Representative Cases

Medicaid Fraud Case Study

1. Factual Analysis
Dr. McAllen ran a successful pain management clinic in South Texas. Among his employees were two anesthesiologists whom he had hired shortly after they were admitted to practice. After a few years of practicing with Dr. McAllen, the anesthesiologists became discontent with their practice and decided to leave Dr. McAllen’s pain management clinic and start their own practice in the same town.

Once the anesthesiologists left Dr. McAllen’s clinic and started their own pain management clinic, they filed a lawsuit against Dr. McAllen under the Federal False Claims Act. Under the Act, employees or former employees of a business may sue on behalf of the government in cases were the defendant is allege to have defrauded the government. In these “whistleblower” or “qui tam” cases, the individuals who filed the suit may receive as much as 25% of the government’s recovery. The anesthesiologists alleged in their suit that Dr. McAllen had improperly billed numerous procedures to the Medicare and Medicaid systems, resulting in millions of dollars in losses to the government.

The United States chose to intervene in the case and became the plaintiff. Subsequently, the State of Texas joined the case as an intervenor. Dr. McAllen was faced with defending his practice against the combined forces of the state and federal governments.

Upon entering the case, the United States immediately confiscated the records of Dr. McAllen. While the government alleged that Dr. McAllen had conspired to defraud the government through numerous schemes, it would not provide him access to his own records in order that he could defend himself. Indeed, the government’s original complaint did not cite one specific instance of fraud, instead it merely alleged, in the broadest of terms, that Dr. McAllen defrauded the government.

2. Legal Course of Action
Dr. McAllen vehemently denied the allegations him and believed that the original case was brought by his former employees in order to harass him and improve their practices at the cost of destroying his. All of the government’s evidence to support their claim came from the former employees of Dr. McAllen.

Dr. McAllen’s attorneys immediately set out to secure copies of the records seized by the government. As with other tasks in the case, the government’s obstinacy and disinterest required that the attorneys expend great effort to achieve results. When copies of the records were finally received from the government, almost 30,000 pages, they were disheveled and out of order. Meanwhile, McAllen’s attorneys filed motions to force the government to specifically identify instances of frauds that formed the basis of their claims. The government finally produced a list of 50 transactions that it alleged were examples of fraudulent billing. The government claimed it lost a whopping $600 on those claims.

An audit was done of he claims the government used as the basis for its claims and a statistical sampling of other claims showed that while some billing codes were improper for some claims, the financial impact of the mislabeling was a net benefit to the government. A meeting was arranged between the government’s coding expert and Dr. McAllen’s coding expert to discuss the claims. The result of the meetings has been a significant drop in the government’s zeal to pursue this case.

3. Outcome and Lessons to be Learned
This case is ongoing and settlement discussions are taking place. In cases such as this, it is important to understand that the government’s sole source of information is usually a disgruntled former employee who stands to profit handsomely from any recovery. In this case, the government started out stating that they foresaw Dr. McAllen forfeiting large sums of money. As the case has progressed it has become clear that any miscoding was unintentional and has not resulted in the losses the government initially claimed. In many of these cases, however, the defendant is essentially battling the presumption that he is guilty and must expend time, energy and money to prove his innocence. This case has been no exception. It is important to understand that part of the government’s strategy in cases like this is to intimidate defendants into an early settlement. If a defendant can weather the early part of the case, he will be in a better negotiating position down the road.