In the Spring 2015 edition of The Wharton Healthcare Quarterly, Duane Morris partner Lisa Clark’s article, “Affidavit: Healthcare and the Law – Healthcare Reform Update: What’s in a Name?,” discussed the innovations under the Affordable Care Act (ACA). One of the innovations was the Accountable Care Organization (ACO), where a new healthcare reimbursement system was introduced as an alternative to the tradition fee-for-service model. Over the years, the Accountable Care Organizations and other value-based models will be tested and hopefully, there will be buzz around this new model in the next year.
The Department of Justice’s sweeping arrest of nearly 250 people for healthcare fraud yesterday shows that they are still following an approach long used by narcotics investigators. By investigating and prosecuting healthcare professionals like drug dealers, the DOJ risks creating long term and even unintended consequences for healthcare professionals.
In an article for the American Health Care Association entitled Healthcare Fraud is the Quiche of the ‘80s, I pointed out that the government is investigating healthcare fraud with the same linear approach it investigates drug cases: identifying someone with “low level” culpability, developing informants, working up the chain-of-command to the “leaders” of the operation, take a picture with a big pile of drugs, declare victory, celebrate, repeat.
Yesterday the government revealed another page from its playbook – the roundup.
When I was a narcotics prosecutor our efforts yielded awards. We called our operations Sudden Impact. Indict lots of offenders but hold back and arrest them all at once. Why do this? There are some very legitimate benefits. First off, it does draw attention to a serious problem. The allegations of 243 defendants and over $700 million in fraud is significant (and just the tip of the iceberg). Furthermore, when we arrested 50 local drug dealers in one day – we suddenly noticed other known dealers leaving town. Why? The dealers knew what they had done but did not know who we had arrest warrants for and did not want to wait around to find out! Presumably, this sweep may deter those who are committing (or considering) healthcare fraud.
However, there are very real problems with applying these approaches to healthcare fraud.
The investigative approach of trading up the criminal “chain-of-command” only works if the degree of culpability follows a consistent progressive hierarchy. In healthcare fraud that not always true. Who is prompting or encouraging the fraud varies. It could be the owner, the patient, the nurses, the doctors, the recruiters, the billers… anyone involved in the transaction can lead it astray. The government’s assumption that physicians and other healthcare professionals should face the most punishment, and investigating accordingly, can yield miscarriages of justice.
The consequences of roundups is that it does scare people away – but not always the right people. Healthcare professionals are under attack and many quality professionals feel like even an honest mistake will subject them to scrutiny for potential fraud. They are not wrong. Many quality and honest healthcare professionals are deciding that being presumptively viewed as suspects is just not worth it. Some are leaving healthcare – others, more commonly, are abandoning the Medicare and Medicaid system – thus denying the recipients of government-sponsored healthcare access to quality healthcare providers. The government needs to be aware of the unintended consequences of its actions – no matter how laudable its motives may be.
There are lessons to be learned:
- The war is on. Healthcare is under attack. Whether civil, administrative, or criminal – there are consequences. Innocence does not entirely insulate you from consequence because exoneration comes at a cost. Investigating and defending these allegations is not inexpensive and too many people only remember the allegation – not the outcome.
- Perform a checkup. Healthcare professionals should heed their own advice and obtain some preventative care. The days of honest mistakes are over and one should address a problem before it becomes acute.
- The roundup is coming soon to a city near you. Getting out in front of it – understanding and evaluating your exposure – and establishing policies and practices to minimize any future exposure is just what the doctor ordered.
Following up on a post from last week entitled “OIG Issues Fraud Alert on Medical Director Arrangements“, the US Department of Justice announced today a $17 million settlement of a False Claims Act suit brought by the former CFO of a Miami nursing home network.
The FCA claim accused the nursing home company of running a kickback scheme. According to the settlement, from 2006 through 2013, the nursing homes allegedly hired physicians as medical directors in sham positions at its facilities. The physicians performed few or no contractual job duties. The sham positions were essentially disguised payments for referrals to the facilities.
The case is United States of America et al v. Plaza Health Network et al, case number 1:12-cv-20951, in the U.S. District Court for the Southern District of Florida.
On June 9, 2015, the Office of the Inspector General of the US Department of Health and Human Services (“OIG”) issued a fraud alert entitled: Physician Compensation Arrangements May Result in Significant Liability.
This isn’t the first time the OIG has warned providers and physicians about questionable compensation relationships for medical director or administrative services. The OIG advised that compensation arrangements such as medical directorships must be fair market value for bona fide services the physicians actually provide. The OIG cited to its recent settlements with 12 individual physicians who entered into questionable medical directorship and office staff arrangements as the primary reason for the issuance of the fraud alert. Continue reading OIG Issues Fraud Alert on Medical Director Arrangements
In an opinion that sets forth a blueprint to class action certification for healthcare providers challenging insurance companies’ claim practices, a federal district court in New Jersey has granted class certification in DeMaria v. Horizon Healthcare Inc., d/b/a BlueCross BlueShield of New Jersey, No. 11-7298 (WJM) (D.N.J. June 1, 2015), an action brought by participating and non-participating chiropractors who treated patients insured by Horizon Healthcare Services, Inc., d/b/a BlueCross BlueShield of New Jersey and Horizon HMO. The plaintiff chiropractors allege that Horizon systematically denied payment of insurance benefits for certain chiropractic treatments provided by the plaintiffs. The district court held that the Complaint satisfied the elements for class certification under Fed.R.Civ.P. 23(a), as well as 23(b)(1) and 23(b)(3) and granted class certification.
Plaintiffs alleged that the class members regularly provided three types of chiropractic treatment: (1) chiropractic manipulative therapy (“CMT”); (2) evaluation and management services (“E/M”); and (3) ancillary physical therapy (“PT”). Horizon allegedly paid the plaintiffs for CMT, but denied all claims for E/M and PT on the grounds that its “bundling” practice incorporated payments for all chiropractic treatments into a “global fee” for CMT. Horizon’s denial of these claims was automatic, as was its denial of all appeals. Horizon’s Explanation of Benefit forms stated that the claims for E/M and PT were denied because chiropractors were “not eligible” for payment for those services. Plaintiffs sought relief for Horizon’s denial of E/M and PT claims on the ground that Horizon’s bundling practice violated the Employment Retirement Income Security Act of 1974 (ERISA) and breached its contracts. Continue reading New Jersey Federal Court Grants Class Certification To Chiropractors Challenging Systematic Denial Of Claims By Horizon Under ERISA And State Law
The Government and IPC The Hospitalist Company, Inc. (“IPC”) continue their False Claims Act (“FCA“) fight in court, now disputing the scope of discovery in light of the Northern District of Illinois’ partial denial of IPC’s motion to dismiss (detailed by Duane Morris here). The Government has moved to strike certain of IPC’s general objections to discovery: (1) IPC’s objection to producing documents from IPC’s nationwide operations and (2) IPC’s objection to producing documents dated after December 31, 2010 (“Motion“).
Five ambulance companies have agreed to pay $11.5 million to resolve a False Claim’s Act suit brought by a former competitor alleging allegations of the Anti-Kickback statute. (United States ex rel. Carlisle v. Pacific Ambulance, S.D. Cal., No. 3:09-cv-02628-L-BLM, dismissal 5/7/15).
The complaint was levied by the former CEO of a medical care transportation company against several former competitors. The CEO acknowledged the discounts as having historically been a standard practice across the industry and even admitted his own company once offered these same services, but stopped after learning of another allegation of impropriety involving similar conduct. This case continues a trend that anything that could even conceivably be portrayed as being “of value” can be framed as an incentive for referrals and thus become the subject of Anti-Kickback statute scrutiny. Long Term Care providers should proactively evaluate their existing relationships because liability for a violation of the Anti-Kickback statute runs both ways: to the person providing the kickback as well as the party receiving the benefit.
This case should act as a reminder to all healthcare providers and their ancillary partners of the expanding reach of the Anti-Kickback statute and the potential for scrutiny. It illustrates that the scrutiny can emanate from more than just the government. It could result from a survey, an audit or investigation, from competitors within the marketplace, or former employees through the use of the false claims act qui tam provisions. It should also underscore the importance of consistently reevaluating internal practices based on today’s norms. What was once acceptable may no longer be and “everyone was doing it” is no longer a viable defense (if it ever was).
This settlement comes on the heels of the March 2015 OIG Advisory Opinion No. 15—04 (available at https://oig.hhs.gov/fraud/docs/advisoryopinions/2015/AdvOpn15-04.pdf (last accessed May 28, 2015)) in which the Inspector General opined that a laboratory waiving some portion of the patient’s fees to obtain exclusive rights to the medical practice’s laboratory work might violate the Anti-Kickback statute. In that instance, the perceived potential benefit to the providers included such “controversial” concerns as improving efficiency for doctors, avoiding administrative burdens, and enjoying consistency in communications regarding the reporting of test results. We are, arguably, nearing a point where practices which denote the hallmark of good business in any other industry can continue to be vilified and, potentially, criminalized in healthcare.
These decisions illustrate the continuing trend of broadening the scope of potential Anti-Kickback statute liability. The most prudent course of action is to intensely analyze anything (beyond quality services) that might be cast as providing incentive to refer. Regularly performing these assessments (internally or externally) is the best practice for providers intent on avoiding the scrutiny of the federal government’s investigative arm or the burdens of a False Claims Act.
The Medicare Part B appeal process is lengthy and cumbersome, typically requiring full exhaustion of administrative remedies, including an administrative request for reconsideration, an ALJ hearing and Departmental Appeals Board review. The process is especially frustrating when the appeal involves a challenge to a Local Coverage Determination (“LCD”), likely to have spawned several individual appeals of the same decision.
The Medicare Act does provide a shortcut to a legal review by way of 42 U.S.C. § 1395ff(f)(3) which provides that a Medicare recipient “may seek review [of an LCD] by a court of competent jurisdiction without … otherwise exhausting other administrative remedies.” This direct access to court review applies only if “there are no material issues of fact in dispute, and the only issue of law is the constitutionality of a provision of this subchapter or that a regulation, determination or ruling by the Secretary is invalid.” Continue reading California Medicare Appeal Applies Strict Standing Rules
An article in The Philadelphia Inquirer reported about the reluctance of major banks to participate in the marijuana industries in those states that have legalized marijuana for recreational and/or medicinal purposes because marijuana is still a Schedule 1 controlled substance under the federal Controlled Substance Act. I have previously written that lawyers in those states share similar concerns because the rules of ethics prohibit lawyers from assisting clients in illegal activities.
The conflict between state legalization and federal criminalization of marijuana thus appears to be depriving the businesses and individuals, such as investors, growers, manufacturers, dispensaries, physicians, patients, and consumers, currently or potentially participating in the emerging marijuana industry from the two resources – lawyers and bankers – that are arguably the most important to the establishment and sustained growth of an emerging, regulated industry. This is especially concerning given the importance to all citizens of the careful implementation of marijuana legislation. Continue reading Bankers, Lawyers, and the Conflict Between State and Federal Marijuana Laws
Earlier this year, I wrote that 2015 might be the year that medical marijuana legislation is passed in Pennsylvania. This was because in 2014 the PA Senate approved such legislation, and, although the legislation sat in the PA House through the end of the term, the election of Governor Tom Wolf removed the additional hurdle of a veto by former Governor Tom Corbett were the PA House to pass the legislation.
On May 12, 2015, the PA Senate again passed a medical marijuana bill. It obviously remains to be seen what the PA House will do, but given Governor Wolf’s indication that he would not veto such legislation should it reach his desk, and reports that up to 88% of PA residents are in favor of legalized medical marijuana, the odds of legalization in 2015 seem to be improving. Continue reading PA Senate Passes Medical Marijuana Legislation Again