Private equity money is flooding into healthcare in the United States — and with it comes demands for increased profits and the potential for fraud.
In 2021, $206 billion was spent on more than 1,400 private-equity healthcare acquisitions, according to industry tracker PitchBook. And research by the University of California-Berkeley found several metropolitan areas where private equity firms have taken over more than two-thirds of the market for anesthesiology and gastroenterology services.
But as private equity firms take over these healthcare operations and seek bigger profits from their investments, multiple allegations of fraud have been made by whistleblowers.
A recent report by Kaiser Health News found that companies owned or managed by private equity firms have agreed to pay fines of more than $500 million since 2014 to settle at least 34 lawsuits filed under the False Claims Act.
One of the most egregious cases involved management company Benevis LLC and more than 130 of its affiliated Kool Smiles dental clinics in 17 states, which agreed to paid $23.9 million in January 2018 to settle a whistleblower lawsuit that alleged it submitted false Medicare claims for medically unnecessary baby root canals, tooth extractions and crowns.
The government had alleged the clinics “routinely pressured and incentivized dentists to meet production goals through a system that disciplined or rewarded dentists with cash bonuses based on the revenue generated by the procedures they performed. According to the government’s allegations, Kool Smiles clinics ignored complaints from their own dentists regarding overutilization.
Three whistleblowers, all former Kool Smiles employees, were awarded payments totaling more than $2.4 million. 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.
In February 2018, the Justice Department intervened in a qui tam lawsuit filed by two former employees of Patient Care America, a Florida compounding pharmacy managed by private equity firm Riordan, Lewis & Haden Inc., alleging that the pharmacy paid illegal kickbacks to induce prescriptions for compounded drugs reimbursed by TRICARE, a federally-funded health care program for military personnel and their families. PCA, its chief executive officer and former vice president of operations, and the private equity firm were named as defendants.
According to the complaint, PCA and the defendants paid marketing companies to target TRICARE beneficiaries for prescriptions for compounded pain creams, scar creams, and vitamins, without regard to the patients’ medical needs. They also allegedly paid telemedicine doctors to prescribe the creams and vitamins without seeing the patients, and sometimes paid the patients themselves to accept the prescriptions.
The suit was settled in September 2019, with PCA and RLH agreeing to pay $21 million.
Also in 2019, two pain management clinics in northern Virginia agreed to pay approximately $3.3 million to settle a False Claims Act case made by a whistleblower.
Physician assistant Michelle O’Connor sued National Spine and Pain Centers and private equity owner Sentinel Capital Partners in 2015, using the False Claims Act, alleging the company overcharged Medicare, TRICARE and the Federal Employees Health Benefits Program.
The clinics billed up to $1,100 for “unnecessary and often worthless” back braces and up to $1,800 each for urine drug tests that were “medically unnecessary and often worthless,” according to the suit. According to the Kaiser report, O’Connor cited a “revenue maximization” policy that mandated medical staffers see at least 25 patients a day, up from 16 to 18 before the takeover.
The Kaiser report said Sentinel Capital Partners had sold the pain management chain to another private equity firm before the settlement and paid no part of it.
The whistleblower lawyers at Keller Grover believe that those exposing fraud are courageous and deserve to be supported by a team with their same strength and resolve. If you work in healthcare and believe someone has engaged in Medicare fraud, the lawyers at Keller Grover can help you.
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.