Last month, Insys Therapeutics, Inc. announced that it reached a settlement-in-principle with the U.S. Department of Justice (DOJ) to settle claims that it knowingly offered and paid kickbacks to induce physicians and nurse practitioners to prescribe the drug Subsys and that it knowingly caused Medicare and other federal health care programs to pay for non-covered uses of the drug. The drugmaker agreed to pay at least $150 million and up to $75 million more based on “contingent events.” According to a status report filed by DOJ, the tentative agreement is subject to further approval and resolution of related issues. The settlement does not resolve state civil fraud and consumer protection claims against the company.

The consolidated lawsuits subject to the settlement allege that Insys violated the False Claims Act and Anti-Kickback Statute in connection with its marketing of Subsys, a sub-lingual spray form of the powerful opioid fentanyl. The Food and Drug Administration has approved Subsys for, and only for, the treatment of persistent breakthrough pain in adult cancer patients who are already receiving, and tolerant to, around-the-clock opioid therapy. The government’s complaint alleges that Insys provided kickbacks in the form of arrangements disguised as otherwise permissible activities. Specifically, it alleges that Insys instituted a sham speaker program, paying thousands of dollars in fees to practitioners for speeches “attended only by the prescriber’s own office staff, by close friends who attended multiple presentations, or by people who were not medical professionals and had no legitimate reason for attending.” Many of these speeches were held at restaurants and did not include any substantive presentation. Insys also allegedly provided jobs for prescribers’ friends and relatives, visits to strip clubs, and lavish meals and entertainment. Continue Reading Insys Announces Settlement-in-Principle with DOJ Over Alleged Subsys Kickback Scheme

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.

This April, providers cheered when a federal district court in the Middle District of Florida found insufficient evidence to support a relator’s theory that a hospital had provided free parking to physicians, in violation of the Stark Law and Anti-Kickback Statute (AKS). In the Report and Recommendation for United States ex rel. Bingham v. BayCare Health Systems, 2017 WL 126597, M.D. Fla., No. 8:14-cv-73, Judge Steven D. Merryday of the Middle District of Florida endorsed magistrate judge Julie Sneed’s recommendation that Plaintiff Thomas Bingham’s Motion for Partial Summary Judgment be denied and that Defendant BayCare Health System’s Motion for Summary Judgment be granted. However, as we discussed in a previous FCA blog post regarding these allegations, this type of case encapsulates a worrying and costly trend where courts allow thinly pleaded relator claims in which the government opted not to intervene, to survive past the motion to dismiss stage into the discovery phase of the litigation.

Bingham is a serial relator who practices as a certified real estate appraiser in Tennessee and was unaffiliated with BayCare. In his latest attempt, Bingham alleged that BayCare Health System had violated the Stark Law and the AKS by providing affiliated physicians free parking, valet services and tax benefits to induce physicians to refer patients to the health system. Continue Reading A Hospital’s Deserving Stark and AKS Victory—But At What Cost?

With health care becoming more consumer-driven, health care providers and health plans are wrestling with how to incentivize patients to participate in health promotion programs and treatment plans. As payments are increasingly being tied to quality outcomes, a provider’s ability to engage and improve patients’ access to care may both improve patient outcomes and increase providers’ payments. In December 2016, the Office of Inspector General of the US Department of Health and Human Services (OIG) issued a final regulation implementing new “safe harbors” for certain patient incentive arrangements and programs, and released its first Advisory Opinion (AO) under the new regulation in March 2017. Together, the new regulation and AO provide guardrails for how patient engagement and access incentives can be structured to avoid penalties under the federal civil monetary penalty statute (CMP) and the anti-kickback statute (AKS).

Read the full article.

On December 7, 2016, the Office of Inspector General of the US Department of Health and Human Services published a final rule containing revisions to both the federal Anti-Kickback Statute safe harbors and the beneficiary inducement prohibition in the civil monetary penalty rules. Effective January 6, 2017, the Final Rule modifies certain existing safe harbors and adds additional safe harbors to the Anti-Kickback Statute and incorporates Affordable Care Act-mandated exceptions into the definition of remuneration under the civil monetary penalty rules.

Read the full article here.

On December 7, 2016, the Office of the Inspector General (OIG) of the US Department of Health and Human Services (HHS) issued a policy statement increasing its thresholds for gifts that are considered “nominal” for purposes of the patient inducement provisions of the civil monetary penalties law (section 1128A(a)(5) of the Social Security Act) (CMP Law). HHS also announced the new thresholds in the preamble to a final rule issued on December 7, 2016, revising safe harbors under the Anti-Kickback Statute and rules under the CMP Law. 81 Fed. Reg. 88368, 88394 (Dec. 7, 2016).  The previous thresholds for gifts to Medicare and Medicaid beneficiaries were $10 per item or $50 in the aggregate annually per patient. The new thresholds are $15 per item or $75 in the aggregate annually per patient.

Under the CMP Law, a person who offers or provides any remuneration to a Medicare or Medicaid beneficiary that the person knows or should know is likely to influence the beneficiary’s selection of a particular provider, practitioner or supplier of Medicare or Medicaid payable items or services may be liable for civil money penalties, subject to a limited number of exceptions. The OIG has indicated that gifts of “nominal value” are not required to meet an exception. However, the OIG has not changed its thresholds for what constitutes “nominal value” since issuing its 2002 Special Advisory Bulletin: Offering Gifts and Other Inducements to Beneficiaries, which included thresholds of no more than $10 in value individually or $50 in value in the aggregate annually per patient. To account for inflation, the OIG has now increased its interpretation of “nominal value,” permitting inexpensive gifts (other than cash or cash equivalents) of no more than $15 per item or $75 in the aggregate per patient annually, effective immediately.

The OIG’s policy statement provides that violations of the CMP Law could result in penalties of up to $10,000 per wrongful act; however, HHS increased the penalty to $15,024 per violation in an interim final rule issued earlier this year. 81 Fed. Reg. 61538, 61543 (Sept. 6, 2016). While the new thresholds are still fairly low, they are a welcome update to the longstanding $10/$50 thresholds.

As many health lawyers know, the government usually only pursues the person or entity that offers or pays allegedly improper remuneration, even though the federal Anti-Kickback Statute (AKS) also applies to those to solicit or receive it.  This uneven enforcement pattern occurs for a variety of reasons — the alleged payor is the focus of the relator’s complaint and resulting investigation, the amount of time that this investigation and resolution takes can create practical and legal problems in pursuing additional defendants, and the increasing number of qui tam cases stretches the government’s limited resources.

However, on October 7, 2015, the U.S. Department of Justice (DOJ) announced a settlement with an alleged kickback recipient over three years after it settled with the alleged payor.  PharMerica Corporation, identified by the DOJ as the nation’s second-largest provider of pharmaceutical services to long-term care facilities, agreed to pay $9.25 million to settle allegations that, from 2001 to 2008, the company knowingly solicited and received kickbacks from Abbott Laboratories in the form of rebates, educational grants and other financial support in exchange for recommending that physicians prescribe Abbott’s anti-epileptic drug Depakote to nursing home patients where PharMerica provided pharmacy services.

PharMerica noted in a press release that it denied the government’s allegations and fully cooperated with the DOJ throughout the investigation.  Of note, the Office of Inspector General (OIG) did not require an amendment to PharMerica’s current corporate integrity agreement to add provisions concerning AKS compliance as part of this resolution.

This settlement comes over three years after Abbott entered into an FCA settlement agreement with the DOJ and several individual states in May 2012, which, along with addressing separate allegations related to the promotion of Depakote, settled allegations related to its arrangement with PharMerica. Abbott also did not admit to any wrongdoing in its settlement.  Both the PharMerica and Abbott settlements are the product of lawsuits filed in federal court in the Western District of Virginia under the whistleblower provisions of the False Claims Act.

The pursuit of the settlement with PharMerica may indicate a growing interest by DOJ in pursuing AKS allegations against both the alleged offeror and the alleged recipient of prohibited remuneration under the FCA.

On July 20, the Office of Inspector General of the Department of Health and Human Services (OIG) posted a new Advisory Opinion (the Opinion) addressing a health system’s restructured arrangement to lease employees, and provide other operational and management services, to a related psychiatric hospital (the Arrangement). The Opinion is a notable departure from other recent statements and enforcement actions, and signals a greater flexibility in how related entities may share non-clinical employees and operational expenses. It also shows the OIG’s willingness to consider more practical factors, such as cost reporting requirements and the systemic benefits from integrated entities behaving in cost-efficient ways, when determining the risk presented by an arrangement.

The Opinion concerns a nonprofit health system (System) with a membership interest in the psychiatric hospital (Center). The Center is also part of the System’s integrated health network.  The System and the Center are potential referral sources to each other. Currently, both parties have an existing arrangement, whereby the Center leases non-clinician employees and obtains certain other operational and management services from the System, paying the System’s fully loaded costs (e.g., salary, benefits, overhead expenses) plus a two percent administration fee. The Arrangement would continue the same relationship, but the Center would no longer pay the System the administration fee. The parties have asserted, and OIG verified, that the administrative fee is an unallowable cost under applicable Medicare cost-reporting rules, and would not be reimbursable by the Medicare program.

The OIG noted that the new Arrangement, where the System would provide the same services for less aggregate compensation, could raise fair market value (FMV) issues. Such a discount could be considered remuneration in exchange for the Center’s referrals. In addition, the aggregate compensation under the Arrangement can’t be set in advance as the System’s costs, and Center’s needs, may change during the term. Given these issues, the Arrangement would not meet the requirements of the Anti-Kickback Statute (AKS) safe harbor for personal services and management contracts. Nonetheless, given the totality of the circumstances, the OIG concluded that the Arrangement would present a low risk of fraud and abuse and thus OIG would not impose sanctions.

The Opinion described several mitigating factors that, from OIG’s perspective, decreased the Arrangement’s risk of fraud and abuse. Not only did the parties attempt to structure the Arrangement to be in compliance with Medicare cost-reporting rules for related parties, there was also no evidence that the Arrangement was structured to, or actually would, induce referrals. Moreover, the parties pointed to the cost efficiencies of health system integration that would be promoted by the Arrangement, and to the potential indirect benefits (by way of cost savings) to federal health care programs.

The Opinion’s more flexible approach to analyzing the Arrangement stands in contrast to the OIG’s other recent activities, all of which express a consistent concern with payments between independent actors that are not consistent with FMV. For example, the OIG issued a fraud alert focusing on improper physician financial arrangements on June 9, 2015 (previously discussed here. The alert encourages physicians to “ensure that [their] arrangements reflect fair market value for bona fide services.” Similarly, the OIG has recently settled with several leased-employee physicians compensated by Fairmont Diagnostic Center and Open MRI Inc. (Fairmont) following Fairmont’s False Claims Act settlement concerning these arrangements. The OIG alleged that full time Fairmont employees, placed in certain physicians’ offices for study-related tasks, were actually performing office functions on the physician’s behalf, which constituted improper remuneration intended to induce referrals. Given this sustained regulatory focus on FMV compensation, health care entities should pay particular attention to the business justifications of their arrangements.