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.
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.
In an important decision for providers facing a lawsuit alleging violations of the False Claims Act, the U.S. District Court for the Middle District of Florida, in U.S. ex rel. Pelletier v. Liberty Ambulance Service, Inc., Case No. 3:11-cv-587-J-32MCR (Middle District of Florida, Jacksonville Division), dismissed the government’s complaint intervening in a qui tam action that alleged that Liberty Ambulance Service, among other providers that settled with the government prior to the dismissal, submitted false claims to Medicare and Medicaid for ambulance services that were never provided, on the basis that the government’s complaint failed to satisfy the heightened pleading requirements under Federal Rules of Civil Procedure 8 and 9.
The Court’s decision is significant because the government attached to its complaint affidavits of current and former employees of Liberty and a dispatcher, along with other materials, suggesting that falsified reports were submitted to Liberty that would be payable by Medicare and Medicaid, but, as the Court found, “the allegations stop short of describing what happened once the run reports were submitted to the Liberty office for processing.” The Court’s decision hinged on the lack of any evidence pertaining to the actual billing process employed by Liberty. In fact, the affidavit of the person who claimed the most familiarity with that process, did not claim to have witnessed the submission to the government of any actual false claims.
Although the dismissal was without prejudice to the government amending the complaint to provide greater particularity, the decision is an important example for providers facing False Claims Act claims of how the heightened pleading requirements under FRCP 8 and 9 may strengthen their defense.
In a settlement with the US DOJ in U.S. ex rel. Halpin and Fahey v. Kindred Healthcare Inc. et al., 1:11-cv-12139, Kindred Healthcare, Inc., a skilled nursing and long-term care company, has agreed to pay the federal government more than $125 million for alleged False Claims Act violations by a therapy services company, RehabCare Group, Inc., acquired by Kindred in June, 2011.
RehabCare contracts with more than 1,000 skilled nursing facilities across the country, and, along with Kindred, is alleged to have caused those facilities to submit Medicare claims for services at the highest reimbursement levels that were not actually provided, or not necessary. Two whistleblowers stand to receive almost $24 million from the settlement.
While all providers need to have strong compliance, this is a reminder that larger providers, whose operations span multiple offices, cities and states, need to be especially vigilant and install strong company-wide compliance programs.
The Supreme Court has agreed to hear a case involving the implied certification theory under the False Claims Act. Implied false certification occurs when an entity has previously undertaken to expressly comply with a law, rule, or regulation, and that obligation is implicated by submitting a claim for payment even though a certification of compliance is not required in the process of submitting the claim. Many relators have tried to use this theory to turn a regulatory violation into a false claim–with its concomitant treble damages and statutory damages.
There has long been a split in the circuits regarding the viability of the implied certification theory. As recently as June 2015, the Seventh Circuit rejected the theory, stating that the “FCA is simply not the proper mechanism for government to enforce violations of conditions of participation contained in—or incorporated by reference into—a PPA [Program Participation Agreement].” Rejection of this theory recognizes that there administrative procedures designed to address regulatory violations.
In contrast, the Ninth Circuit has embraced the implied certification theory, stating “”[i]t is the false certification of compliance which creates liability when certification is a prerequisite to obtaining a government benefit.” The problem in the health care arena is that facilities promise to comply with a myriad of regulations when entering into PPAs, and certify compliance when submitting bills. Thus, under this theory, every single regulatory violation can turn into a false claim.
The health care industry will be closely watching the Supreme Court’s ruling on this important issue.
The Office of Inspector General identified “reducing waste in . . . hospice care” as one of the “top management challenges” for the 2015 fiscal year. The federal government’s efforts to respond to that challenge are illustrated by several recent developments in False Claims Act (“FCA“) cases brought against hospice care providers. For example, the Robinson-Hill, Betts, and Gooch cases discussed herein underscore the attention given to hospice care providers and their alleged billing and personnel-related practices, and the high monetary settlements that can result from such attention.
Continue reading “Recent Trends In FCA Litigation Against Hospice Care Providers”
In Tierney v. Advocate Health & Hospitals Corp., the Seventh Circuit recently affirmed the dismissal of a Fair Credit Reporting Act (“FCRA“) complaint and found that a hospital was not a “credit reporting agency” under the FCRA. Continue reading “Seventh Circuit Finds Hospital Not A “Credit Reporting Agency””
The number of far-reaching and burdensome False Claims Act (FCA) decisions increases by the day. In an August 14, 2015 order by the U.S. District Court for the Middle District of Florida, a whistleblower’s complaint survived a motion to dismiss based upon some rather attenuated allegations. Since this matter was decided at the pleadings stage, the facts may ultimately dictate a different outcome; nevertheless, the cost and burden of defending the case may result in a costly settlement precipitated by this decision.
In the case, U.S. ex rel. Bingham v. BayCare Health System, the claim is that BayCare’s construction of medical office buildings, common areas, walkways and garages on the campus of a BayCare hospital (St. Anthony’s Hospital), provided a benefit to referring physicians sufficient to constitute prohibited remuneration under the Stark law. The medical office building was constructed by an entity called “St. Pete MOB, LLC”, which is not described as having ownership by referring physicians. Although the facts are not clear, it appears that the allegedly improper benefit to physicians took the form of BayCare providing a “non-exclusive parking easement” to St. Pete MOB. Continue reading “Another far-reaching FCA decision”
The Stark Law, 42 U.S.C. 1395nn, places restrictions on lease arrangements between physician groups and hospitals for equipment owned by the physicians, leased to the hospitals and then used by the same physicians to treat patients at the hospital. Under the Stark Law, such leases are prohibited unless the arrangement complies with the equipment rental exception, 42 U.S.C. 1395nn(e)(1)(B).
One requirement of the equipment rental exception, which is both statutory and regulatory (42 C.F.R. 411.357(b)), is that the rental charges be “set in advance.” In a recent case from the D.C. Circuit Court of Appeals, Council for Urological Interests v. Burwell, the court considered whether a “per-click” or “per-use” fee could be considered “set in advance” and otherwise meet the criteria for the exception. In an oddly constructed opinion, the court struck down a regulatory prohibition on per-click arrangements, but remanded under terms that would permit the restriction to be re-instated. Continue reading ““Per-click” fees OK but don’t count on it”
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”