For what appears to be the first time, a False Claims Act whistleblower who received a reward in connection with the False Claims Act case also received a share of a subsequent CMP imposed by the HHS-OIG in a related enforcement action. As background, the False Claims Act case had been brought against Jack Baker, M.D., and Fairmont Diagnostic Center/Open MRI. In 2012, Dr. Baker, who was a prominent radiologist in Houston, TX, and Fairmont entered into a $650,000 False Claims Act settlement concerning allegations that Dr. Baker and Fairmont engaged 17 physicians in “sham” medical director agreements to induce patient referrals. Fairmont also allegedly placed its own full-time employees as “referral coordinators” in certain physicians’ offices to help patients obtain the ordered imaging study. The government alleged that these full-time Fairmont employees were performing office functions on behalf of the physician, which constituted improper remuneration intended to induce referrals. The whistleblowers in that case, Drs. Philip Blum and David Spinks, jointly received 20% of the proceeds of the settlement.

Subsequently, on June 9, 2015, the OIG issued a fraud alert aimed at warning physicians about how their financial arrangements – such as medical directorships – can create a risk of personal liability under the Federal Anti-Kickback Statute. The fraud alerted warned physicians about entering into suspect compensation arrangements and advised them to “ensure that those arrangements reflect fair market value for bona fide services the physicians actually provide” by “carefully consider[ing] the terms and conditions of medical directorships and other compensation arrangements before entering into them.” Payments that take into account the volume or value of referrals do not reflect fair market value for the services performed, and compensate physicians in ways that are unrelated to providing services therefore raising compliance risks, according to the OIG. Similarly, not providing the services called for under the arrangement can also create liability issues.

The OIG’s fraud alert also addressed a series of 12 settlements under the OIG’s CMP authorities obtained over the past two years with the individual physicians who had medical director arrangements with the False Claims Act case defendants. In total, the OIG collected over $1.4 million in penalties from 11 physicians and excluded one physician for three years. The settlement amounts ranged from $50,000 to $195,016. Most recently, it came to light that the OIG was awarding a share of these penalties to the False Claims Act whistleblowers, which means that the whistleblowers received two awards, one from DOJ and one from HHS-OIG.

This is an interesting and important development in the False Claims Act/CMP context, and could further encourage whistleblowers to come forward.

The Florida based law firm of Nicholson & Eastin, LLP represents clients in healthcare and non-healthcare False Claims Act and qui tam cases. The attorneys in the firm include a former Assistant United States Attorney that handled False Claims Act cases, as well as other attorneys with significant False Claims Act and qui tam experience.