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
U.S. Department of Justice
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Huge Stark Law Hospital Settlements and Physician Culpability – The New Normal Post-Tuomey?

By and on Sep 29, 2015
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After the federal government’s victory against Tuomey Hospital, we have seen an increasing number of large False Claims Act (FCA) settlements with hospitals involving Stark Law allegations. Despite the intricacies of Stark Law compliance, the U.S. Department of Justice (DOJ) has not shown much leniency in its treatment of these cases, as shown by two recent settlements involving Columbus Regional Healthcare System and North Broward Hospital District. This On the Subject explores some “lessons learned” from these settlements as well as DOJ’s emerging interpretation of the Stark Law that may put vertically integrated health systems’ physicians arrangements at risk for scrutiny.

Read the full On the Subject.



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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OIG Announces New Penalty and Exclusion Litigation Team to ‘Level the Playing Field’

By on Jul 2, 2015
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The federal government’s health care fraud enforcement efforts expanded this week with an announcement by the Office of the Inspector General (OIG), of the U.S. Department of Health and Human Services, that it has created a new litigation team dedicated to pursuing civil penalty and exclusion cases.

Read the full On the Subject discussing the announcement.



Court Refuses To Reconsider Bifurcation Order

By on Jun 29, 2015
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We previously posted on the U.S. Department of Justice’s motion for reconsideration of the United States District Court for the Northern District of Alabama’s order bifurcating the element of falsity from scienter (and the other False Claims Act (FCA) elements) at trial in U.S. ex rel. Paradies v. Aseracare, Inc. Last Thursday, the court denied the motion for reconsideration. The court was unpersuaded by DOJ’s contention that bifurcation had never been done before in an FCA case. “Just because a trial technique has never been done does not preclude the court from using its discretion to do so.”  The court also noted—perhaps turning DOJ’s “never been done before” argument against it—that “[t]he parties have not directed the court to any other False Claims Act trial involving a [M]edicare hospice benefit.”

With respect to DOJ’s arguments about juror confusion and duplicative evidence in the different phases of a bifurcated trial, the court rejected them, and reiterated its position that evidence of “general corporate practices” unrelated to actual, allegedly false claims would be inadmissible in the first trial phase.

While the court’s denial of the motion for reconsideration was not unexpected, it was undoubtedly the correct result, evidencing the court’s desire to ensure that DOJ properly establishes the element of falsity without unduly prejudicing the defendant with evidence irrelevant to the falsity question.  After all and in the words of the court, “no FCA liability exists without a false claim.”



Bifurcation Squarely Within Court’s Discretion, Notwithstanding DOJ’s Motion for Reconsideration

By on Jun 12, 2015
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On June 10, 2015, the Department of Justice moved for reconsideration of the U.S. District Court for the Northern District of Alabama’s May 20 decision in U.S. ex rel. Paradies v. AseraCare, Inc., a False Claims Act (FCA) case in which the court ordered bifurcation of the element of falsity from the element of scienter at trial, with the issue of falsity to be tried first.  Despite the government’s arguments, the bifurcation order was both within the court’s discretion and well-reasoned.

A primary feature of the government’s motion for reconsideration is its contention that bifurcation of this type has never before been done in an FCA case.  However, bifurcation lies squarely within a district court’s discretion: the applicable rule (F.R.C.P. 42) expressly provides for bifurcation of “one or more separate issues,” and there is no exception to this rule under the FCA.

The government’s position nonetheless suggests that there is something that categorically distinguishes bifurcation considerations in an FCA case from bifurcation considerations in other types of cases.  But this categorical argument is not particularly compelling; indeed, the government’s contention that bifurcation requires it “to jump over an arbitrary hurdle that is without precedent” does not resonate, given that falsity is a distinct element of an FCA claim and has always been a hurdle the government must surmount.  It is hardly arbitrary—a false claim is the central feature of an FCA case, without which there is no case.  In any event, whether or not bifurcation has ever before been ordered in an FCA case, the court found that the specific circumstances in this case warranted bifurcation.

An important consideration underlying the bifurcation order was the court’s prior decision authorizing the use of sampling and extrapolation to prove falsity, a ruling on which we previously reported.  Given that decision, it is entirely proper for the court to take the precaution of bifurcation to prevent evidence that is not relevant to falsity from improperly infecting the jury’s determination of whether the claims within the sample were false.  This is particularly true given that the government indicated it would seek to present evidence of general corporate practices at trial.  The court properly held that “[a]llowing such general ‘pattern or practice’ evidence before the jury decides whether any claim is false would be unduly prejudicial to Aseracare.  Further, this type of evidence would be confusing to the falsity analysis as the jury must view each claim separately to determine whether it is objectively false.”  The court went on:

Essentially, the Government argues that the existence of the scheme proves the falsity of the claims.  The court disagrees.  The Government must show that each separate claim within the 233 patient sample is objectively false.  Falsity cannot be inferred by reference to AseraCare’s general corporate practices unrelated to specific patients.  A claim is either false or not without evidence of corporate practices unrelated to that claim.

The government presented several other arguments in its motion for reconsideration, including that some [...]

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

By on May 20, 2015
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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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