Justice Department Settles False Claims Act Against Alabama-Based Healthcare Provider

Justice Department Settles False Claims Act Against Alabama-Based Healthcare Provider

For decades, companies have been looking for ways to game the United States system and dupe the government. However, efforts to put these culprits behind bars have also been effective, with indictments and lawsuits going.

Last week, the government got another company that has been duping it for years, announcing a settlement with the company going forward.

Boosting Numbers to Get More Money

In a press release, the United States Department of Justice announced that it had settled a case with SpectraCare Health Systems Inc. - a healthcare provider that operates out of Dothan, Alabama. The press release confirmed that SpectraCare Health Systems had been violating the False Claims Act for a long time, falsifying statements with the state of Alabama’s Medicaid insurance system.

SpectraCare Health Systems operates as a 501(c)(3) nonprofit that provides integrated healthcare services for customers. Some of these services include behavioral health, developmental disability treatment, and more. So, the company caters to the needs of different types of patients with different disabilities. The Department of Justice confirmed that the company had been submitting false claims for Medicaid, receiving the reimbursement of services that it never provided.

The healthcare company had been operating this scam between October 2012 and December 2019, sending many fake claims to Medicaid. Some of these claims were filed improperly, while others had been duplicate services. The ones that covered actual services were billed at exorbitantly high prices.

As the Justice Department explained, SpectraCare Health Systems had either used, manufactured, or caused the use of fake records and statements while filing with Medicaid. The company also took money from Medicaid for claim submissions and refused to conduct the proper due diligence in determining its obligations to repay. Whether intentionally or not, this failure to repay was a significant problem.

The Jig is Up

Eventually, an employee of SpectraCare noticed what the company was doing and sounded the alarm. After finding several irregularities in the company’s filing process, the employee - who no longer works with them at this point - immediately reported the company to the authorities and was put under whistleblower protection. The Justice Department didn't share the details of the employee but confirmed that it was a lady.

The release also confirmed that the whistleblower will receive a portion of the funds recovered from SpectraCare Health Systems.

Amongst other things, the success of the case shows the importance of the False Claims Act. The oldest of all whistleblower laws, the Act posits that whistleblowers can freely speak to the government when they see irregularities from individuals and organizations that directly defraud the government. Whistleblowers also get between 15 and 30 percent of the funds recovered by the government.

In the event that there are additional discoveries, the whistleblower is also entitled to the funda gained. However, this only works if the whistleblower’s information has been useful in getting a prosecution and financial penalty.

It is unclear when the case against SpectraCare Health Systems was filed. However, it is suspected that the case has gone on for a few years. The United States District Court led the investigation for the Middle District of Alabama. At the same time, there was also participation from agencies like the Civil Health Care Fraud Investigator of the United States Attorney's Office, the Office of the General Counsel for the Alabama Medicaid Agency, and the Inspector General for the United States Department of Health and Human Services.

A Much Smaller Fine Than Others

Under the terms of the settlement, SpectraCare will pay $1 million to close the case. The United States government will receive $743,193, while the Alabama Medicaid Agency will get $256,807. The remaining funds will be given to the whistleblower as compensation for the information she provided to the government.

With the penalty paid, SpectraCare Health Systems has been able to close the case entirely. Barring the discovery of new details, SpectraCare will be able to continue its operations without admitting any wrongdoing. There will also be no additional penalties or oversight requirements.

It does seem like the healthcare company is getting a lot from this deal - especially when you consider some of the other False Claims Act cases and how much the culprits have had to pay. However, the company’s scale also seems much smaller than most of the culprits here. So, they will be getting a much lower fine.

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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.

To connect with David: [hidden email] or 714-907-0697.
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