Wound Care Chain Healogics Agrees to Repay Medicare $22.5 Million

June 21, 2018

The Justice Department said that Healogics, a Florida-based wound care chain, agreed to pay up to $22.51 million to settle allegations that it violated the False Claims Act by knowingly causing wound care centers to bill Medicare for medically unnecessary and unreasonable hyperbaric oxygen (HBO) therapy.

The Justice Department announced Wednesday that Healogics, a Florida-based wound care chain, agreed to pay up to $22.51 million to settle allegations that it violated the False Claims Act by knowingly causing wound care centers to bill Medicare for medically unnecessary and unreasonable hyperbaric oxygen (HBO) therapy.

Healogics manages nearly 700 hospital-based centers across the country. Medicare covers HBO therapy, a treatment in which the entire body is exposed to oxygen under increased atmospheric pressure, as an adjunctive therapy to treat certain chronic wounds.

The settlement resolves allegations that from 2010 through 2015, Healogics knowingly submitted or caused the submission of false claims to Medicare for medically unnecessary or unreasonable HBO therapy.

The Washington Post reported last year that HBO has become a cash cow for some facilties, as Medicare is the largest payer for HBO therapies, particularly for foot wounds caused by diabetes complications. As a result, Medicare has begun to scruitinize such claims and has put in place prior authorization requirements for some states, starting with New Jersey, Michigan, and Illinois.

“Medicare beneficiaries are entitled to care based on their clinical needs and not the financial goals of healthcare providers,” said Acting Assistant Attorney General Chad A. Readler for the Justice Department’s Civil Division. “All providers of taxpayer-funded federal healthcare services, whether contractors or direct billers, will be held accountable when their actions knowingly cause false claims for medically unnecessary services to be submitted.”

Under the settlement, Healogics has agreed to pay $17.5 million, plus an additional $5.01 million if certain financial contingencies occur within the next 5 years, for a total potential payment of up to $22.51 million.

In addition to resolving its False Claims Act liability, Healogics entered into a 5-year Corporate Integrity Agreement with the HHS Office of Inspector General (OIG), which includes, among other things, a claims review and a systems review—both to be conducted by an independent review organization. The claims settled by this agreement are allegations only, and there has been no determination of liability, the Justice Department said.

“When greed is the primary factor in performing medically unnecessary healthcare procedures on Medicare beneficiaries, both patient well-being and taxpayer funds are compromised,” said Special Agent in Charge Shimon R. Richmond of HHS OIG. “We will continue to thoroughly investigate healthcare companies that engage in such fraudulent schemes.”

The allegations resolved by this settlement arose from a lawsuit filed by James Wilcox, a former director for research and quality for medical affairs at Healogics, and a separate lawsuit filed by Benjamin Van Raalte, MD, Michael Cascio, MD, and John Murtaugh, 2 doctors and a former program director who worked at Healogics-affiliated wound care centers.

The lawsuits were filed under the whistleblower, provisions of the False Claims Act, which permit private citizens with knowledge of fraud against the government to bring an action on behalf of the United States and to share in any recovery. The settlement provides for a whistleblower share of up to $4,276,900.

The settlement was the result of a coordinated effort by the Civil Division’s Commercial Litigation Branch, the United States Attorney’s Office for the Middle District of Florida, and HHS OIG.

The cases are United States ex rel Van Raalte, et al v Healogics, Inc., 14-cv-283 (M.D. Fla.) and United States ex rel Wilcox v Healogics, Inc, et al, 15-cv-1510 (M.D. Fla.).