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United States Government gets $12 million settlement from the hospital of the University of Pennsylvania over allegations of medicare billing fraud

In September 2000, the University of Pennsylvania Health Systems (UPHS) agreed to settle a civil Medicare False Claims case for $12 Million. The case was initiated by a whistleblower complaint filed by John J. Saunders. The complaint led to the government investigation with Saunders receiving more than $2 Million of the settlement money.

Through Saunders, a former mental health counselor for the University of Pennsylvania Health System, the government learned of the Health System’s involvement in an alleged Medicare fraud involving unnecessary psychiatric treatment for nursing home residents.

In 1997, Saunders sued Penn’s Health System and its Presbyterian Medical Center. This prompted the federal government to launch an investigation. On August 30, 2012, U.S. District Judge Clarence C. Newcomer unsealed Saunders’ lawsuit after Penn Health agreed to settle the civil case by paying $12 Million to Medicare, twice the amount of the alleged fraud. Saunders’ reward is about 18 percent of the settlement. Whistleblowers are entitled to rewards ranging from 15 percent to 25 percent of what the government can recover.

Saunders’ lawyers, Gaetan J. Alfano and Marc S. Raspanti, said Saunders learned of the fraud in 1995. Saunders became concerned when he learned that Penn administrators were recruiting elderly nursing home patients for psychiatric treatment. Counselors like Saunders were told they would lose their jobs if enrollment didn’t increase.

Mr. Alfano and Mr. Raspanti said elderly nursing home residents who were beyond help were signed up even though they couldn’t participate in nor benefit from psychiatric counseling.

To increase revenues, administrators directed counselors to bill Medicare for therapy sessions when their patients were “watching television, attending birthday parties, and napping,” Raspanti said. Staff members were told to bill Medicare “for feeding the patients lunch,” according to Raspanti and Alfano.

Assistant U.S. Attorney Margaret L. Hutchinson, who supervised the government’s investigation, said more than 1,000 nursing home patients were improperly put into the program over a four-year period, 1993-1997. She faulted Penn Health for not investigating Presbyterian’s operations before the merger and for not taking steps to stop fraudulent Medicare billings until two years after Saunders blew the whistle. Saunders first complained to Penn’s Health System officials but was labeled a “troublemaker,” his lawyers said.

The qui tam case is titled United States ex rel. Saunders v. Univ. of Pennsylvania Health System, 97-6747 (E.D.Pa.).

The False Claims Act allows private persons (known as “relators”) to file a lawsuit against those individuals, businesses, and other entities that have directly or indirectly defrauded the federal government. Although the federal government can file its own False Claims Act lawsuit, the true success of the statute has come in cases that were filed by whistleblowers.

For more information about the False Claims Act and whistleblower cases, we invite you to visit the False Claims Act Resource Center at www.falseclaimsact.com.

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The lawyers in the national qui tam whistleblower practice of Pietragallo Gordon Alfano Bosick & Raspanti have proven, battle tested experience fighting for whistleblowers in federal and state false claims cases. The False Claims Act Practice Group, which includes four former federal and state prosecutors and two certified fraud examiners, has:

  • Recovered nearly $2 billion for federal and state taxpayers
  • More than 30 years combined experience representing whistleblowers
  • Fought some of the most complex cases brought under federal and state false claims acts
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