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Amanda Enyeart maintains a general health industry and regulatory practice, focusing on fraud and abuse, information technology and digital health matters. Amanda advises health care industry clients in all aspects of software licenses and other agreements for the acquisition electronic health record (EHR) systems and other mission critical health IT.  Amanda’s health care IT transactional experience also includes advising clients with respect to software development, maintenance, service and outsourced hosting arrangements, including cloud-computing transactions. Read Amanda Enyeart's full bio.

On October 23, 2017, the US Court of Appeals for the Seventh Circuit reversed itself by determining that proximate cause—and not the “but-for” causation test that the court adopted 25 years ago—is the appropriate standard to determine causation in a claim under the False Claims Act (FCA). United States v. Luce, No. 16-4093 (7th Cir. Oct. 23, 2017).

The United States brought suit against defendant Robert S. Luce under the FCA and the Financial Institutions Reform, Recovery and Enforcement Act (FIRREA) in 2011 based upon Fair Housing Act (FHA) certifications included in annual verification reports that Luce and his subordinates signed on behalf of the mortgage company he owned and operated. Although Luce had been indicted in 2005 for an unrelated matter, the mortgage company continued to submit certifications stating that no officers of the company were then subject to criminal proceedings. Only in February 2008, after almost three years had passed since the defendant’s indictment, did the company notify an inspector with the US Department of Housing and Urban Development (HUD) of the indictment. HUD issued a Referral for Suspension/Disbarment of the company shortly thereafter. Continue Reading Seventh Circuit Reevaluates and Adopts More Stringent FCA Causation Standard

On July 10, 2017, US Circuit Court of Appeals for the Ninth Circuit reversed a December 3, 2014, district court dismissal of False Claims Act (FCA) claims against Salish Kootenai College (College), a tribal college of the Salish Kootenai Tribes (Tribe).  United States ex rel. Cain v. Salish Kootenai College, Inc. (July 10, 2017). The 9th Circuit directed the district court to reconsider whether the College is subject to liability under the FCA under a different standard than used by the district court.

The district court had entered its order dismissing claims by the qui tam relators that the College filed false progress reports to the US Department of Health and Human Services and the Indian Health Service in order to retain grant funding from the agencies, holding that the College was an arm of the Tribe and shared the Tribe’s sovereign immunity, which had not been waived by the Tribe or Congress. (The district court also dismissed claims against the members of the College board of directors and the College foundation. Relators, however, only appealed the dismissal of claims against the College.)

The court of appeals disagreed with the district court’s framing of the question. The central question is not, as the district court found, whether the College enjoyed tribal immunity and whether such immunity had been waived. Rather, the central issue in a FCA case is whether the College is a “person” within the meaning of the FCA, and, thus subject to liability under the FCA. Accordingly, the court undertook a two-part analysis to decide the question: (1) whether the Tribe is a person under the FCA or a sovereign not subject to the FCA, and, if the latter; (2) whether the College is an arm of the Tribe that shares the Tribe’s sovereign status for purposes of the FCA. Continue Reading Ninth Circuit Remands False Claims Act Case against Tribal College for Determination of Sovereign Status

On April 11, 2017, the US District Court for the District of Oregon sided with the Oregon Health and Sciences University (OHSU), finding that as an arm of the state, OHSU is not subject to liability under the False Claims Act (FCA) even when the claim is brought by the federal government. In United States ex rel. Doughty v. Oregon Health and Sciences University, No. 3:13-CV-1306-BR (April 11, 2017 D. Or.), the district court dismissed the qui tam FCA claims, in which the federal government intervened, but granted leave to file an amended complaint on other grounds.

The United States asserted, among other claims, that after relocating its Vaccine and Gene Therapy Institute (VGTI) to its Oregon National Primate Research Center (ONPRC), OHSU wrongly applied to VGTI the higher billing rates applicable to ONPRC, allegedly resulting in inflated reimbursement through a National Institutes of Health grant. OHSU filed a motion to dismiss the case on the grounds it is an arm of the state and not a “person” subject to FCA liability. The United States argued that OHSU is a not an arm of the state for purposes of the FCA, and, even if it were, the bar against FCA liability is limited to cases brought by private individuals. Continue Reading District Court Finds Oregon University Immune to FCA Suit Brought by Federal Government

According to a report released last week, the Health Care Fraud and Abuse Control Program (HCFAC) returned over $3.3 billion to the federal government or private individuals as a result of its health care enforcement efforts in fiscal year (FY) 2016, its 20th year in operation. Established by the Health Insurance Portability and Accountability Act of 1996 (HIPAA) under the authority of the Department of Justice (DOJ) and the Department of Health and Human Services (HHS), HCFAC was designed to combat fraud and abuse in health care. The total FY 2016 return represents an increase over the $2.4 billion amount reported by the agencies for FY 2015.

The report serves as a useful resource to understand the federal health care fraud enforcement environment. It highlights costs and returns of federal health care fraud enforcement, providing not only amounts recovered from settlements and awards related to civil and criminal investigations but also outlining funds allocated for each departmental function covered by the HCFAC appropriation. Total HCFAC allocations to HHS for 2016 totaled $836 million (approximately $255 million of which was allocated to the HHS Office of Inspector General (OIG)) and allocations to DOJ totaled $119 million. The report touts a return on investment of $5 for every dollar expended over the last three years.

The report also includes summaries of high-profile criminal and civil cases involving claims of violations of the False Claims Act (FCA), among other claims. The cases include OIG and HHS enforcement actions as well as some of those pursued by the Medicare Fraud Strike Force, which is an interagency task force composed of OIG and DOJ analysts, investigators, and prosecutors. Successful criminal and civil investigations touch virtually all areas of the health care industry from various health care providers to pharmaceutical companies, device manufacturers and health maintenance organizations, among others.

The report follows an announcement by the DOJ last December declaring FY 2016’s recovery of more than $4.7 billion in settlements and judgments from civil cases involving fraud and false claims in all industry sectors to be its third highest annual recovery, the bulk of which, $2.5 billion, resulted from enforcement in the health care industry.

On November 15, 2016, as part of its 2017 Medicare Physician Fee Schedule update, the Center for Medicare and Medicaid Services reissued its prohibition on certain unit-based rental arrangements with referring physicians, adopted updates to the list of CPT/HCPCS codes defining certain of the Stark Law’s designated health services and implemented a minor technical change to its instructions for submitting a request for an Stark advisory opinion. These revisions can be found at 81 Fed. Reg. 80170, 80524-36.

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On October 28, 2016 in an unpublished opinion, the Fifth Circuit Court of Appeals affirmed the decision of the US District Court for the Southern District of Texas that granted summary judgment to Omnicare, Inc. in a qui tam action. We discussed the decision of the district court here.

The relator alleged, among other claims, that Omnicare violated the False Claims Act (FCA) by writing off debt owed by skilled nursing facilities (SNFs) and offering prompt-payment discounts in exchange for referrals to Omnicare’s pharmacy business, in violation of the Anti-Kickback Statute, 42 U.S.C. § 1320a-7b(b)(2) (AKS).

The Fifth Circuit agreed with the district court that the evidence offered by the relator regarding the debt write-off practices did not support a finding that Omnicare offered benefits to SNFs that were designed to induce Medicare and Medicaid referrals. The court found that, at best, the evidence, which consisted primarily of company emails, supported a finding that “Omnicare did not want unresolved settlement negotiations to negatively impact its contract negotiations with SNF clients” and was “avoiding confrontational collection practices that might discourage SNFs from continuing to do business with Omnicare.” In addtion, the court found no evidence that the SNFs were told that they were receiving special benefits, noting that if the “purported benefits were designed to encourage SNFs to refer Medicare and Medicaid patients to Omnicare, one might expect to find evidence showing that the SNFs at least knew about the benefits.”Moreover, the court found that the relator offered no evidence that prompt-payment discounts were offered to the SNFs for the “illegitimate purpose of inducing referrals rather than the legitimate purpose of inducing payments.”

The court invoked the principle that there is no AKS violation where “the defendant merely hopes or expects referrals from benefits that were designed for other purposes” and noted that “although Omnicare may have hoped for Medicare and Medicaid referrals, absent any evidence that Omnicare designed its settlement negotiations and debt collection practices to induce such referral, Relator cannot show an AKS violation.”

Although the Fifth Circuit’s decision was not published, it stands as an affirmation of the district court’s admonition that “an accusation of a multimillion-dollar fraud must be supported by more than a few ambiguous e-mails.”

The US Court of Appeals for the Ninth Circuit issued an opinion overturning a district court’s grant of summary judgment against a False Claims Act (FCA) relator in United States ex rel. Driscoll v. Todd Spencer M.D. Medical Group, Inc. on August 9, 2016.  The case involved allegations by Scott Driscoll, M.D., a radiologist who had worked for the defendant medical group, that the medical group and its principal, Dr. Todd Spencer, performed unnecessary procedures and unbundled certain procedures in order to bill for multiple procedures rather than just one at a higher reimbursement rate.

The district court had granted the defendants’ motion for summary judgment on the grounds that the amended complaint failed to satisfy the particularity standard of Fed. R. Civ. P. 9(b).  Specifically, the district court held that although the relator alleged the performance of certain unnecessary procedures and improper unbundling of procedures, the claims failed to sufficiently describe the details of the alleged scheme by failing to allege the “who, what, when, where, and how of the scheme.”  For example, the district court found that the complaint lacked particularity in identifying the persons who performed the unnecessary services and submitted inflated bills.  Moreover, the district court found that the relator failed to flesh out how the scheme worked and to provide facts regarding a protocol that was allegedly developed by Spencer and appeared to be the basis for the relator’s claims related to the performance of unnecessary procedures.  The district court held that any subsequent amendment to the compliant would be futile and dismissed it with prejudice, noting that in a prior order related to the initial complaint, it had given the relator “one and only one” opportunity to amend the complaint and specific instructions on how to cure the complaint’s factual deficiencies.

The Ninth Circuit disagreed with the district court, holding that certain of the allegations in the complaint were sufficiently specific that the defendants could answer the complaint and defend against the charges.  Citing its holding in Ebeid ex rel. United States v. Lungwitz (616 F. 3d 993 (2010)) the Ninth Circuit noted that, under Rule 9(b), it is sufficient to allege particular details of a scheme to submit false claims paired with reliable indicia that lead to a strong inference that claims were actually submitted.  Moreover, a plaintiff need only provide enough detail to give the defendant notice of the particular misconduct which is alleged to constitute the fraud charged so that he or she can defend against the charge and not just deny that he or she has done anything wrong.  The Ninth Circuit contrasted the facts in Driscoll with those in Ebeid (in which the court ultimately found that the claims failed to satisfy the heightened pleading standards of Rule 9(b)) in that in Driscoll, the relator had personal knowledge of the defendants’ practices whereas, in Ebeid, the relator was not an insider, “so his claim depended on speculation.”  However, the opinion does not elaborate on how such a difference contributed to the court’s determination that the Rule 9(b) pleading standard had been met in Driscoll.

Finding that only a portion of the compliant was sufficiently specific, the Ninth Circuit remanded the case to the district court with instructions to allow the relator to amend the complaint to address the deficiencies and narrow the scope of the complaint so that the litigation would be manageable.

Although Ninth Circuit’s opinion in Driscoll was not published and does not have precedential value, it  illustrates that some courts may give certain relators with personal knowledge of an alleged fraudulent scheme more leeway in meeting their Rule 9(b) burdens.  However, Rule 9(b) continues to set a demanding standard that should be enforced by courts to guard against frivolous claims.

On July 12, 2016, the US Senate Finance Committee held a hearing to “examine ways to improve and reform the Stark Law” as a follow up to releasing a white paper on June 30 titled Why Stark, Why Now? Suggestions to Improve the Stark Law to Encourage Innovative Payment Models. The white paper summarizes comments and recommendations gathered during a roundtable discussion held by the Senate Finance Committee and the US House Committee on Ways and Means in December 2015 as well as written comments submitted by roundtable participants and other stakeholders on topics taken up by the roundtable in the weeks following the meeting.

Senate Finance Committee Chairman Senator Orrin Hatch commented in a press release that “[t]he health care industry has changed significantly since Stark was first implemented, and while the original goals of the Stark law were appropriate, today it is presenting a real burden for hospitals and doctors trying to find new ways to provide high quality care while reducing costs as they work to implement recent health care reforms. . . [The] paper reflects critical feedback from the stakeholder community on the law’s ambiguities, its unintended consequences and the need for reform, and I am hopeful it jumpstarts the discussion on how Congress can modernize the law to make it work for patients, providers and taxpayers.”

Congress’ attention to Stark Law reform would address the significant False Claims Act exposure Stark Law violations can pose, which has been a very active topic for relators and government investigations in recent years.

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On May 23, 2016, the US District Court for the District of Massachusetts dismissed several of the claims in a False Claims Act (FCA) whistleblower suit against Medtronic, Inc. and its wholly-owned subsidiary Medtronic MiniMed, Inc. (Medtronic) related to its insulin pumps and integrated diabetes management systems.

In United States ex rel. Witkin v. Medtronic, Inc., the relator, Witkin (a former employee of Medtronic) alleged that certain of Medtronic’s promotional activities related to its insulin pumps and the pediatric use of its integrated diabetes management systems designed for adult use were false or misleading, resulting in false claims for reimbursement.  The district court held that Witkin failed to plead his claims with sufficient particularity pursuant to Fed. R. Civ. P. 9(b).  The district court emphasized the particularity requirement in this case, observing that “the alleged fraudulent promotional activity permits only a weak inference of resulting false claims.”  Specifically, the district court held that, with respect to allegations that Medtronic promoted its insulin pumps for use with a type of insulin that is not approved for administration with a pump, Witkin failed to connect allegations of fraudulent promotion to any false claims for reimbursement of either the pumps or the insulin. In addition, with respect to the pediatric use of adult integrated diabetes management systems, the District Court invoked the often-cited principle that “Witkin had alleged an elaborate fraudulent scheme with some detail, but without particularity as to the ‘who, what, where, and when’ of the underlying fraudulent promotion or eventual false claims.”

Accordingly, the district court dismissed the claims that relied on a theory of off-label promotion on Rule 9(b) grounds.  Notably, the district court distinguished the alleged off-label promotion at issue in this case from claims in other cases that premise FCA liability on truthful off-label promotion, noting that there is a question about whether imposing liability in such circumstances would run afoul of the First Amendment (citing the Second Circuit’s 2012 holding in United States v. Caronia, which we discussed in our post on May 26).

The particularity of the pleading was also an issue in a claim unrelated to off-label promotion.  The district court also dismissed, on Rule 9(b) grounds, Witkin’s claims that Medtronic assisted patients in fabricating eligibility criteria for pump therapy because Witkin failed to include particularized allegations of patient targets or when or what information was falsified “let alone allegations of doctors who endorsed the fabricated certifications of medical necessity and thereafter made false claims to the government health care programs.”

The decision was not a total loss for Witkin, however, as the district court permitted certain FCA claims to continue, based on payments to physicians allegedly in violation of the Anti-Kickback Statute (AKS).  In addition, the district court allowed Witkin’s retaliatory discharge claims to continue.  As to the dismissed claims, however, the district court indicated that it was not inclined to allow Witkin to amend.  The district court warned that, as Witkin had already been allowed two amended complaints, the court was unlikely to grant any additional requests to amend the complaint, stating that, absent unforeseen circumstances, Witkin would not be allowed to “try to reformulate his allegations, yet again, to avoid their legal deficiencies.”

On March 7, the U.S. Court of Appeals for the Fifth Circuit affirmed a grant of summary judgment by the U.S. District Court for the Northern District of Texas in favor of Kaner Medical Group and its owner, David Kaner, in a qui tam suit brought under the False Claims Act (FCA).  United States ex rel. Johnson v. Kaner Med. Grp., 2016 WL 873816 (5th Cir. Mar. 7, 2016).  The suit was filed by a former employee of the group, who alleged that the group submitted false claims for reimbursement to Medicare and TRICARE, and that she was terminated in retaliation for raising concerns regarding the group’s billing practices.

The relator’s FCA claims were based on the group’s practice of entering the National Provider Identifier (NPI) of the provider who referred a patient to the group’s allergy clinic on Medicare claims in a box that, according to instructions from the Centers for Medicare & Medicaid Services (CMS), should have contained the NPI of the provider who supervised the work carried out at the allergy clinic on the day the patient received the service.  The district court found that, although the summary judgement record indicated the possibility that a large number of the group’s claims forms had incorrect provider information, the evidence did not show that the performing medical assistants lacked the requisite supervision or that the services were rendered under circumstances that would cause the group not to be entitled to payment.  U.S. ex rel. Johnson v. Kaner Med. Grp., 2015 WL 631651 (N.D. Tex. Feb. 12, 2015).  Instead, the record “provide[d] evidence that defendants perhaps were negligent in their indications on some of the forms of healthcare provider information.”

In affirming the district court, the appeals court found that the relator presented no evidence that the group acted “knowingly,” i.e., with actual knowledge of information or in deliberate ignorance or reckless disregard with respect to the truth or falsity of the information.  Instead, the appeals court agreed with the district court that the record indicated that “at most, [the group’s] misunderstanding of CMS’s requirements was negligent, which is not sufficient to attach liability under the FCA.”  As the court found in favor of the group on summary judgment, it also found that the relator did not engage in protected activity under the whistleblower protections of the FCA, and affirmed the dismissal of her retaliation claim.

As the outcome in this case demonstrates, the fact that a health care provider has improperly billed Medicare is not enough to support an FCA claim.  Among other things, a plaintiff must raise a genuine dispute of material fact that a defendant knowingly asked Medicare to pay amounts it does not owe.  As the court noted, the FCA “is not a general ‘enforcement device’ for federal statutes, regulations and contracts. . . but the Government’s ‘primary litigation tool’ for recovering losses resulting from fraud.”