On February 11, 2019, the Eighth Circuit affirmed the dismissal of a group of relators’ qui tam suit against Crawford County Memorial Hospital for failure to meet the pleading standards required by Federal Rule of Civil Procedure 9(b). The court’s decision focused on the relators’ failure to allege the specifics of any actual claim for payment by Crawford County – a solid confirmation that the Eighth Circuit continues to require the pleading of identifiable false claims for payment, even in instances in which a relator is not in a position to have that information.

The three relators were a former EMT and two former paramedics at Crawford County. The relators alleged that Crawford County violated the FCA by submitting, among other things, claims for breathing treatments administered to patients by paramedics, claims for lab services performed by paramedics and EMTs, and claims with false credentials of service providers. The relators further stated that Crawford County used false statements to get these claims paid, including records documenting breathing treatments as taking 30 minutes when they did not, records referring to paramedics as “specialized ancillary staff” for breathing treatments, and documents containing false credentials for emergency staff. The complaint was fairly detailed – it included allegations that Crawford County required paramedics to perform breathing treatments previously provided by nurses, that hospital management told staff the change was explicitly for billing purposes, and that management required the paramedics to document each breathing treatment at 30 minutes, regardless of its actual length. Continue Reading Eighth Circuit Rejects FCA Claim for Failure to Allege Actual Claims for Payment

DOJ announced on February 6, 2019, the Settlement Agreement resolving allegations in DOJ’s Complaint that Greenway caused its customers to submit false Medicare and Medicaid claims for payments under the EHR Incentive Programs in violation of the FCA and that it paid illegal kickbacks to current customers to recommend Greenway products (that are used to generate incentive payments or avoid penalties under the EHR Incentive Programs) to new customers. Under the Settlement Agreement, Greenway agreed to pay approximately $57 million to resolve the allegations without admitting liability. Greenway also entered into a five-year CIA with strict compliance oversight, reporting obligations and costly obligations to provide the latest version of Greenway’s EHR software to each of Greenway’s current customers at no additional charge.

This settlement comes nearly two years after eCW entered into a groundbreaking settlement with DOJ. At that time, we wondered whether it may be a sign of increasing FCA actions against vendors of EHR technology (CEHRT) certified through the health information technology (HIT) certification program of the Office of the National Coordinator of HIT (ONC). Statements by the United States Attorney for the District of Vermont, Christina E. Nolan, in the DOJ press release discussing the Greenway settlement seem to answer that question very directly in the affirmative. She says that “EHR companies should consider themselves on notice.” It is notable that, unlike the eCW case, the Greenway case was not initiated by a relator, but pursued by DOJ directly. In light of the government’s continued focus on vendors of EHR technology used to earn payments or avoid penalties for failing to succeed under the EHR Incentive Programs (or their successor value-based payment programs), HIT vendors should:

  • Take care to accurately and transparently demonstrate their software during HIT certification program testing
  • Review, and consider improvements to, their systems and other procedures for identifying, responding to and correcting software design and quality issues that call into question EHR software’s conformity to applicable EHR certification criteria or present patient safety or clinician usability risks; and
  • Review existing customer reference, referral and marketing arrangements for compliance with the Anti-Kickback Statute.

Click here to read the full post.

On February 8, 2019, the Department of Justice (DOJ) announced that it obtained a temporary restraining order (TRO) in the Middle District of Tennessee against two pharmacies, their owner and three pharmacists from dispensing controlled substances, including opioids. The DOJ simultaneously unsealed a complaint alleging violations of the False Claims Act and Controlled Substances Act against the same parties. DOJ’s press release is available here.

The DOJ described this action as part of a coordinated effort by the Prescription Interdiction & Litigation (PIL) Task Force to deploy its criminal, civil and regulatory tools to address the opioid epidemic in the United States. The complaint alleges that the pharmacies and pharmacists filled numerous prescriptions for controlled substances outside the usual course of professional practice and in violation of the pharmacists’ corresponding responsibility to ensure that prescriptions were written for a legitimate medical purpose. In particular, the complaint alleges that the defendants routinely dispensed controlled substances and ignored “red flags” of diversion and abuse, such as unusually high dosages of oxycodone and other opioids, dangerous combinations of opioid prescriptions other controlled substances and patients travelling extremely long distances to get and fill prescriptions. The complaint also asserts that the pharmacies falsely billed Medicare for illegally dispensed prescriptions.

“Pharmacies and pharmacists have a legal obligation to dispense controlled substances properly, so as not to put patients’ health at risk,” said Assistant Attorney General Jody Hunt for the Department of Justice’s Civil Division. “The Department of Justice will use every available tool to stop individuals and entities responsible for the improper distribution of controlled substances.”

While the DOJ has previously obtained TROs and a permanent injunction against physicians for prescribing opioids upon filing a complaint, this is the first case in which the agency has taken this combination compliant and TRO action against a pharmacy and pharmacists.

On January 31, 2019, the Department of Health and Human Services (HHS) released a notice of proposed rulemaking (the Proposed Rule) as part of ongoing administration drug pricing reform efforts. The Proposed Rule would modify a regulatory provision that had previously protected certain pharmaceutical manufacturer rebates from criminal prosecution and financial penalties under the federal Anti-Kickback Statute.

Specifically, the Proposed Rule would exclude from “safe harbor” protection rebates and other discounts on prescription pharmaceutical products offered by pharmaceutical manufacturers to Medicare Part D plan sponsors or Medicaid Managed Care Organizations (MCOs), unless the price reduction is required by law (such as rebates required under the Medicaid Drug Rebate Program). The proposed exclusion would apply to rebates offered directly to Part D plan sponsors and Medicaid MCOs, as well as those negotiated by or paid through a pharmacy benefit manager (PBM). HHS stated that it does not intend for the revisions in this Proposed Rule to negatively impact protection of prescription pharmaceutical product discounts offered to other entities such as wholesalers, hospitals, physicians, pharmacies and third party payors in other federal health care programs. The proposed effective date of this regulatory modification is January 1, 2020, although HHS has sought comments regarding whether this allows sufficient time for parties to restructure existing arrangements.

Click here to read the full post. 

This latest installment of the Health Care Enforcement Quarterly Roundup reflects on trends that persisted in 2018 and those emerging trends that will carry us into 2019 and beyond. Leading off with the US Department of Justice’s (DOJ) December announcement of its fiscal year 2018 False Claims Act (FCA) recoveries, it remains clear that the health care industry is a primary target of FCA enforcement activity. We also revisit the current state of implementation of DOJ’s Granston Memorandum, substantive revisions to the Yates Memorandum, critical interpretations of the landmark Escobar case (including those expected in the coming year), and continued enforcement activity in the pain management industry.

Click here to read the full issue of the Health Care Enforcement Quarterly Roundup

Click here to download a PDF of the issue. 

In September 2015, Deputy Attorney General Sally Yates issued the Yates memo on individual accountability in the context of corporate investigations. It is no understatement to say that this memo created a near-cottage industry of articles and panels on the memo’s impact on government investigations and officer/director liability.

After the change in administration, a favorite parlor game of the defense bar was wagering on the memo’s survival. And after Deputy Attorney General Rod Rosenstein revealed, in September and October 2017, that the Yates memo was under active reconsideration, discussions turned serious about whether the memo would be preserved, diluted or outright reversed and whether the distinctions between criminal and civil False Claims Act matters would receive needed nuance.

Click here to read the full article as published in Law360.

In a January 10, 2019 decision, the US District Court for the District of Arizona granted summary judgment to Defendants because Relators failed to raise a genuine issue of material fact on the issue of “knowledge” under the False Claims Act (FCA) which, as everyone knows by now, includes deliberate ignorance or reckless disregard. The decision is significant for the simple fact that courts can be reluctant to address scienter on summary judgment, and in many cases prefer to simply let the issue go to trial. Moreover, the court’s opinion makes clear that corrections to claiming issues and improvements to systems that result in better claims submission do not function as evidence of knowledge or recklessness under the FCA. In tort law parlance, “remedial measures” are not evidence of fraud.

In Vassallo v. Rural/Metro Corp., a qui tam lawsuit in which the government declined to intervene (but filed a statement of interest attempting to support the Relator’s opposition to summary judgment), the allegations primarily concerned Defendants’ transition from using internal coders to an outside coding vendor to code claims for ambulance transports. There were some alleged issues with the coding performed by the outside coding company, which Defendants worked to improve and correct during and after the transition. Notably, Defendants had been operating under a Corporate Integrity Agreement (CIA) during the time period at issue, and consistently received positive results from the Internal Review Organization (IRO) with respect to coding, billing and claims submission.

The district court held that no reasonable jury could have found that Defendants acted with deliberate indifference or reckless disregard. Relators contended, among other things, that Defendants’ transition to the outside coding vendor was reckless, and that they completed the transition despite knowing about the vendor’s coding and billing errors and issues. In response, Defendants pointed to evidence regarding their training and oversight efforts, their instructions that the vendor’s coders should undercode if they had any doubt about the correct code to be used, their positive results under the CIA, and their retention of Deloitte to address any continued issues with the vendor’s coding. Continue Reading Process Improvements Not a Basis to Establish Scienter: District Court Grants Summary Judgment to Defendants

On December 21, just before the government shutdown began, the Civil Division of the US Department of Justice (DOJ) announced its fiscal 2018 False Claims Act (FCA) statistics.  According to DOJ, FCA judgments and settlements totaled over $2.8 billion for the year.

While this number is the lowest total since 2009, the reason for this result is related to a drop in non-health care related cases.  In fact, the statistics show that health care remains the top driver of FCA activity, both in the number of cases filed and total dollars recovered; only about $370 million of the $2.8 billion, or about 13 percent, came from non-health care cases. Almost all of the fiscal 2018 number–over $2.5 billion–came from cases involving the Department of Health and Human Services (HHS). This appears to be the largest percentage of the total recoveries since DOJ began reporting these statistics in 1987. $1.9 billion of this $2.5 billion came from qui tam cases (also resulting in over $266 million in relator share awards). Indeed, 2018 continued the trend into the ninth consecutive year where health care case recoveries exceeded $2 billion.

The overall number of new FCA matters also fell for the second year in a row; 767 new cases were filed in 2018, with 645 of them filed by relators. Interestingly, the number of new HHS cases also is trending downwards. 2018 saw 506 new HHS cases, 446 of which were filed by relators. In 2017, DOJ reported 550 new HHS cases (495 from relators) and 573 new HHS cases (503 from relators) in 2016, which was the all-time high record of new HHS cases. The 2018 total is consistent with number of new HHS cases filed since 2010.

DOJ’s press release notably emphasized three policy issues outside of dollars that have defined DOJ’s FCA activities in 2018: the continued focus on alleged violations of the Anti-Kickback Statute, 42 U.S.C. § 1320-7b; the movement seek dismissal of unmeritorious cases as discussed in the Granston Memo; and “holding individuals accountable” by seeking monetary resolutions with individuals in addition to corporations. We should expect all three of these trends to continue into 2019.

DOJ’s 2018 False Claims Act statistics can be found here and the press release can be found here.

On November 16, 2018, the United States Supreme Court granted certiorari in United States ex rel. Hunt v. Cochise Consultancy, Inc., 887 F.3d 1081 (11th Cir. 2018). The question presented to the Court is “whether a relator in a False Claims Act qui tam action may rely on the statute of limitations in 13 U.S.C. § 3731(b)(2) in a suit in which the United States has declined to intervene and, if so, whether the relator constitutes an “official of the United States” for purposes of Section 3731(b)(2).”

Section 3731(b) requires an FCA case be filed either (1) six years after the date on which the violation…is committed, or (2) three years after the date when facts material to the right of action are known or reasonably should have been known by the official of the United States charged with responsibility to act in the circumstances, but in no event more than 10 years after the date on which the violation is committed, whichever is later.

In Cochise Consultancy, Inc., the Eleventh Circuit held that § 3731(b)(2) was available to a relator in a non-intervened case. The court also held that the relevant person whose knowledge triggers the limitations period is an official of the United States.

The Eleventh Circuit’s decision deepens the divide among circuits as to how to apply § 3731(b)(2), creating a three-way circuit split. The decision is a departure from the Fourth Circuit and Tenth Circuit. Both courts determined that § 3731(b)(2) extends the statute of limitations period only if the government is a party. See United States ex rel. Sanders v. N. Am. Bus Indus., Inc., 546 F.3d 288 (4th Cir. 2008); United States ex rel. Sikkenga v. Regence BlueCross BlueShield of Utah, 472 F.3d 702 (10th Cir. 2006).

The decision is also a departure from the Third Circuit and Ninth Circuit. The Third Circuit and Ninth Circuit also held that § 3731(b)(2) is available when the government does not intervene.  However, the three-year period depends on the relator’s knowledge. See United States ex rel. Malloy v. Telephonics Corp., 68 F. App’x 270 (3d Cir. 2003); United States ex rel. Hyatt v. Northrop Corp., 91 F.3d 1211 (9th Cir. 1996).

The Supreme Court’s decision to tackle this issue will provide clarity to businesses subject to the FCA because it will likely provide an answer as to how long a relator has to bring an action when the government has not intervened. It could also do away with any forum shopping that relators currently have the ability to engage in.

The Office of Inspector General, Department of Health and Human Services posted an unusual negative Advisory Opinion (AO 18-14) on a drug company’s proposal to provide free drugs to hospitals for use with pediatric patients suffering from a form of epilepsy. Of particular interest is OIG’s reliance on a longstanding, but rarely used, authority to justify finding and relying on public information about the drug at issue, including pricing information, to support its unfavorable conclusion. This advisory opinion might counsel future opinion requestors to withdraw their opinion request once OIG indicates the opinion will be unfavorable.

Click here to read the full post.