SteriCycle Agrees to Settle False Claims Act Allegations for $26 Million

Medical waste company SteriCycle has agreed to settle allegations it defrauded the federal government and 14 states pursuant to contracts for waste disposal.
Image source: Wikimedia Commons

A company known as SteriCycle, which specializes in compliant disposal of biological waste, has agreed to settle a qui tam lawsuit launched by a former employee in 2009.[1. Koenigsberg, David & Menz, John. “Stericycle to Pay $26.75 Million to Settle False Claims Act Case.” PRNewsWire.com, October 9, 2015. http://www.prnewswire.com/news-releases/stericycle-to-pay-2675-million-to-settle-false-claims-act-case-300157412.html] 

The case, which also involved 14 states, began after an observant whistleblower took notice of potentially unlawful price increases implemented by the company in violation of the terms of its government contracts. In her position in the collections department, the whistleblower soon realized that SteriCycle was regularly overcharging government entities by as much as 18 percent above what they charged their private clients.

As a result, the whistleblower is set to receive a sizable percentage of the $26.5 million settlement, although the exact figure has yet to be determined.

Background of the SteriCycle case

In 1987, Congress enacted the Medical Waste Tracking Act in response to an influx of hazardous medical waste washing up on East Coast beaches. Under the MWTA, companies engaging in health-related industries are required to maintain strict compliance with the storage and disposal of items like syringes and other biological material.

Once enacted, the MWTA prompted growth in the private sector medical waste industry, resulting in the formation of companies like SteriCycle. To date, SteriCycle remains the largest and most diverse medical waste transport company in the United States.[2. Sweet, Benjamin J. “Conchranton Veterinary Hospital v. SteriCycle, Inc.” Publicus.com. http://wnedit.cr.atl.publicus.com/assets/PDF/WN87451319.PDF (Retrieved Oct. 13, 2015).]

In 2003, the federal government – followed by several states – entered into several service agreements with SteriCycle wherein the company agreed to properly transport and dispose of medical waste from both “Large Quantity Generators” (e.g., hospitals) and “Small Quantity Generators” (e.g., outpatient clinics).

Contractual issues

According to the complaint, SteriCycle uses a standard “Steri-Safe” service contract with all its clients, of which there are over 522,000. While the agreement allows for reasonable and standard rate increases due to increased operational expenses, SteriCycle is prohibited from implementing unnecessary fees for its government clients.

Nonetheless, as the whistleblower eventually uncovered, SteriCycle began regularly implementing Automatic Price Increases without seeking consent from government entities. Over time, these APIs amounted to millions of dollars in overcharges and could not be tied to any actual increases in operating costs absorbed by the company.

By and large, SteriCycle’s government contracts involved medical waste transport from schools, correctional facilities, government-run medical facilities, and county health departments.

In the state of New York alone, the APIs amounted to $820,000,[3. Schneiderman, Eric T. “A.G. Schneiderman Announces $2.4 Million Settlement With Stericycle For Overcharging NY State And Local Entities.” Press Releases. http://www.ag.ny.gov/press-release/ag-schneiderman-announces-24-million-settlement-stericycle-overcharging-ny-state-and] while the state of Rhode Island reported increases totaling nearly $200,000. Many of the states involved in the matter settled with SteriCycle in 2013 and 2014. However, the federal government did not finalize its settlement until October 2015.

Contact a whistleblower attorney today

If you are considering a whistleblower action and would like to discuss your rights under the False Claims Act, please do not hesitate to contact Berger Montague today.