Department of Justice Seal Department of Justice
FOR IMMEDIATE RELEASE
THURSDAY, FEBRUARY 14, 2002
WWW.USDOJ.GOV
CIV
(202) 514-2007
TDD (202) 514-1888

RESPIRATORY EQUIPMENT & SUPPLIES COMPANY TO PAY U.S. $17 MILLION
TO SETTLE HEALTH CARE FRAUD ALLEGATIONS


WASHINGTON, D.C. The Department of Justice, the United States Attorney's Office for the District of Montana and the United States Department of Health and Human Services announced today that Rotech Medical Corporation will pay the United States $17 million to resolve allegations that the company fraudulently overbilled government health care programs for respiratory equipment, supplies and services. Orlando, Florida-based Rotech is one of the nation's largest suppliers of respiratory equipment, supplies and services, operating through subsidiary companies in 40 states, including Community Home Oxygen of Montana.

The settlement resolves the government's contention that Rotech and Community Home Oxygen submitted false claims to the Medicare, Montana Medicaid, the Department of Veterans Affairs, and Indian Health Service programs, in violation of the False Claims Act. These allegations include the submission of forged and falsified documents used in billing the government for durable medical equipment such as oxygen cylinders, oxygen concentrators, and nebulizers; double billing; claims for undelivered items; claims for medically unnecessary drugs and equipment; claims for treating deceased patients; and claims that were arbitrarily inflated based upon a relative lack of competition.

Further, the government contended that a significant number of the claims for oxygen services and equipment at issue were based upon self-qualified test results in violation of federal payment regulations. This resolution was the result of the joint investigative efforts of the FBI, the U.S. Department of Health and Human Services, Office of Investigations, the Montana Division of Criminal Investigations and Assistant United States Attorney Leif Johnson.

"Today's settlement underscores our resolve to pursue vigorously allegations of financial fraud against federal health care programs, even in the context of complex federal bankruptcies," said Robert McCallum, Jr., Assistant Attorney General for the Civil Division of the Department of Justice. The settlement is on behalf of the United States Department of Health and Human Services (HHS), Montana Medicaid, the United States Department of Veteran's Affairs and the U.S. Indian Health Service (a component of HHS) with respect to claims submitted to those programs between 1995 and 2000.

"I think it is important to point out the role of a small district like Montana in a case of this size," emphasized William Mercer, the United States Attorney for the District of Montana. "This case demonstrates that big health care fraud can occur anywhere and when it occurs in the District of Montana, we will find it and we will devote the resources necessary for a successful prosecution."

Of the $17 million settlement amount, approximately $15.5 million is a recovery for losses sustained by the Medicare program across the western United States, and approximately $1 million represents losses sustained at three additional locations, one in Florida, one in Georgia, and one in Kentucky. Montana Medicaid's recovery is approximately $500,000.

In February 2000, Rotech, its subsidiaries, and its parent company, Integrated Health Services Inc., sought protection under the federal bankruptcy laws. The terms of the settlement agreement announced today are part of Rotech's plan of reorganization in the bankruptcy proceeding. According to the plan, the company and its subsidiaries emerge from the larger bankruptcy without any further obligation to creditors or future connection to Integrated Health Services. Post- confirmation, Rotech will be known as Rotech Healthcare, Inc. and will be managed by a new board of directors. Integrated Health Services remains in Chapter 11 bankruptcy proceedings.

The settlement agreement and bankruptcy plan also incorporate by reference Rotech's agreement to fulfill a variety of integrity obligations, known as a corporate integrity agreement, designed to prevent any recurring billing problems with the government.

"This is a valuable agreement for both parties," stated Janet Rehnquist, Inspector General at HHS, "the corporate integrity agreement between the United States and Rotech is an important step toward achieving the goal of insuring the integrity of the federally-funded health care programs."

Press inquiries should be directed to William W. Mercer or Leif M. Johnson of the United States Attorney's Office in Billings, Montana, at (406)657-6101.

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