Historic False Claims Act Settlement Tops $85 Million

On Oct. 12, the U.S. Department of Justice (DOJ) announced that it had entered into a historic $85 million settlement with Cardiac Imaging Inc., a mobile PET scan provider, and its founder and owner, Sam Kancherlapalli, to resolve claims that they had violated the False Claims Act (FCA), the Anti-Kickback Statute (AKS), and the Stark Law.

The case was initiated by whistleblower Lynda Pinto, who was a former billing manager at Cardiac Imaging, and the resolution is considered historic in that it is believed to be the largest healthcare settlement under the FCA ever to come out of the Southern District of Texas. 

Of the settlement amount, Cardiac Imaging Inc. has agreed to pay over $75 million, and Mr. Kancherlapalli has agreed to pay over $10 million. Kancherlapalli had allegedly paid kickbacks to refer cardiologists in the form of fees, ostensibly for supervising PET scans, that were far above fair market value.  The alleged misconduct occurred over a ten-year period, between 2014 and 2023.  

Specifically, with Kancherlapalli’s oversight and approval, Cardiac Imaging paid kickbacks to refer 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. These fees substantially exceeded fair-market value for the cardiologists’ services, the DOJ alleged, because Cardiac Imaging paid the referring cardiologists for each hour they spent scanning the cardiologists’ patients, including the time the cardiologists were away from mobile scanning units providing care for other patients (or when they were not even on-site). Cardiac Imaging’s fees also purportedly compensated the cardiologists for additional services beyond supervision that were not actually provided. The DOJ also alleged that Cardiac Imaging relied on a consultant’s fair-market value analysis of the referring physicians’ services that it knew was fundamentally inaccurate (and that the consultant ultimately withdrew).

In addition to the $85 million settlement, Cardiac Imaging and Kancherlapalli have entered into a five-year Corporate Integrity Agreement with the U.S. Department of Health and Human Services Office of Inspector General (HHS-OIG) requiring, among other things, that Cardiac Imaging implement measures to ensure that its arrangements with referring physicians are in compliance with the AKS and Stark Law, to implement a centralized annual risk assessment process to identify risk, and to retain an Independent Review Organization to perform a review of the arrangements.

Although the whistleblower’s share of the settlement has not yet been determined, under the FCA, whistleblowers in intervened cases like this one are entitled to a range of between 15 and 25 percent of the recovery.

Finally, the whistleblower’s complaint also includes claims against a remaining defendant, Richard Nassenstein, Cardiac Imaging‘s former President and part-owner. These claims have not been resolved by this settlement. We’ll keep you apprised as we continue to track the resolution of the remaining claims in this important case.