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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Remuneration? Not If It’s Fair Market Value, Says Eleventh Circuit

By and on Sep 27, 2019
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Bingham v. HCA, Inc., a recent Eleventh Circuit case, highlights the centrality of fair market value to Anti-Kickback Statute (AKS) analyses. This decision is significant for several reasons and we expect to see Bingham cited by many defendants in future False Claims Act cases. The case is also a reminder that the current regulatory and enforcement environment can result in litigation over arrangements with fair market value payments that involve little, or no, compliance concerns.

One of the most fundamental elements of managing risk under the federal Anti-Kickback Statute (AKS) is ensuring remuneration is consistent with fair market value. A recent Eleventh Circuit case highlights the centrality of fair market value to AKS analyses. See Bingham v. HCA, Inc., Case No. 1:13-cv-23671 (11th Cir. 2019). In Bingham, the court held that proving fair market value is an essential element for a relator to survive summary judgment and that relators must plead a lack of fair market value consistent with the Rule 9(b) particularity requirement to allege improper remuneration exists in the first place. The court’s holding is significant for two reasons: (1) it underscores that the plaintiff bears a burden in pleading and proving lack of fair market value, and (2) it suggests that fair market value compensation may be an absolute defense to an AKS allegation. We expect to see Bingham cited by many defendants in future False Claims Act cases, and we will be watching to see how the Eleventh Circuit and other courts continue to evaluate these concepts.

Case Background and Procedural History

We note that it took five years of costly litigation for HCA to reach this decision. Relator, who has filed a number of cases against hospital systems over the years concerning real estate deals, filed his first amended complaint on August 15, 2014. Relator alleged that HCA, through its Centerpoint Medical Center and Aventura Hospital facilities, violated the FCA due to improper space rental arrangements with physicians. Relator alleged that HCA allegedly paid a medical office building developer improper subsidies and that the developer passed the value of these subsidies onto physician tenants who signed 10-year leases through low initial lease rates, restricted use waivers, operating cash-flow shares and free office improvements. Relator also alleged HCA provided direct remuneration to physician tenants at the Aventura facility, including free parking, subsidized common area maintenance, free use permissions and below market rent.

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Recent Developments on the Fair Market Value Front – Part 1

By on Oct 3, 2017
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Over the last several months, a handful of federal court decisions—including two rulings this summer on challenges to the admissibility of proposed expert testimony—serve as reminders of the importance of (and parameters around) fair market value (FMV) issues in the context of the Anti-Kickback Statute (AKS) and the False Claims Act (FCA).

First, a quick level-set.  The AKS, codified at 42 U.S.C. § 1320a-7b(b), is a criminal statute that has long formed the basis of FCA litigation—a connection Congress made explicit in 2010 by adding to the AKS language that renders any claim for federal health care program reimbursement resulting from an AKS violation automatically false/fraudulent for purposes of the FCA.  42 U.S.C. § 1320a-7b(g).  Broadly, the AKS prohibits the knowing and willful offer/payment/solicitation/receipt of “remuneration” in return for, or to induce, the referral of federal health care program-reimbursed business.  Remuneration can be anything of value and can be direct or indirect.  In interpreting the “in return for/to induce” element, a number of federal courts across the country have adopted the “One Purpose Test,” in which an AKS violation can be found if even just one purpose (among many) of a payment or other transfer of value to a potential referral source is to induce or reward referrals—even if that clearly was not the primary purpose of the remuneration. (more…)



A Hospital’s Deserving Stark and AKS Victory—But At What Cost?

By , and on May 31, 2017
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This April, providers cheered when a federal district court in the Middle District of Florida found insufficient evidence to support a relator’s theory that a hospital had provided free parking to physicians, in violation of the Stark Law and Anti-Kickback Statute (AKS). In the Report and Recommendation for United States ex rel. Bingham v. BayCare Health Systems, 2017 WL 126597, M.D. Fla., No. 8:14-cv-73, Judge Steven D. Merryday of the Middle District of Florida endorsed magistrate judge Julie Sneed’s recommendation that Plaintiff Thomas Bingham’s Motion for Partial Summary Judgment be denied and that Defendant BayCare Health System’s Motion for Summary Judgment be granted. However, as we discussed in a previous FCA blog post regarding these allegations, this type of case encapsulates a worrying and costly trend where courts allow thinly pleaded relator claims in which the government opted not to intervene, to survive past the motion to dismiss stage into the discovery phase of the litigation.

Bingham is a serial relator who practices as a certified real estate appraiser in Tennessee and was unaffiliated with BayCare. In his latest attempt, Bingham alleged that BayCare Health System had violated the Stark Law and the AKS by providing affiliated physicians free parking, valet services and tax benefits to induce physicians to refer patients to the health system. (more…)



New OIG Rules Change Patient Incentive Program Landscape: Where Are the Limits Now?

By , and on Apr 11, 2017
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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).

Read the full article.



Circumstantial Evidence Stretched Beyond Its Limits in Proving Kickback and Fraud-on-DrugDex Theories

By on Dec 18, 2015
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Two decisions from the US District Court for the Southern District of Texas limit the extent to which relators can stretch the use of circumstantial evidence to support a False Claims Act case based on an anti-kickback or off-label marketing theory. In two separate decisions on December 10 and December 14 in US ex rel. King v. Solvay Pharmaceuticals, Inc. (SPI)., the court granted SPI’s summary judgment motion finding insufficient evidence for a reasonable juror to support either theory.

For the anti-kickback claim, relators alleged that SPI engaged in a number of activities, such as speaker programs, preceptorships, honorariums, free continuing medical education, and provided gifts such as dinners and event tickets, as part of a national scheme to illegally induce physicians to prescribe SPI’s drugs. In dismissing this claim on December 10, the court first found that the allegations of a nationwide scheme were unsupported because in relator’s response to interrogatories and expert report, only 46 Texas-based physicians were identified as having prescribed SPI’s drugs and as having allegedly received remuneration from SPI. The court observed:

[t]heoretically Relators could survive summary judgment with examples, the examples would have to be linked to remuneration from SPI, some evidence of intent that the remuneration would lead to claims, and claims for prescriptions written by these physicians that a reasonable juror could believe resulted from the unlawful remuneration.  Additionally, to continue a claim on a national-level scheme, Relators would need to demonstrate that kickbacks were provided to physicians in different areas of the country as part of a nationwide scheme to increase prescriptions of the specific Drugs at Issue to patients who are on Medicaid or part of some other government prescription program.

Since relators provided no physician examples outside of Texas, the court ruled the multi-state claims failed.

The court then examined each of the alleged forms of remuneration and found that the evidence was insufficient to find SPI had the requisite “knowing and willful” intent to induce referrals to support an anti-kickback claim under federal or Texas law. For example, the “physician profile interview program” involved sales representatives interviewing physicians prior to the launch of the drug Aceon to obtain information about the physicians’ practice and treatment of hypertension. Physicians were paid $100 for participating in this 30 minute interview. Sales reps were instructed to not mention Aceon during these interviews. Relators offered no evidence that sales reps failed to follow this instruction. Not surprisingly, the court found that the evidence failed to show that SPI intended the program to induce physicians to write prescriptions for a drug they were not told about. For other forms of remuneration, the court found that relators offered no proof that the physicians who received the remuneration actually prescribed SPI’s drugs.

In a separate ruling on December 14, the court granted SPI’s summary judgment motion dismissing relators’ “fraud-on-DrugDex” theory. To be eligible for government reimbursement for an off-label use of a drug, relators alleged that off-label use has to be [...]

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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.



Can Satisfying A Regulatory Requirement Now Equate To Providing Illegal Remuneration?

By and on Sep 9, 2015
Posted In , ,

Defending False Claims Act litigation is often a costly budget item. The disposal of weak cases by the government through the intervention decision making process has always been a critical safety valve for non-culpable defendants. Two of the more concerning trends in False Claims Act litigation, however, are (1) the increasing likelihood of relators pursuing factually and legally weak allegations after the government declines to intervene, and (2) courts allowing such cases to survive a Rule 9(b) motion to dismiss. A recent case in the Middle District of Florida involving the unintended consequences of a health system’s adherence to a local zoning obligation serves as a prime example of these troubling trends.

On August 14, 2015, in U.S. ex rel. Bingham v. BayCare Health System, the court denied the defendants’ motion to dismiss relator’s claim that BayCare Health System (BayCare) and an independent third party real estate developer, St. Pete MOB, LLC (St. Pete’s)—referred to by relator as BayCare’s “proxy”—entered into a “scheme” to enable BayCare to pass remuneration to physicians in violation of the Stark Law and Anti-Kickback Statute (AKS). According to the relator, the heart of this “scheme” is BayCare’s ground lease to St. Pete’s on a BayCare hospital’s campus to build a medical office building (MOB).

In this ground lease, BayCare provided a non-exclusive easement for MOB tenants to use the hospital’s parking facilities.  As pleaded by the relator, and acknowledged by the court, this easement was included in the lease “to satisfy zoning and other governmental requirements.”  Despite this salient fact, relator turns this legally-required easement into illegal remuneration under the Stark Law and AKS simply by alleging that one of BayCare’s purposes in providing the easement was for St. Pete to avoid incurring the costs to lease additional land and to build a parking garage, and then for St. Pete to “pass some or all of the millions of dollars in savings to physician tenants to encourage them to make or increase referrals.” However, the relator does not appear to have mustered support for this bald conclusion. The relator does not appear to allege that the terms of the physicians’ leases with St. Pete’s are problematic, other than suggesting that amending the leases in 2013 to allow the physicians, staff and patients to use the parking facilities to access the MOB at no charge is another sign of improper remuneration.  The relator also asserts that BayCare provided a “rent concession” to the tenant physicians (even though BayCare is not the landlord) by claiming a tax exemption for what is alleged to be non-exempt property, which saved St. Pete’s about $140,000 in real property taxes. The relator alleges, with little support, that this tax exemption resulted in lower rent charged to the physician tenants and that BayCare is culpable for this alleged remuneration even though St. Pete’s was the lessor.

The legal theory and factual problems with this case are multifold. BayCare’s legal obligation to meet the local zoning requirement for the easement should raise significant challenges for [...]

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