While medical practices are generally aware that relators and the government pursue allegations of false or duplicative claims to federal health care programs, a recent settlement reflects a growing trend of False Claims Act (FCA) allegations concerning the failure to report and return identified overpayments. On October 13, 2017, the US Department of Justice (DOJ) announced that it had reached a $450,000 settlement with First Coast Cardiovascular Institute, P.A. (FCCI) of Jacksonville, Florida in a qui tam lawsuit alleging that FCCI failed to promptly return identified overpayments from federal health care programs after the overpayments came to the attention of the practice’s leadership. Continue Reading DOJ Settlement with Florida Medical Practice Serves as a Reminder: Delayed Repayment to Federal Programs Can Have Significant Consequences
In the fourth of a related set of qui tam False Claims Act (FCA) suits, the United States District Court for the Northern District of Illinois granted summary judgment in favor of generics manufacturer Par Pharmaceutical Companies (Par). The court’s August 17, 2017, opinion in U.S. ex rel. Lisitza et al v. Par Pharmaceutical Co, Inc. held that the relator had not presented sufficient evidence to support an implied certification theory of FCA liability.
Like its sister cases, the relator in Par Pharmaceutical alleged that the defendant caused the submission of false claims to the Medicaid program via an unlawful prescription-switching scheme. The alleged scheme involved manufacturing generic drugs in forms and dosage strengths that were atypical and not covered by existing Medicaid reimbursement limits, then marketing the drugs to pharmacies based on their higher reimbursement potential. The pharmacies would then fill the scripts with the more expensive forms and dosages manufactured by Par. The relators also alleged that the drugs were dispensed without physician approval and without meeting the medical necessity and economic requirements of governing state and federal Medicaid regulations, in violation of the FCA.
In US ex rel. Michaels v. Agape Senior Community, the Department of Justice has assented to a $275,000 settlement after having rejected a $2.5 million settlement two years ago (despite declining to intervene in the case). This case garnered substantial attention because the relators sought to employ statistical sampling to establish liability on hundreds of millions of dollars of allegedly false claims to Medicare and Medicaid.
Previously, the Fourth Circuit heard–on interlocutory appeal–argument as to (1) whether statistical sampling could be used to establish liability in a False Claims Act case; and (2) whether the government could veto a False Claims Act settlement in a case in which the government declines to intervene. The Fourth Circuit ruled that the government did possess the authority to veto a settlement in a non-intervened case, and refused to address whether sampling could be used to establish liability. We discussed the Fourth Circuit’s decision here.
Although the Fourth Circuit declined to reach the question of whether False Claims Act plaintiffs can establish liability by using statistical sampling, the presiding district court judge had already concluded that plaintiffs could not do so. Having represented to the court that they could not marshal the resources to establish liability on a claim-by-claim basis, the court granted partial summary judgment on the vast majority of claims at issue. The relators subsequently settled for the value of the claims originally at issue: approximately one percent of the claims at issue in this case and 11 percent of what the relators and defendants previously agreed to.
The Fourth Circuit was to be the first appellate court to address the sampling issue, and this case demonstrates the importance of this issue. Where plaintiffs in this arena may lack sufficient resources to prove their cases on a claim-by-claim basis, the use of statistical sampling makes it far more cost-effective to prosecute their cases. If appellate courts rule on this issue in the future, and in favor of defendants, such rulings will deprive plaintiffs of this potential shortcut. This would appropriately limit plaintiffs’ recovery to claims plaintiffs actually prove are false by a preponderance of the evidence.
One of the most litigated issues following the Supreme Court’s Escobar decision is whether the Court created a limited, two-part test to define the implied certification theory under the False Claims Act. In the US Court of Appeals for the Second Circuit, the prevailing view confirms that the proper interpretation of Escobar is that the implied certification theory can only proceed when the defendant made specific representations about the goods or services provided and that those representations were rendered misleading due to its failure to disclose noncompliance with material statutory, regulatory or contractual requirements. On August 10, 2017, federal district judge Deborah Batts in the Southern District of New York joined the majority view of her colleagues in U.S. ex. rel. Forcier v. Computer Sciences Corporation and the City of New York in dismissing part of the government’s complaint.
In this case, the US Department of Justice (DOJ) filed a complaint in intervention alleging the City of New York (City) and its billing contractor, Computer Sciences Corporation (CSC), submitted false claims to the Medicaid program in two ways.
First, DOJ argued that the defendants failed to adhere to Medicaid secondary payor requirements concerning the state’s Early Intervention Program (EIP), which pays for services to children with developmental delays. These requirements obligate municipalities to take “reasonable measures” to determine whether third party insurance coverage was available for the EIP services and seek reimbursement from such available payors. DOJ alleged that CSC and the City did not comply with these requirements by submitting incorrect policy numbers to third party insurers knowing that such claims would be denied and by incorrectly informing Medicaid that no third party coverage existed or such coverage had been rejected. Continue Reading Latest District Court Decision Confirms Escobar Two-Part Implied Certification Test
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:
- 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);
- Compare Medicare Part B and Part A claims to check for overlapping claims between home health agencies and/or hospices and outside providers;
- Investigate the validity of Medicare payments for telehealth services provided at distant sites that do not have corresponding originating site claims; and
- 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 May 31, 2017, the US Department of Justice announced a Settlement Agreement under which eClinicalWorks, a vendor of electronic health record software, agreed to pay $155 million and enter into a five-year Corporate Integrity Agreement to resolve allegations that it caused its customers to submit false claims for Medicare and Medicaid meaningful use payments in violation of the False Claims Act.
On May 1, 2017, the US Court of Appeals for the Third Circuit affirmed the dismissal of United States ex rel. Petratos, et al. v. Genentech, Inc., et al., No. 15-3801 (3d. Cir. May 1, 2017). On appeal from the US District Court for the District of New Jersey, the Third Circuit reinforced the applicability of the materiality standard set forth by the US Supreme Court in Universal Health Services v. Escobar. Per the Court, the relator’s claims implicate “three interlocking federal schemes:” the False Claims Act (FCA), Medicare reimbursement, and US Food and Drug Administration (FDA) approval.
The relator, Gerasimos Petratos, was the former head of health care data analytics at Genentech. He alleged that Genentech suppressed data related to the cancer drug Avastin, thereby causing physicians to certify incorrectly that the drug was “reasonable and necessary” for certain Medicare patients. This standard is drawn from Medicare’s statutory framework: “no payment may be made” for items and services that “are not reasonable and necessary for the diagnosis and treatment of illness or injury.” 42 U.S.C. § 1395y(a)(1)(A) (emphasis added). In turn, the Centers for Medicare and Medicaid Services (CMS) consider whether a drug has received FDA approval in determining, for its part, whether a drug is “reasonable and necessary.” Petratos claimed that Genentech “ignored and suppressed data that would have shown that Avastin’s side effects for certain patients were more common and severe than reported.” Petratos further asserted that analyses of these data would have required the company to file adverse-event reports with the FDA and could have triggered the need to change Avastin’s FDA label.
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).
The Office of Inspector General (OIG) recently published a final rule regarding its exclusion authorities. The final rule goes into effect March 21, 2017, and expands OIG’s authority to exclude certain individuals and entities from participating in federal health care programs under section 1128 of the Social Security Act.
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