Kickbacks, Penalties, But No Jail: Why is the Federal Government Different?

July 20, 2018

On Monday, July 16, 2018, the U.S. Department of Justice issued a press release (as they regularly and often do) about the resolution of a False Claims Act case, to the tune of $1.5 million dollars, to settle allegations that a home health care agency in Palm Beach Gardens, Healthquest, Inc. and its owners, Frank Jaramillo and Ruth Jaramillo, paid kickbacks to marketers in order to induce patient referrals.  The defendants also entered into a five-year Integrity Agreement with the Department of Health and  Human Services, Office of Inspector General that includes, among other things, an Arrangements Review including a systems review and a transaction review to be conducted by an Independent Review Organization.

The United States alleged that from December 2013 to May 2017, Healthquest paid kickbacks to its marketers in order to induce them to refer patients to Healthquest for home health services.

The federal False Claim Act provides a “qui tam” provision, commonly referred to as the “whistleblower” provision. This provision allows a private person with knowledge of a false claim to bring a civil action on behalf of the United States Government. The purpose of bringing a qui tam suit is to recover the funds paid by the Government as a result of the false claim. If the suit is successful, the whistleblower who brought the qui tam suit may be awarded a percentage of the funds recovered.

These qui tam suits permit private parties, known as “relators,” to sue on behalf of the government and receive a share of any recovery. The act also authorizes the government to intervene in and assume primary responsibility for litigating the lawsuit, as the government has done in this case.  The whistleblower in this case will receive $300,000 as their price, their “inducement” to blow the whistle.

As is typical, the relators are overwhelmingly current and former employees.

In other words, the whistleblower gets a kickback for reporting on the kickback.

“Kickback schemes drive up the cost of health care and lead to medical services that are often unnecessary and not in the best interests of patients,” said United States Attorney Benjamin G. Greenberg.  “The U.S. Attorney’s Office will continue to hold health care companies and their owners responsible for using kickbacks to line their pockets at the expense of taxpayers and federal health care beneficiaries.”

“Referrals resulting from kickbacks that are designed to increase profits rather than improve the health of patients will not be tolerated,” said Special Agent in Charge Richmond. “OIG Special Agents are tireless in their efforts to uproot such schemes and eliminate fraud, waste, and abuse in Federal health care programs.”

From all indications, the Defendants in this case are not being criminally prosecuted.

Jeffrey Lynne

Jeffrey Lynne

Jeffrey C. Lynne is a South Florida native, representing individuals and business entities relating to licensing, accreditation, regulatory compliance, business structure, marketing, real estate, zoning and litigation pertaining to substance abuse treatment facilities and sober living residences. Mr. Lynne has been recognized across the region as a leader in progressive public dialogue about the role that substance abuse treatment has within our communities and the fundamental need and right to provide safe and affordable housing for those who are both in treatment for addiction and alcoholism as well as those who are established in their recovery.
Jeffrey Lynne

About Jeffrey Lynne

Jeffrey C. Lynne is a South Florida native, representing individuals and business entities relating to licensing, accreditation, regulatory compliance, business structure, marketing, real estate, zoning and litigation pertaining to substance abuse treatment facilities and sober living residences. Mr. Lynne has been recognized across the region as a leader in progressive public dialogue about the role that substance abuse treatment has within our communities and the fundamental need and right to provide safe and affordable housing for those who are both in treatment for addiction and alcoholism as well as those who are established in their recovery.

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