DOJ False Claims Act Suit Targets Long Term Care Hospital Chain

DOJ False Claims Act Suit Targets Long Term Care Hospital Chain

On January 16, the US Department of Justice (DOJ) filed a complaint under the False Claims Act (FCA) against Priority Hospital Group LLC (PHG), a hospital management company headquartered in Louisiana, along with three long term care hospitals operated by PHG and an individual physician. The government’s lawsuit centers on allegations that the defendants billed Medicare for clinically unnecessary services and engaged in improper financial arrangements to secure patient referrals in violation of federal health care fraud statutes.

Long term care hospitals serve patients with complex medical needs who require prolonged inpatient treatment, and Medicare bases its payments to these facilities partly on how long patients remain hospitalized. The government contends that PHG and its affiliated hospitals exploited this reimbursement structure by keeping patients beyond the point of clinical necessity to maximize federal payments. Specifically, the lawsuit alleges that the defendants postponed patient discharges even when treatment had concluded or when patients were ready to transition to less intensive care settings — decisions allegedly driven by financial considerations rather than patient welfare.

The lawsuit also targets an alleged kickback scheme involving Riverside Hospital of Louisiana. According to the government, Riverside compensated a physician through consulting contracts and other payments as an incentive for him to steer patients to the facility. Such arrangements implicate the Anti-Kickback Statute (AKS), which bars exchanging anything of value for referrals involving federally funded health care programs, and the Stark Law, which prohibits hospitals from billing Medicare for certain services referred by physicians with whom they have financial ties.

A former Riverside Hospital employee originally brought the case under the qui tam provisions of the FCA, which allow private citizens to sue on behalf of the government and share in any recovery. Federal prosecutors have since intervened and assumed control of the litigation. Should the defendants be found liable, they face potential damages of up to three times the government’s losses, in addition to statutory penalties.

The case is United States ex rel. DeVos v. Priority Hospital Group LLC, et al., No. 20-cv-01041 (W.D. La.).

Read the DOJ’s press release here.

Florida Ophthalmology Practices Settle False Claims Act Allegations for $6 Million

Five Florida ophthalmology practices have agreed to pay a combined settlement of nearly $6 million to resolve allegations that they violated the FCA by billing federal health care programs for medically unnecessary trans-cranial doppler ultrasounds (TCDs) through a kickback arrangement. Clay Eye Holdings LLC, Retina Macula Specialist of Miami LLC, Florida Eye Institute P.A., Miami Eye LLC, and Kendall Eye Institute Inc. each entered into separate settlements, with individual settlement amounts ranging from $310,000 to $2.14 million. Under the settlement terms, these entities have also agreed to cooperate with the DOJ’s ongoing investigations into other parties allegedly involved in the scheme.

According to the government, between January 2018 and June 2022, the practices administered TCDs to thousands of patients and billed Medicare and Medicaid hundreds of dollars per test. Before patients received their test results, the practices and a third-party testing company purportedly assigned patients a serious diagnosis that could qualify for reimbursement, even though the vast majority of patients had no such diagnosis reflected in their medical histories or test results. The practices allegedly paid the third-party company based on the volume or value of tests ordered and referred patients to that company’s preferred radiology group for the professional component of the TCDs. The government contended that this conduct violated the AKS and Stark Law and resulted in the submission of false claims to federal health care programs. 

The case originated as a qui tam action filed under the FCA’s whistleblower provisions. Of the total settlement amount, the whistleblower will receive approximately $1.14 million and the state of Florida will receive approximately $333,500 as its share of Medicaid, which is jointly funded by the federal government and the states. The DOJ has previously resolved similar allegations against two other Florida ophthalmology practices, Brandon Eye Associates P.A. and Pinellas Eye Care, P.A.

Read the DOJ’s press release here.

The claims resolved by the settlement are allegations only and there has been no determination of liability.

Florida Man Convicted on 34 Counts for Defrauding US Military

Last week, a federal jury in the Southern District of Florida convicted Jasen Butler, a 37-year-old Jupiter, Florida resident, on 34 felony counts stemming from his orchestration of a multimillion-dollar fraud targeting the US military. The charges included wire fraud, money laundering, and forgery. Butler was taken into custody immediately following the verdict.

Butler operated through his company, Independent Marine Oil Services LLC, to exploit the SEA Card Program — a US Department of Defense initiative enabling US Navy and Coast Guard vessels to purchase essential fuel for operations worldwide. Between August 2022 and January 2024, Butler submitted fraudulent and doctored invoices and wire transfer documentation to numerous American warships, including the USS Patriot, while those vessels sought to refuel at international ports. In total, the scheme netted Butler more than $4.5 million in payments for fabricated expenses he never actually incurred.

When Navy officials began questioning his activities, Butler attempted to evade detection by assuming a false identity and claiming to work for a fictitious fuel division of another company. He funneled the illicit proceeds into personal enrichment, acquiring multiple high-value properties in Florida and Colorado. Butler’s sentencing is scheduled for April 8, and he faces substantial prison time: up to 20 years for each wire fraud count, and up to 10 years for each forgery and money laundering count.

The investigation was conducted jointly by the Coast Guard Investigative Service, the Defense Criminal Investigative Service, and the Naval Criminal Investigative Service as part of the DOJ’s Procurement Collusion Strike Force, a multi-agency initiative established in 2019 to combat bid rigging, price fixing, and fraud affecting government procurement at all levels.

Read the DOJ’s press release here.

Florida Health Care Executive Pleads Guilty to Medicare Kickback Conspiracy

On January 20, a Florida health care executive pleaded guilty to criminal charges stemming from a health care kickback conspiracy. Evelyn Herrera, who operated a durable medical equipment business called Merida Medical Supplies Inc., entered a guilty plea in the District of Vermont. Federal prosecutors allege that Herrera obtained personal information for individuals located in Vermont, throughout New England, and elsewhere across the country, and then used that information to submit fictitious Medicare claims for wrist, knee, and back braces that beneficiaries never requested or received. The fraudulent billings totaled roughly $6.5 million, of which Medicare paid approximately $2.8 million.

Prosecutors further allege that Herrera took steps to conceal the origins of her illicit gains. She reportedly moved more than $300,000 in proceeds to a cryptocurrency platform and wired an additional $125,000 overseas to acquire real estate in Mexico. When federal regulators at the Centers for Medicare & Medicaid Services notified Merida that payments were being suspended due to suspected fraud, Herrera allegedly made substantial cash withdrawals from bank accounts and diverted funds for the benefit of herself and relatives. 

Herrera’s sentencing is set for May 11 and she faces up to five years in prison. The case was brought as part of the DOJ’s Health Care Fraud Strike Force Program, which has charged over 5,800 defendants for fraudulent billing exceeding $30 billion since the program’s inception in 2007.

Read the DOJ’s press release here.