Texas-Based Health Company and Top Investor to Pay Millions in False Claims Act Case

Texas-Based Health Company and Top Investor to Pay Millions in False Claims Act Case

Alliance Family of Companies (Alliance) - a national electroencephalography (EEG) testing company based in Texas, has received a fine from the United States government after being found guilty of manipulating Medicare and Medicaid claims to get more money.

The settlement came about after the Department of Justice (DOJ) posted a press release to that effect. According to the release, the company and one of its investors; Anchor Holdings LP (Anchor), was fined for defrauding the national healthcare system.

Improper Billing Practices on Alliance’s End

As the press release explained, Alliance Family of Companies had engaged in a complex system of operations designed to defraud the government and get more money than it was owed in Medicare reimbursement funds. The company had essentially contacted physicians and enticed them with juicy kickbacks in exchange for their co-operation in its scheme.

As many know, healthcare companies are free to provide medical services to their clients provided that the government reimburses them. These reimbursements are only possible if the services offered are necessary and provided judiciously. However, in the Alliance Family of Companies case, it allegedly got professionals to conduct EEG tests and gave them favorable interpretations.

Alliance Family of Companies had especially focused on EEG tests as these procedures are usually challenging for non-professionals to handle. Most medical practitioners who aren’t skilled in neurology will be unable to interpret these test results, which is where the company will step in.

By offering favorable test interpretations, Alliance Family of Companies provided an avenue for these companies to bill Medicare and Medicaid for their services - as if they had actually conducted the tests. If Alliance Family of Companies didn’t charge them for these interpretations, it most likely got a cut from their government-funded proceeds.

The Department of Justice also accused Alliance Family of Companies of conducting certain tests and logging them with the wrong billing code. This way, the company was able to bill its Medicaid and Medicare plans even more. Most especially, Alliance had billed the government for digital health analysis services that it never actually performed.

The Justice Department’s indictment pointed out that Alliance Family of Companies had essentially defrauded the Federal Employees Health Benefits Program and the TRICARE Insurance program for uniformed officers, retirees, and their members - in addition to Medicaid and Medicare.

Anchor Looked the Other Way

On its end, Anchor Holdings was working towards a partnership with Alliance Family of Companies when the scam had begun. The private investment firm had done its due diligence, and it understood that Alliance Family of Companies was committing crimes. But, instead of raising an alarm or complaining about what was going on, the investment firm essentially joined in and helped cover things up.

By knowingly investing in an already fraudulent company, Anchor Holdings was essentially a willing accomplice. Some sources also believe that Anchor Holdings might have been the problem, forcing the crime in order to boost the bottom line of Alliance - and, by extension, its bottom line as well.

Whistleblowers Save the Day

While it is unclear how long this criminal scheme went on, two employees eventually tipped the authorities off. The whistleblowers - who were simply referred to as Realtors Chava and Mandalapu - shared information with the authorities about what was going on here and how Alliance Family of Companies and Anchor Holdings had been defrauding the government.

The case eventually got to the highest levels, with the U.S. Attorney’s Office for the Middle District of Florida handling the case. Other participating agencies included the U.S. Attorney’s Office for the Southern District of Texas and the Civil Division’s Commercial Litigation Branch, Fraud Section. There was also help from the Medicaid Fraud Control Unit and various state attorneys general.

Under the provisions of the False Claims Act, Mandalapu and Chava will be set to get monetary compensation for their help. The Department of Justice has confirmed that Alliance will pay $13.5 million to settle the case, while Anchor will have to pay $1.8 million. Of the total $15 million, Chava and Mandalapu are eligible to get up to $2.962 million in compensation.

The Department of Justice also confirmed that Chava and Mandalapu will be eligible for more proceeds if the case yields more information, leading to further penalties on Anchor and Alliance.

Jennifer B. Lowery in the U.S. Attorney’s Office for the Southern District of Texas explained following the prosecution:

“This settlement should put health care providers on notice that we will hold accountable those who seek to profit by pursuing kickbacks and other improper billing schemes. This office, in coordination with its law enforcement partners, will use all available resources to pursue those who defraud these federal programs and to protect our nation’s health care system.”

Alliance has also agreed to a Corporate Integrity Agreement with the Office of the Inspector-General at the Department of Health and Human Safety as part of the settlement. The Justice Department didn't disclose how extensive the agreement will be, but it is set to stand for five years and provide an additional incentive for Alliance and Anchor to operate legitimately.


David Kani

David Kani is a Southern California based trial lawyer with a focus on class actions and whistleblower (False Claims Act, SEC and others) cases.

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