Tag Archives: FCA

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.

Another far-reaching FCA decision

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

Gov’t and IPC Continue FCA Fight In Court

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“).

Continue reading Gov’t and IPC Continue FCA Fight In Court

Certain FCA Defendants Dismissed; “Lumping” Defendants Together Is Not Enough To State An FCA Claim

A district court in the Northern District of Illinois recently partially granted a motion to dismiss the Government’s False Claims Act (“FCA”) complaint filed against IPC The Hospitalist Company, Inc. (“IPC”) and its subsidiaries and affiliates. The district court dismissed IPC’s subsidiaries and affiliates because the Government simply “lumped” those subsidiaries and affiliates in with IPC, and did not plead facts tying the subsidiaries and affiliates to the alleged fraud. The decision underscores an important defense available to FCA defendants, and highlights the nuanced pleading requirements that the Government must meet in an FCA case. Continue reading Certain FCA Defendants Dismissed; “Lumping” Defendants Together Is Not Enough To State An FCA Claim

Health Care Workers May Think Twice Before Becoming a Relator

The Federal False Claims Act (and many similar state false claims acts) allow an individual—called a “relator”—to file a lawsuit on behalf of the United States Government. If successful, the relator stands to collect a portion of the amount collected. Since the False Claims Act provides for treble damages and statutory penalties of up to $11,000 per false claim, the reward to the relator can be considerable.

Complaints by relators must filed under seal. This allows the Government time to investigate the relator’s allegations before deciding whether to intervene in the case. Cases in which the Government intervenes tend to have higher judgments or settlements. Once the Government makes this decision, the complaint is unsealed and the case can move forward.

Earlier this week, an Alabama judge ruled that the relators could not keep their identities secret, even though they voluntarily dismissed their lawsuit against Great Bend Regional Hospital. Frank Coyle and Randy Bruce argued that their careers in health care may be damaged if their identities are revealed. However, the court agreed with the Government, that the reason for sealing the complaint is for the limited purpose of protecting the Government’s investigative process.

It may have been a bad choice for Coyle and Bruce to ask for anonymity. If they had merely dismissed their case, the dismissal may have been a mere footnote or back page news item. By seeking anonymity and losing, it is front page news. When filing a case, relators may think that they will no longer have to work once they win millions of dollars. As these relators have learned, you don’t always win. And there are consequences to your actions.

False Claims Act Defendants May Have Possible Counterclaims Against Whistleblowers

Although whistleblowers benefit from strong public policies protecting the means by which they assert and support their False Claims Act (FCA) allegations, a recent decision highlights a possible counterclaim theory that empowers defendants to assert claims against the whistleblower.  In U.S. ex rel. Notorfransesco v. Surgical Monitoring Association, Inc. et al., (E.D. Pa.),  the whistleblower was a former employee of the defendant, and the defendant asserted a counterclaim based on the former employee’s taking and disseminating confidential information from the former employer, including using that information in the qui tam complaint.  The counterclaim asserted breach of contract, implied contract and promissory estoppel theories.

The district court denied the whistleblower’s motion to dismiss the counterclaim, holding that the counterclaim raised claims that were independent of the FCA allegations and therefore were not against public policy.  The court also held that the defendant had plausibly asserted that it could be entitled to  injunctive relief and damages. Continue reading False Claims Act Defendants May Have Possible Counterclaims Against Whistleblowers