000. That, the jury found, was not true. And instead of using the PPP money for payroll expenses, evidence showed the defendant used it for personal expenses, payments on his personal credit cards, transfers to other personal and business accounts he controlled, and renting an oceanfront apartment in Santa Monica.

“The Small Business Administration, in sending that money out, basically said to people, ‘Apply and sign and tell us that you’re really entitled to the money,’” Department of Justice inspector general Michael Horowitz, chair of the Pandemic Response Accountability Committee, told NBC News in March. “And, of course, for fraudsters, that’s an invitation. … What didn’t happen was even minimal checks to make sure that the money was getting to the right people at the right time.”

A SBA inspector general report found the SBA did not have an organizational structure with clearly defined roles, responsibilities, and processes to manage and handle potentially fraudulent PPP loans. In addition, the report said, the agency did not establish a centralized entity to design, lead, and manage fraud risk because it did not establish a sufficient fraud risk framework. 

As of December 2021, PPP fraud hotline complaints exceeded 54,000 and more than 70,000 potentially fraudulent PPP loans totaling at least $4.6 billion were identified. A House subcommittee report said over $10 billion in PPP and EIDL funds had been returned to the government as of June 2.

Frauds on the PPP may also result in liability for making a false claim to the government for payment. Whistleblowers play an important role in helping the government combat this kind of fraud. One of the government’s most important tools for recovering those taxpayer dollars is the False Claims Act, or FCA, which provides a way for whistleblowers to report wrongdoing. 

The FCA incentivizes whistleblowers to report a fraud on the government by rewarding them with a percentage of the amount the government successfully recovers because of the whistleblower’s FCA case. By law, that amount is 15 to 30 percent of the government’s recovery, depending on a few factors. The law also protects against retaliation. 

False Claims Act whistleblowers may be employees with first-hand knowledge of fraud in their companies, and for that reason, their cases often combine whistleblower and employment law issues. With more than 30 years of combined experience litigating fraud and employment cases, the attorneys of Keller Grover stand ready to represent whistleblowers in a holistic way.  

We provide confidential, free consultations to advise those who have observed suspected wrongdoing and can help you determine the best path forward from the very beginning, helping you minimize the impact of reporting, protect your rights and achieve the best possible outcome for your situation. 

 

 

 

The Covid pandemic brought to light another widespread illness — rising fraud against U.S. taxpayers. 

To be sure, the figures are staggering. Pandemic fraud alone ate up an estimated $80 billion of intended small business relief, $90 billion of unemployment relief, and $80 billion from a separate Covid relief program, according to NBC News. Government statistics keep rising but have yet to catch up to those estimates.

Unfortunately, those staggering fraud estimates dwarf the $62 billion in settlements and judgments that the U.S. Department of Justice clawed back between 1986 and 2019 under the False Claims Act. 

In other words, as our Kate Scanlan wrote for Taxpayers Against Fraud, in just more than a year, fraudsters took more from the small business relief program (officially known as the Paycheck Protection Program, or PPP) than FCA enforcement had recovered in 34 years. 

“PPP money went out from a firehose,” she wrote. “It will have to be clawed back one thimble-full at a time.”

For the fiscal year ending Sept. 30, 2021, the DOJ reported $5.6 billion in settlements and judgments from civil cases involving fraud and false claims. That marked its second-largest fraud recovery ever, which is impressive in some ways, but not in others, Scanlan wrote in a separate analysis.

As of a June report to the Select Subcommittee on the Coronavirus Crisis, more than $10 billion of relief funds had been recouped, and hundreds of people had been criminally charged. 

Obviously, much has yet to be done, but it’s a start. And it’s a stark reminder that vigilance is required for every government contract, pandemic or otherwise.

Whistleblowers play an integral role in that vigilance, both in uncovering specific instances of fraud and in discouraging other malicious actors. 

At Keller Grover, we feel strongly about helping whistleblowers inoculate the country against further surges in fraud. Through our confidential, free consultations, we can advise potential whistleblowers about the best path forward from the very beginning, helping minimize the impact of reporting, protect rights and achieve the best possible outcome for the situation. Our deep experience litigating both fraud and employment law makes us uniquely skilled to represent whistleblowers.