Last month, the Justice Department announced that Health Management Associates, formerly a U.S. hospital chain headquartered in Naples, Florida, will pay over $260 million to resolve charges that HMA knowingly billed government health care programs for inpatient services that should have been billed as outpatient or observation services, paid remuneration to physicians in return for patient referrals, and submitted inflated claims for emergency department facility fees.

Marc Raspanti

HMA entered into a non prosecution agreement to resolve related criminal charges and an HMA subsidiary plead guilty.

The case was driven by a group of whistleblowers – two of them emergency room doctors in North Carolina and two of them former hospital executives at HMA hospitals in Lancaster, Pennsylvania.

Those whistleblowers were represented by Marc Raspanti, a partner at Pietragallo, Gordon, Alfano, Bosick & Raspanti in Philadelphia along with his law partner Pamela Coyle Brecht.

Raspanti has been a leader in the False Claims Act bar – bringing many high profile cases over the years.

The North Carolina doctors he represented were echoing the complaints of emergency room doctors around the country. This was not an isolated case.

“Most people think that hospitals staff their emergency rooms with their own employees,” Raspanti told Corporate Crime Reporter in an interview last week. “And while that is sometimes the case, most of the time it’s not. When you enter into an emergency room of a large or small hospital, many times they are staffed by independent contractors hired by the hospital to perform 24 hour a day, 7 day a week, 365 days emergency room services. They are extremely lucrative contracts for the emergency room doctor groups. They are particularly lucrative for the large emergency room publicly traded companies. They have contracts all over the country. And often, there are pressures on these doctors from the hospitals to admit patients.”

“Think about it. You come into an emergency room of a local hospital. I have kids who played hockey. And you take your child or a grandparent into an emergency room to stitch up a head or to treat abdominal pain. That typically can be treated in the emergency room for a few hundred dollars. But if you are admitting that patient because you want to submit that patient to a battery of tests, or you want to admit that patient for a day or two – that ER charge by the hospital for several hundred dollars becomes a several thousand dollar hospital bill. In addition to admitting that person to make more money, the hospital also exposes that patient to all kinds of hospital borne diseases.”

“My physician clients in North Carolina decided they were going to come forward and challenge the hospital system and a national emergency services staffing company on their fraudulent practices. And they paid the price. They were fired. They were fired from contracts they held with two hospitals in excess of eighteen years.”

Before they filed their case under seal, they brought their case to corporate management?

“To the highest levels of the corporation. They raised their concerns with the highest levels of the corporation. They raised them repeatedly. They raised them in a noisy manner. They raised them in emails, in letters and with management. That didn’t get them anywhere. It got them fired – and replaced by an emergency staffing giant, whom we also sued, EmCare. They decided to look for someone like me to try and move the case forward.”

You will hear corporate defense counsel say –  the proper place for an employee to raise a complaint is within the corporate hierarchy.

Companies are sensitive to these complaints and employees should bring them up within the company.

But in almost every one of these False Claims Act cases, the whistleblowers do raise the issue within the company. Why don’t employees go straight outside and sue the company under seal first?

“The first conversation I typically have with a relator is – did you try and resolve this matter within the company? My clients didn’t raise these issues to lose their contracts. They had the contracts for long periods of time. They enjoyed the working relationship they had with the hospital staff. They attempted to resolve the matter internally.”

“They even went out and got an outside lawyer to push the issue within the company. They thought eventually somebody would listen to them and stop the practice. But that eventually led to them being terminated.”

“Why do companies continue to do this? I laugh sometimes when I go and speak to compliance officers. They want insight. I tell them – if you just listen to the very complaints that are coming through and took them seriously, you will save your company billions of dollars.”

“I’ve been hired and fired by multiple publicly traded companies who brought me in asking me to stop their whistleblower problem. I said – I can certainly minimize the problem. But after a few meetings with them, they say – thank you but we are not going to do any of those things.  Real change is simply too difficult.”

Because you would recommend fixing the problem?

“I was recommending fixing the problem. I was recommending going to the whistleblower and telling the whistleblower what the company has done to resolve the problem.  A couple of companies had paid over $2 billion in fines. But they were so entrenched in the way they had done things. They always look at these whistleblower cases as a long story, an outlier, or some disgruntled person.”

Is it a requirement under the False Claims Act that the relator must first raise the issue within the company?

“It is not.”

Why then don’t the employees just go straight outside and file their case under seal?

“The people I represent take at face value their company’s word that they are going to run an honest corporation.  And they go to compliance meetings. They are addressed by corporate officers, by outside law firms, inside lawyers. And they believe someone is listening.”

It seems to be common knowledge now that the company can’t get it right. As a result, are we seeing any cases where the whistleblower goes outside first?

“Most of the cases I currently have involve insiders who first attempted to one degree or another to raise the problem internally. I don’t have anybody who just came straight to me. In fact, when they come straight to me, I ask them why they didn’t go internally first. While there is not a requirement, the government does want to know if there is a robust compliance program that is working – or not.”

What were the allegations in the Philadelphia whistleblower case?

“The Philadelphia case was a bit more convoluted. It raised allegations about  HMA’s corporate practices of entering into hospital joint ventures with referring physicians. HMA would joint venture a hospital with a group of local physicians. And those physicians, as a result of the joint venture, would share in the hospital profits. And those profits would be enhanced by the number of patients the physicians referred to the hospital. There are Stark and AKS exceptions that could have shielded these practices, but we exposed that the physicians’ returns were not in proportion to their investment. It was complicated to allege, but ultimately, it was a successful theory.”

“The whistleblowers in the Philadelphia matter were two former HMA hospital executives. They worked in the Lancaster area. They saw that HMA was getting involved in these complex whole hospital joint ventures with physician groups and they started to ask questions. It took a fair amount of leg work and effort to be able to unpack these complicated health care transactions. And we found that HMA was paying good money for the so called assets of one of the groups – Physicians Alliance Ltd. (PAL). We retained health industry experts to demonstrate to the government what they were doing. HMA was bloating the fair market value of some of the assets. And by bloating the values, they were paying more money to the physicians. We argued that by paying more money to the physicians than their investments warranted, HMA was  really paying them a kickback to induce referrals. And that was the crux of the allegation.”

“There have only been four or five cases of this type in the United States. It took a fair amount of forensic accounting work to be able to unpack those allegations and to demonstrate that while they may look legal, if you step back, we alleged that they were not legal.”

Other than the HMA case, what were some of your greatest False Claims Act hits since you started practicing in the area?

“The first case that brought some attention to our practice was the SmithKline Beecham case,” Raspanti said.

“It was a $334 million settlement back in 1996. At the time, it was probably the fourth or fifth largest settlement of its kind. It got a lot of notoriety for a lot of reasons.”

“I settled a $265 million case against a large hospital chain in New Jersey for upcoding.”

“I settled a case against a large PBM for over $180 million after litigating that case for a number of years.”

“We have been involved in some large military contractor settlements over the years. We settled a defense contractor case over food that was shipped to Afghanistan and Iraq. And we alleged that the food was overpriced and that the contractors had been gouging our military. That was settled for $110 million.”

“And last year we settled a non-intervened case against a giant pharmaceutical company.”

[For the complete q/a format Interview with Marc Raspanti, see 32 Corporate Crime Reporter 42(11), Monday October 29, 2018, print edition only.]