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A former Atlanta health-care executive who gave the government information about unlawful billing and fraud will get almost $25 million from the U.S. government. The award is believed to be the largest ever for a whistleblower in a health-care fraud case. Agreement on Donald S. McLendon’s $24.96 million award was reached Wednesday with high-ranking officials of the Department of Justice, according to McLendon’s lawyer, Marlan B. Wilbanks. The money comes out of $745 million in civil penalties and damages that Tennessee-based hospital giant HCA-The Healthcare Company (formerly Columbia/HCA) agreed in May to pay, settling civil claims that the company committed Medicare fraud in its diagnostic, coding and home health-care practices. Two HCA subsidiaries also agreed in December to pay an additional $95.3 million in criminal fines and to plead guilty to charges involving a range of fraudulent practices, according to a statement issued at the time by the U.S. Department of Justice. The $25 million, which does not include interest, is in addition to $9.8 million that McLendon was awarded out of a $41 million civil fine paid by his former employer, Olsten Corp. McLendon, a former executive vice president at Olsten, is, according to Wilbanks, the highest executive to become a whistleblower, or “relator,” under the federal False Claims Act. The act provides that relators can be paid up to 25 percent of the government’s recovery. Wilbanks says he thinks McLendon’s award is the largest to come out of the largest health-care fraud case and will be “setting the bar for relatorship.” ‘FOUR VERY LONG YEARS’ McLendon, who came forward as a whistleblower in 1997, says it has been “four very long years, to the point where you’re just numb.” He says he’s pleased with the agreement, but adds that “I was lucky to a large extent.” Wilbanks and McLendon have spent the months since the fraud settlement negotiating with the government over the value of information that McLendon provided. More than 30 whistleblower, or qui tam, suits involving HCA were consolidated in multi-district litigation in Washington. McLendon’s information, Wilbanks says, is directly tied to the government’s recovery of at least $250 million. “It’s not like a minor injury and getting a big punitive damage award,” Wilbanks says. “Pennies on the dollar flow back to the relator.” Wilbanks and his firm, Harmon, Smith, Bridges & Wilbanks, will get between 33 percent and 40 percent of McLendon’s recovery, since he took the whistleblower case on contingency. He also will pursue fees directly from HCA, under a statutory provision in the False Claims Act. The recovery goes to McLendon because information that he provided on the billing practices of both Olsten and HCA proved critical to the government’s case in three out of the five categories of fraud federal authorities had identified. And it goes to McLendon because he was either a first or a tie in filing his qui tam suit, because he had direct and specific knowledge of alleged fraud and because he was an original source of information. Those are the requirements that whistleblowers must meet to recover. Once the government has recovered from the target of its investigation, it then determines what portion — anywhere from 15 percent to 25 percent — is attributable to the relator. The rules governing qui tam suits make windfall recoveries anything but certainties for would-be relators. “It is luck,” says McLendon, “because you don’t know what someone else has done. You’re at the mercy of the Justice Department and a bit of luck.” According to both McLendon and Wilbanks, this particular recovery required significant personal sacrifice. “It’s high risk at its highest level,” Wilbanks says. “Extraordinarily high risk for extraordinarily high return.” For McLendon, it meant losing a lucrative executive career in the health-care industry and a comfortable home. It meant cashing out his life insurance policies for cash to live on, and putting his family’s financial well-being in jeopardy. For a time he had no health insurance for his wife and four young children, one of whom has Down’s syndrome. He didn’t have the option of getting other employment, since he had a time-consuming but unpaid job — helping the government decipher massive amounts of financial information. “I knew I did the right thing,” McLendon says, although he says it was a difficult ordeal for his family. For Wilbanks, a principal with Harmon, Smith, Bridges & Wilbanks, pursuing the McLendon case meant foregoing up to $400,000 a year in billable hours. Wilbanks says this case has been the main focus of his practice since March of 1997. As McLendon’s case wound down, however, Wilbanks says his practice changed. Now, nearly 95 percent of his time is spent handling whistleblower cases. McLendon is a rarity among whistleblowers: a top executive with access to the company boardroom. He was an executive vice president at the Atlanta offices of home health care provider Olsten Health Management, a subsidiary of the New York-based Olsten Corp. McLendon claimed his employer was involved, along with Columbia/HCA, in a massive scheme to defraud Medicare. Olsten was under contract to HCA to manage the home care end of the business. HCA went from having no home care component to being tops in the United States in slightly more than two years. This was at a time when buying a home care agency was next to impossible given the lucrative nature of the business, according to McLendon. The company did so, he claimed, by structuring deals to buy home care agencies in such a way as to write off large portions of the purchase price as management fees, which are reimbursable under Medicare. McLendon also told the government that HCA and Olsten improperly obtained sales and marketing reimbursements by reporting them to the government as being for community education and home health-care coordination. McLendon, through his job at Olsten, directly supervised Columbia’s community educator employees. For some time before McLendon notified Olsten that he had filed his qui tam case, he wore a recording device for federal authorities and recorded conversations and meetings with Olsten and HCA executives, both in person and over the telephone. He says he was forced to resign and later settled with Olsten for about $300,000 over what he said was retaliation for his cooperation with the government. But it was two years after he approached the government before he had any idea if the government would intervene. Convincing the government to intervene and take the case as its own is critical for relators. While individuals can pursue their own cases, the government, with its resources and subpoena powers, is better equipped to battle a large corporation. McLendon spent weeks at a time poring over documents at the Richard B. Russell federal building in Atlanta. He and Wilbanks worked with Assistant U.S. Attorneys Nina L. Hunt and Amy B. Kaminshine, both of Atlanta, and Dan Anderson, a trial attorney with the Department of Justice in Washington. Finally, in mid-1999, as McLendon’s short-term savings were nearly gone, the government announced it was intervening in the case and had already settled the claim against Olsten. Now, McLendon, who lives in the Orlando, Fla., area, says his future is looking bright. “Security is no longer an issue,” he says. “We plan to enjoy it.”

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