Home Health & Hospice Week

Whistleblower lawsuits lead to settlements.

Even when the stakes don’t run into the millions, authorities are serious about stamping out kickbacks in home health.

Case in point: Village Home Care in Ocala, Fla., and its majority owner and CEO Joy Rodak paid physicians Vishnu Reddy and Kuchakulla Reddy for home health referrals via sham medical director and sublease agreements from 2012 to 2014, the Department of Justice alleges in a release. VHC paid Vishnu $50,000 “to induce him to refer patients to VHC” although he provided no services, and paid Kuchakulla more than $30,000 through his medical practice for a sublease, although VHC didn’t use the space.

VHC will pay $225,000 to settle the allegations; Rodak will pay $105,000, Vishnu Reddy will pay $100,000, and Kuchakulla Reddy will pay nearly $62,000, according to the release.

Two whistleblower lawsuits filed by former VHC employees sparked the case, the DOJ says. The court hasn’t yet determined the share of the settlement for Kasey Jacobs, James Hanes, Katherine Brooks, Karen Swain, and Barbara Mellot-Yezman.

“Medicare funds should be used to provide care for our seniors, not to induce physicians to refer business,” U.S. Attorney Roger Handberg for the Middle District of Florida says in the release. “This office will take action against individuals who make unlawful payment to physicians in exchange for patient referrals.”

Don’t Automatically Accept A ‘No’ From Insurance

Meanwhile, providers in certain states may feel a little more secure that their insurance coverage can help them out with False Claims Act cases, thanks to a recent federal appeals court decision in Illinois.

The U.S. Court of Appeals for the Seventh Circuit “sided with the policyholder, resolving a large insurance coverage dispute relating to a $100 million settlement,” note attorneys Michael Podberesky, Anthony P. Tatum, and Kelsey D. Haines with law firm McGuire Woods. In 2018, drugmaker Astellas U.S. Holding agreed to pay $100 million to settle government charges that it committed fraud related to its payments to copay assistance funds for a prostate cancer drug it released in 2012, Podberesky, Tatum, and Haines recount in online analysis.

Astellas sought coverage from its insurers, including $10 million from Federal Insurance Co. “The insurer argued that Illinois law prohibited it from covering the settlement because it was restitution for intentional wrongdoing,” says attorney Ryan Leagre with law firm Plews Shadley Racher & Braun in Indianapolis. “The key disputed issue was whether the settlement payment from the pharmaceutical company to the federal government was compensatory (insurable) or restitu­tionary (uninsurable).”

“The court held that the fact that the pharmaceutical company had been accused of fraudulent conduct by the federal government was not enough to establish fraud, which could have transformed the settlement payment into restitution,” Leagre continues. “Had there been more evidence of actual fraud, the court may have agreed with the insurer,” he says.

“Astellas is an important and helpful precedent for subjects of FCA investigations seeking insurance coverage,” Podberesky, Tatum, and Haines explain. “Policyholders who are the subjects of FCA investigations should take a careful look at their insurance policies, applicable state law, and should not accept an insurer’s declination of coverage based on the insurer’s argument that ‘restitutionary’ type damages are not covered under the insurance policy,” they advise.