Tag Archives: False Claims Act

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.

Hospital CEO to pay $1.25 million False Claims tab; a chilling reminder for health system and hospital leadership

2019 is well underway and so are Q1 board meetings.  If you haven’t done so already and serve on a hospital board or work with hospital boards, look back at the December 11, 2018 DOJ press release which announced that a Pennsylvania hospital and health system CEO agreed to pay $1.25 million. https://www.justice.gov/usao-edpa/pr/coordinated-health-and-ceo-pay-125-million-resolve-false-claims-act-liability  

The announcement caught the attention of CEOs, board members and other health leaders across the country as a pre-holiday reminder of the potential for individual civil and criminal liability arising out of compliance failures.  Dr. Emil Dilorio, the founder, principal owner and CEO of Coordinated Health Holdings Co., a for-profit hospital and health system, agreed to settled allegations with the DOJ under the False Claims Act.  The DOJ alleged that he and the company (which is on the hook for $11.25 million) submitted false claims to Medicare and other federal health care programs for orthopedic surgeries in a practice known as unbundling.  Coordinated Health also had to enter into a five year Corporate Integrity Agreement – one of the most dreaded enforcement tools that HHS has in its arsenal.  “The alleged corporate culture and leadership that promoted this conduct and allowed it to continue despite crystal clear warning is shameful,” said U.S. Attorney William M. McSwain of the Eastern District of Pennsylvania.   

It is now an opportune time to assess your organization’s true corporate culture and determine whether your leadership appreciates its growing responsibilities and is equipped to fulfill those responsibilities in a meaningful way.  Going through the motions of compliance education is simply not enough.  The federal government has been very clear that it expects leadership, including boards, to understand their corporate governance responsibilities, their responsibilities regarding review and oversight of the organization’s compliance program, as well as applicable federal and state laws such as the False Claims Act. 

While the OIG has stated that there is not a “one size fits all” program design for all compliance programs and that companies should tailor their compliance program designs, individuals who serve on for-profit and not-for-profit boards should make sure that they are fully equipped during the entire life cycle of their tenure.  Board responsibility, particularly in the fast paced and highly regulated health care space, is not a static journey. 

Moreover, each board member has a different baseline understanding of the industry, experience and skill set.  Not every board member is living and breathing MACRA, ACOs, EMRs, CINs and AKS.  But the old assumptions that health care has too many acronyms to bother lay members with or that the Stark law makes no sense and is not worth going over, have never been accurate and are definitely not in today’s enforcement environment.  In fiscal year 2018 alone, the DOJ recouped $2.8 billion for False Claims Act cases.

Any prudent board member should make sure that either the organization’s current program is sufficiently tailored to that board’s individual needs or ask for additional and ongoing education and support. Initial education and ongoing refresh are just the beginning of an effective board compliance program.  The OIG expects that board members understand their responsibilities to provide oversight for corporate compliance programs and to promote an ethical culture in their organizations.  This is no small task.  The regulatory framework is complex and in a state of flux, the OIG’s Work Plan is comprehensive and not the only determinant of focus areas and compliance risks, hospital operations are being reinvented to transition out of the fee for service model, and the reimbursement landscape is uncertain. 

At a minimum, new and existing board members should look to understand the organization’s business models; organizational and governance structures; governing documents; authority matrix including any powers reserved for a parent or subsidiary board; board committee policies and procedures; D&O policies and scope of coverage; COI policies; current compliance plan; past years’ compliance plans and performance against the plans; significant compliance concerns that have led to self-disclosures or other self-reporting obligations; any recent or material government investigation; the terms of any Corporate Integrity Agreements; significant security or privacy breaches; processes and procedures in place relating to financial arrangements with physicians and physician groups; the fraud and abuse laws; medical necessity; billing and reimbursement basics; security obligations; and other key regulatory requirements that impact the organization. 

Board members are also advised to meet the compliance lead, understand how issues are identified and remediated, and have access to the compliance team to answer any questions that may arise.  Internal and, as appropriate, external counsel should be part of the process and partner with the compliance lead and board members, when necessary.  These steps are important but not sufficient and every organization should continuously assess and improve its ongoing compliance strategy.

Service on a hospital board is an opportunity to serve and a privilege.  It is also an obligation full of responsibilities.  With so many issues competing for boards’ attention these days, the Coordinated Health settlement is a timely reminder that hospital leadership and boards cannot take their eyes off of the importance of compliance.  The risk is too high to get lost in the alphabet soup.

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.

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.

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.

 

 

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.

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.

 

$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.

Supreme Court to Consider Implied Certification theory of FCA

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.

Recent Trends In FCA Litigation Against Hospice Care Providers

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