Splint Supplier and Its President to Pay Over $10 Million to Resolve False Claims Act Allegations

Maryland-based splint supplier Dynasplint Systems Inc., and its founder and president, George Hepburn, have agreed to pay approximately $10.3 million to resolve allegations that they violated the False Claims Act by improperly billing Medicare for splints provided to patients in skilled nursing facilities, the Department of Justice announced today. 

“Health care companies and their principals who flout Medicare rules will be held accountable,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division.  “Today’s settlement demonstrates our continuing vigilance to ensure that companies and individuals do not plunder taxpayer funded programs for their own enrichment.”

“The civil False Claims Act is a valuable weapon in our office’s arsenal to combat abuse of federal healthcare funds here in the Eastern District of Louisiana and nationwide,” said U.S. Attorney Kenneth Allen Polite Jr. of the Eastern District of Louisiana.  “The favorable resolution and settlement of the claims in this case serve as a reminder to all in the industry to stay vigilant for signs of waste and abuse by providers in our healthcare markets.”

The government alleged that Hepburn and Dynasplint knowingly mischarged Medicare for splints used by patients in Medicare-certified skilled nursing facilities.  Patients staying in skilled nursing facilities, or their insurers such as Medicare, pay a bundled payment to these facilities that cover all of a patient’s needs, including such items as splints, and thus no separate Medicare reimbursement for such devices is permitted.   To circumvent Medicare rules, defendants allegedly mispresented that patients were in their homes or other places that were not skilled nursing facilities.   

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 the Attorney General and the Secretary of Health and Human Services.  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 $26.7 billion through False Claims Act cases, with more than $16.8 billion of that amount recovered in cases involving fraud against federal health care programs.

The settlement resolves allegations originally brought in a lawsuit filed by Meredith Deane, a former sales executive for Dynasplint, under the whistleblower, or qui tam, provisions of the False Claims Act, which allow private parties to bring suit on behalf of the government and to share in any recovery.  The United States may intervene in such an action as it did here.  Ms. Deane will receive at least $1.98 million for the settlement.

In August 2013, the U.S. Department of Health and Human Services (HHS) Centers for Medicare & Medicaid Services (CMS) suspended payments to Dynasplint based upon credible allegations of fraud.  As part of the settlement, defendants are agreeing to forfeit all funds held by this payment suspension, approximately $8.5 million. 

“CMS’ highest priority is protecting people with Medicare benefits and taxpayers and the agency will continue to hold health care providers and suppliers accountable for following Medicare rules,” said Acting Administrator Andy Slavitt of HHS CMS.  “We are pleased to partner with the Department of Justice and law enforcement to safeguard patients, taxpayer funding and the integrity of our programs.”

The case was handled by the Civil Division’s Commercial Litigation Branch, the U.S. Attorney’s Office of the Eastern District of Louisiana and HHS’ Office of Inspector General. 

The lawsuit is captioned U.S. ex rel. Deane v. Dynasplint Health Systems, Inc. and George Hepburn, Case No. 10-cv-2085 (E.D. La.).  The claims resolved by this settlement are allegations only and there has been no determination of liability.