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.
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
In healthcare, companies often hire consultants to review billing and coding, privacy and security and a host of other technical issues that regular staff does not have the time or expertise to pursue. A recent discovery ruling in federal court in the Eastern District of Pennsylvania holds that communications with such outside consultants are privileged from discovery if they are made for the purpose of assisting the company in securing legal advice or making legal decisions.
In Smith v. Unilife Corporation, a whistleblower brought an action under Sarbanes-Oxley and Dodd-Frank alleging shareholder fraud and failure to comply with certain FDA requirements. The plaintiff sought discovery of two non-lawyer consultants regarding drafts of the company’s SEC Form 10-K filing. The Court’s decision to deny the plaintiff’s motion to compel was based on the “functional equivalent” doctrine, a principle already adopted in the 8th, 9th and D.C. Circuits, but not yet in the 3rd Circuit.
Continue reading Consultants’ Communications Privileged from Discovery
On January 2, 2015, the U.S. District Court for the Central District of California threw out claims that Walgreens pharmacy violated the federal and California false claims acts on the basis that the plaintiff failed to meet the applicable stringent pleading requirements.
In Irwin v. Walgreens, 2:13-cv-08473, a whistleblower/Relator contended that Walgreens cheated Medicare and Medi-Cal out of millions of dollars by establishing schemes to bill those government healthcare programs for prescriptions that were never picked up by patients, rather than restocking the drugs and reversing any associated charges to the government payers. Among other things, the complaint asserted that, as demonstrated by the fact that they were not picked up by the patients, the prescriptions were not medically necessary, and therefore should not have been billed. The complaint sought money damages, including a penalty of up to $11,000 for each violation and treble damages. In September 2014, the government declined to intervene in the qui tam action. Continue reading Another Win for a False Claims Act Defendant
One arrow in the quiver for healthcare providers sued for violations of false claims and anti-kickback statutes is pressing for discovery from the whistleblower/relator, including a deposition of the relator. The failure of the whistleblower to comply with the discovery obligations could result in meaningful sanctions, including dismissal.
In Guthrie v. A Plus Home Health Care, Inc. et al, 0:12-cv-60629-WPD (S.D. FL), the relator, William Guthrie, sued a home health care provider, its seven doctors, and their spouses, alleging that the doctors and their spouses implemented a fraudulent scheme of compensation and referral payments resulting in violations of the False Claims Act, the Stark Act, and the federal Anti-Kickback Statute. Continue reading False Claims and Anti-Kickback Defendants Should Insist on Discovery from the Whistleblower/Relator