[Post updated June 2019] Medical waste disposal is a big business. The disposal of dirty needles, operating room dressings, hospital surgical gowns and the like is highly regulated and expensive. Medical waste can’t simply be tossed in a landfill.
Where does it go? That depends on the state and the type of debris but often it is incinerated at very high temperatures to prevent the spread of infectious diseases. Although the costs are often borne by hospitals and medical clinics, those costs get indirectly passed along to patients. For many patients, that means Medicare and Medicaid.
Stericycle Medical Waste Whistleblower Lawsuit
‘In 2008, an employee of Stericycle, a Chicago area medical waste company, filed a qui tam complaint alleging that the company was jacking up prices without proper authorization. The employee, Jennifer Perez, was a billing specialist assigned to handle government accounts.
Perez claimed that even though the contracts advertised they had locked in rates, Stericycle would add surcharges such that the rates would increase by 18% every 9 months. Prior to filing her qui tam complaint, she says she alerted management but her concerns fell on deaf ears. When she continued to warn that the company’s billing practices were illegal, she was fired.
Qui tam actions are lawsuits brought by whistleblowers under the federal False Claims Act. Dating back to the Civil War, a qui tam action lets an ordinary person with inside information about fraud file a lawsuit in the name of the government. If the government recovers money, the person bringing the suit is awarded a percentage of the recovery. Last year the federal government paid out over $635 million in qui tam awards.
To file a qui tam lawsuit, there must be a loss to a government program or funds. That is easy in most healthcare cases because Medicare is federally funded. About half the states have a similar qui tam law that covers Medicaid.
According to a media release in the Stericycle case, the company has agreed to pay $26,750,000.00 to settle the case. Much of that money will go to the federal government with 14 states and the District of Columbia getting the rest. In settling the case, the company was not required to admit any wrongdoing.
For her actions in coming forward and filing the claim, Perez was awarded $5.7 million.
Not the First Fraud Lawsuit for Stericycle
Stericycle has been in the hot seat before and after. In 2013, they settled a case under the New York State False Claims Act. That lawsuit claimed the medical waste company had overcharged New York government agencies for its services. The company paid $1,580,000 in penalties to the state and refunded affected agencies $820,000 in overcharges.
In January 2019, the company settled charges brought by its investors. The lawsuit, brought as a class action by the company’s investors, said management concealed “the fact that a material portion of Stericycle’s revenues was derived from fraudulent overcharging of its [small quantity] customers.” The case was settled for $45 million.
The customers of Stericycle also were unhappy about the overcharges and sued. Their case was settled in 2017 for $295,000,000.00. That case was brought primarily by dentists and veterinarians.
In an unusual side note, a financial analyst at Stericycle was charged by the SEC with insider trading. Knowing the company was about to settle the massive fraud complaints against the company, the analyst shared this non public information with his mother who used it to trade stock in advance of the public disclosures.
Many companies consider fines and penalties a cost of doing business. Here Stericycle paid not only $28 million to settle the main whistleblower complaint but wound up paying hundreds of millions more in claims brought by individual states, furious customers and angry investors. This case is a good example of when crime doesn’t pay.
Has the company learned its lesson? There has been no more class action or regulatory actions since the customer class action settled earlier this year. Complaints listed on the Better Business Bureau website, however, suggest the company is still up to its old tricks.
The most recent consumer report says, “We canceled the horrendous service of this company in December 2018 despite all their containers given back to them we continue to receive invoices one of which has a significantly huge amount that they want us to pay!”
The report before that says, “Stericycle has been servicing us for some time now and a decision has been made this January that we are terminating the services mainly due to the excessive fees that increase in time and also we are no longer happy with the service. We received a bill from Stericycle that says liquidated damages? for $3882.12 it seems that upon reading the complaints lodged in the BBB by other facilities it’s been the norm for Stericycle to claim such on customers that wish to get out of their service.”
Stericycle did respond to the complaints. Better Business Bureau says the company is not accredited by them.
Contract Procurement Fraud
Contract procurement fraud hurts not only taxpayers but legitimate businesses too. When a company cheats the government, it is often difficult for honest businesses to compete. While the dishonest company boosts its profits and has more money to expand, honest operators must struggle.
Filing a qui tam lawsuit requires a lawyer and inside knowledge of fraud. Cases are filed under seal meaning they remain secret while the government investigates. Investigations can last months or years. Ultimately prosecutors must decide whether they wish to take over the suit or let the whistleblower’s own counsel prosecute in the government’s name. In rare instances the government can ask the court to dismiss the suit.
Whether the government intervenes or the whistleblower must do most of the work effects how much the whistleblower is paid. By statute, a federal qui tam plaintiff is entitled to between 15% and 30% of whatever the government collects.
We believe that whistleblowers are the new American heroes. They take direct action against fraud and often are paid millions of dollars for their efforts. Over the last 12 months our whistleblower clients have been paid over $100 million dollars.
Interested in filing a qui tam lawsuit? Visit our False Claims Act whistleblower reward page. Have specific questions or want to see if you have a case? Give us a call. All inquiries are kept strictly confidential and protected by the attorney – client privilege. For more information, contact attorney Brian Mahany at or by telephone at (direct).
MahanyLaw – America’ Whistleblower & Whistleblower Lawyers