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We recently outlined the significant proposed changes to the Stark Law that the Centers for Medicare & Medicaid Services (CMS) released on October 9.  The analysis was written for the American Health Lawyers Association’s (AHLA) Fraud and Abuse Practice Group and co-authored by Dickinson Wright attorney Rose Willis. In the article, the authors summarized the Proposed Rule, including:

  1. Changes related to a value-based care delivery model – With the ongoing shift from the traditional fee-for-service model to value-based payment and delivery model, the Proposed Rule addresses three new exceptions to the Stark Law focused on the value-based model.
    Continue Reading CMS Proposed Rule Adds Exceptions to Stark Law and Provides Additional Guidance and Clarification

The U.S. Court of Appeals for the Third Circuit recently issued a False Claims Act (FCA) decision calling into question productivity-based physician compensation structures under the Stark Law, in reliance on a controversial interpretation of the Stark Law’s “volume or value” standard.

The case, U.S. ex rel. Bookwalter v. UPMC, involved employment arrangements between the University of Pittsburgh Medical Center’s (UPMC) subsidiary physician practice entities and neurosurgeons who performed procedures at UPMC’s affiliated hospitals.  The decision is significant for hospitals and health systems in that the Third Circuit’s holding is contrary to guidance promulgated by the Centers for Medicare & Medicaid (CMS) and appears to call into question a common compensation methodology used by health systems to compensate physicians.Continue Reading Third Circuit Holds Allegations of Improper Compensation Methodologies under the Stark Law Survive Motion to Dismiss

On July 5, 2019, the D.C. Circuit Court of Appeals affirmed dismissal of a qui tam lawsuit against several chemical manufacturers that set forth a unusual theory of liability: the relator alleged that the manufacturers violated the False Claims Act (FCA) by failing to self-report information about the dangers of their chemicals under the Environmental Protection Agency’s (EPA) voluntary Compliance Audit Program.

According to the relator, the manufacturers should have self-disclosed certain information to the EPA, who in turn would have assessed civil penalties under the Toxic Substances Control Act.  By failing to do so, the relator alleged that the defendant manufacturers concealed their obligations to transfer property (the risk information) and money (the unassessed penalties) to the government.Continue Reading Failure to Voluntarily Self-Report is a “Non-starter” under the FCA

The Medicare Advantage program, which allows private insurance companies to offer and administer Medicare benefits, continues to be an area of sharp scrutiny for False Claims Act (FCA) enforcement despite some significant recent setbacks in pursuing FCA liability against Medicare Advantage Plans (MA Plans or Plans).  In 2018, several district court decisions raised obstacles to the pursuit of FCA liability against MA Plans, and those decisions have continued to affect FCA enforcement efforts in the first half of 2019.  Despite those setbacks, however, the prevalence of government enforcement actions involving Medicare Advantage illustrates that it remains an area of focus for the Department of Justice (DOJ).

The Focus on Medicare Advantage

Unlike traditional fee-for-service Medicare, MA Plans are compensated on a monthly basis through a fixed payment for each member.  The amount of the monthly payment – known as a capitation payment – is determined for each payment year through a process called “risk adjustment” and is based on each individual member’s demographic information and data reflecting the member’s medical condition, as documented during the 12 months preceding the payment year.  A member’s condition and medical diagnoses must be supported by a valid medical record.Continue Reading Medicare Advantage: Recent Developments in FCA Enforcement

In two recent decisions, federal district courts in the Eastern District of Pennsylvania and the Southern District of Illinois, respectively, considered the Government’s motions to dismiss False Claims Act (FCA) lawsuits against pharmaceutical companies and marketing consultants alleging violations of the Anti-Kickback Statute (AKS) related to patient assistance programs.  As discussed in our previous post, the two lawsuits were among 11 similar qui tam actions filed by corporate relators described by the Department of Justice (DOJ) as “shell companies,” and which DOJ sought to preemptively dismiss based on its view that the claims lacked merit and that litigation of the actions would waste “scarce government resources.”

In the Pennsylvania case, U.S. ex rel. Harris v. EMD Serono, Inc., the court granted DOJ’s motion to dismiss over the relators’ objection.  In the Illinois case, U.S. ex rel. CIMZNHCA, LLC v. UCB, Inc., the court denied DOJ’s motion, declining to dismiss the case.  Although reaching different dispositions, both courts parted ways with a prior decision of the U.S. Court of Appeals for the D.C. Circuit by holding that the Government does not possess “unfettered” discretion to dismiss FCA actions.  Instead, the courts joined two other circuits in requiring the Government to demonstrate that its decision to dismiss an FCA action has “a rational relationship to a government interest.”

The circuit split highlighted by the decisions in EMD Serono and UCB is one of increasing importance in light of indications that the Government may be more aggressive in seeking preemptive dismissals of qui tam actions following the January 2018 Granston Memo.Continue Reading District Courts Hold that DOJ Lacks “Unfettered” Discretion to Preemptively Dismiss Qui Tam Actions

On March 18, 2019, the Department of Justice (DOJ) filed an amended complaint-in-intervention in the False Claims Act (FCA) case against Diabetic Care Rx, LLC d/b/a Patient Care America (PCA); two of PCA’s executives; and the company’s private equity owner, Riordan, Lewis & Haden, Inc. (RLH).  This filing comes on the heels of a March 5 decision by the U.S. District Court for the Southern District of Florida that dismissed for insufficient pleading DOJ’s FCA claim that the defendants submitted or caused the submission of false claims to TRICARE for compound prescriptions obtained through the payment of unlawful kickbacks to marketers, physicians and patients.  This case is significant and has been closely watched by the industry because it represents the first time DOJ has intervened in an FCA suit against a private equity firm alongside a healthcare portfolio company accused of submitting false claims.

Government Accused Private Equity Owner of Being Involved in Kickback Activity

This matter involves allegations that PCA paid kickbacks to marketers to target TRICARE beneficiaries for compound pain creams, scar creams and vitamins, regardless of medical necessity.  The marketers allegedly paid telemedicine physicians who prescribed the products without ever physically examining the patients, and colluded with PCA to pay many patients’ copayments to induce their acceptance of the lucrative compound drugs.  As support for its claim against RLH, as the private equity firm, the government has repeatedly cited to evidence purporting to show RLH’s material day-to-day involvement in the operations of PCA and its awareness of the facts surrounding the alleged kickback conduct.  The government has alleged that at all relevant times, RLH managed and controlled PCA through two RLH partners who also served as officers and/or directors of PCA and of two holding companies with an interest in PCA.Continue Reading Government Files Amended FCA Complaint Against Private Equity Firm and its Portfolio Company

Greenway Health LLC, a Tampa-based developer of electronic health records (EHR) software, recently agreed to pay $57.25 million to resolve False Claims Act (FCA) allegations that it overstated the capabilities of and failed to correct known errors with its EHR software.  In a complaint filed in the United States District Court for the District of Vermont, the United States alleged that Greenway caused its users to submit false claims to the government by, among other things, misrepresenting the capabilities of its EHR product “Prime Suite” and providing unlawful remuneration to users to induce them to recommend the product.

EHR Companies Must Be HHS Certified

The American Recovery and Reinvestment Act of 2009 established the Medicare and Medicaid EHR Incentive Program to encourage healthcare providers to adopt EHR technology and demonstrate its “meaningful use.”  To obtain certification for their product, EHR companies are required to demonstrate that their product satisfies all applicable U.S. Department of Health and Human Services (HHS) certification criteria.  This requires that developers do the following two things:

  1. Pass testing performed by an independent, accredited testing laboratory authorized by HHS.
  2. Obtain and maintain certification by an independent, accredited certification body authorized by HHS.

Continue Reading Electronic Health Records Company Pays High Price for Software Shortcomings

On December 26, 2018, the U.S. Court of Appeals for the Fourth Circuit issued an opinion in United States ex rel. Grant v. United Airlines affirming dismissal of the relator’s False Claims Act (FCA) allegations on the grounds that the complaint failed to plead presentment of a false claim with sufficient particularity under Rule 9(b). In the same opinion, however, the court revived the relator’s retaliation claim on the grounds that the relator satisfied the lower standard of Rule 8(a) applicable to retaliation claims, which are not claims of fraud.

Presentment Must Follow from Conduct Alleged in Complaint

The court affirmed dismissal of the relator’s substantive FCA claims because it held that the relator failed to adequately plead presentment under Rule 9(b) in either of the two ways that the Fourth Circuit has recognized as acceptable:

  1. By alleging with particularity that specific false claims actually were presented to the government for payment, including by describing the time, place, and contents of the false representation; the person making the false representation; and what was obtained by making this representation
  2. By alleging a pattern of conduct that would “necessarily have led to a false claim being submitted”

The court focused its analysis on whether the complaint was adequately pleaded under the latter of those two options. The relator was a former maintenance technician of United Airlines who was a second-tier subcontractor on a government contract for the repair and maintenance of military aircraft. His complaint alleged that United Airlines was specifically subcontracted to repair, overhaul and inspect certain airplane engines and was required to do its work in compliance with certain regulations. The complaint alleged that United Airlines violated the FCA by failing to comply with the required regulations in completing work on these airplane engines.
Continue Reading Fourth Circuit Weighs in on Standards for Pleading Presentment and Retaliation

From the Bass, Berry & Sims Blog Network
From the Bass, Berry & Sims Blog Network

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