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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Dash to Digital Health? How the Regulatory Sprint to Coordinated Care Could Expand Access to Care

By on Jul 26, 2019
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Certain long-standing laws, such as the civil monetary penalty provision prohibiting patient inducements, have hampered providers’ ability to fully leverage remote patient monitoring and other telehealth tools. Many stakeholders are hoping that developments in the Regulatory Sprint to Coordinated Care will begin the rulemaking process to enable greater access to digital health and virtual care products.

The US Department of Health and Human Services (HHS) launched the Regulatory Sprint to Coordinated Care in 2018 with the goal of reducing regulatory burden and incentivizing coordinated care. As part of this initiative, the Centers for Medicare and Medicaid Services and other agencies are scrutinizing a variety of long-standing regulatory requirements and prohibitions to determine whether they unnecessarily hinder the innovative arrangements policy-makers are otherwise hoping to see develop. While regulations such as the civil monetary penalty prohibition on patient inducements have significant benefits for reducing fraud and abuse, they can also make it difficult for health systems to deploy digital tools that help patients track, monitor and share health data with their providers.

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Northern District of California Dismisses FCA Claim with Prejudice for Inability to Point to Particular Claims for Payment

By on Oct 15, 2018
Posted In

On October 1, 2018, the District Court for the Northern District of California dismissed with prejudice a relator’s qui tam suit against Carelink Hospice Services, Inc. (Carelink) for failure to meet the heightened pleading standards mandated by Federal Rule of Civil Procedure 9(b). The court’s decision largely rested on the relator’s inability to specifically plead the existence of identifiable false claims—a strong affirmation that, in the Ninth Circuit, courts continue to hold relators to their pleading burdens.

The relator worked for Carelink, a hospice provider, for a three-month period in 2015. As a hospice provider, Carelink needed to provide certifications of terminal illness to justify admissions to the facility and, in turn, receive reimbursements from Medicare for services rendered. The relator, without identifying particular claims for reimbursement or patients, alleged that Carelink violated the FCA by seeking reimbursement for patients who Carelink knew were not terminally ill. The court seized upon the relator’s inability to point to specific claims in rendering its dismissal of the case.

Relying on Rule 9(b)’s particularity requirement, the court dismissed the relator’s complaint due to her failure to identify, with the required specificity, actual false claims. The court noted that the relator “relies on general allegations that Carelink presented false claims” but failed to “identify any reimbursements from Medicare[.]” The court came to this conclusion despite the relator’s citation to four patients about whom she alleged to have raised eligibility concerns. The court reasoned that these allegations, without “describ[ing] the nature of [her] concerns or her basis for believing the four individuals” were not eligible for Medicare reimbursements, were not enough to satisfy Rule 9(b).

The court concluded that the relator “fail[ed] to identify with particularity what ‘claims’ Caremark submitted” that were false because the allegations “do not provide a reasonable basis for [the court] to infer that claims had been submitted on behalf of any particular patient.” The court specifically dispelled the relator’s argument that, based on her extremely limited tenure with Carelink, the Rule 9(b) requirement should be relaxed in her case.

This decision confirms that, in the Ninth Circuit, a relator must allege the existence of specific, particularized, identifiable false claims submitted to the government. This confirmation serves as a strong defense against relators who do not sufficiently allege the “who, what, when, where, and how” of their FCA claims.



Third Circuit Affirms Dismissal of FCA Suit against Genentech Based on Supreme Court’s Materiality Standard

By on May 10, 2017
Posted In

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.

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RehabCare Settles False Claims Act Allegations for $125 Million

By on Feb 5, 2016
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RehabCare, the nation’s largest provider of nursing home rehabilitation services, agreed to pay $125 million on January 12 to settle claims under the False Claims Act (FCA) in connection with allegations that it caused its skilled nursing facility customers to submit false claims to Medicare for therapy services. In connection with the settlement, RehabCare entered into a corporate integrity agreement (CIA) with the Office of Inspector General (OIG). The provider’s companies, RehabCare Group, Inc. and RehabCare Group East, Inc. (RehabCare), have been subsidiaries of Kindred Healthcare, Inc. (Kindred) since their merger in 2011 with a Kindred subsidiary. In a press release, Kindred stated that it agreed to the settlement without any admission of wrongdoing in order to provide clarity for contract customers, shareholders and government oversight entities.

The government’s unsealed Complaint in Intervention alleged that RehabCare manipulated the amount and type of patient therapy to achieve a higher Medicare reimbursement level than was warranted for the patient. Skilled nursing facilities are reimbursed by Medicare by resource utility groups (RUGs), which reflect the anticipated costs associated with providing nursing and rehabilitation services to beneficiaries with similar characteristics or resource needs. A patient’s RUG is assigned based upon the time and type of therapy provided to the patient during a seven-day reference period, and the amount of reimbursement is tied to the RUG level that is determined during that reference period.

The CIA, which applies to both RehabCare and Kindred, has a five-year term and, among other requirements, provides for the development of staff training regarding the accurate use of RUGs, documentation of therapy services, coordination of care and other requirements for the provision of therapy. In addition, Kindred must engage an independent review organization to conduct annual medical necessity and appropriateness reviews related to contracted rehabilitation services. The CIA also requires the submission of annual reports that include certifications as to compliance with applicable federal health care program requirements and with the CIA from several executives of RehabCare and with executives of Kindred who have direct oversight responsibilities for RehabCare, including the compliance officer, CEO and CFO of Kindred.

The case was originally brought via a qui tam lawsuit filed by two former employees of RehabCare.  These individuals will receive approximately $24 million as their share of the recovery.

A copy of the DOJ press release is available here.



Recent DOJ Enforcement Actions Demonstrate that the Focus on Mental Health Services Fraud Continues

By on May 20, 2015
Posted In

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 [...]

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