False Claims Act Case against American Healthways Subsidiary to Return for Trial after Fourteen Years of Litigation

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Among other evidence, the Court found evidence that the entire business model of DTCA was built on increasing patient admissions to host hospitals around the country by providing financial incentives for 276 physicians to refer patients to DTCA.

Hare, Wynn, Newell & Newton LLP

the relator [whistleblower] has produced a wealth of evidence supporting his claims.

The precedent setting case of United States ex rel. Pogue v. Diabetes Treatment Centers of America will soon return to Nashville, Tennessee for a jury trial in Federal Court. Originally filed in Nashville in 1994, the case alleges that Diabetes Treatment Centers of America ("DTCA") violated the False Claims Act and the Anti-Kickback Act by inducing physicians with cash and other forms of remuneration to refer patients to DTCA centers at host hospitals.

The Pogue case was one of the first in the country to establish that violations of the Anti-Kickback Act can form the basis of a False Claims Act case. U.S. ex rel Pogue v. American HealthCorp, Inc., 914 F.Supp. 1507 (M.D. Tenn. 1996); 238 F.Supp.2d 258 (D.D.C. 2002). The legal precedent founded in the Pogue case has lead to more than a billion dollars being returned to the United States Treasury as a result of False Claims Act kick-back cases prosecuted under the law of this case and the line of cases that followed.

Over the fourteen year history of the litigation, millions of pages of documents have been produced, reviewed and subject to deposition testimony. According to the Federal Court who reviewed the evidence, the documents and testimony tell a compelling story. In its opinion denying summary judgment and remanding the case for trial in Nashville, the District Court for the District of Columbia stated that "the relator [whistleblower] has produced a wealth of evidence supporting his claims."

Among other evidence, the Court found evidence that the entire business model of DTCA was built on increasing patient admissions to host hospitals around the country by providing financial incentives for 276 physicians to refer patients to DTCA. Further, the court found ample evidence that the "medical director" contracts entered into by DTCA with physicians contained physician duties regarding the referral of patients and allowed DTCA to terminate the physicians if the patient census level was not maintained above a certain threshold.

The court also quoted a particular physician medical director's observation that DTCA had an "excessive and obvious concern about profit rather than giving services." The Court further referred to evidence from a former DTCA medical director that "DTCA ostensibly paid us for our referrals. That was part of the arrangement."    

The Federal District Court denied DTCA's Motion for Summary Judgment and it's motion for partial reconsideration of that denial finding more than sufficient evidence to support the whistleblower's claims. When the case returns to Nashville, DTCA will face a jury trial on the allegations that it violated the Anti-Kickback Act and False Claims Act.

If a jury finds proof of such violations, DTCA will face payment of treble damages plus up to $11,000 per false claim. According to the counsel for the whistleblower and documents filed in the case, these damages could amount to hundreds of millions of dollars. Under the False Claims Act, the majority of damages awarded would be returned the United States Treasury.

The prosecution of the case is being handled by Scott Powell, Don McKenna and Jamie Moncus of Hare, Wynn, Newell & Newton LLP; Rick Morgan and Jennifer Verkamp of Morgan Verkamp LLC; and, attorney Larry Crain of Nashville. The United States is represented by J. Chris Larson and Dan Anderson of the United States Department of Justice Civil Fraud Division.

Contact:    
Scott A. Powell
Don Mckenna
Hare, Wynn, Newell & Newton, LLP
(205) 328-5330
scott @ hwnn.com
don @ hwnn.com

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