Pacific Pulmonary settles for $11.4M

NOVATO, Calif. - Five years after the FBI raided its offices, Pacific Pulmonary Services has agreed to pay $11.4 million to the federal government to settle allegations that it participated in a kickback scheme.

As part of that scheme, in 2006, the company's patient care coordinators allegedly began making patient referrals to sleep testing clinics in exchange for CPAP referrals, in violation of the Anti-Kickback Act.

“The allegations are that the company had this wink, wink, nod, nod understanding with sleep labs that said, 'If we refer a patient to you, the sleep lab, to be tested for OSA, you need to be sure to send that patient back to us,'” said a healthcare attorney who didn't want to be named. “That type of cross-referral is a kickback.”

Pacific Pulmonary, which has admitted no wrongdoing, has also signed a corporate integrity agreement with the Office Of Inspector General.

The company expanded its offerings to include sleep therapy products in 2005 and quickly grew its CPAP device business from $678,417 in Medicare revenues in 2006 to about $3.2 million in 2011, the year before the raid.
“That's how they grew so fast,” said one Calif.-based provider, who didn't want to be identified

Also part of the government's charges: in 2004, Pacific Pulmonary allegedly began submitting claims to Medicare, Tricare and Federal Employee Health Benefit programs for oxygen equipment without first obtaining a doctor's order.

The settlement comes as a validation of sorts for competitors.

“We are doing the right thing here and we can go to our referral sources and say, 'This is why we ask for paperwork and this is why we have to go back and forth to make sure the T's are crossed and the I's are dotted,” said the provider in California. “I could double my referrals tomorrow if I did what they did.”

In early 2012, FBI agents raided several California offices of Pacific Pulmonary, including Bakersfield, where the provider has a centralized sleep therapy center, and billing and reimbursement offices.

Two years prior, in 2010, Manuel Alcaine, a former sales representative at the company, filed the whistleblower lawsuit against Pacific Pulmonary in the U.S. District Court of Northern California. He will receive $1.825 million of the recovered funds.

Pacific Pulmonary had not returned a call by press time.