FCA UPDATE
FCA UPDATE
Exploring Recent Developments in False Claims Act Litigation, Enforcement and Compliance
FCA UPDATE
Exploring Recent Developments in False Claims Act Litigation, Enforcement and Compliance
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Medicare Part B Provider Secures Dismissal of FCA Claims Under First-to-File Bar

By on Mar 15, 2017
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On February 27, 2017, the US District Court for the Southern District of Mississippi granted a defense motion to dismiss False Claims Act (FCA) claims in United States ex rel. Dale v. Lincare Holdings, Inc., on the grounds that the claims were precluded by the FCA’s first-to-file bar.

The defendant, Lincare Holdings, Inc., is a national respiratory care provider that serves Medicare Part B patients via the sale and rental of medical oxygen supplies. The relator, a former salesperson for a Lincare subsidiary, filed his complaint on February 23, 2015, under seal, alleging that Lincare implemented a scheme to falsify and manipulate medical necessity testing in order to generate false reports that would allow it to sell oxygen and other Medicare-covered services to patients who were not medically qualified for coverage. The relator alleged that an office manager and nurse instructed employees to direct patients to take a variety of steps, such as raising their arms while attached to an oxygen sensor, in order to generate falsely low arterial oxygen saturation levels. The relator further claimed retaliatory discharge under the FCA. The United States declined to intervene on August 17, 2015, and the complaint was unsealed on August 24, 2015.

Granting a nearly year-old motion to dismiss, the court held that the relator’s FCA claims were precluded by the FCA’s first-to-file bar, finding that the “fraudulent scheme depicted in Relator’s complaint is largely based on the same underlying facts as the [United States ex rel. Robins v. Lincare, Inc.] scheme.”  The first-to-file bar prohibits plaintiffs from being a “related action based on the facts underlying [a] pending action.” 31 U.S.C. § 3730(b)(5).  The Robins suit was filed first in the US District Court for the District of Massachusetts and the court found that there was a “substantial overlap in material facts” underlying the schemes alleged in each case such that the complaints are sufficiently related for purposes of the first-to-file bar. (more…)



Seventh Circuit Strictly Construes Original Source Requirement Against ‘Bounty-Hunting’ Relator

By on Jan 5, 2016
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In a decision released yesterday in U.S. ex rel. Bogina v. Medline Industries, Inc., the U.S. Court of Appeals for the Seventh Circuit affirmed a district court’s dismissal of a relator’s False Claims Act (FCA) complaint, holding that the complaint’s allegations had been publicly disclosed in a prior, settled lawsuit and the relator was not an original source. The opinion, authored by Judge Richard Posner, described FCA relators as “bounty hunters” and observed that the FCA imposes obstacles on parasitic bounty-hunting relators who seek to “be handsomely compensated if the[ir] suit succeeds.” Among those obstacles is the FCA’s public disclosure bar, which Judge Posner’s opinion ensures has sharp teeth in the Seventh Circuit.

First, the court held that the 2010 amendments to the original source exception the public disclosure bar, requiring a relator to “materially add” to publicly disclosed allegations in order to surmount the bar, could be applied retroactively because the amendments merely clarified the prior version of the exception. Accordingly, parties litigating in courts within the Seventh Circuit can expect that the current version of the public disclosure bar’s original source requirement will apply, regardless of when the relator acquired his or her knowledge.

Second, the court rejected the argument of the relator, August Bogina, that he had materially added to the allegations made by a prior relator, Sean Mason, in a prior FCA case that the government had settled. Both suits alleged that defendant Medline had made kickbacks to induce purchases of medical equipment. Bogina’s subsequent suit before the Seventh Circuit added a defendant (the Tutera Group, a nursing home chain that allegedly accepted kickbacks) that had not been mentioned in Mason’s prior, settled suit. Bogina also argued that the release provided by the government in the prior suit only concerned false claims submitted to Medicare Part A and Medicaid, but not to other government healthcare programs such as Medicare Part B and Tricare. The Seventh Circuit held that these differences were “unimpressive” from an original source standpoint, observing:

The government was thus on notice of the possibility of a broader bribe-kickback scheme before Bogina sued. Had it wanted to broaden the case against Medline beyond the Mason settlement, it could have gone after, among other Medline customers, nursing home companies such as the Tutera Group that received (if Bogina is correct) Medline kickbacks. …. Moreover, a settlement is a compromise; and it is notable that among the claims the government released as part of the Mason settlement were some of the very claims alleged in Bogina’s complaint.

The Seventh Circuit’s focus on the extent to which the prior suit put the government on notice of the alleged fraud is of crucial importance for defendants faced with copycat claims based on allegations that are similar to allegations they previously settled. Adding defendants or payors not involved in the prior suit is not a material addition sufficient to survive the public disclosure bar, where the prior suit put the government on notice of the allegations. Future [...]

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Recent Settlements and Enforcement Activity Serve as a Reminder of FCA Liability for Physicians and Practice Groups

By on Jun 2, 2015
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While the health care industry has accounted for a large portion of settlements and judgments involving fraud and False Claims Act (FCA) liability in recent years—68 percent of the United States’ $3.8 billion recovery in 2013 and 40 percent of the $5.69 billion recovery in 2014—the U.S. Department of Health and Human Services Office of Inspector General (OIG) and the U.S. Department of Justice (DOJ) have been primarily focused on hospitals, health care systems and large health care companies.  However, recent settlement and enforcement trends reiterate that individual physicians and smaller practice groups are not immune to qui tam whistleblowers and direct investigation by the OIG.

Such was the case for Garden State Cardiovascular Specialists, P.C., (Garden State) a 12-physician group in New Jersey that just last week reached a $3.6 million settlement in United States ex rel. Cheryl Mazurek v. Garden State Cardiovascular Specialists, P.C. et al., Civil Action No. 10-4734 (D.N.J.).  The settlement resolved sealed allegations that Garden State’s physicians and their NJ Medcare / NJ Heart facilities submitted claims to Medicare for various cardiology diagnostic tests and procedures (including stress tests, cardiac catheterizations and external counterpulsation).  The case against Garden State and two of its principal physicians was brought by Cheryl Mazurek, who worked for Garden State’s third-party billing and coding vendor, MediGain Inc.  Mazurek’s claims against MediGain, also filed under seal, have not yet been resolved.

The OIG Work Plan, complemented by a Mid-Year Update last month, echoes the increased focus on issues that directly implicate physicians operating independent of hospitals and larger companies.  For example, the OIG is reviewing physician coding on Medicare Part B claims for services performed in ambulatory surgical centers (ASC) and hospital outpatient departments to determine whether they properly coded the places of service.  Because Medicare reimburses physicians at a higher level when services are performed in a non-facility setting (e.g., a physician’s office) versus services performed in a hospital outpatient department or (with some exceptions) in an ASC, the OIG will be closely scrutinizing site of service this year and beyond.

Whether on the billing/coding side of the equation, medical necessity or any number of focus areas for DOJ and the OIG, physicians and practice groups (even small ones) should be keenly aware of their compliance obligations under the current FCA regime.  For a quick refresher on fraud enforcement trends for 2015 and beyond (along with some practical tips), you may find this article to be a helpful resource.



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