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
Office of the Inspector General
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DOJ Settlement with Home Health Providers Underscores Strategic Considerations for Self-Disclosure

By on Oct 23, 2017
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Eventually, any health care organization with an effective compliance program is very likely to discover an issue that raises potential liability and requires disclosure to a government entity. While we largely discuss False Claims Act (FCA) litigation and defense issues on this blog, a complementary issue is how to address matters that raise potential liability risks for an organization proactively.

On August 11, 2017, a group of affiliated home health providers in Tennessee (referred to collectively as “Home Health Providers”) entered into an FCA settlement agreement with the US Department of Justice (DOJ) and the US Department of Health and Human Services Office of Inspector General (OIG) for $1.8 million to resolve self-disclosed, potential violations of the Stark Law, the Federal Anti-Kickback Statute, and a failure to meet certain Medicare coverage and payment requirements for home health services. This settlement agreement underscores the strategic considerations that providers must weigh as they face self-disclosing potential violations to the US government. (more…)



Physician Compensation Scrutiny Continues in Recent FCA Settlement

By and on Jun 16, 2017
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A hospital system in Missouri recently agreed to settle with the US Department of Justice (DOJ) for $34 million to resolve claims related to alleged violations of the Stark Law. On May 18, 2017, DOJ announced a settlement agreement with Mercy Hospital Springfield (Hospital) and its affiliate, Mercy Clinic Springfield Communities (Clinic). The Hospital and Clinic are both located in Springfield, Missouri. The relator’s complaint was filed in the Western District of Missouri’s Southern Division on June 30, 2015.

The complaint’s allegations center on compensation arrangements with physicians who provided services in an infusion center. According to the complaint, until 2009 the infusion center was operated as part of the Clinic, and the physicians who practiced at the infusion center shared in its profits under a collection compensation model. In 2009, ownership of the infusion center was transferred to Mercy Hospital so that it could participate in the 340B drug pricing program, substantially reducing the cost of chemotherapy drugs. The complaint alleges that the physicians “expressed concern about losing a substantial portion of the income they had received under the collection compensation model as a result of the loss of ownership of the Infusion Center.” In response, the Hospital allegedly assured them that they would be “made whole” for any such losses. While it doesn’t provide precise details, the complaint alleges that the Hospital addressed the shortfall by establishing a new work Relative Value Unit (wRVU) for drug administration in the infusion center, which now operated as part of the Hospital. The value of this new wRVU was allegedly calculated by “solving for” the amount of the physician’s loss and “working backwards from a desired level of overall compensation.” Physicians were able to earn the wRVU for the patients they referred to the infusion center. The complaint alleges that the drug administration wRVU rate was 500 percent of the comparable wRVU for in-clinic work. In its announcement of the settlement agreement, DOJ characterized the compensation arrangement as being “based in part on a formula that improperly took into account the value of [the physicians’] referrals of patients to the infusion center operated by [the Hospital].” (more…)



False Claims Act Settlement with eClinicalWorks Raises Questions for Electronic Health Record Software Vendors

By , and on Jun 9, 2017
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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.

Read the full article.



OIG Revises Safe Harbors under the Anti-Kickback Statute and Civil Monetary Penalty Rules Regarding Beneficiary Inducements

By , , and on Dec 14, 2016
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On December 7, 2016, the Office of Inspector General of the US Department of Health and Human Services published a final rule containing revisions to both the federal Anti-Kickback Statute safe harbors and the beneficiary inducement prohibition in the civil monetary penalty rules. Effective January 6, 2017, the Final Rule modifies certain existing safe harbors and adds additional safe harbors to the Anti-Kickback Statute and incorporates Affordable Care Act-mandated exceptions into the definition of remuneration under the civil monetary penalty rules.

Read the full article here.



OIG Continues to Refine Guidance on Patient Assistance Programs

By on Feb 23, 2016
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The past three months have seen a flurry of advisory opinion activity from the U.S. Department of Health and Human Services (HHS) Office of Inspector General (OIG). The majority of this activity focuses on patient assistance programs (PAPs) as donors and organizations continue to have questions about OIG’s most recent PAP guidance. While none of these opinions or modifications are dramatically new on their face, together they provide valuable insight into the types of facts that can mitigate the OIG’s general concerns with tailored disease funds.

Typically, sponsored by pharmaceutical manufacturers and/or independent charity organizations with industry donors, PAPs provide financial assistance or free prescription drugs to low income individuals. Some PAPs are also structured to provide assistance to patients with a specific disease, like cancer or Crohn’s disease. As PAPs have the potential to be used by manufacturers to subsidize the purchase of their own products, or to improperly steer a patient’s drug selection, they can trigger scrutiny under the federal Anti-Kickback Statute (AKS) and Beneficiary Inducement Civil Monetary Penalty (CMP), among other laws. Not surprisingly, the OIG is more comfortable with bona fide charitable programs that are not drug-specific and that reflect other characteristics demonstrating a broad patient focus, rather than those reflecting a drug or pharmaceutical manufacturer focus.

Historically, the OIG has treated PAPs as important safety nets for patients who face chronic illnesses and high drug costs. The OIG issued a special advisory bulletin (SAB) in 2005 confirming that PAPs could help ensure patients had access to and could afford their medically necessary drugs. The OIG’s guidance evolved with its May 2014 SAB, which addressed the growing trend of independent charity PAPs establishing or operating specific disease funds that limit assistance to a subset of available products. The OIG articulated a concern with such PAPs, and indicated that it would view such programs as having a higher baseline risk of abuse when their assistance was limited to only a subset of available FDA-approved products for treatment of the disease. The OIG advised PAPs to define disease funds in accordance with widely recognized clinical standards and in a manner that covered a broad spectrum of products and manifestations of the disease (e.g., without reference to specific symptoms, drug stages, treatment types, severity of symptoms or other “narrowing” factors).

Consistent with this guidance, the OIG began issuing new advisory opinions and modifications of previous opinions in January 2015. The OIG’s opinions and modifications posted in the past three months are also consistent with this standard, but importantly add nuanced factors and exceptions that appear to show a more refined stance on specific disease funds. In December, the OIG posted a modification of Advisory Opinion 07-11, concerning a PAP that provided support for patients experiencing a specific symptom of cancer. In January, the OIG posted two new advisory opinions that addressed a PAP tailored to support patients with two specific diseases (a type of cancer and a type of chronic kidney disease) and a PAP providing support to needy [...]

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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.



OIG’s 2016 Work Plan: Mixed Results for 2015 and New Data-Mining and Policy Efforts in 2016

By on Nov 24, 2015
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The U.S. Department of Health and Human Services (HHS) Office of Inspector General (OIG) annual release of a new Work Plan both summarizes the results achieved last year and highlights new areas for examination in the next. This year’s Work Plan reported rising audit results but declining investigative results, in contrast to previous years.

In examining the new topics added to the Work Plan, two themes emerge.  First, many of the new payment audits reflect OIG’s use of data mining to identify providers or suppliers who could potentially be considered “outliers” from the average use of a particular code or procedure. Data mining will also play a significant role in connection with the second theme—a notable increase in OIG’s review of significant, and some controversial, policy issues concerning changes in the country’s health care delivery system, operation of HHS programs and the effectiveness of HHS agency oversight of those changes and programs.

Based on how OIG identified new study topics, the main takeaway from the Work Plan is “know your data.” Whether the issue is Medicare claims or data reporting obligations, the OIG increasingly turns to data analytics to both generate audit or investigative leads or to study HHS program effectiveness.

To access a full analysis of the Work Plan, click here.



OIG Issues Alert About Information Blocking, Warning Providers Who Share Software

By on Oct 27, 2015
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Amid bipartisan concerns in Congress and multiple U.S. Department of Health and Human Services (HHS) agencies about health “information blocking,” the HHS Office of Inspector General (OIG) recently issued an alert reminding the health care industry that health information blocking can impact whether an arrangement satisfies the electronic health record (EHR) items and services safe harbor (42 C.F.R. § 1001.952) (EHR Safe Harbor) under the federal Anti-Kickback Statute (AKS) (42 U.S.C. § 1320a-7b(b)).

The EHR Safe Harbor permits certain health care providers and other donors to pay up to 85 percent of the cost of EHR technology provided to a physician practice or other referral source if the arrangement meets all EHR Safe Harbor elements.  The third element of the EHR Safe Harbor requires that “The donor (or any person on the donor’s behalf) does not take any action to limit or restrict the use, compatibility, or interoperability of the items or services with other electronic prescribing or electronic health records systems (including, but not limited to, health information technology applications, products, or services).”

In the alert, the OIG cautions that information blocking may cause an arrangement that would otherwise satisfy the EHR Safe Harbor to fail to meet the third element. In an April 2015 report cited by the OIG in the alert, the Office of the National Coordinator of Health Information Technology defines information blocking: “Information blocking occurs when persons or entities knowingly and unreasonably interfere with the exchange or use of electronic health information.”

Previously, the OIG expressed concern about this issue in the preamble to its final rule amending the EHR Safe Harbor in 2013, stating, “[D]onors must offer interoperable products and must not impede the interoperability of any electronic health record software they decide to offer . . . Agreements between a donor and a vendor that preclude or limit the ability of competitors to interface with the donated software would cause the donation to fail to meet the condition at 42 CFR 1001.952(y)(3), and thus preclude protection under the electronic health records safe harbor.” (78 Fed. Reg. 79202, 79209 [December 27, 2013]).

The alert cites several examples of information blocking that would threaten protection under the EHR Safe Harbor.  For example, if a provider limits the use or interoperability of software by agreeing with the potential referral source to prevent a competitor from interfacing with the software, the safe harbor requirements would not be satisfied.  Likewise, if the software vendor agrees with a provider to charge high interface fees to outside providers or suppliers or to competitors, the safe harbor requirements may not be satisfied.

In order to avoid running afoul of the AKS (and resulting False Claims Act [FCA] claims), health care providers considering the roll-out of below-cost EHR technology to physician practices or other referral sources should take care to avoid health information access restrictions that unreasonably interfere with access to information for continuity of care or other appropriate purposes and, thereby, threaten EHR Safe Harbor protection.



DOJ Pursues Both Sides of an Alleged Kickback Arrangement Under the FCA

By and on Oct 20, 2015
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As many health lawyers know, the government usually only pursues the person or entity that offers or pays allegedly improper remuneration, even though the federal Anti-Kickback Statute (AKS) also applies to those to solicit or receive it.  This uneven enforcement pattern occurs for a variety of reasons — the alleged payor is the focus of the relator’s complaint and resulting investigation, the amount of time that this investigation and resolution takes can create practical and legal problems in pursuing additional defendants, and the increasing number of qui tam cases stretches the government’s limited resources.

However, on October 7, 2015, the U.S. Department of Justice (DOJ) announced a settlement with an alleged kickback recipient over three years after it settled with the alleged payor.  PharMerica Corporation, identified by the DOJ as the nation’s second-largest provider of pharmaceutical services to long-term care facilities, agreed to pay $9.25 million to settle allegations that, from 2001 to 2008, the company knowingly solicited and received kickbacks from Abbott Laboratories in the form of rebates, educational grants and other financial support in exchange for recommending that physicians prescribe Abbott’s anti-epileptic drug Depakote to nursing home patients where PharMerica provided pharmacy services.

PharMerica noted in a press release that it denied the government’s allegations and fully cooperated with the DOJ throughout the investigation.  Of note, the Office of Inspector General (OIG) did not require an amendment to PharMerica’s current corporate integrity agreement to add provisions concerning AKS compliance as part of this resolution.

This settlement comes over three years after Abbott entered into an FCA settlement agreement with the DOJ and several individual states in May 2012, which, along with addressing separate allegations related to the promotion of Depakote, settled allegations related to its arrangement with PharMerica. Abbott also did not admit to any wrongdoing in its settlement.  Both the PharMerica and Abbott settlements are the product of lawsuits filed in federal court in the Western District of Virginia under the whistleblower provisions of the False Claims Act.

The pursuit of the settlement with PharMerica may indicate a growing interest by DOJ in pursuing AKS allegations against both the alleged offeror and the alleged recipient of prohibited remuneration under the FCA.



DOJ’s “Yates Memorandum” Calls for Increased Focus on Individuals in Investigating Allegations of Both Criminal and Civil Corporate Wrongdoing

By and on Sep 28, 2015
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On September 9, 2015, the U.S. Department of Justice (DOJ) released a memorandum to prosecutors nationwide regarding “Individual Accountability for Corporate Wrongdoing,” authored by Deputy Attorney General Sally Q. Yates.  Dubbed the “Yates Memorandum,” this missive consolidates both long-standing DOJ policy and newly minted guidance for prosecutors and civil enforcement attorneys that could significantly alter the course of both criminal and civil investigations under the False Claims Act (FCA) particularly for health care entities.  The day after releasing the memo, Yates spoke at NYU School of Law, where she noted that DOJ’s mission is “not to recover the largest amount of money from the greatest number of corporations,” but rather, “to seek accountability from those who break our laws and victimize our citizens.”

At its core, the Yates Memorandum calls for a substantially increased focus on individual accountability for corporate wrongdoing and amendment of prior Department policies that have become standard operating procedures in both criminal and civil investigations.  While this is nothing new for FCA defendants, the renewed focus on individuals – and the corresponding guidance in the Yates Memorandum – will have an immediate and lasting impact on internal investigations, pre-intervention negotiations, litigation and any extra-judicial resolution of the case.

Leaving aside the policy statements that deal solely with internal DOJ operations, the Yates Memorandum outlines three key areas of focus that will be relevant for FCA defendants facing exposure from an investigation or qui tam litigation:

Increased Focus on Individuals

As part of this increased focus, corporations will be incentivized to tailor internal investigations to include a hard look at individuals.  First, the DOJ will limit or decline to provide “cooperation credit” unless the corporation “completely disclose[s] to the Department all relevant facts about individual misconduct.”  While the application of cooperation credit in criminal cases is more commonplace, the Yates Memorandum makes clear that this principle will apply equally in the civil context.  Citing the FCA, the Department’s position on “full cooperation” under 31 U.S.C. 3729(a)(2) will be “at minimum, all relevant facts about responsible individuals must be provided.”  The Yates Memorandum also directs prosecutors and civil attorneys to proactively investigate individuals “at every step of the process – before, during, and after any corporate cooperation.”  By focusing on individuals from the inception of the investigation, the DOJ hopes to “increase the likelihood that individuals with knowledge of the corporate misconduct will cooperate with the investigation and provide information against individuals higher up the corporate hierarchy.”

The implications of these directives will impact all stages of the corporate response to an FCA investigation.  While the DOJ recognizes that investigations must be “tailored to the scope of the wrongdoing,” corporations should anticipate a need to expand internal investigations to gather facts and potentially assess the roles played by individuals in the overarching corporate wrongdoing at issue.  As the corporation seeks to resolve the corporate liability, the Yates Memorandum suggests that defense attorneys will be under increased pressure to focus attention [...]

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