Dan Gottry - Blog

Dan Gottry's Blog

Monday, September 18, 2006

Hanger ... "Prescription For Fraud?"

[The following are News Articles/Press Releases About Pending Hanger Litigation]

Recent News
Prescription For Fraud?
NewsChannel 4 Investigation
UPDATED: 1:57 PM EDT June 15, 2004

The country's largest supplier of prosthetic limbs is facing investigation for allegedly stealing from Medicare, Medicaid and insurance companies.

NewsChannel 4's Tim Minton Reports

An insider at Hanger Inc. is speaking out, and the company acknowledges an internal audit is under way.

The insider says company policy amounts to a prescription for fraud. She says thousands of patient files are forged or nonexistent. None of which, she claims, stops the company from billing taxpayers for medical devices that may or may not have been delivered.

Some of Hanger Inc.'s prosthetics were on display Monday night at a conference for medical professionals, including shoes for diabetics and limbs for amputees. It's a multimillion-dollar business.

But according to Hanger employee Kendall McDaniel, the money's often paid for nothing at the company's Long Island division. She should know. She's in charge of processing patients' bills.

"They'll come in with, say, a prescription for shoes," McDaniel said. "And they'll either get the shoes, but then their insurance company will be billed for shoes and additional items. And then I'm saying that there may be no patient at all. Just a fake name."

The rules for reimbursement by Medicare, Medicaid and insurance companies are strict and specific. A prescription signed by a doctor is required.

And so are notes that justify why particular equipment is necessary, given the patient's diagnosis and condition.

McDaniel says blank Elmhurst Hospital prescription pads and official insurance company documents are kept at the Hanger office -- where she says she's seen a manager fill them out.

"Not only prescriptions, [but also] Medicare suppliers' standards," McDaniel said. "Things that need to be in a chart in order to bill out to Medicare are just signed as if a doctor was signing them on a day-to-day basis."

In a statement released Monday night, the New York City Health and Hospitals Corp. said: "This matter appears to involve the theft and fraudulent use of hospital prescription pads without any knowledge of Elmhurst Hospital or the physicians whose names were used."

The whistle blower says she has hired an attorney, Kenneth Mollins, to make sure she can keep her job and follow the law. Mollins sent a letter to federal and state prosecutors, requesting they review Hanger's files.

"So that they can investigate whether or not millions of dollars in fraud is taking place, and whether it's isolated to this one office, or whether or not it's nationwide," Mollins said.

Hanger's response: "The company is adamant about compliance. We are conducting an internal audit. If there is something that is done inappropriately, there will be strong and immediate action."

But the results of an internal audit conducted last summer and obtained by NewsChannel 4 shows that all 15 files checked had problems complying with the law. Issues ranged from no prescription to no justifying notes.

Overall, the company's own auditor gave a failing grade -- 50 out of 100 -- with 80 considered compliance.

In a follow-up this February -- seven months later -- the auditor sent an e-mail to company officials warning: "I am still very concerned about the integrity of the documents I have received ... there remain numerous altered documents."

"I worked for WorldCom," McDaniel said. " I got fired -- or laid off -- due to fraud. The biggest fraud in the history of the country. I've been through this. And I don't want it to happen again. Maybe I can stop it and tell people. And maybe somebody else will come forward."

McDaniel has been placed on administrative leave with pay until Hanger completes its internal audit.

The company says it has reassigned a manager implicated in forged prescriptions and other alleged fraud to a job where he can be more closely supervised.

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NEW YORK--(BUSINESS WIRE)--June 22, 2004--Fifth graph, first sentence of release should read: If you bought the securities of Hanger between July 29, 2003 and June 14, 2004 and sustained damages, you may, no later than August 23, 2004, request that the Court appoint you as lead plaintiff.

MILBERG WEISS ANNOUNCES THE FILING OF A CLASS ACTION SUIT AGAINST HANGER ORTHOPEDIC GROUP, INC. ON BEHALF OF INVESTORS

The law firm of Milberg Weiss Bershad & Schulman LLP announces that a class action lawsuit was filed on June 22, 2004, on behalf of purchasers of the securities of Hanger Orthopedic Group, Inc. ("Hanger" or the "Company")

NYSE:HGR) between July 29, 2003 and June 14, 2004, inclusive, (the "Class Period"), seeking to pursue remedies under the Securities Exchange Act of 1934 (the "Exchange Act"). A copy of the complaint filed in this action is available from the Court, or can be viewed on Milberg Weiss's website at:

http://www.milbergweiss.com

The action, numbered 04 CV 42585, is pending in the United States District Court for the Eastern District of New York against defendants Hanger, Thomas F. Kirk, George E. McHenry and Ivan R. Sable.

Hanger describes itself as "the world's premier provider of orthotic and prosthetic patient-care services." The Complaint alleges that, throughout the Class Period, the Company performed poorly and that defendants were under tremendous pressure to meet the expectations they themselves had set and thereby maintain their credibility. The complaint further alleges that, to achieve this end, they resorted to an illegal scheme to bilk the Medicaid and Medicare programs, the Veterans Administration and private insurers.

Specifically, unbeknownst to investors, during the Class Period, Hanger improperly booked sales by filling out fake prescriptions and adding items that were not prescribed for existing patients in order to increase bills to Medicare and Medicaid. This practice not only artificially inflated Hanger's revenues and earnings, it also jeopardized Hanger's status as a Medicare and Medicaid provider, and its relationships with private insurers. It was, therefore, highly relevant to investors seeking to evaluate the effectiveness of the Company's operations.

The truth began to emerge on June 14, 2004, after the close of trading, when NBC News aired an investigative report in which a Hanger employee described the Company's allegedly fraudulent billing practices. The next day, the Company issued a news release over the PR Newswire in which it admitted that the Company had initiated an investigation into "billing irregularities."

The Company's shares had opened on June 14, 2004 at $15.75. They closed out the day at $14.41 and fell to a closing price of $12.75 on June 15,

2004 onheavy trading volume of 2.4 million shares for a two-day drop of 19 percent. If you bought the securities of Hanger between July 29, 2003 and June 14,2004 and sustained damages, you may, no later than August 23, 2004, request that the Court appoint you as lead plaintiff. A lead plaintiff is a representative party that acts on behalf of other class members in directing the litigation. In order to be appointed lead plaintiff, the Court must determine that the class member's claim is typical of the claims of other class members, and that the class member will adequately represent the class. Under certain circumstances, one or more class members may together serve as "lead plaintiff." Your ability to share in any recovery is not, however, affected by the decision whether or not to serve as a lead plaintiff. You may retain Milberg Weiss Bershad & Schulman LLP, or other counsel of your choice, to serve as your counsel in this action.

Milberg Weiss Bershad & Schulman LLP

http://www.milbergweiss.com is a firm with over 100 lawyers with offices in New York City, Los Angeles, Boca Raton, Delaware, Seattle and Washington, D.C. and is active in major litigations pending in federal and state courts throughout the United States. Milberg Weiss has taken a leading role in many important actions on behalf of defrauded investors, consumers, and others for nearly 40 years. Please contact the Milberg Weiss website for more information about the firm. If you wish to discuss this action with us, or have any questions concerning this notice or your rights and interests with regard to the case, please contact the following attorneys:

Steven G. Schulman
Peter E. Seidman
Andrei V. Rado
One Pennsylvania Plaza, 49th fl.
New York, NY, 10119-0165
Phone number: 800-320-5081
Email: sfeerick@milbergweiss.com
Website: http://www.milbergweiss.com

posted by Daniel Gottry at 8:15 AM