Safety Consultant Agrees to $1 Million Settlement for Causing False Claims

According to a March 2 Department of Justice press release, Dr. Charles Denham, from Laguna Beach, Calif. a prominent safety consultant, has agreed to pay a $1 million fine and will be excluded from Medicare, Medicaid and all other government programs to settle allegations he solicited and accepted kickbacks in return for using his influence in promoting a company’s products. Two companies that Denham ran, Health Care Concepts Inc. and Texas Medical Institute of Technology, a research organization, are parties to the settlement and are excluded as well. During 2009 and 2010, Denham was under contract with CareFusion at the same time he co-chaired a National Quality Forum (NQF) committee called the Safe Practices Committee, which reviews, endorses and recommends health care performance measures and practices. As part of his CareFusion contract, initiated in 2008, the DOJ alleged that Denham received monthly payments ultimately worth about $11.6 million. According to the government, the payments were made to induce Denham to use his influences with the NQF committee to recommend a specific CareFusion product called ChloraPrep. According to an Email Alert, published by the American Health Lawyers Association on March 13, Denham was investigated because of a government investigation of CareFusion that resulted in a $40.1 million dollar settlement concerning false claims and kickback allegations. See the January 2014 issue of G2 Compliance Advisor for more information on the government’s case concerning ChloraPrep and CareFusion. Although Denham was not specifically named in that suit, the government investigated him personally as a result of it, according to the AHLA Alert.
Non-Disclosure Creates Bigger Issue Allegedly, Denham did not reveal his relationship with CareFusion to the committee or any other individual. Hiding the financial relationship with CareFusion may have led to more scrutiny of his activities, but there is no way to know whether or not disclosing his relationship would have helped his case. However, he would likely have had to recuse himself from making decisions about ChloraPrep and, as a result, there would be no benefit to CareFusion allegedly paying bribes and kickbacks to him. The AHLA Alert also points out that the settlement agreement appears to have been reached based on Denham’s ability to pay and not on what the government might think is appropriate for his part in the case. Denham self reported his financials used to determine the amount. AHLA says that if the government finds out he understated his net worth by at least $100,000, they can rescind the initial settlement amount.
Comments and Conclusions There are lessons here for compliance professionals, consultants and health care providers such as laboratories and others. Dr. Denham did not submit any claims nor did he make any referrals—which we are used to seeing as key elements in any false claims case. Instead he was alleged to have caused false claims to be submitted. Under the Anti-Kickback statute, inducing another person or entity to submit a false claim has the same consequence as if the person or entity actually submitted the claim itself. Theoretically, this same scenario could apply to a reference laboratory making recommendations to a referral source that may be submitting claims for tests it referred but bills itself, such as a hospital laboratory. Hospital laboratories have to submit claims for all of its outpatients, whether the tests are referred or not. Potentially, if a reference laboratory instructs a referring laboratory how it can get paid for tests referred to it, as a way to induce the referring laboratory to make the referral, the reference laboratory could be accused of a false claims violation if the instruction turns out to be improper or illegal. The same principle applies to a consultant who helps a laboratory get paid for difficult or expensive tests, if the method used is improper or illegal. Remember: The person or entity submitting the claim is ultimately responsible for its accuracy and thus should exercise some healthy skepticism when taking recommendations from another person, even if that person is considered an expert or seems beyond reproach. Takeaway: Two best practices when following advice of another person or entity who may have something to gain by your laboratory following his recommendations is to contact your government contractor even if you believe the contractor may not be of help, and document everything so you can demonstrate your good faith effort should there be a problem later.