The October issue of the journal Science features a series of short articles highlighting a database containing a list of more than 18,000 scientific papers and conference abstracts that have been retracted over the past several decades. An analysis of the database shows that nearly 60 percent of retraction notices mentioned fraud or other kinds of misconduct (the balance of which were retracted because of errors, problems with reproducibility and other issues). The Science article, as well as a link to the searchable database, can be accessed here. Not only does research misconduct have significant potential for reputational harm–potentially career ending for the investigator, with ripple effects for the institution–but as described below, when the associated research is federally funded, such misconduct could have significant legal (and liability) implications.

US health care organizations are used to warnings about the potential for exposure under the federal False Claims Act (FCA) resulting from improper claims submitted to federal payors such as Medicare and Medicaid. Less attention has been paid to the potential for FCA liability resulting from research non-compliance. Recipients of federal grant funding are subject to a variety of complex rules (e.g., the National Institute of Health (NIH)  Grants Policy Statement), as well as the terms and conditions of the Notices of Award.  Just as compliance with Medicare rules can lead to questions about potential FCA exposure for Medicare payments, compliance with federal grant funding rules can lead to the same questions for grant funds.

For example, grant recipients should consider the FCA implications of research misconduct. “Research misconduct” is defined by the Public Health Services’ (PHS’s) final rule, effective  June 2005 (the Rule), as the “fabrication, falsification, or plagiarism in proposing, performing, or reviewing research, or in reporting research results.” 42 C.F.R. § 93.103. The Rule confers upon an organization an affirmative duty to protect PHS funds from misuse by ensuring the integrity of all PHS supported work, and primary responsibility for responding to and reporting allegations of research misconduct. 42 C.F.R. § 93.100(b). The Rule applies to grant funding from a variety of federal agencies, including the Food & Drug Administration, NIH, Centers for Medicare and Medicaid Services, and the Substance Abuse and Mental Health Services Administration, to name a few.

Continue Reading Practice Reminder: Research Misconduct can be a Source of False Claims Act Liability

At a time when health care organizations are facing greater financial and reputational costs than ever before, more than 150 health care industry leaders, legal and compliance executives, and investors gathered for McDermott’s Health Care Litigation, Compliance & Investigations Forum at the Ritz-Carlton in Chicago to discuss strategies for proactively managing and effectively responding to compliance risks, investigations and litigation.

Sylvia Mathews Burwell, Secretary of Health and Human Services from 2014 to 2017, delivers the keynote presentation.

The event covered a wide range of issues, including fraud and abuse (such as False Claims Act and Stark Law matters), governance, cybersecurity, antitrust, white-collar, intellectual property, products liability and tax-exemption disputes. The event also featured a keynote address by Sylvia Mathews Burwell, Secretary of Health and Human Services from 2014 to 2017, on the foundations of the Affordable Care Act (ACA), the ramifications of the elimination of the individual mandate and the ACA’s prospects going forward.

If your organization needs support in current litigation or wants to ensure best practices to help avoid one, we’re here to help.

Below are key insights from the sessions:

Every Day’s Adventure: How Leading GCs Are Thinking about Compliance and Enforcement

  • Collaboration between the general counsel and the compliance officer provides a proactive and team-oriented approach to substantive legal and policy issues.
  • Keys to effective collaboration include communication, coordination and a culture of sharing, coupled with respect for the independence of the compliance/audit function.
  • Transparency is key; bad news is OK, but surprises are not. Stay closely engaged with the board and internal audit team. Of audience members surveyed, 40 percent brief their board on legal or compliance matters about once a quarter, and 47 percent do so every board meeting.
  • Preventative compliance measures involve a formal enterprise risk management plan and proactive two-way communication with line teams regarding trends and solutions.

Continue Reading Best of McDermott’s 2018 Health Care Litigation, Compliance & Investigations Forum

On August 20, 2018, U.S. District Judge Algenon L. Marbley of the United States District Court for the Southern District of Ohio granted summary judgment in favor of The Brink’s Company (Brink’s), concluding that Regional Federal Reserve Banks (RFRB) are not “the Government” for purposes of the federal False Claims Act (FCA).

The relator’s qui tam action was premised on an alleged penny-swapping scheme. Brink’s and other armored carriers regularly enter Coin Terminal Agreements (CTA) with RFRBs to transport and store coins. Pursuant to one such CTA, Brink’s received, weighed, tracked and stored the Federal Reserve Bank of Cleveland’s coins and provided similar services to other customers. Although Brink’s maintained electronic records of the coins in its inventory, it did not segregate physical coins by customer.

The relator, a former Brink’s employee, alleged Brink’s violated its contract with the Federal Reserve Bank of Cleveland and defrauded the government by engaging in a penny-swapping scheme with Jackson Metals. In essence, the relator alleged that Brink’s entered into a secret agreement, allowing Jackson Metals to purchase commingled pennies, cull out the pennies minted prior to 1982, and replace them with pennies minted after 1982. Pennies minted prior to 1982 have a higher metallurgical value because of their copper content. The replacement pennies are made from lower-value zinc. The relator argued that this penny-swapping scheme deprived the government of the value of the copper.

In moving for summary judgment, Brink’s argued, in part, that the FCA did not apply because RFRBs are not “the Government” under the FCA. The court agreed. First, Judge Marbley examined the structure of the Federal Reserve. He contrasted the Board of Governors with RFRBs, noting that RFRBs “are ‘private corporations whose stock is owned by the member commercial banks within their district.’” Continue Reading Southern District of Ohio Concludes that Regional Federal Reserve Banks are not “the Government” Under the FCA

On March 13, 2018, the United States District Court for the Eastern District of Oklahoma dismissed U.S. ex rel. Montalvo v. Native American Servs. Corp. In this case, the relators alleged that the defendants performed substandard work at a US Army ammunition plant. Specifically, the relators alleged that the defendant oversaw a construction project in which a subcontractor was ordered to pour concrete into areas that contained tree roots and stems, which allegedly damaged the quality of the concrete.

At summary judgment, the only evidence offered by the relator was an affidavit setting forth the facts above. The only disputed fact was whether the defendant knew about the tree roots and stems when ordering the subcontractor to pour the concrete. Regardless of that factual dispute, the court concluded that the plaintiff had failed to offer sufficient evidence that the defendant had knowingly caused the submission of false claims and granted summary judgment in the defendant’s favor. Continue Reading District Court Rejects FCA Claim Based on “Substandard” Product

Attendees at the Health Care Compliance Association’s Health Care Enforcement Compliance Institute are reporting that, Michael Granston, Director, Civil Frauds, Commercial Litigation Branch of the Civil Division of the US Department of Justice (DOJ), announced a significant shift in policy for the DOJ in dealing with False Claims Act (FCA) complaints that are deemed “frivolous” on the merits. Acknowledging the burden on the resources of all parties caused by the litigation of frivolous FCA matters, Mr. Granston reportedly stated that, going forward, once it has determined that the allegations of a qui tam complaint lack merit, the DOJ will more aggressively exercise its discretion to move to dismiss the case rather than leave to the qui tam relator in every instance the option of whether to continue the litigation. Senior management—including boards of directors, in-house corporate counsel and chief compliance officers—should take notice of this new, potentially meaningful, opportunity to extricate FCA defendants from burdensome qui tams pursued by relators purely for settlement value. Continue Reading DOJ Announces Significant Shift Towards Affirmative Dismissal Of “Frivolous” Qui Tam Complaints: A New Exit Strategy For Defendants?

Earlier this year, DOJ and OIG independently issued guides focused on evaluating compliance program effectiveness. The guides approach the topic from different perspectives but cover overlapping themes and work well in tandem. We reviewed the guides and compiled the reference tool to aid organization executives and boards of directors to measure compliance program effectiveness and, in turn, wisely invest resources.

Read the full article “Breaking Down the 2017 DOJ and OIG Compliance Guides.”

On September 18, 2017, the Tenth Circuit reversed a decision of the US District Court for the District of Utah in United States ex rel. Little v. Triumph Gear Sys., Inc. In doing so, the Tenth Circuit concluded that the False Claims Act’s first-to-file bar extends to situations where relators’ counsel substitute parties prior to the initial complaint even being unsealed.

In this case, relator Joe Blyn brought a qui tam action against a government contractor, alleging that he witnessed instances of fraud. The initial complaint named Blyn and three John Does as relators. The following year, Blyn and the John Does “vanished” from the action with Blyn’s counsel, David Little, instead naming himself, and Kurosh Motaghed as the sole relators.  After the court unsealed the action, Triumph moved to dismiss the amended complaint, arguing that the substitution of parties triggered the “first-to-file” bar, which prevents private parties from intervening in existing actions or filing related actions based on the facts of the underlying action. The district court denied Triumph’s motion to dismiss, ruling that replacing the relator in this manner did not contemplate an “intervention” for purposes of 31 U.S.C. § 3730(b)(5).

The Tenth Circuit reversed. The court noted that had Little merely added himself and Motgahed as relators and maintained Blyn as a third relator, such an addition would have merely been an amendment permissible under Federal Rule of Civil Procedure 15, which would not have triggered the first-to-file bar.  As it happened, however, Blyn did not amend the complaint – Little and Motaghed did.  And because amendments under Rule 15 may only be made by parties, the Tenth Circuit concluded that Little’s and Motaghed’s actions constituted an “intervention.”

Once Blyn was removed from the complaint, the court determined, the district court lacked jurisdiction over the case. Consequently, Little’s subsequent reinstatement of Blyn as a relator was ineffective. This case thus demonstrates the power and breadth of the first-to-file bar, and how defendants can use it effectively to address follow-on complaints.

Following on the Department of Health and Human Services Office of Inspector General’s (OIG) June announcement that it would begin updating its public-facing Work Plan on a monthly basis, OIG released its first update to add 14 new topics to the Work Plan on July 17. As the health care industry knows, OIG Work Plan sets forth various projects that the OIG’s Office of Audit Services (OAS) and Office of Evaluation and Inspections (OEI) are currently undertaking or planning to undertake in the future. Previously, OIG updated its Work Plan to reflect adjustments once or twice each year. In a stated effort to increase transparency in its audit and inspection work, OIG changed its practices to begin issuing monthly updates.

The 14 topics all describe new OAS audit work, much of which is focused on Medicare and Medicaid issues. Several areas appear to lend themselves to data-mining, such cross-checking claims between Medicare Parts A and B or providers of concurrent services. For example, the OIG aims to:

  1. Evaluate whether certain Medicare Part B payments for ambulance services are subject to Medicare Part A skilled nursing facility (SNF) consolidated billing requirements (i.e. the SNF received payment for the ambulance transport as part of the Part A payment, and thus was responsible for paying the ambulance provider);
  2. Compare Medicare Part B and Part A claims to check for overlapping claims between home health agencies and/or hospices and outside providers;
  3. Investigate the validity of Medicare payments for telehealth services provided at distant sites that do not have corresponding originating site claims; and
  4. Examine Medicare payments to hospital outpatient providers for non-physician outpatient services provided under the inpatient prospective payment system.

OIG also proposed two more wide-ranging programmatic reviews. First, OIG plans to conduct a study to identify “common characteristics” of “at risk” home health agency providers in an effort to target pre-and post-payment claim reviews. This OAS study appears to be a follow-up to an OEI study issued in June 2016 of “selected characteristics commonly found in OIG-investigated cases of home health fraud.” Second, OIG plans to review hospital electronic medical record incentive payments for compliance with Medicare’s meaningful use requirements. OIG’s continued examination of EMR incentive payments follows on OAS’ June 2017 report estimating that between May 2011 and June 2014, over $729 million was paid to hospitals and physicians who did not comply with the incentive program requirements.

For a full list of the 14 additional inquiries, visit the OIG’s Work Plan website.

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 May 16, 2017, the US Court of Appeals for the Fourth Circuit issued a decision in US ex rel. Badr v. Triple Canopy, Inc. In this case, the government had contracted with a private security company to provide guards at a military airbase in Iraq. Although the applicable contract required the guards to have certain marksmanship scores, the defendant (as alleged by the relator and the government) failed to employ guards with the requisite qualifications.

The Fourth Circuit’s recent decision is the continuation of a years-long battle between the plaintiffs and Triple Canopy over whether the operative complaint adequately pleads violations of the False Claims Act. The Fourth Circuit previously held that the complaint had done so, but after Triple Canopy petitioned the Supreme Court for certiorari, the Supreme Court remanded the case back to Fourth Circuit for reconsideration in light of the high court’s recent Escobar decision.

Continue Reading Fourth Circuit Decision in Triple Canopy Sets up Another Implied Certification Circuit Split