Medical Group and Related Parties to Pay Over $62 Million to Resolve FCA Claims for False Diagnoses

Medical Group and Related Parties to Pay Over $62 Million to Resolve FCA Claims for False Diagnoses

On March 26, the US Department of Justice (DOJ) announced that a California-based medical group and related parties agreed to pay over $62 million to resolve allegations that they violated the False Claims Act (FCA) by causing the submission of false diagnosis codes for spinal conditions to increase payments from the Medicare Advantage program.

Medicare Advantage, also known as the Medicare Part C program, involves managed care insurance plans that contract with health care providers to deliver Medicare-covered benefits. The Centers for Medicare and Medicaid Services (CMS), which oversees the Medicare program, adjusts payments under these plans based on beneficiaries’ health diagnoses, known as “risk scores.” A beneficiary with a higher risk score will generally result in a higher risk-adjusted payment.

Per the DOJ, from 2015 to 2021, Seoul Medical Group Inc., its subsidiary Advanced Medical Management Inc., and their former president and majority owner, Dr. Min Young Cha, submitted diagnoses for two severe spinal conditions for patients who did not suffer from either. The DOJ alleges that, in an effort to perpetuate this scheme, Renaissance Imaging Medical Associates assisted Seoul Medical Group by creating radiology reports that appeared to support these diagnoses. The submission of these false diagnoses resulted in increased payments from CMS to the Medicare Advantage plan, which then resulted in increased payments to Seoul Medical Group.

The case was originally filed under the whistleblower provision of the FCA, in a lawsuit brought by the former vice president and chief financial officer of Advanced Medical Management.

Under the settlement agreement, Seoul Medical Group and Advanced Medical Management will pay $58,740,000, Dr. Cha will pay $1,760,000, and Renaissance Imaging Medical Associates will pay $2,350,000. The whistleblower’s portion of the settlement amount has not yet been determined.

The whistleblower suit is US ex rel. Pew v. Seoul Medical Group, Inc., et al., No. 2:20-cv-05156, filed in the Central District of California. The DOJ’s press release is available here.

Flooring Company to Pay $8.1 Million to Resolve FCA Allegations Related to Import Duties

Earlier this week, the DOJ announced that Evolutions Flooring Inc. has agreed to pay $8.1 million to resolve a lawsuit filed under the whistleblower provision of the FCA.

Under federal law, importers must declare certain information for imported goods, including the country of origin of the goods, the value of the goods, whether the goods are subject to duties, and the amount of duties owed. Per the settlement agreement announced this week, Evolutions — a California-based importer of multilayered wood flooring, and its owners, Mengya Lin and Jin Qian — knowingly and improperly evaded customs duties on multilayered wood flooring manufactured in the People’s Republic of China that the company imported between September 1, 2019, and July 31, 2022.

The DOJ alleged that this conduct violated the FCA, as it caused false information to be submitted to the US Customs and Border Protection regarding the identity of the manufacturers and country of origin of the imported multilayered wood flooring. When announcing the settlement, the DOJ emphasized the importance of import duties in maintaining fair competition and government revenue.

As part of the $8.1 million settlement, the whistleblower will receive approximately $1,215,000.

The whistleblower suit is United States ex rel. Urban Global LLC v. Struxtur Inc. et al., No. CV20-7217, filed in the Central District of California. The DOJ’s press release is available here.

MORSECORP Inc. Settles $4.6 Million FCA Allegations Over Cybersecurity Failures in Defense Contracts

On March 26, the DOJ announced that it reached a settlement with MORSECORP Inc., a Massachusetts-based defense contractor who had contracts with the US Departments of the Army and Air Force to resolve FCA allegations prefaced on cybersecurity fraud.

Per the Defense Federal Acquisition Regulation Supplement, US Department of Defense (DOD) contractors and subcontractors must provide adequate security on all covered contractor information systems. This includes, at a minimum, implementing certain specific security requirements.

Under the settlement agreement, MORSECORP admitted that it failed to comply with these cybersecurity requirements on multiple fronts. Key admissions include using a third-party email host without proper security measures, failing to implement all required cybersecurity controls, and inaccurately reporting its cybersecurity compliance score to the DOD. Despite these failures, MORSECORP submitted claims for payment on the contracts it had with the federal government, forming the basis for an FCA violation.

MORSECORP will pay $4.6 million to resolve these allegations, with the whistleblower to receive an $851,000 share of the settlement amount.

The whistleblower suit is United States ex rel. Berich v. MORSECORP Inc. et al., No. 23-cv-10130, filed in the District of Massachusetts. The DOJ’s press release is available here. A copy of the settlement agreement is available here.