Cardiac imaging company and founder to pay historic $85M settlement

HOUSTON, TX -- Cardiac Imaging Inc. (CII), headquartered in Illinois, and its founder, owner and CEO Sam Kancherlapalli, a resident of Florida, have agreed to pay a total of $85,480,000, to resolve False Claims Act allegations that they paid referring cardiologists excessive fees to supervise PET scans in violation of the Anti-Kickback Statute (AKS) and the Physician Self-Referral Law (Stark Law).

This is the largest single district civil settlement in the history of the Southern District of Texas (SDTX).

CII agreed to pay $75 million plus additional amounts based on future revenues, while Kancherlapalli agreed to pay $10,480,000. These settlements are based on their ability to pay.

“Paying illegal kickbacks to cardiologists so they refer patients undermines the integrity of federal healthcare programs and needlessly increases costs,” said Alamdar Hamdani, U.S. Attorney for the SDTX. “Patients deserve care based on their medical need and not on a doctor or company’s financial interest or gain. This outcome emphasizes my office’s commitment to pursing justice, ensuring the public’s trust in the federal healthcare system and holding the corrupt accountable.”

“Healthcare providers that pursue patient referrals through illegal kickbacks and other unlawful financial arrangements will be held accountable,” said Principal Deputy Attorney General Brian M. Boynton, head of the Justice Department’s Civil Division. “We will continue to safeguard federal healthcare funds by rooting out financial relationships between healthcare providers and referring physicians that can corrupt medical decision making and increase the cost of care.”

The United States alleged that between March 1, 2014, and May 31, CII and Kancherlapalli knowingly caused false or fraudulent claims to federal health care programs arising from violations of the AKS and the Stark Law. Specifically, with Kancherlapalli’s oversight and approval, CII allegedly paid kickbacks to referring cardiologists in the form of above-fair market value fees of $500 or more per hour, ostensibly for the cardiologists to supervise the PET scans for the patients they referred to CII. The United States alleged these fees substantially exceeded fair market value for the cardiologists’ services because CII paid the referring cardiologists for each hour CII spent scanning the cardiologists’ patients, including time the cardiologists were away from CII’s mobile scanning units providing care for other patients or were not even on site. CII’s fees also purportedly compensated the cardiologists for additional services beyond supervision that were not actually provided. CII purported to rely on a consultant’s fair market value analysis that the U.S. government contends CII knew was premised on fundamental inaccuracies about the services referring physicians provided and that the consultant ultimately withdrew.

“Illegal kickback payments not only corrupt the medical decision-making process but also cause harm and financial loss to Medicare and other federally funded healthcare programs,” said Special Agent in Charge Jason E. Meadows for the Department of Health and Human Services Office of Inspector General (DHHS-OIG). “DHHS-OIG works closely with our law enforcement partners to root out and hold accountable those who put profit and personal gain ahead of legitimate medical services.”

In connection with the settlement, CII and Kancherlapalli entered into a five-year Corporate Integrity Agreement (CIA) with DHHS-OIG. The CIA requires, among other compliance provisions, that CII implement measures designed to ensure that arrangements with referring physicians are compliant with the AKS and the Stark Law. The CIA also requires that CII implement a centralized annual risk assessment and internal review process to identify and address the AKS and the Stark Law risks associated with arrangements and retain an Independent Review Organization to perform a systems and transactions review of arrangements.

The civil settlement resolves claims brought under the qui tam or whistleblower provisions of the False Claims Act by Lynda Pinto, a former billing manager at CII. Under those provisions, a private party can file an action on behalf of the United States and receive a portion of any recovery. The qui tam action also raises claims against CII’s former president and part-owner Richard Nassenstein, which are not resolved in this settlement. The qui tam case is captioned U.S. ex rel. Pinto v. Cardiac Imaging Inc., et al., No. 18-cv-2674 (S.D. Tex.). The relator’s share of the settlement has not yet been determined.

The resolution obtained in this matter was the result of a coordinated effort between the SDTX and the Justice Department’s Civil Division - Commercial Litigation Branch, Fraud Section, and with assistance from DHHS-OIG, Defense Health Agency OIG, Railroad Retirement Board OIG and Veteran’s Affairs OIG.

The investigation and resolution of this matter illustrates the government’s emphasis on combating healthcare fraud. One of the most powerful tools in this effort is the False Claims Act. Tips and complaints from all sources about potential fraud, waste, abuse, and mismanagement, can be reported to the Department of Health and Human Services at 800-HHS-TIPS (800-447-8477).

Assistant U.S. Attorney Melissa M. Green handled the matter along with Commercial Litigation Branch Trial Attorneys Samuel R. Lehman and Jake M. Shields.

The claims resolved by the settlement are allegations only and there has been no determination of liability.