The False Claims Act (FCA) allows the government to pursue any “alternate remedy available” if the government chooses not to intervene in a qui tam action. See 31 U.S.C. § 3730(c)(5). However, if the government pursues an “alternate remedy,” the FCA gives the qui tam plaintiff the “same rights” in the “alternate” proceeding that the plaintiff would have had if the qui tam action “had continued.” Id. In U.S. v. Couch et al., the question before the United States Court of Appeals for the Eleventh Circuit was whether the FCA allows a qui tam plaintiff to intervene in a criminal forfeiture proceeding when the government chooses to prosecute fraud rather than intervene in the qui tam plaintiff’s action. No. 17-13402 (Oct. 17, 2018). The Eleventh Circuit held that criminal forfeiture law bars qui tam plaintiffs from intervening in related forfeiture proceedings.

Background

The suit stemmed from a qui tam action brought by Lori Carver, a former employee of an Alabama-based pain management company. During her employment, Carver allegedly discovered that the two doctors that ran the clinic, John P. Couch and Xiulu Ruan, submitted false claims to federal health care programs. Carver took her information to the US Attorney’s office, which encouraged her to bring a qui tam action against the doctors and the clinic. Carver brought the qui tam action in 2013 and the case remains pending. Carver is litigating the case herself, because the government chose not to intervene.

With Carver’s information, the government began investigating Dr. Couch and Dr. Ruan. Two years after Carver brought her qui tam action, the government criminally charged both doctors with conspiracy to distribute controlled substances and conspiracy to commit health care fraud. The charges in the indictment partially overlapped with Carver’s qui tam complaint. Thereafter, more defendants and charges were added to the criminal case in subsequent, superseding indictments. A jury ultimately convicted Couch on all charges and Ruan on all but one charge, which resulted in the judge issuing a preliminary forfeiture order.

Carver moved to intervene in the forfeiture proceedings, asserting a right to some of the forfeited assets. Carver primarily argued that the alternate-remedy provision allows her to intervene to claim a share of the assets she would be entitled to if the government had intervened in her qui tam action.

In response, the government argued that Carver did not have standing to intervene under the alternate-remedy provision because her qui tam case is pending—meaning that Carver has not yet established a right to a relator’s share. The government also argued that the FCA does not permit intervention in criminal cases.

The district court denied Carver’s motion to intervene and ruled that the alternate-remedy provision does not permit intervention in criminal cases.

Appeal Before Eleventh Circuit

The Eleventh Circuit took issue with the government’s jurisdictional arguments. The Eleventh Circuit concluded that Carver had standing to assert that the alternative-remedy provision gives her a right to intervene in criminal forfeiture proceedings and claim an interest in the forfeited property.

The Eleventh Circuit rejected the government’s claim that Carver’s potential property interest in the forfeited assets was too “speculative.” While the Eleventh Circuit agreed that no court had yet adjudicated whether Carver was entitled to a relator’s share, it noted that if this were enough to deprive the panel of jurisdiction, “no person claiming a property interest would ever get into federal court.”

Turning to the substantive issues, the Eleventh Circuit noted that whether a criminal fraud prosecution is an “alternate remedy” is an open question. Applying statutory construction to interpret the alternate-remedy provision of the FCA, the Eleventh Circuit held that the three criminal forfeiture statutes at issue each expressly bar third parties from intervening in forfeiture proceedings to claim an interest in property subject to forfeiture: “these criminal forfeiture statutes speak to the precise issue raised in this appeal, and they make plain that [Carver] has no right to intervene.”

The Eleventh Circuit noted that its ruling will not prevent Carver from getting her relator’s share, with the government having provided a related assurance to the court that if Carver is successful in her FCA case, she will be entitled to her share of the judgment, including the restitution already paid, which can be offset against the FCA judgment.

The government’s focus on the US opioid crisis has been consistently expanding over the past year beyond manufacturers to reach prescribers and health care providers who submit claims to federal health care programs for opioid prescriptions. These efforts increasingly include investigations under the False Claims Act and administrative actions, in addition to the more traditional criminal approach to these issues.

With the Trump administration’s public health emergency orders, it is expected for the government’s enforcement activities, including those instigated by relators and their counsel, to grow in this area.

Continue Reading.

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.

Two recent actions announced by the U.S. Department of Justice (DOJ), one civil and one criminal, along with a recent speech by Assistant Attorney General Leslie R. Caldwell, illustrate the current climate of government enforcement related to mental health services (i.e., intensive outpatient psychotherapy (IOP) and partial hospitalization program (PHP) services).  In her speech, Caldwell specifically mentioned mental health as one of the areas the DOJ has targeted through its increasing use of data analytics to identify suspicious billing patterns.

On May 7, 2015, the DOJ announced that 16 hospitals agreed to pay a combined $15.69 million to resolve a qui tam lawsuit filed under the False Claims Act (FCA), with the relator receiving approximately $2.67 million.  According to the DOJ, Health Management Associates (HMA) and 14 hospitals formerly owned and operated by HMA, Community Health Systems and its subsidiary Wesley Medical Center, and North Texas Medical Center allegedly knowingly submitted claims for IOP, typically provided on the hospitals’ behalf by contractor Allegiance Health Management (Allegiance), that did not qualify for Medicare reimbursement for a variety of reasons.  The claims settled by these agreements are allegations only, and there has been no determination of liability.

IOP is a collection of ambulatory psychiatric services, which, according to the DOJ’s announcement, provide active treatment to individuals with mental disorders using a variety of treatment methods.  The present case included allegations that the hospitals submitted claims that did not qualify for Medicare reimbursement because: the patient’s condition did not qualify for the treatment; the treatments were not provided pursuant to an individualized treatment plan as required; the patient’s progress was not adequately tracked or documented; the patient received an inappropriate level of treatment; and/or the therapy provided was primarily recreational or diversional in nature, and not therapeutic.  The DOJ noted that in October 2013, it resolved similar allegations for $4.67 million with LifePoint Hospitals, Inc. and two of its subsidiaries, which, according to the settlement agreement, also contracted with Allegiance to provide IOP services to their patients.  

On May 6, 2015, one day before the announcement described above, the DOJ announced the indictment of Walid H. Hamoudi, a Houston physician, and Geraldine J. Caroline, the owner of a group home, for their alleged participation in a scheme related to the submission of $5.2 million in false claims to Medicare and $380,000 in false claims to Medicaid for PHP services.  Hamoudi and Caroline were both charged with conspiracy to commit health care fraud, conspiracy to pay and receive kickbacks, and multiple counts of paying and receiving kickbacks in relation to the scheme, in which Hamoudi allegedly paid Caroline to send her group home residents to Riverside General Hospital to receive PHP services that were either not provided or for which the patients did not qualify.  Hamoudi was also charged with money laundering under the scheme.

According to the Medicare Benefit Policy Manual, PHPs are structured to provide intensive psychiatric care through active treatment, which closely resembles that of a highly structured, short-term hospital inpatient program.  PHP is treatment at a level more intense than outpatient day treatment. Programs providing primarily social, recreational or diversionary activities are not considered partial hospitalization.

These indictments are the most recent in a long list of criminal actions related to this PHP services scheme.  Between February 2012 and October, 2014, six individuals, including Mohammad Kahn, an assistant administrator of Riverside General Hospital, pleaded guilty to charges related to the scheme, which reportedly involved a total of $158 million in Medicare claims, and four individuals, including Riverside’s president and his son, have been convicted.  Khan is scheduled to be sentenced on May 21, 2015 and the other defendants are also awaiting sentencing.  PHP services have been under scrutiny by the federal government for the past several years.  In 2011, based on a qui tam complaint, the DOJ investigated and prosecuted American Therapeutic Corporation for a $205 million Medicare fraud scheme involving PHP services, which resulted in the conviction of more than 20 individuals, guilty pleas from the corporation and an associated management company, and a 50-year prison sentence for the mastermind of the scheme, according to a DOJ announcement and the recent Assistant Attorney General speech.  Further, in August 2012, the Office of Inspector General (OIG) of the Department of Health and Human Services (HHS) published a study entitled Questionable Billing by Community Mental Health Centers, in which it reiterated concerns published in earlier reports regarding vulnerabilities in Medicare payments to community mental health centers for PHP services.

In another case, the DOJ announced in October 2014 that it sentenced an owner and operator of two community mental health centers in Houston and a patient recruiter for a community health center in Louisiana to prison and ordered them to pay restitution for their role in a Medicare fraud scheme for PHP services totaling $258.5 million.  Finally, the DOJ announced in January 2015 the sentencing of two Houston-area physicians and the owner of a group home to 148 and 120 months in prison, respectively, and ordered them to pay combined restitution of nearly $10 million for their roles in a $97 million Medicare fraud scheme involving claims for PHP services provided to patients who did not qualify or need the services and the payment of kickbacks to group home owners and recruiters for patient referrals.

These recent enforcement actions, together with the Assistant Attorney General’s focus on these civil and criminal actions in her recent speech, serve to remind mental health providers of potential risks of criminal and civil liability associated with the provision of mental health services, particularly IOP and PHP services, and the need to ensure that all such services billed to Medicare are medically reasonable and necessary and unrelated to improper financial inducements.