Whistleblower says pharmacy engaged in wrongful ‘swapping’

On Behalf of | Sep 28, 2018 | Whistle-blower Claims

There is a difference in how government health care programs reimburse health care providers for Medicare Part A services as compared to Part B and Part D Medicare services. Some commentators believe that the different arrangements tempt some health care providers to create schemes to increase profits through reimbursement.A whistleblower says that he noticed a billing discrepancy in the way a Kentucky-based pharmacy company that serves nursing homes negotiated its prices under Part A when dealing with nursing home facilities. He initiated a whistleblower lawsuit alleging that the institutional pharmacy service provider used a scheme, commonly referred to as “swapping,” to defraud Medicare.

The lawsuit alleges that the pharmacy company provided nursing homes with prescription medications for Medicare part A patients at discounted prices. In turn, the pharmacy company sought referrals from the care facilities for Part D patients.

How ‘Swapping’ Schemes May Function

In general, Medicare reimburses skilled nursing homes on a flat per-diem basis for Part A patients. Medicare and Medicaid pay pharmacies on a cost basis for services provided. That is where “swapping” becomes an unfair and unlawful scheme. The nursing homes receive flat fee reimbursements from Medicare for prescriptions that they obtained at discounted prices. In turn, they have an incentive to refer Part D patients to the pharmacy, without financial risk.

The trial court dismissed the case based upon the reasoning that the “scheme” was publicly disclosed. A federal appellate panel disagreed, determining that the individual financial arrangements where not publicly disclosed. The case has been reinstated. Whistleblowers must be the first to raise the specific issues in a claim. For that reason, it is important for those with knowledge of fraud to work with a lawyer who is well-versed in whistleblower law sooner, rather than later, to reduce the risk that the information will become public before filing a claim.

Whistleblowers Are Entitled To A Percentage Of Any Successful Recovery

Under the False Claims Act, individuals may sue on behalf of the government to recover money that has been fraudulently obtained related to a government contract. Whistleblowers are entitled to a reward, or “finder’s fee,” for initiating a successful lawsuit under the “qui tam” provision of the False Claims Act.The reward is a percentage of any verdict or settlement that results from the claim – the percentage is case specific. If the government intervenes, the percentage the whistleblower receives in between 15 and 25 percent of the recovery. If the Department of Justice refuses to participate, the finder’s fee is 25 to 30 percent of any recovery.


FindLaw Network