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Hagens Berman successfully represented New Jersey whistleblower Anthony Kite, a health care finance expert who exposed a fraudulent Medicare scheme involving a number of hospitals in the northeastern United States. The federal government initially declined to litigate against several large health care providers named in Kite’s qui tam action, so Hagens Berman’s whistleblower attorneys litigated those cases on Kite’s behalf. Eventually, after Hagens Berman’s successful litigation, the Department of Justice joined the case against the remaining defendants and negotiated large settlements with them, earning Kite a multimillion-dollar reward for his efforts.

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THE HOSPITALS’ PLOT TO DEFRAUD MEDICARE

Anthony Kite and Philip Besler first met when they were in high school, and would cross paths again as adults when Kite became Director of Finance for St. Francis Medical Center in Trenton, New Jersey. For his part, Besler was a health care consultant and St. Francis was one of his clients. 

According to court filings, Besler was regarded “an expert” and “hero” on reimbursement issues, having helped several hospitals receive hundreds of millions of dollars in additional Medicare payments in 1999. He was known to regularly entertain – and even travel with – medical executives, and generously supported hospital-affiliated charities.

In 2000, Besler and Kite opened a restaurant together in Trenton, with Kite taking a short break from the health care sector to devote his time and energy to the eatery, which was located a short distance from St. Francis and was frequented by many health care professionals – including a consultant named Robert Shusko.

Kite got to know Shusko in 1998, when Kite served as Chief Financial Officer of Columbus Hospital in Newark. One day, St. Francis’ Director of Reimbursement came into Kite’s restaurant and, according to the second amended complaint, told Kite that “2001 was a huge year for charge increases at St. Francis in order to boost Outlier payments” – Medicare funds doled out to hospitals in unusually expensive cases that incentivize them to provide the necessary patient care regardless of cost.

Besler and Shusko came into the restaurant on separate occasions and mentioned similar Outlier windfalls to Kite. What Kite couldn’t have realized at the time was just how familiar his two acquaintances were with this scheme.

FRAUDULENT CHARGES, SOARING PAYMENTS

Kite reentered the health care field in 2001 and noticed that Warren Hospital, where he was consulting, saw its Outlier payments rise by nearly 100% between 2000 and 2001, from $4.8 million to $9.43 million. He noticed a similar dynamic at another hospital in 2002 and became suspicious.

He had a right to be, as the complex scheme constituted Medicare fraud – and it was Shusko’s brainchild. In the plainest of terms, hospitals were able to increase their Outlier payments by inflating charges for certain procedures – including some that were relatively inexpensive – in a manner that was wildly out of step with the actual costs incurred. For instance, the second amended complaint points out that St. Michael’s Hospital increased charges by 293% – from $252 million to $991 million – between 2000 and 2003. During the same period, actual expenses only rose by 13.8%, from $136 million to $155 million. In short, the more hospitals charge, the bigger the Outlier payments they are eligible to receive.

After conceiving the scam, Shusko enlisted the well-connected Besler to get more hospitals involved. In exchange for helping them set up the Outlier scheme, Shukso and Besler pocketed tens of millions of dollars in commissions.

Some of their clients were especially brazen: According to the second amended complaint, St. Michael’s Outlier payments jumped from $2 million in 2000 to $28.59 million in 2001 – a 1,400% increase in just one year – while Brookhaven Memorial Hospital in New York saw its Outlier payments rise from $536,632 in 2001 to $7.28 million in 2002, or a 1,500% increase.

The government was initially given the opportunity to join Kite’s False Claims Act case against scores of defendant health care providers, and which named Besler, Shusko and several northeastern hospitals as co-defendants, but declined. Against several of them, the Department of Justice declined to intervene. With the help of Hagens Berman, Kite decided to pursue the lawsuit independently. The firm litigated the case aggressively, pushing it toward settlement to the point where the Department of Justice ultimately decided to become a partner in the effort and bring the co-defendants to justice through separately negotiated settlements.

Kite, who was entitled to a significant percentage of the penalties under the False Claims Act's rewards program, wound up earning millions of dollars for blowing the whistle on this costly and fraudulent scam.

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