Category Archives: Healthcare Litigation

GAO Report: Assisted Living Providers & Federal Regulation

Neville M. Bilimoria
Neville M. Bilimoria
GAO Report: Assisted Living Providers & Federal Regulation
On February 5, 2018, the Government Accountability Office, a nonpartisan investigative arm of Congress, found that there are huge gaps in regulation of assisted living facilities. The report, entitled “Medicaid Assisted Living Services: Improved Federal Oversight of Beneficiary Health and Welfare is Needed,” comes on the heels of years of discussion as to whether assisted living facilities are sufficiently regulated by individual states, or whether further federal oversight is warranted.

The suggestion of the need for federal regulation of assisted living came from GAO’s finding that more than $10 billion a year is spent from federal and state funds for assisted living services for more than 330,000 Medicaid beneficiaries. With demand for additional Medicaid assisted living funding, and the potential increase in demands of the senior population in the next 5 years, these numbers will continue to rise significantly as noted by the GAO: “Medicaid spending on long-term care is significant, representing about one quarter of Medicaid spending annually and is expected to grow with an aging population.” Continue reading GAO Report: Assisted Living Providers & Federal Regulation

Illinois Posts Medicaid Managed Care Performance Report

In January 2018, The Office of the Auditor General for the State of Illinois published its Performance Audit (“Audit Report”) of Medicaid Managed Care Organizations (“Medicaid MCOs”) for Fiscal Year 2016. What was unleashed was a startling review of the Medicaid MCOs’ performance over FY 2016 in administering the Medicaid Program for what was then called the Integrated Care Program (“ICP”) or Medicare/Medicaid Alignment Initiative (“MMAI”) Programs. You may recall these ICP and MMAI Medicaid MCO programs in Illinois involved almost a dozen Medicaid MCOs that covered about 70% of the State of Illinois Medicaid recipients.

The Audit Report played into health care providers’ deepest fears in Illinois: showing that Medicaid Managed Care may not be working as it was intended; namely, to reduce costs and improve quality of care in the Medicaid Program in Illinois. For example, long term care providers in Illinois had to fight tooth and nail with Medicaid MCOs under the ICP and MMAI programs, experiencing cumbersome Medicaid contracts, denied claims, delayed claims, and worse yet, a prior authorization administration problem (administrative MCO delay) which in some instances prevented residents from receiving care timely. Most, but not all, of those issues are still being resolved, but providers had hoped that there was a good reason for this madness involving Medicaid MCOs: better and lower cost care for Medicaid beneficiaries. Continue reading Illinois Posts Medicaid Managed Care Performance Report

Healthcare Fraud Takedowns

As a former federal prosecutor in Chicago, I am well acquainted with the phrase “takedowns.” For the unwary, a subject-area “takedown” is a practice used by federal prosecutors to send a message to a given industry. Prosecutors investigate and prepare to charge cases in a given industry sector and then release the charges nationally on the same day along with a press release. The idea is that such public “takedowns” serve as a deterrent to future criminal activity in the industry. For example, almost every April 15th, prosecutors across the country release charges in dozens of tax-fraud cases.

Recently, this practice has expanded into the healthcare industry. See more on the The Department of Health and Human Services Office of Inspector General website. In June 2016, there was the largest healthcare fraud takedown in DOJ history – prosecutors charged more than 300 defendants in 36 federal judicial districts (and this does not even include civil fraud investigations).

To read the full text of this blog post, please visit the Duane Morris White-Collar Criminal Law Blog.

FTC to Keep Healthcare and Pharmaceutical Sectors in Antitrust Crosshairs

While the Trump Administration’s antitrust policy is still developing, and most believe it will provide for less enforcement than antitrust policy under the Obama Administration, the Federal Trade Commission announced on Friday, March 31, that it has no intention of letting up on the healthcare and pharmaceutical sectors, where the FTC has been increasingly active over the past few years.  In 2016, the FTC challenged the mergers of hospitals/health systems in Illinois and Pennsylvania, and initiated actions to protect pharmaceutical price competition; early 2017 has been no different.

Thus, while the Trump Administration’s antitrust policy unfolds, and it may be less strict than the antitrust policy of the prior administration, healthcare and pharmaceutical industry participants should stay vigilant about antitrust compliance because the FTC intends to remain focused on competition in those sectors.

 

 

 

Cybersecurity and Emergency Preparedness for Long-Term Care

On January 13, 2017, the Centers for Medicare and Medicaid Services (“CMS”) sent a Memorandum (“Memo”) to State survey agency directors encouraging long-term care providers to “consider cybersecurity when developing or reviewing their emergency preparedness plans.” The Memo was a follow-up to the CMS long-term care emergency preparedness rule published in the Federal Register on September 16, 2016: “Medicare and Medicaid Programs; Emergency Preparedness Requirements for Medicare and Medicaid Participating Providers and Suppliers.” Under that final rule, long-term care facilities were held to additional standards, including requirements to have emergency and standby power systems in place. Nursing homes were also required to create plans regarding missing residents that could be activated regardless of whether the facility has activated its full-scale emergency plan. The rule was spurred on by recent flooding in Baton Rouge, Louisiana, and other emergency disasters, such as Hurricane Sandy and the 2009 H1N1 pandemic, according to CMS.

Whether State surveyors will actually enforce lack of cybersecurity plans for emergency preparedness as violations remains to be seen from this Memo. But certainly, a State survey agency could impose deficiencies for failure to have a proper cybersecurity plan and/or a proper cybersecurity back‑up plan as part of a facility’s emergency preparedness going forward. It is not clear why CMS decided to send this encouragement Memo three months after the Final Rule on emergency preparedness, but it likely has something to do with the fact that 2016 was a banner year for HIPAA privacy infractions and HIPAA enforcement by the Office for Civil Rights (“OCR”), the entity responsible for HIPAA compliance. In 2016, payouts for HIPAA violations skyrocketed to record heights of $23.51 million from OCR enforcers against health care providers. That number was triple the previous record of almost $7.94 million in payouts in 2014, followed by $6.19 million in payouts in 2015.

Continue reading Cybersecurity and Emergency Preparedness for Long-Term Care

Wound Company’s Antitrust Claim Tossed

Having dismissed the Sherman Act Section 1 conspiracy and Section 2 monopolization claims of Suture Express in August 2013, a federal judge in Kansas, on April 11, 2016, tossed the remainder of plaintiff’s $200 million claim, which asserted that Cardinal Health and Owens & Minor, wound care companies, entered into a predatory pricing scheme to prevent hospitals from buying the plaintiff’s competing products.  Suture Express, Inc., v. Cardinal Health, Inc., et al., 2:12-cv-02760.

The court determined that the summary judgment record did not demonstrate an injury to competition in the acute care market resulting from defendants’ alleged pricing arrangement, as the plaintiff failed to establish that defendants had market power.  Rather, according to the court, the record on summary judgment demonstrated a competitive market, where a number of defendants’ rivals have been able to grow their businesses and compete effectively against defendants, while defendants’ market shares have remained relatively stable; in fact, the court found that defendants’ themselves competed against one another.

In dismissing the case, the court noted, as courts usually do in cases where the record demonstrates, at most, an injury only to the plaintiff, the antitrust laws were designed to protect competition not competitors, and the failure to demonstrate an injury to competition in the market is fatal to a plaintiff’s Sherman Act claims.

Although, as this case shows, antitrust defendants may have to endure lengthy and expensive litigation, experienced antitrust counsel, familiar with the deep and growing body of defense-oriented antitrust decisions, have a number of arrows in their quiver for shooting down antitrust claims.

 

FTC Settles Antitrust Claims Against Orthopedists

Following an investigation, on December 14, 2015, the FTC filed a Complaint and a Decision and Order that resolved antitrust claims against 19 orthopedists in Berks County, PA, arising out of a 2011 merger of six independent physician groups in which the orthopedists practiced.  Those six groups merged to form Keystone Orthopaedic Specialties (“Keystone”).

According to the Complaint, the 19 orthopedists comprised 76% of the 25 physician orthopedic physician services market in Berks County.  Prior to the merger, competition among orthopedists was robust, with the 25 orthopedists in the market practicing in 11 different physician groups.  The merger, however, resulted in market concentration likely well above the thresholds for presuming market power and illegality under the Herfindahl-Hirschman Index.

According to the Complaint, because of the highly concentrated market and entry barriers, health plans operating in Berks County were unable to establish networks of orthopedists for their enrollees in Berks County, and were therefore forced to pay higher rates to the Keystone  orthopedists, which they passed on to their enrollees.

The Decision and Order imposes extensive multi-year restrictions on the types of joint arrangements the Keystone orthopedists and their practices may enter into going forward, prohibiting some arrangements altogether, while requiring FTC consent for others.

The lesson of Keystone is simple.  Physicians practicing in independent physician groups who are contemplating a joint venture of any kind should retain antitrust counsel to advise on and resolve any antitrust issues before the arrangement is consummated in order to avoid regulator scrutiny and the potential for the severe penalties and practice restrictions that come with it.

SCOTUS To Decide Viability and Scope of “Implied Certification” Liability

In Universal Health Services Inc. v. U.S. et al. ex rel. Escobar et al., case number 15-7, the U.S. Supreme Court will decide the viability and scope of the “implied certification” theory of liability under the False Claims Act.   That theory has been upheld in various circuits, resulting in FCA liability and penalties, including treble damages, for government contractors’ reimbursement claims where the contractor has failed to comply with a statute, regulation, or contractual provision that does not state that it is a condition of payment. For the healthcare industry, whose participants are generally subject to a gauntlet of federal and state regulations, statutory requirements, and contractual provisions, the significance of the implied certification theory of FCA liability is obvious.

The FCA imposes liability on any person who “knowingly presents, or causes to be presented, a false or fraudulent claim for payment or approval.” See 31 U.S.C. § 3729(a)(1)(A)-(G). “Knowingly” requires actual knowledge of false information, deliberate ignorance of the truth or falsity of information, or reckless disregard of the truth or falsity of information.” Id. § 3729(b)(1)(A)(i)-(iii). The FCA imposes a mandatory civil penalty of between $5,500 and $11,000 for each violation of the Act, as well as treble damages. 31 U.S.C. § 3729(a)(1); 28 C.F.R. § 85.3(a)(9).

Under the implied certification theory, a defendant may be held liable under the FCA where it knowingly violates a statute, regulation, or contractual provision, even if that provision has nothing to do with payment. In Universal Health, for example, the Petitioner, a mental health facility, was held liable under the FCA for failing to comply with Massachusetts regulations governing the scope of services and staffing requirements, including staff qualifications, certification, and supervision, at mental health facilities. Unlike other provisions in the Massachusetts regulations, these provisions did not condition reimbursement on their being complied with.  The specific injury in Universal Health alleged by the Relators was that their daughter experienced an adverse reaction to a drug that was prescribed by a nurse who was not supervised in accordance with the Massachusetts regulations; namely, the requirement that she be supervised by a board certified psychiatrist. Among other things, the First Circuit Court of Appeals determined that Petitioner’s lack of understanding of the regulatory requirements regarding supervision was sufficient to constitute a “knowing” violation of the FCA.

The Supreme Court will decide whether the implied certification theory of liability is ever viable, and, if so, whether it can be applied to claims for payment where the alleged falsity resulted from failing to comply with a regulatory, statutory or contractual provision that is not explicitly a condition of payment by the government.

The facts in Universal Health are not uncommon in the healthcare industry. Indeed, among other amici, the American Hospital Association, Federation of American Hospitals and Association of American Medical Colleges have jointly filed an amicus brief in support of Petitioner.

Dental Providers and Labs Allege Antitrust Conspiracy

Dental and orthodontic practices and dental laboratories around the U.S. are being represented in class actions filed this week in federal courts in Texas and New York, see, e.g., Comfort Care Family Dental, P.C. et al v. Henry Schein, Inc. et al, 1:16-cv-00282 (E.D. NY), that claim  defendants Henry Schein, Inc., Patterson Companies, Inc., and Benco Dental Supply Company (“Benco”), alleged to be the dominant dental product distributors in the U.S., together controlling over 80% of the national market for the distribution of dental supplies and dental equipment,  conspired to boycott competitors in that market in violation of Section 1 of the Sherman Act.

The Comfort Care complaint asserts that Defendants’ conduct constitutes a horizontal group boycott that resulted in either a per se violation of Section 1 or a violation of the Sherman Act under the “rule of reason,” and alleges that Defendants “frequently communicated with each other at in-person meetings, via electronic mail and texts, and through phone calls” to collectively respond to new competitors and pressure dental associations as part of the group boycott.   The Comfort Care complaint also provides economic information purporting to demonstrate that the alleged market is highly concentrated, has high barriers to entry, and has experienced increased pricing despite static or declining demand, all of which support the claim of anticompetitive conduct.

In addition to the private antitrust actions, as the Comfort Care complaint alleges,  various state AGs and the FTC are investigating  Defendants’ conduct as well, and Benco has already agreed to a consent judgment with the Texas AG pertaining to some of the conduct at issue in the private actions.

 

Another Healthcare Fraudster Convicted

In addition to the sentencing Tuesday of Patricia Akamnonu, owner of Ultimate Care Home Health Services, for 10 years for conspiring with her husband and others to commit healthcare fraud, late yesterday the owner and manager of three Miami-area home health agencies, Khaled Elbeblawy, was convicted on counts of conspiracy to commit healthcare fraud and wire fraud and one count of conspiracy to defraud the United States and pay healthcare kickbacks.

The $57 million healthcare fraud scheme involved Elbeblawy and his co-conspirators submitting false claims to Medicare for services that were not actually provided, not medically necessary, or for patients who were procured through kickbacks to doctors and patient recruiters.

The case was brought as part of the Medicare Fraud Strike Force, which operates in nine cities across the country, and has charged nearly 2,000 defendants who have collectively billed more than $6 billion.