Michael R. Barr, former chief executive officer of Louisville, Kentucky-based HealthEssentials Solutions Inc., has agreed to pay $1 million to resolve allegations that he knowingly caused HealthEssentials to submit false claims to Medicare between 1999 and 2004, the Justice Department announced today. Norman J. Pfaadt, HealthEssentials’ former chief financial officer, also agreed to pay $20,000 to resolve similar allegations. H ea lt h E s s e nt i a ls p r o vi d ed p r i m a ry m e di c al c a re to p a ti e nts in nursing fa cilit ies, assisted living facilities and other settings from 1998 until it filed for bankruptcy and ceased operations in 2005. Barr founded HealthEssentials and served as its president, chief executive and board chairman. Pfaadt served as HealthEssentials’ senior vice president and chief financial officer.
“Healthcare executives should lead by example and create cultures of compliance within their companies, not pressure their employees to cheat the taxpayers,” said Assistant Attorney General for the Civil Division Stuart F. Delery. “We will continue to hold health care executives personally accountable for their dealings with Medicare.”
“Pursuing health care fraud is a priority of this office and the Department of Justice,” said U.S. Attorney for the Western District of Kentucky David J. Hale. “We will continue to work with the Department of Health and Human Services and the public to ensure that fraudulent claims are investigated and those responsible are required to pay.”
In March 2008, HealthEssentials pleaded guilty to submitting false statements to Medicare relating to services it provided to patients in assisted living facilities and entered into a civil settlement with the government. In May 2011, HealthEssentials’ former director of billing, Karen Stone, pleaded guilty for her role in the company’s billing scheme.
The settlement announced today resolves Barr’s and Pfaadt’s alleged liability under the False Claims Act for their roles in HealthEssentials’ false billings. The government alleged that, between 1999 and 2004, HealthEssentials billed for services that were inflated or not medically necessary and that Barr and Pfaadt pressured HealthEssentials employees to inflate the company’s billings, despite having been advised by attorneys and others that doing so would be improper. The government further alleged that Barr pressured HealthEssentials employees to conduct special medical assessments on patients, without regard to whether the patients required the assessments, solely to increase the amount that HealthEssentials could bill for the visits. As part of the settlement, Barr has agreed to a three-year period of exclusion from participating in federally funded health care programs.
“Executives cheating taxpayers and patients – as alleged in this case – should beware of exclusion from Medicare, Medicaid and all other federal health programs, as well as criminal and civil liability,” said Inspector General of the U.S. Department of Health and Human Services Daniel R. Levinson. “Vulnerable beneficiaries deserve protection from potentially harmful, medically unnecessary services.”
The allegations that were resolved by the settlement arose in part from a lawsuit filed by former HealthEssentials employees Michael and Leigh RoBards under the qui tam, or whistleblower, provisions of the False Claims Act, which allow private citizens to bring suit on behalf of the government and to share in any recovery. Mr. and Mrs. RoBards will receive a total of $153,000.
This settlement illustrates the government’s emphasis on combating health care fraud and marks another achievement for the Health Care Fraud Prevention and Enforcement Action Team (HEAT) initiative, which was announced in May 2009 by Attorney General Eric Holder and Health and Human Services Secretary Kathleen Sebelius. The partnership between the two departments has focused efforts to reduce and prevent Medicare and Medicaid financial fraud through enhanced cooperation. One of the most powerful tools in this effort is the False Claims Act. Since January 2009, the Justice Department has recovered a total of more than $17 billion through False Claims Act cases, with more than $12.2 billion of that amount recovered in cases involving fraud against federal health care programs.
The case was handled by the Commercial Litigation Branch, Civil Division, U.S. Department of Justice and the U.S. Attorney’s Office for the Western District of Kentucky, with assistance from the Department of Health and Human Services Office of Inspector General and the Federal Bureau of Investigation.
The claims settled by this agreement are allegations only; there has been no determination of liability. The case is captioned United States ex rel. Stydinger, et al. v. Michael R. Barr and Norman J. Pfaadt, Civil No. 3:03-cv-00380-TBR (W.D. Ky.).