DOJ Secures $61.2 Million in False Claims Act Settlements Across Health Care, Federal Contracting

Key Takeaways

• Three Settlements Total $61.2 Million: The Justice Department announced False Claims Act settlements involving Tetra Tech EC, Monogram Health, and AiNET Corp. and its former CEO, spanning three very different corners of federal spending.
• Tetra Tech Accounts for the Largest Resolution: Tetra Tech EC paid $57 million to resolve allegations that it falsified radiological testing data at San Francisco's former Hunters Point Naval Shipyard, including allegations that potentially contaminated soil samples were replaced with clean ones.
• Medicare Risk Scores Come Under Scrutiny: Monogram Health agreed to pay $2.4 million over allegations that it submitted unsupported or inaccurate diagnosis codes that inflated Medicare Advantage beneficiaries' risk scores and led CMS to make higher payments.
• Data Center Certifications Lead to $1.8 Million Settlement: AiNET Corp. and former CEO Deepak Jain agreed to pay $1.8 million over allegations involving false claims about whether a Maryland data center met technical standards required under an SEC contract.
• Whistleblowers Played a Significant Role: The Tetra Tech and Monogram cases arose under the False Claims Act's qui tam provisions, with whistleblowers set to receive approximately $11.97 million and $380,000, respectively.

Deep Dive

The Justice Department announced three False Claims Act settlements totaling $61.2 million on Aug. 24, resolving allegations against companies working in health care, federal data services and environmental remediation. Tetra Tech paid $57 million. Monogram Health agreed to pay $2.4 million. AiNET Corp. and its former chief executive, agreed to pay $1.8 million.

The amounts are uneven, and so are the allegations. But each case turns on whether soil was contaminated, whether Medicare patients had particular medical conditions, whether a data center met the technical standards promised in a government contract. The largest settlement arose from Hunters Point Naval Shipyard in San Francisco, where the federal government has spent years trying to determine whether land once used by the Navy could be cleared of harmful radiation and eventually turned over to the city for redevelopment.

Tetra Tech EC, a wholly owned subsidiary of Tetra Tech Inc., performed radiological testing and remediation work at the former shipyard under Navy contracts issued between 2003 and 2014. The work carried an obvious consequence beyond the contract itself. The government needed to know whether the property was safe.

According to a lawsuit filed by the United States in federal court in Northern California, Tetra Tech employees were instructed to discard soil samples collected from potentially contaminated locations and replace them with clean soil already known to satisfy release criteria. Those replacement samples were then submitted for laboratory analysis.

The government also alleged that Tetra Tech manipulated scan results in its database, making scans performed at different locations appear to have been conducted by the same technician at the same time.

If the allegations sound technical, their alleged purpose was not. The government said Tetra Tech benefited by collecting contract award fees it had not earned and avoiding additional remediation work that would have cost the company money.

Tetra Tech paid $57 million to resolve the False Claims Act allegations. The settlement does not constitute a judicial determination of liability.

The litigation grew out of whistleblower claims brought by seven former Tetra Tech employees and contractors — Arthur R. Jahr III, Elbert G. Bowers, Susan V. Andrews, Archie R. Jackson, Anthony Smith, Donald K. Wadsworth and Robert McLean — under the False Claims Act's qui tam provisions. Those provisions allow private parties to bring claims on behalf of the United States and share in the government's recovery. The government intervened in the consolidated cases, and the whistleblowers will receive approximately $11.97 million from the settlement.

The Monogram Health case reaches the False Claims Act through an entirely different mechanism, though one built around the same basic problem: the government pays according to information it receives, and the accuracy of that information matters.

Medicare Advantage does not pay private insurers the same amount for every beneficiary. The Centers for Medicare & Medicaid Services adjusts its monthly payments according to expected health costs, generally paying Medicare Advantage organizations more for beneficiaries whose medical conditions suggest they will require more expensive care. Diagnoses reported by health care providers feed into the risk-adjustment model CMS uses to make those calculations.

A diagnosis, then, can carry a dollar value. Tennessee-based Monogram Health provides in-home care and related services to Medicare beneficiaries enrolled in Medicare Advantage plans. Under contracts with certain Medicare Advantage organizations, Monogram was eligible to receive more money when patients in its care had higher risk scores because CMS, in turn, paid the organizations more for those beneficiaries.

The Justice Department alleged that this arrangement gave Monogram a financial incentive to submit additional diagnosis codes that would increase patient risk scores and the corresponding federal payments.

Between Jan. 1, 2021, and Dec. 31, 2023, according to the government, Monogram knowingly submitted diagnosis codes that were not clinically accurate, were unsupported by beneficiaries' medical records or did not require or affect the care, treatment or management provided during the relevant visit.

The allegations involved four categories in the Hierarchical Condition Category model used for Medicare Advantage risk adjustment: protein-calorie malnutrition, substance use disorder, coagulation defects and other specified hematological disorders, and angina pectoris.

The government alleged that those codes inflated beneficiaries' risk scores and caused CMS to make larger capitated payments to Medicare Advantage organizations than it otherwise would have made.

Monogram Health Professional Services PC and Monogram Health Inc. agreed to pay $2.4 million to resolve the allegations. The case was brought by Dr. Ajay Gupta, a physician formerly employed by Monogram, under the False Claims Act's whistleblower provisions. Gupta will receive approximately $380,000 from the recovery.

AiNET's $1.8 million settlement begins with another kind of representation, this time about a building designed to keep government technology running.

AiNET operates a data center in Beltsville, Maryland, and provided data center services to the Securities and Exchange Commission under a federal contract. The government alleged that AiNET and Jain fraudulently induced the SEC to enter that contract by falsely certifying that the facility met at least Tier III standards under the Telecommunications Industry Association's TIA-942 standards, as the contract required.

The United States alleged that it did not. More unusually, the government said AiNET and Jain certified that experts from an entity called UpTime Council had inspected the data center and determined that it met the still higher Tier IV standard. According to the government's allegations, UpTime Council was not an operating company and had never inspected the facility.

AiNET and Jain agreed to pay $1.8 million to resolve allegations that they violated the False Claims Act by knowingly submitting false claims for services provided under the SEC contract.

The three settlements come as the Justice Department is giving False Claims Act enforcement a prominent place in the administration's broader campaign against fraud, waste and abuse in federal programs. The administration this year launched the Task Force to Eliminate Fraud and the National Fraud Enforcement Division, and the department has said its False Claims Act work will support both efforts.

There is a temptation to think of government fraud primarily in terms of money taken or invoices padded. These cases show why the False Claims Act reaches further into the machinery of federal spending. Modern government buys services through systems that depend on representations made long before a check is written: a medical code that changes a risk score, a technical certification that satisfies a contract requirement, a laboratory result that tells an agency whether contaminated land has been cleaned.

Once those representations become inputs into decisions about federal money, their accuracy stops being clerical. It becomes the thing the government is paying for.

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