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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New Guidance on Medicare Payment Rule Enforcement

By , , , and on Dec 5, 2019
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A few days before Thanksgiving, the news media published an internal memo by the Office of General Counsel (OGC) at the US Department of Health and Human Services (Department) to officials at the Centers for Medicare and Medicaid Services (CMS). The memo expressed OGC’s views on the impact of the Supreme Court’s Azar v. Allina Health Services, et. al., No. 17-1484 decision earlier this year on the enforcement of various CMS guidance. Specifically, OGC states that Medicare payment rules that meet the Court’s standard that did not go through notice-and-comment rulemaking cannot form the basis for an enforcement action, including an overpayment finding.

The issue in this case was whether the Department’s determination that Medicare Part C patients should be included in the Medicare fraction represented a change in a “substantive legal standard” within the meaning of Section 1871(a)(2) of the Social Security Act (SSA). If the answer was yes, then notice-and-comment procedures were required under the title 18 of the SSA. In a 7-1 decision, the court held that the inclusion of Part C patients in the Medicare fraction was “substantive.” The court explained that the “substantive legal standard” under Section 1871(a)(2) of the SSA means any legal standard or determination that creates rights and obligations, such as the scope of benefits, payment for services, eligibility of individuals to receive benefits, or eligibility of individuals, entities or organizations to furnish services.

OGC concludes that, according to the Supreme Court, Congress imposed a notice-and-comment requirement for substantive Medicare rules in a broader range of circumstances than otherwise would be required under the Administrative Procedure Act. Therefore, CMS guidance documents, such as the Medicare Internet-Only Manuals, setting forth interpretive payment rules, are legally nonbinding and may not be used as the basis of an enforcement action. As an example, if a “broadly worded statute or regulation can be interpreted a variety of ways,” sub-regulatory policy statements may be viewed as creating a new substantive rule, and thus cannot be enforced as binding rules under the Court’s ruling. According to OGC’s memo, CMS guidance documents that are “closely tied to a statutory or regulatory requirement” may provide additional clarity through such guidance and enforcement actions implicating the guidance can still be brought. Further, even if the sub-regulatory guidance is not specifically enforceable as a substantive legal standard, it can be used for other purposes, such as scienter or materiality, as stated in the Department of Justice Brand Memo.

OGC indicates that it does not believe Local Coverage Decisions (LCDs) require notice-and-comment rulemaking because LCDs reflect payment determinations of the local Medicare Administrative Contractor (MAC) and are not binding on the Department. They accordingly do not create any substantive legal standards.  In its memo, OGC concludes, that LCDs cannot be solely used as the basis for a “government enforcement action,” including an overpayment demand. OGC also notes that codifying guidance in a retroactive regulation could create other legal risks for enforceability.

The primary takeaway is that providers should examine carefully the basis for any [...]

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Questions Remain for the EHR Industry as a Second EHR Vendor, Greenway Health, Settles False Claims Act Allegations

By , and on Feb 26, 2019
Posted In , , ,

DOJ announced on February 6, 2019, the Settlement Agreement resolving allegations in DOJ’s Complaint that Greenway caused its customers to submit false Medicare and Medicaid claims for payments under the EHR Incentive Programs in violation of the FCA and that it paid illegal kickbacks to current customers to recommend Greenway products (that are used to generate incentive payments or avoid penalties under the EHR Incentive Programs) to new customers. Under the Settlement Agreement, Greenway agreed to pay approximately $57 million to resolve the allegations without admitting liability. Greenway also entered into a five-year CIA with strict compliance oversight, reporting obligations and costly obligations to provide the latest version of Greenway’s EHR software to each of Greenway’s current customers at no additional charge.

This settlement comes nearly two years after eCW entered into a groundbreaking settlement with DOJ. At that time, we wondered whether it may be a sign of increasing FCA actions against vendors of EHR technology (CEHRT) certified through the health information technology (HIT) certification program of the Office of the National Coordinator of HIT (ONC). Statements by the United States Attorney for the District of Vermont, Christina E. Nolan, in the DOJ press release discussing the Greenway settlement seem to answer that question very directly in the affirmative. She says that “EHR companies should consider themselves on notice.” It is notable that, unlike the eCW case, the Greenway case was not initiated by a relator, but pursued by DOJ directly. In light of the government’s continued focus on vendors of EHR technology used to earn payments or avoid penalties for failing to succeed under the EHR Incentive Programs (or their successor value-based payment programs), HIT vendors should:

  • Take care to accurately and transparently demonstrate their software during HIT certification program testing
  • Review, and consider improvements to, their systems and other procedures for identifying, responding to and correcting software design and quality issues that call into question EHR software’s conformity to applicable EHR certification criteria or present patient safety or clinician usability risks; and
  • Review existing customer reference, referral and marketing arrangements for compliance with the Anti-Kickback Statute.

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DOJ Expands New Enforcement Tactic – Obtains TRO to Prevent Pharmacy From Dispensing Opioids

By on Feb 13, 2019
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On February 8, 2019, the Department of Justice (DOJ) announced that it obtained a temporary restraining order (TRO) in the Middle District of Tennessee against two pharmacies, their owner and three pharmacists from dispensing controlled substances, including opioids. The DOJ simultaneously unsealed a complaint alleging violations of the False Claims Act and Controlled Substances Act against the same parties. DOJ’s press release is available here.

The DOJ described this action as part of a coordinated effort by the Prescription Interdiction & Litigation (PIL) Task Force to deploy its criminal, civil and regulatory tools to address the opioid epidemic in the United States. The complaint alleges that the pharmacies and pharmacists filled numerous prescriptions for controlled substances outside the usual course of professional practice and in violation of the pharmacists’ corresponding responsibility to ensure that prescriptions were written for a legitimate medical purpose. In particular, the complaint alleges that the defendants routinely dispensed controlled substances and ignored “red flags” of diversion and abuse, such as unusually high dosages of oxycodone and other opioids, dangerous combinations of opioid prescriptions other controlled substances and patients travelling extremely long distances to get and fill prescriptions. The complaint also asserts that the pharmacies falsely billed Medicare for illegally dispensed prescriptions.

“Pharmacies and pharmacists have a legal obligation to dispense controlled substances properly, so as not to put patients’ health at risk,” said Assistant Attorney General Jody Hunt for the Department of Justice’s Civil Division. “The Department of Justice will use every available tool to stop individuals and entities responsible for the improper distribution of controlled substances.”

While the DOJ has previously obtained TROs and a permanent injunction against physicians for prescribing opioids upon filing a complaint, this is the first case in which the agency has taken this combination compliant and TRO action against a pharmacy and pharmacists.



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

By on Oct 15, 2018
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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.



Insys Announces Settlement-in-Principle with DOJ Over Alleged Subsys Kickback Scheme

By and on Sep 13, 2018
Posted In , , , , ,

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. (more…)



Courts Weigh Appropriateness of Statistical Sampling in Ongoing Case

By on Jun 13, 2018
Posted In ,

On April 2, 2018, the magistrate judge for the US District Court for the Southern District of Indiana issued an order refusing qui tam relators’ request to conduct discovery related to claims submitted to Medicare on a nationwide basis in an ongoing False Claims Act (FCA) case.  Importantly, the judge considered whether statistical sampling could be used to establish liability under the FCA for multiple entities affiliated with the defendant when the alleged false claims in the relators’ complaint originated from a single location. The US Department of Justice (DOJ) subsequently submitted a statement of interest defending relators’ discovery request and the use of statistical sampling to establish liability for false claims, which the court has not yet addressed.

In the underlying qui tam case, the relators alleged that Evansville Hospital, a long-term acute care hospital in Indiana, and a physician violated the FCA by submitting claims to Medicare for medically unnecessary lengths of stay in order to maximize Medicare reimbursement. (more…)



The Third Circuit Rejects the Anti-Kickback Statute “Tainted Claims” Theory

By on Apr 24, 2018
Posted In ,

A key area of dispute in False Claims Act (FCA) cases based on Anti-Kickback Statute (AKS) violations is what degree of connection plaintiffs must allege between alleged kickbacks and “false claims.” The AKS states that “a claim that includes items or services resulting from a violation of this section constitutes a false or fraudulent claim for purposes of [the FCA].”

The government and relators typically argue that the mere fact that claims were submitted during the period of alleged kickbacks is sufficient. Defendants argue that the law requires plaintiffs to specifically identify claims “resulting from” an alleged kickback – i.e., that there is proof that the alleged kickback caused the referral or recommendation of the item or service contained in the claim. The Third Circuit’s recent decision in United States ex rel. Greenfield v. Medco Health Systems, Inc. articulated a middle of the road approach.  In affirming summary judgment for the defendants, the Court held that to prevail, plaintiffs must establish that a claim submitted to a federal health care program was “exposed to a referral or recommendation” in violation of the AKS.

The relator, a former area vice president for Accredo, a specialty pharmacy that sells blood clotting drugs and provides nursing assistants to hemophiliacs in their homes, filed a qui tam suit alleging that Accredo violated the AKS and FCA in connection with donations to two charitable organizations that assist the hemophiliac community: Hemophilia Services, Inc. (HSI) and Hemophilia Association of New Jersey (HANJ).  During the time Accredo made monetary donations to HSI and HANJ, the HANJ website allegedly listed Accredo as one of four “approved providers” or “approved vendors” and directed users to “remember to work with our HSI [approved] providers.” In 2010, Accredo notified both charities that it was decreasing its donation the following year. In response, HSI allegedly engaged in activities to persuade Accredo to restore its donation level to previous years, including encouraging its members to contact Accredo to protest the funding cut. The relator was involved in purportedly analyzing the return on investment for returning to previous donation levels. After the relator’s report allegedly projected a significant decline in business in New Jersey if donation levels were not restored, Accredo restored the donation level and relator filed his suit.

The government declined to intervene in this case, but the relator continued the litigation. He argued the expansive view: that the donations amounted to kickbacks, and since Accredo certified compliance with the AKS when submitting Medicare claims, the FCA was violated and, therefore, every claim submitted by Accredo was false. The district court granted summary judgment to Accredo.  The district court declined to decide whether the relator had established an AKS violation, but instead held that the relator did not show sufficient evidence of causation of an FCA violation. The district court held that the relator’s evidence that Accredo submitted claims for 24 federal beneficiaries during the relevant time period, by itself, “did not provide the link between defendants’ 24 federally insured customers and the donations.” The [...]

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The Opioid Crisis: An Emerging False Claims Act Risk Trend

By on Feb 5, 2018
Posted In , , , , , ,

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.

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Escobar Upends $350 Million FCA Verdict

By on Jan 17, 2018
Posted In ,

On January 11, 2018, a federal court in Florida overturned a $350 million False Claims Act (FCA) jury verdict against a nursing home operator, finding “an entire absence of evidence of the kind a disinterested observer, fully informed and fairly guided by Escobar, would confidently expect on the question of materiality.”

In United States ex. rel. Ruckh v. CMC II LLC et al., the relator claimed that a skilled nursing facility and its management company failed to maintain “comprehensive care plans” ostensibly required by Medicare regulations as well as a “handful of paperwork defects” (for example, unsigned or undated documents). In addition, the relator alleged a corporate-wide scheme to bill Medicare for services that were not provided or needed. (more…)



DOJ Settlement with Florida Medical Practice Serves as a Reminder: Delayed Repayment to Federal Programs Can Have Significant Consequences

By on Oct 30, 2017
Posted In ,

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. (more…)



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