US Department of Justice

Earlier this year, DOJ and OIG independently issued guides focused on evaluating compliance program effectiveness. The guides approach the topic from different perspectives but cover overlapping themes and work well in tandem. We reviewed the guides and compiled the reference tool to aid organization executives and boards of directors to measure compliance program effectiveness and, in turn, wisely invest resources.

Read the full article “Breaking Down the 2017 DOJ and OIG Compliance Guides.”

One of the most litigated issues following the Supreme Court’s Escobar decision is whether the Court created a limited, two-part test to define the implied certification theory under the False Claims Act. In the US Court of Appeals for the Second Circuit, the prevailing view confirms that the proper interpretation of Escobar is that the implied certification theory can only proceed when the defendant made specific representations about the goods or services provided and that those representations were rendered misleading due to its failure to disclose noncompliance with material statutory, regulatory or contractual requirements. On August 10, 2017, federal district judge Deborah Batts in the Southern District of New York joined the majority view of her colleagues in U.S. ex. rel. Forcier v. Computer Sciences Corporation and the City of New York in dismissing part of the government’s complaint.

In this case, the US Department of Justice (DOJ) filed a complaint in intervention alleging the City of New York (City) and its billing contractor, Computer Sciences Corporation (CSC), submitted false claims to the Medicaid program in two ways.

First, DOJ argued that the defendants failed to adhere to Medicaid secondary payor requirements concerning the state’s Early Intervention Program (EIP), which pays for services to children with developmental delays. These requirements obligate municipalities to take “reasonable measures” to determine whether third party insurance coverage was available for the EIP services and seek reimbursement from such available payors. DOJ alleged that CSC and the City did not comply with these requirements by submitting incorrect policy numbers to third party insurers knowing that such claims would be denied and by incorrectly informing Medicaid that no third party coverage existed or such coverage had been rejected. Continue Reading Latest District Court Decision Confirms Escobar Two-Part Implied Certification Test

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].” Continue Reading Physician Compensation Scrutiny Continues in Recent FCA Settlement

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.

In a case of first impression, a federal court found that the federal physician self-referral law’s (Stark Law) requirement that financial arrangements with physicians be memorialized in a signed writing could be material to the government’s payment decision. This case raises troubling questions about applying the False Claims Act (FCA) to what many in the industry consider “technical” Stark issues, especially given the Supreme Court’s description of the materiality test as “demanding” and not satisfied by “minor or insubstantial” regulatory noncompliance.

United States ex rel. Tullio Emanuele v. Medicor Associates (Emanuele), in the US District Court for the Western District of Pennsylvania, involves Medicor Associates, Inc., a private medical group practice (Medicor), and Hamot Medical Center’s (Hamot) exclusive provider of cardiology coverage. Tullio Emanuele, a qui tam relator and former physician member of Medicor, alleged that Hamot, Medicor, and four of Medicor’s shareholder-employee cardiologists (the Physicians) violated the FCA and Stark Law because Hamot’s multiple medical director compensation arrangements with Medicor failed to satisfy the signed writing requirement in the Stark Law’s personal services or fair market value exceptions during various periods of time. The US Department of Justice declined to intervene in the case, but filed a statement of interest in the summary judgment stage supporting the relator’s position. Continue Reading Is the Stark Law’s “Signed Writing” Requirement Material to Payment: One Federal Court Says Yes

Released on March 27, 2017, the Compliance Program Resource Guide (Resource Guide), jointly prepared by the US Department of Health and Human Services Office of Inspector General (OIG) and the Health Care Compliance Association (HCCA) reflects the result of a “roundtable” meeting on January 17, 2017, of OIG staff and compliance professionals “to discuss ways to measure the effectiveness of compliance programs.” The resulting Resource Guide document catalogues the roundtable’s brainstorming discussions to “…provide a large number of ideas for measuring the various elements of a compliance program…to give health care organizations as many ideas as possible, to be broad enough to help any type of organization, and let the organization choose which ones best suit its needs.”

Here are a few main takeaways from the Resource Guide:

  • Ideas for Auditing: The Resource Guide contributes to the critical conversation about how to evaluate compliance program effectiveness by listing additional ideas on what to audit and how to audit those areas. The items listed in the Resource Guide generally center on ideas on auditing and monitoring compliance program elements, such as periodically reviewing training and policies and procedures to ensure that they are up-to-date, understandable to staff and accurately reflect the business process as performed in practice. Legal and compliance can use this document to identify those particular elements that may be most applicable to their individual organization.

Organizations would also benefit from considering the questions listed in the new compliance program guidance issued in February by the US Department of Justice (DOJ) Criminal Division’s Fraud Section, “Evaluation of Corporate Compliance Programs” (DOJ Guidance), as part of examining compliance program effectiveness. (We covered the DOJ Guidance previously.) Health care organizations may also use the various provider-specific compliance program guidance documents created by OIG over the years as another source for ideas on what to measure.

  • Not a Mandate: The Resource Guide is very clear that it is not intended to be a “best practice”, a template, or a “‘checklist’ to be applied wholesale to assess a compliance program.” This clarification is an important one since there is the potential for the Resource Guide to be (incorrectly) viewed by qui tam relators or others as creating de facto compliance program requirements or OIG recommendations.
  • How to Measure: The Resource Guide does not delve into how or who should undertake or contribute to the effectiveness review. Who conducts the review is a question that may have legal significance given the nature of a particular issue. General counsel and the chief compliance officer should consider this issue as part of the organization’s ongoing compliance program review. It may be valuable to include the organization’s regular outside white collar counsel to comment on such critical, relevant legal considerations as the proper conduct of an internal investigation; preserving the attorney-client privilege in appropriate situations; coordinating communications between legal, compliance and internal audit personnel; and applying “lessons learned” from the practices of qui tam relators and their counsel. Outside consultants may also have useful expertise and insight to contribute. In some situations, the organization may want to undertake a compliance program assessment conducted under attorney-client privilege as part of advising the executive team and the board audit and compliance committee.

Perhaps the greatest benefit of the Resource Guide is the extent to which it serves as a catalyst for closer, coordinated consideration of the metrics by which compliance program effectiveness may be measured by legal and compliance personnel and the audit and compliance committee. The Resource Guide is one of several resources that can be referenced by the general counsel and the chief compliance officer as they work together to support the organization’s audit and compliance committee in reviewing compliance program effectiveness.

The law is uncertain. One example of this uncertainty is how the “Yates memo” is to be applied in civil cases — in particular, what constitutes “cooperation” and how cooperation may benefit a company under investigation for False Claims Act violations. On September 29, 2016, DOJ attempted (for a second time) to address the lack of clarity surrounding cooperation in civil matters. While DOJ provided some more detail on what it viewed as “full cooperation,” and indicated that “new guidance” had been issued within DOJ on cooperation in civil enforcement matters, it still failed to give concrete guidance on how such cooperation may benefit a company in a FCA or other civil resolution. In essence, DOJ is saying “Trust Us” to companies considering the potential benefits of cooperation.

Read the full article here.

On June 29, 2016, the US Department of Justice (DOJ) issued an anticipated interim final rule that substantially increases penalties under the False Claims Act (FCA).  Under the interim final rule, minimum penalties per claim will dramatically spike from the current $5,500 to $10,781, and the maximum penalties per claim will jump from $11,000 to $21,563.  As we previously reported, the substantial increase in FCA penalties has been expected since the Railroad Retirement Board (RRB) issued a similar interim final rule in May 2016.  The massive increase in FCA penalties comes in response to the Bipartisan Budget Act of 2015, which requires agencies to adjust penalties for inflation over the past 30 years.

The increased FCA penalties are set to go into effect on August 1, 2016 and will apply to claims after November 2, 2015.  As we have observed, the increased FCA penalties may raise constitutional concerns regarding defendants’ due process rights and under the Eighth Amendment’s bar on excessive fines.  With FCA cases increasingly involving tens of thousands of claims, the application of these increased penalties could easily result in circumstances where punitive recoveries are dramatically out of proportion with single damages.

There is a 60-day comment period associated with the interim final rule, which is available here.

On May 27, 2016, the US Department of Justice said it will appeal to the Eleventh Circuit its loss in the False Claims Act (FCA) case against hospice chain AseraCare Inc. The government’s decision to appeal comes as no surprise, and it means that the substantial attention this case has received will continue.

As a reminder, this case, U.S. ex rel. Paradies v. AseraCare, Inc., focused on whether AseraCare fraudulently billed Medicare for hospice services for patients who were not terminally ill. AseraCare argued (and the district court ultimately agreed) that physicians could disagree about a patient’s eligibility for end-of-life care and such differences in clinical judgment are not enough to establish FCA falsity.

The government appealed three orders issued by the US District Court for the Northern District of Alabama. We previously posted about each of these three orders.

The first order on appeal is the district court’s May 20, 2015 decision bifurcating the trial, with the element of falsity to be tried first and the element of scienter (and the other FCA elements) to be tried second. The government had unsuccessfully sought reconsideration of this decision.  This is the first instance in which a court ordered an FCA suit to be tried in two parts.

The second order on appeal is the district court’s October 26, 2015 decision ordering a new trial, explaining that the jury instructions contained the wrong legal standard on falsity. This order came after two months of trial on the element of falsity and after a jury verdict largely in favor of the government.

The third order on appeal is the district court’s March 31, 2016 decision, after sua sponte reopening summary judgment, granting summary judgment in favor of AseraCare. In dismissing the case, the court explained that mere differences in clinical judgment are not enough to establish FCA falsity, and the government had not produced evidence other than conflicting medical expert opinions.

The government must file its opening brief 40 days after the record is filed with the Eleventh Circuit. We will be watching this case throughout the appellate process.