U.S. Recovers $1.09 Billion in Medical, Defense Fraud

Spurred by recoveries in health care fraud cases, the government collected a record $1.09 billion in civil settlements and judgments in fiscal 1994, nearly three times more than the year before, the previous high.

Defense procurement fraud pay-backs of $578 million, led by cases in which whistle-blowers sued contractors in the name of the government, constituted the biggest category of recoveries, the Justice Department said Tuesday.

But health care fraud--reflecting an unprecedented $324-million settlement with a psychiatric hospital chain for allegedly overcharging Medicare, Medicaid and other federal health programs--generated $411 million, the second-largest category.

“We want the word to get out--that persons, entities, companies are not going to be permitted to cheat the taxpayers of this country and get away with it,” Frank W. Hunger, assistant attorney general for the department’s civil division, told a press conference.

“Whether a Fortune 500 defense contractor delivers substandard equipment, or a large health care supplier lies about its costs to obtain inflated federal reimbursement, or a doctor falsifies a diagnosis to get paid by Medicare, or a businessman lies on an application for federal funds, we will seek to recover every dime and more on behalf of the taxpayers,” Hunger said.

The $1.09 billion in civil recoveries topped the $900 million that the government obtained in criminal fines and forfeitures last year.

The largest element in the health care fraud recovery was the $324-million settlement from National Medical Enterprises Inc., a multinational corporation that owns a nationwide chain of psychiatric hospitals and substance abuse facilities.

The alleged fraudulent practices at the firm’s facilities included admitting and treating patients unnecessarily, keeping patients hospitalized longer than necessary to use available hospital insurance, billing insurance programs multiple times for the same service, billing when no service was provided and billing Medicare for payments made to doctors and others that were intended solely to induce referrals of patients.