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AmMed Direct LLC has agreed to pay the United States and the state of Tennessee $18 million plus interest to settle allegations that it submitted false claims to Medicare and Tennessee Medicaid (TennCare), the Justice Department announced today. Under the agreement, AmMed will pay $17,560,997 to the United States and $439,003 to Tennessee.
The United States and Tennessee allege that, from September 2008 through January 2010, the Antioch, Tenn.-based company submitted false claims to Medicare and TennCare for diabetes testing supplies, vacuum erection devices and heating pads. The United States and Tennessee asserted that AmMed widely advertised free cookbooks in order to induce Medicare beneficiaries to contact AmMed or its hired telemarketing firm. Once AmMed confirmed that a beneficiary was covered by Medicare, AmMed representatives improperly attempted to sell the beneficiary supplies that would be paid for by Medicare. Medicare rules prohibit medical businesses from making unsolicited telephone contact with beneficiaries to sell them their products, unless specific exceptions apply.
The United States and Tennessee further alleged that, as a result of AmMed’s improper marketing, many Medicare beneficiaries who called AmMed to receive the advertised free cookbooks returned their diabetic supplies to AmMed. AmMed, however, failed to timely refund the money to Medicare or TennCare. Rather, AmMed allowed the unpaid refunds to accrue from September 2006 until January 2010. Prior to learning of the United States’ and Tennessee’s investigation, AmMed disclosed to the Medicare Administrative Contractors its failure to refund monies for returned supplies and began paying the refunds to Medicare and TennCare.
“Government health care programs have in place important rules that prohibit suppliers from improperly contacting beneficiaries regarding their products,” said Stuart F. Delery, Acting Assistant Attorney General for the Justice Department’s Civil Division. “The Department of Justice is committed to ensuring that companies that bill government health care programs abide by those rules.”
“Enforcement of the False Claims Act remains a top priority of this office,” said Jerry E. Martin, U.S. Attorney for the Middle District of Tennessee. “All Medicare providers must comply with Medicare rules for reimbursement. The U.S. Attorney’s Office for the Middle District of Tennessee will continue to devote the resources necessary to vigorously protect taxpayers’ interests and aggressively pursue fraud and abuse.”
“We are grateful for the hard work and cooperation of our state and federal agencies in this case,” said Tennessee Attorney General Bob Cooper. “Working to stop healthcare fraud is a major priority for all of us because ultimately everyone pays for this kind of theft.”
The allegations arose from a lawsuit brought under the qui tam, or whistleblower, provisions of the False Claims Act, which permit private citizens with knowledge of false claims against the government to bring an action on behalf of the United States and to share in any recovery. The qui tam action was filed in 2009 in federal district court in Nashville, Tenn., by former AmMed Direct employee Bryan McNeese. The relator will receive approximately $2.88 million as his share of the settlement proceeds.
This resolution is part of the government’s emphasis on combating health care fraud and another step for the Health Care Fraud Prevention and Enforcement Action Team (HEAT) initiative, which was announced by Attorney General Eric Holder and Kathleen Sebelius, Secretary of the Department of Health and Human Services in May 2009. 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 that effort is the False Claims Act, which the Justice Department has used to recover more than $6.7 billion since January 2009 in cases involving fraud against federal health care programs. The Justice Department’s total recoveries in False Claims Act cases since January 2009 are over $9 billion.
The case was investigated by the Department of Health and Human Services- Office of Inspector General (HHS-OIG), the U.S. Attorney’s Office for the Middle District of Tennessee and the Tennessee Attorney General’s Office. The Justice Department’s Civil Division monitored the investigation.
The claims settled by today’s agreement are allegations only; there has been no determination of liability.