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Laura McLane serves as head of McDermott's Boston Litigation Practice Group. Laura represents national and international clients in health care, securities and other government enforcement matters, both civil and criminal. She also represents clients in professional and products liability cases and in complex commercial disputes. A significant part of Laura's practice is devoted to representing health care and other companies, as well as individuals, in government investigations and qui tam litigation based on the False Claims Act (FCA) and related statutes, including the Anti-Kickback Statute and the Stark Law. Read Laura McLane's full bio.

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 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

In the latest installment of Health Care Enforcement Quarterly Roundup, we examine key enforcement trends in the health care industry that we have observed over the past few months. In this issue, we report on:

  • Practical applications of recent guidance from the US Department of Justice (DOJ)
  • A recent blow to DOJ’s effort to use the federal False Claims Act (FCA) to attack Medicare Advantage reimbursement
  • Continued enforcement efforts at the state and federal level to combat the opioid crisis
  • Potential changes to the Stark Law and Anti-Kickback Statute
  • Continued reporting on how the lower courts have interpreted the landmark Escobar case

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

Join us on for a webinar discussion on Tuesday, October 23. will take a deep dive into the trends and issues covered in this installment of the Health Care Enforcement Quarterly Roundup. Click here to register.

In the aftermath of the Supreme Court’s 2016 Escobar decision, the majority of litigation regarding that decision’s impact has concerned the issue of materiality. While the materiality predicate to False Claims Act (FCA) liability announced in Escobar has certainly assumed top billing, another aspect of the Supreme Court’s decision is increasingly getting attention: that is, whether the two-part test for applicability of the implied certification theory of FCA liability is mandatory.

In Escobar, the Supreme Court held that the implied certification theory “can be a basis for liability, at least where two conditions are satisfied: first, the claim does not merely request payment, but also makes specific representations about the goods or services provided; and second, the defendant’s failure to disclose noncompliance with material statutory, regulatory or contractual provisions makes those representations misleading half-truths.”

Since this pronouncement, lower courts have grappled with whether all implied certification FCA cases must satisfy this two-part test, or whether the Supreme Court simply intended to describe a non-exhaustive set of factors that could give rise to an implied certification claim.  This is important, in part, because not all claims for payment submitted to government payors actually describe or make representations about the goods or services provided, thus failing part one of the test.

In prior cases, such as the one we reported on here, panels of the Ninth Circuit Court of Appeals have held that the two-part test is mandatory. A Ninth Circuit panel reaffirmed this holding on August 24, 2018, albeit with a total lack of enthusiasm. In United States ex rel. Rose v. Stephens Institute, the court stated that “while the [Supreme] Court did not state that its two conditions were the only way to establish liability under an implied false certification theory,” the panel was “bound by [prior] three-judge panels of this court” interpreting Escobar. The Rose court went on to suggest that the Ninth Circuit hearing the case en banc might decide the issue differently. (No petition for rehearing en banc has yet been filed in Rose; any such petition is not due until October 9, because of an extension of time for filing).

The skepticism about the mandatory nature of the Escobar two-part test expressed by the Ninth Circuit panel in Rose is unwarranted. First, the Supreme Court granted certiorari in Escobar for the very purpose of resolving whether the implied certification theory of FCA liability is viable and if so, to what extent. The notion that the Supreme Court would then have laid out two “conditions” for implied certification liability, labeled them “conditions,” but not have actually meant them to be “conditions,” makes little sense.

While some advocates for the contrary view (including the government) have grasped onto the phrase “at least” in the Supreme Court’s opinion to suggest that the “conditions” are instead non-exhaustive “examples” of situations where implied certification claims may proceed, such reasoning is flawed: the use of the term “at least” conveys that the two conditions are the minimum necessary components of a viable implied certification claim. This point is underscored when the phrase “at least” is used in a (somewhat) more conventional sentence. For example, if a person says, “I like skydiving, at least when I’m wearing a parachute,” one would not conclude that there are situations in which the person would entertain skydiving without a parachute.

We will have to wait and see what happens if the Ninth Circuit has occasion to address the Escobar two-part test en banc.

How will key trends and developments in health care policy and enforcement impact future litigants? In the latest Health Care Enforcement Quarterly Roundup, we address this question in the context of:

  • Continued interpretations of the landmark Escobar case
  • The latest guidance from US Department of Justice (DOJ) leadership regarding enforcement priorities
  • The uptick in state and federal efforts to combat the opioid crisis
  • Recent court decisions regarding the use of statistical sampling in False Claims Act (FCA) cases
  • A recent increase in regulatory scrutiny of co-location and shared services/equipment arrangements

Materials from our corresponding Q2 webinar can be accessed below.

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

Click here to view the archived webinar.

Health Care Enforcement Q2 Roundup Webinar
Date: Tuesday, July 17, 2018
Time: 11:00 am PDT | 12:00 pm MDT | 1:00 pm CDT | 2:00 pm EDT

REGISTER NOW

How will recent developments and emerging trends related to health care fraud and abuse impact future investigation targets and litigants?

Our upcoming Health Care Enforcement Quarterly Roundup webinar will address this critical question and discuss trends related to:

  • Continued interpretations of landmark Escobar case
  • Recent guidance from DOJ leadership regarding enforcement priorities
  • Uptick in state and federal efforts to combat the opioid crisis
  • Court guidance on the use of statistical sampling in False Claims Act (FCA) cases
  • Growing Circuit split on key FCA provisions, including the public disclosure bar, statute of limitations and tolling of claims
  • Other trends that are critical to health care business operations and compliance with the ever-changing regulatory landscape

Attendees will also receive an advance copy of McDermott’s Health Care Enforcement Quarterly Roundup report on the day of the webinar and will have the opportunity to ask questions of the panel through the webinar platform.

On April 6, 2018, the U.S. District Court for the Eastern District of Pennsylvania granted a motion for summary judgment filed by a waste company in an implied certification case under the False Claims Act (FCA), holding that the relator failed to satisfy the Supreme Court’s materiality standard announced in the landmark Escobar case.

The claims in U.S. ex rel. Cressman v. Solid Waste Services, Inc. arose from waste company employees discharging leachate, a liquid that passes through or is generated by trash, onto a grassy area at a transfer station, rather than sending the leachate to a treatment plant.  The relator reported the leachate discharge to the Pennsylvania Department of Environmental Protection (DEP), which conducted an investigation.  The waste company cooperated in the investigation, conducted its own investigation, and took corrective steps in response to the allegations.  The company also entered into a consent decree in connection with which it paid a civil penalty.

The relator then filed his qui tam action under the FCA, in which the government declined to intervene.  The relator asserted that the defendant waste company was liable under the FCA because it submitted claims for payment to federal agencies without disclosing its violation of environmental regulations arising from the leachate discharge incident. Continue Reading Another Court Grants Summary Judgment to FCA Defendant Based on Escobar’s Materiality Standard

In a two-page memorandum, the US Department of Justice (DOJ) announced a broad policy statement prohibiting the use of agency guidance documents as the basis for proving legal violations in civil enforcement actions, including actions brought under the False Claims Act (FCA). The extent to which these policy changes ultimately create relief for health care defendants in FCA actions is unclear at this time. That said, the memo provides defendants with a valuable tool in defending FCA actions, either brought by DOJ or relator’s counsel, that attempt to use alleged noncompliance with agency sub-regulatory guidance as support for an FCA theory.

Continue reading

On March 2, 2017, the US District Court for the Southern District of New York applied the materiality standard announced by the Supreme Court of the United States in Universal Health Services, Inc. v. United States ex rel. Escobar to dismiss a relator’s complaint because the relator, a former managing director of Moody’s, failed to plead materiality as a matter of law.

In United States ex rel. Kolchinsky v. Moody’s Corp., the district court had previously dismissed with prejudice four of five categories of claims, and dismissed without prejudice the relator’s “Ratings Delivery Service” claim, i.e., that Moody’s provided inaccurate ratings directly to subscribers, including government agencies.  In his Second Amended Complaint, the relator attempted to cure the pleading defects of Ratings Delivery Service claim in a “124-page tome,” but to no avail. Continue Reading SDNY Dismisses Sub-Prime Mortgage Crisis Complaint on Materiality Grounds Because Government Paid Claims Despite Notice of Alleged Fraud

On January 19, 2017, another district court ruled that a mere difference of opinion between physicians is not enough to establish falsity under the False Claims Act.  In US ex rel. Polukoff v. St. Mark’s et al., No. 16-cv-00304 (Jan. 17, 2017 D. Utah), the district court dismissed relator’s non-intervened qui tam complaint with prejudice based on a combination of Rule 9(b) and 12(b)(6) deficiencies.  In so doing, the Polukoff court joined US v. AseraCare, Inc., 176 F. Supp. 3d 1282, 1283 (N.D. Ala. 2016) and a variety of other courts in rejecting False Claims Act claims premised on lack of medical necessity or other matters of scientific judgment.  This decision came just days before statements by Tom Price, President Trump’s pick for Secretary of Health and Human Services (HHS), before the Senate Finance Committee in which he suggested that CMS should focus less on reviewing questions medical necessity and more on ferreting out true fraud.  Price’s statements, as well as decisions like Polukoff, are welcome developments for providers, who often confront both audits and FCA actions premised on alleged lack of medical necessity, even in situations where physicians vigorously disagree about the appropriate course of treatment.

In Polukoff, the relator alleged that the defendant physician, Dr. Sorensen, performed and billed the government for unnecessary medical procedures (patent formen ovale (PFO) closures). The relator also alleged that two defendant hospitals had billed the government for associated costs.  Specifically, the relator alleged that PFO closures were reasonable and medically necessary only in highly limited circumstances, such as where there was a history of stroke.  Medicare had not issued a National Coverage Determination (NCD) for PFO closures or otherwise indicated circumstances under which it would pay for such procedures.  However, the relator held up medical guidelines issued by the American Heart Association/American Stroke Association (AHA), which, essentially, stated that PFO closures could be considered for patients with “recurring cryptogenic stroke despite taking optimal medical therapy” or other particularized conditions. Continue Reading The FCA and Medical Necessity: An Increasingly Tenuous Relationship