False Claims Act – Duane Morris Health Law

July 31, 2024July 31, 2024 by Seth A. Goldberg

Another Stark Law Action

I recently wrote about what appears to be a surge in Stark Law enforcement by the DOJ, and just days later the DOJ announced another Stark Law enforcement action. The Stark Law, or Physician Self-Referral Law, 42 U.S.C. § 1395nn, which is a strict liability statute that prohibits physicians from referring patients to an entity for “designated health services,” such as inpatient hospital, laboratory, or radiology services, in which the physician has a financial relationship, such as an ownership interest or compensation arrangements where the remuneration exceeds fair market value.

On July 26, 2024, the DOJ filed a Complaint against Murphy Medical Center, Inc. doing business as Erlanger Western Carolina Hospital and Chattanooga-Hamilton County Hospital Authority doing business as Erlanger Health System and Erlanger Medical Center (collectively, Erlanger) in the U.S. District Court for the Western District of North Carolina, alleging that Erlanger violated the Stark Law and thereby violated the False Claims Act, which permits the government to recover treble damages, among other relied.

The Complaint alleges, based on information provided by two qui tam relators, or whistleblowers, who worked for Erlanger as Chief Compliance Officer and Chief Financial Officer, that Erlanger developed a strategy to drive business to it by knowingly paying physicians large salaries and bonuses without regard to whether work was actually performed. Consequently, the Complaint alleges, Erlanger was paying more than fair market value in violation of the Stark Law. The Complaint notes instances where Erlanger should have been on notice of the disproportionate payment, but lacked or ignored internal controls and warning signs that could have resulted in a correction. The Complaint also notes that Erlanger had previously settled DOJ claims of Stark Law violations, agreeing to pay $40 million in 2005.

The Complaint provides specific examples of services provided by ten physicians who were compensated by Erlanger in amounts exceeding fair market value. Because those services, among others, billed to Medicare allegedly violated the Stark Law, the government asserted claims against Erlanger under the False Claims Act and for common law unjust enrichment and payment by mistake. The DOJ seeks damages against Erlanger of approximately $27.8 million.

The Erlanger action and the others I previously wrote about should remind hospitals and health systems to be vigilant about physician compensation structures, as the fair market value assessment may result in subtle disparities that nonetheless raise the specter of Stark Law violations. This is an area of compliance to be particularly mindful about.

July 22, 2024 by Seth A. Goldberg

DOJ Enforcing Stark Law Violations Through False Claims Act

The Stark Law, or Physician Self-Referral Law, 42 U.S.C. § 1395nn, prohibits physicians from referring patients to an entity for “designated health services,” such as inpatient hospital, laboratory, or radiology services, in which the physician has a financial relationship, such as an ownership interest or compensation arrangements where the remuneration exceeds fair market value. Although there is no private right of action under the Stark Law, an alleged Stark Law violation can provide the basis for a civil qui tam or whistleblower action under the False Claims Act.

For example, in March 2024, in United States ex rel. Lisa Parker v. Mohammad Athari M.D., et al. (4:20-cv-02056), the DOJ intervened and settled a claim for Stark Law violations where the qui tam relator asserted that a Houston-based physician had allegedly referred neurology patients to a diagnostic imaging center the physician owned. The settlement also resolved allegations that the physician falsely billed for medically unnecessary services under Medicare Part B. The whistleblower received 18% of the $1.8 millon settlement. Similarly, in October 2023, the DOJ intervened and settled the qui tam action styled U.S. ex rel. Pinto v. Cardiac Imaging, Inc., et al., No. 18-cv-2674 (S.D. Tex.), where the defendant, Cardiac Imaging Inc. and its owner, paid referring cardiologists fees exceeding fair market value for their referrals. The settlement value totaled $85,480,000.

While the anti-kickback laws are often the vehicle for claims under the False Claims Act, healthcare providers and entities doing business with them should be aware of the potential for Stark Law claims arising out of compensation arrangements for services and be focused on compliance accordingly.

February 29, 2024February 29, 2024 by Seth A. Goldberg

Healthcare False Claims Act Judgments/Settlements Lead Way in 2023

The DOJ recently reported that two-thirds of the $2.68 billion in False Claims Act judgments and settlements in 2023, or $1.8 billion, came from the healthcare industry. 2023 also marked the highest number of FCA settlements and judgments in a year, totaling 543.

The treble damages that result from FCA violations provide a powerful tool to the federal government to root out fraudsters who knowingly defraud the U.S. or fail to pay money owed to the U.S. As Principal Deputy Assistant Attorney General Boynton, head of the Justice Department’s Civil Division, stated, “the record-breaking number of recoveries reflects, those who seek to defraud the government will pay a high price.”

Healthcare FCA settlements and judgments spanned the industry, including managed care providers, hospitals, pharmacies, laboratories, long-term acute care facilities, and physicians. FCA claims settled or decided included charges against providers for overbilling and medically unnecessary billing, and charges against insurers for submitting inaccurate information, such as diagnosis codes, in order to increase reimbursement. Kickbacks and lab testing fraud were also the subject of FCA settlements and judgments.

October 8, 2019October 8, 2019 by Duane Morris

Discovery Ruling in District of Minnesota May Have Far-Reaching Implications for FCA Defendants

In a concise, six-page discovery order, a federal judge in Minneapolis may have just started the proverbial shifting of tectonic plates undergirding routine defense procedures in False Claims Act (FCA) litigation by requiring a defendant in an FCA lawsuit to produce the information provided to the Department of Justice (DOJ) during the DOJ’s process of determining whether to pursue the matter.

The FCA creates liability for persons or entities found to have knowingly submitted false claims to the government or having caused others to do so. Like some other federal laws, the FCA creates a private right of action; under the act, a private party—a whistleblower or “relator”—may bring a qui tam action on behalf of the government. When initially filed, the court seals the complaint pending the government’s investigation of the case. If the government chooses, it may intervene and pursue the matter. If not, the relator may pursue the case on its own. (In either case, the relator is entitled to a percentage of the government’s recovery.)

View the full Alert on the Duane Morris LLP website.

February 8, 2018February 9, 2018 by Duane Morris

False Claims Act Enforcement Activity Continues

By Susan V. Kayser

New U.S. Department of Justice (DOJ) statistics released in January 2018 show that False Claims Act (FCA) whistleblowers who are not joined by the DOJ in their lawsuits reaped $898 million in proceeds in 2017, far greater than the $425 million initially reported by the DOJ. However, in a coincidental turn of events, just hours after the new statistics were released a Florida federal court judge overturned a $350 million FCA verdict against a nursing home operator, Salus Rehabilitation, LLC. Accordingly, the DOJ statistics will likely be revised again to reflect 2017 proceeds of $548 million for whistleblowers.

The ruling in the Salus Rehabilitation case is itself worthy of attention. The Salus whistleblower alleged record-keeping violations and a scheme to boost Medicare and Medicaid reimbursement by exaggerating the medical needs of nursing home residents. Overriding a jury verdict, U.S. District Court Judge Steven D. Merryday ruled that a whistleblower’s allegations that the provider defrauded Medicaid were not sufficient to sustain a hefty FCA judgment. He wrote “… the evidence and the history of this action establish that the federal and state governments regard the disputed practices with leniency or tolerance or indifference or perhaps with resignation to the colossal difficulty of precise, pervasive, ponderous, and permanent record-keeping in the pertinent clinical environment.”

In making his ruling, Judge Merryday relied heavily on Universal Health Services v. Escobar, a 2016 U.S. Supreme Court ruling that established a set of requirements that must be met before a FCA judgment can be brought against a provider. Among the requirements are that the government and whistleblowers must show the government would not have paid the underlying claims if it knew of the regulatory violations alleged. The Escobar decision found that continued government reimbursement after fraud allegations are made is strong evidence that the allegations are not material. Judge Merryday noted that in the Salus case the government continued to pay for services rendered and stated that the whistleblower did not provide enough evidence to prove that Medicaid reimbursement would have stopped even if the government were aware of paperwork problems at the Salus facility. Clearly, the Salus decision is a victory for providers.

February 3, 2016 by Seth A. Goldberg

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.

January 22, 2016 by Seth A. Goldberg

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.

January 22, 2016January 22, 2016 by Seth A. Goldberg

Wife Joins Husband Behind Bars for Healthcare Fraud

On Tuesday, January 19, a federal judge in Texas sentenced Patricia Akamnonu to 10 years in federal prison for her role in a conspiracy to commit healthcare fraud. Akamnonu and her husband, Cyprian Akamnonu, who together owned Ultimate Care Home Health Services, pleaded guilty to their role in the conspiracy, which involved them and others recruiting Medicare beneficiaries for treatment at Ultimate and then billing for skilled nursing services that the beneficiaries either did not qualify for or were not necessary. Mr. Akamnonu is currently serving out a similar 10-year sentence, and both were ordered to each pay $25 million in restitution.

The conspiracy, which raked in $40 million plus for Ultimate and $375 million for all of the co-conspirators, is considered one of the largest healthcare frauds in history. Dr. Jacques Roy, who certified more than 78% of the false claims submitted to Medicare by Ultimate and the Akamnonus, is scheduled to be tried for his role in the conspiracy in May 2016, and faces a possible life sentence.

A reminder to providers that healthcare fraud can carry stiff criminal and civil penalties.

January 15, 2016 by Seth A. Goldberg

False Claims Act Claims Dismissed by Federal Court in Florida

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.

January 13, 2016January 13, 2016 by Seth A. Goldberg

$125 Million Settlement For Alleged FCA Violations

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.