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Tony Maida counsels health care and life sciences clients on government investigations, regulatory compliance and compliance program development. Having served as a government official, Tony has extensive experience in health care fraud and abuse and compliance issues, including the federal and state Anti-Kickback and Stark Laws and Medicare and Medicaid coverage and payment rules. He represents clients in False Claims Act (FCA) qui tam matters, government audits, civil monetary penalty and exclusion investigations, and Centers for Medicare and Medicaid Services (CMS) suspension, and revocation actions, negotiating and implementing corporate integrity agreements, and making government self-disclosures. Read Tony Maida's full bio.

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.

This week, the Sixth Circuit declined the en banc petition of Brookdale Senior Living Communities to revisit a three-judge panel’s two-to-one decision to permit the Relator’s third amended complaint to move forward. We previously analyzed this decision here. The court’s one-page order did not explain the reasoning for declining the petition, although it noted that the dissenting judge voted in favor of re-hearing.

Fortunately, most courts have taken to heart the Supreme Court’s direction that materiality is a “demanding” and “rigorous” test in which “minor or insubstantial” non-compliance would not qualify as material. However, the Sixth Circuit’s decision that noncompliance with a physician signature timing requirement sufficiently alleged materiality under Escobar arguably is inconsistent with Escobar. The better analysis of the Relator’s complaint would conclude that the Relator pled insufficient facts, under the Rule 9(b) particularity standard, to suggest that the untimely physician signature somehow resulted in the government paying for home health services for which it otherwise would not have paid. As the dissenting opinion noted, the Sixth Circuit created the “timing” requirement in a prior opinion in this matter. Given this unusual circumstance, this case may be distinguishable in other cases in which the court is less constrained by their prior ruling.

On August 24, 2018, the Office of Inspector General (OIG), Department of Health and Human Services (HHS) published a request for information, seeking input from the public on potential new safe harbors to the Anti-Kickback Statute and exceptions to the beneficiary inducement prohibition in the Civil Monetary Penalty (CMP) Law to remove impediments to care coordination and value-based care. The broad scope of the laws involved and the wide-ranging nature of OIG’s request underscore the potential significance of anticipated regulatory reforms for virtually every healthcare stakeholder.

The request for information follows a similar request by the Centers for Medicare and Medicaid Services (CMS) published on June 25, 2018, regarding the physician self-referral law, commonly known as the Stark Law. Both of these requests are part of HHS’s “Regulatory Sprint to Coordinated Care,” which is being spearheaded by the Deputy Secretary as an effort to address regulatory obstacles to coordinated care.

The Anti-Kickback Statute prohibits offering, paying, soliciting or receiving anything of value in exchange for or to induce a person to make referrals for items and services that are payable by a federal health care program, or to purchase, lease, order or arrange for or recommend purchasing, leasing or ordering any services or items that may be covered by a federal health care program. The beneficiary inducement prohibition in the CMP Law authorizes the imposition of civil money penalties for paying or offering any remuneration to a Medicare or Medicaid beneficiary that the offeror knows or should know is likely to influence the beneficiary’s selection of a particular provider or supplier of Medicare or Medicaid payable items. Many value-based payment models implicate these statutes, and the OIG acknowledges that they are widely viewed as impediments to arrangements that would advance coordinated care.

While the request for information arises in the context of a concerted focus on care coordination and value-based payment, the request is wide-ranging and effectively invites stakeholders to provide comments on a broad range of potential issues under both the Anti-Kickback Statute and the beneficiary inducement prohibition. The OIG solicits comments across four general categories: (1) promoting care coordination and value-based care; (2) beneficiary engagement, including beneficiary incentives and cost-sharing waivers; (3) other regulatory topics, including feedback on current fraud and abuse waivers, cybersecurity-related items and services, and new exceptions required by the Bipartisan Budget Act of 2018; and (4) the intersection of the Stark Law and the Anti-Kickback Statute.

The OIG encourages individuals and organizations who previously submitted comments to CMS in response to its request for information on the Stark Law to also submit comments directly to OIG, even where those comments may be duplicative, to ensure they are considered by OIG as it exercises its independent authority with respect to the Anti-Kickback Statute and CMP Law.

Comments are due by October 26, 2018.

On August 7, 2018, the 11th Circuit Court of Appeals affirmed a ruling by the United States District Court for the Southern District of Florida dismissing a qui tam suit against the AIDS Healthcare Foundation, Inc. (AHF), finding that the payments made to AHF employees for referring patients to AHF were protected by the employment safe harbor of the federal Anti-Kickback Statute (AKS).

In Jack Carrel, et al. v. AIDS Healthcare Foundation, the relator claimed that AHF, a nonprofit organization that provides medical services to patients with HIV/AIDS, paid kickbacks to employees in exchange for referring HIV-positive patients for health care services billed to federal health care programs in violation of the AKS and both the Florida and federal False Claims Acts (FCA). The relators, each former AHF directors or managers, specifically cited two allegedly representative false claims in which an employee was paid $100 for referring patients to AHF for completing follow up clinical services that were billed to the Ryan White Program. The Department of Justice and the State of Florida declined to intervene.

In response to AHF’s initial motion to dismiss on May 8, 2015, the district court dismissed all but two of the relators’ claims for lack of particularity, but permitted the claims related to payments to employees for referrals to proceed into discovery. In June 2017, after the conclusion of discovery, the district court granted summary judgment to AHF on the remaining two claims based on the applicability of employee safe harbor. Under the AKS employee safe harbor (42 U.S.C. § § 1320a-7b(b)(3)(B); 42 C.F.R. 1001.152(i)), the definition of “remuneration” excludes “any amount paid by an employer to an employee, who has a bona fide employment relationship with the employer, for employment in the furnishing of any item or service for which payment may be made in whole or in part under Medicare, Medicaid or other Federal health care programs.”  Continue Reading Circuit Court Affirms Payments for Referrals Made to Employees are Protected by the AKS Safe Harbor

During a July 17, 2018, hearing before the House Ways and Means Subcommittee on Health, United States Department of Health and Human Services (HHS) Deputy Secretary Eric Hargan testified about HHS’ efforts to review and address obstacles that longstanding fraud and abuse laws pose to shifting the Medicare payment system to a value-based, coordinated care payment system. Deputy Secretary Hargan confirmed that the agency is looking at regulatory reforms to both the physician self-referral law (Stark Law) and the Anti-Kickback Statute (AKS) as part of HHS’ “Regulatory Sprint to Coordinate Care.”

According to Hargan’s testimony, “the goal of the sprint is to remove regulatory barriers to coordinated care while ensuring patient safety. We want to genuinely engage stakeholders in this effort, and solicit feedback at each stage—but this is a sprint, not a jog. These words were chosen specifically because we want to fix, as quickly as possible, the regulatory processes that have increased provider burden.”

As part of this Sprint, in June the Centers for Medicare & Medicaid Services (CMS) issued a broad Stark Law Request for Information (RFI) that solicited public comments on how the Stark Law impedes care coordination and how Stark Law exceptions could be modified or create to promote such coordination as well as on how other exceptions may require regulatory change to reduce regulatory burden. Comments to the Stark Law RFI are due August 24.  We previously reported on the Stark Law RFI here.

In his testimony, Hargan stated that HHS is also looking at the AKS and its intersection with the Stark Law based on feedback from providers who find it “very difficult if not impossible to understand” how to comply with both laws.  Hargan described a four-agency task force that is working together to examine obstacles to coordinate care related to the Stark Law, the AKS, the Health Insurance Portability and Accountability Act of 1996 (HIPAA)  and rules under 42 CFR Part 2 related to opioid and substance abuse disorder treatment.  This task force is composed of CMS, the HHS Office of Inspector General (OIG), the HHS Office of Civil Rights, and the Substance Abuse and Mental Health Services Administration (SAMHSA) to “coordinate amongst themselves to facilitate a coordinated care system” to “reduce duplication, overlap and contradictions” in regulations and “ensure regulatory requirements are aligned.”  As part of this effort, Hargan indicated that HHS would soon issue an RFI on AKS reforms as part of the Sprint.

HHS has already begun exploring changes to the AKS regarding drug pricing.  On July 18, 2018, OIG sent a proposed rule to the Office of Management and Budget entitled “Removal Of Safe Harbor Protection for Rebates to Plans or PBMs Involving Prescription Pharmaceuticals and Creation of New Safe Harbor Protection.”  While the text of the proposed rule is not available at this time, the rule is expected to propose revisions to the AKS discount safe harbor to scale back or exclude rebates from drug manufacturers.

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.

The materiality test articulated in Escobar has become one of the most litigated issues in False Claims Act (FCA) practice. Most courts have taken to heart the Supreme Court’s direction that materiality is a “demanding” and “rigorous” test in which “minor or insubstantial” non-compliance would not qualify as material. However, a recent Sixth Circuit two-to-one decision found that noncompliance with a physician signature timing requirement sufficiently alleged materiality under Escobar, reversing the district court’s dismissal of the case. United States ex rel. Prather v. Brookdale Senior Living Communities, Inc., 892 F.3d 822 (6th Cir. 2018). This opinion arguably is inconsistent with Escobar. The better analysis of Relator’s complaint would conclude that the Relator pled insufficient facts, under the Rule 9(b) particularity standard, to suggest that the untimely physician signature somehow resulted in the government paying for home health services for which it otherwise would not have paid.

Case Summary

This decision was Relator’s second time before the Sixth Circuit litigating the complaint she filed in 2012 against Brookdale Senior Living, Inc., and related entities (Brookdale) after the government declined to intervene. The dispute centers around compliance with the regulation, 42 C.F.R. §424.22(a), which pertains to home health services. Section 424.22(a) provides that a “physician must certify the patient’s eligibility for the home health benefit,” including that the individual is home bound and eligible for home care under Medicare’s coverage rules. Subsection (a)(2) has a timing requirement for this certification; “the certification of need for home health services must be obtained at the time the plan of care is established or as soon thereafter as possible and must be signed and dated by the physician who establishes the plan.” Relator alleged that she was engaged to help Brookdale deal with a large backlog of Medicare claims, including obtaining physician certifications months after a patient’s treatment began. She argued that claims with these “late” certifications violated § 424.22(a)(2) and rendered those claims false under an implied certification theory. Continue Reading Timing is Everything: The Sixth Circuit’s Application of the Materiality Test

On June 25, 2018, the Centers for Medicare and Medicaid Services (CMS) published a request for information, seeking input from the public on how to address any undue regulatory impact and burden of the physician self-referral law (Stark Law) on value-based and other coordinated care arrangements designed to improve quality and lower cost. While the overall focus of CMS’s request for information is on the Stark Law’s actual or perceived barriers to innovation, the request also gives the health care industry a unique opportunity to comment on and request revisions or clarifications for any significant Stark Law provision, including the provisions regarding fair market value, volume or value, and commercial reasonableness, as well as the Stark “group practice” definition.

As part of its focus to shift from a fee-for-service to a value-based health care delivery system, the US Department of Health and Human Services (HHS) launched a “Regulatory Sprint to Coordinated Care,” which is focused on identifying regulatory barriers to coordinated care. CMS identified aspects of the Stark Law that may create obstacles to participation in integrated delivery models, alternative payment models, and other arrangements incentivizing improvements in outcomes and reductions in costs, and is seeking input on revisions or additions to exceptions to the Stark Law.

The Stark Law is largely indifferent to the good faith intentions of health systems to integrate and enter into coordinated care arrangements with physicians, and continues to impose on health systems burdens of proof that the arrangements comply with ambiguous standards like fair market value, volume or value and commercial reasonableness. While financial transactions incident to CMS’s innovative care delivery and payment initiatives, such as accountable care organizations (ACOs), medical homes and bundled payment arrangements can be protected by certain fraud and abuse/Stark Law waivers, there are other common transactions and arrangements with physicians still operating in a fee-for-service environment (such as practice acquisitions, employment, “gainsharing,” service line co-management, pay-for-quality and non-ACO clinically integrated networks) that are not protected by the waivers. CMS’s request for information provides a welcome opportunity for the health care industry to educate CMS on the obstacles the Stark Law presents for innovative coordinated care arrangements with physicians.

In its request, CMS posed 20 specific requests for information on novel financial arrangements and alternative payment models, the applicability of current Stark Law exceptions to such arrangements, and what additional exceptions or revisions to the Stark Law are necessary to protect coordinated care arrangements from Stark Law liability. These requests, however, are so far ranging that they effectively invite comments on just about any Stark Law provision that a stakeholder believes warrants revision or clarification.

Comments are due by 5 pm EDT on August 24, 2018. If you would like assistance in preparing comments, please contact one of the authors or your regular McDermott lawyer.

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

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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.

A key area of dispute in False Claims Act (FCA) cases based on Anti-Kickback Statute (AKS) violations is what degree of connection plaintiffs must allege between alleged kickbacks and “false claims.” The AKS states that “a claim that includes items or services resulting from a violation of this section constitutes a false or fraudulent claim for purposes of [the FCA].”

The government and relators typically argue that the mere fact that claims were submitted during the period of alleged kickbacks is sufficient. Defendants argue that the law requires plaintiffs to specifically identify claims “resulting from” an alleged kickback – i.e., that there is proof that the alleged kickback caused the referral or recommendation of the item or service contained in the claim. The Third Circuit’s recent decision in United States ex rel. Greenfield v. Medco Health Systems, Inc. articulated a middle of the road approach.  In affirming summary judgment for the defendants, the Court held that to prevail, plaintiffs must establish that a claim submitted to a federal health care program was “exposed to a referral or recommendation” in violation of the AKS.

The relator, a former area vice president for Accredo, a specialty pharmacy that sells blood clotting drugs and provides nursing assistants to hemophiliacs in their homes, filed a qui tam suit alleging that Accredo violated the AKS and FCA in connection with donations to two charitable organizations that assist the hemophiliac community: Hemophilia Services, Inc. (HSI) and Hemophilia Association of New Jersey (HANJ).  During the time Accredo made monetary donations to HSI and HANJ, the HANJ website allegedly listed Accredo as one of four “approved providers” or “approved vendors” and directed users to “remember to work with our HSI [approved] providers.” In 2010, Accredo notified both charities that it was decreasing its donation the following year. In response, HSI allegedly engaged in activities to persuade Accredo to restore its donation level to previous years, including encouraging its members to contact Accredo to protest the funding cut. The relator was involved in purportedly analyzing the return on investment for returning to previous donation levels. After the relator’s report allegedly projected a significant decline in business in New Jersey if donation levels were not restored, Accredo restored the donation level and relator filed his suit.

The government declined to intervene in this case, but the relator continued the litigation. He argued the expansive view: that the donations amounted to kickbacks, and since Accredo certified compliance with the AKS when submitting Medicare claims, the FCA was violated and, therefore, every claim submitted by Accredo was false. The district court granted summary judgment to Accredo.  The district court declined to decide whether the relator had established an AKS violation, but instead held that the relator did not show sufficient evidence of causation of an FCA violation. The district court held that the relator’s evidence that Accredo submitted claims for 24 federal beneficiaries during the relevant time period, by itself, “did not provide the link between defendants’ 24 federally insured customers and the donations.” The court held that “[a]bsent some evidence….that those patients chose Accredo because of its donations to HANJ/HSI,” the relator could not carry his burden.

On appeal, the government argued that the district court erred to the extent it required proof that patients chose Accredo because of the referrals and recommendations. In the government’s view, all the relator needed to establish was the existence of “a claim that sought reimbursement for medical care that was provided in violation” of the AKS.

The Third Circuit affirmed the district court’s ruling, but for different reasons than those offered by the parties, the government, and the district court. The Third Circuit rejected the relator’s and government’s position that the alleged kickbacks tainted all claims as false by virtue of the kickback.  However, the Court declined to read the “resulting from” language in the AKS to require, as advocated by Accredo and found by the district court, that the relator needed to prove the patients purchased prescriptions from Accredo because of Accredo’s donations to HSI and HANJ. Instead, the Court held that the relator “must show, at minimum, that at least one of the 24 federally insured patients for whom Accredo provided services and submitted reimbursement claims was exposed to a referral or recommendation of Accredo by HSI/HANJ in violation of the AKS.” As explained by the Court, “[a] kickback does not morph into a false claim unless a particular patient is exposed to an illegal recommendation or referral and a provider submits a claim for reimbursement pertaining to that patient.”

This decision is helpful confirmation that relators and the government cannot simply rely on an alleged kickback to demonstrate that a defendant who submits claims to Medicare, violated the FCA.  Defending this type of allegation should include examination of the evidence relied upon to show the connection between the alleged kickback and the purported false claim.  Whether other courts will follow the Third Circuit’s reasoning or follow the “resulting from” language in the AKS and require a stronger connection between a kickback and claim remains to be seen.  This issue will be a continued subject of litigation in these cases.