In addition to the United States Department of Justice’s recently issued guidelines related to cooperation in FCA enforcement actions, the Department of Justice (DOJ)’s Criminal Division recently revised its guidance pertaining to assessment of corporate compliance programs.  The revised guidance will inform DOJ’s approach to criminal investigations, charging decisions, plea agreements, and sentencing in cases involving alleged corporate noncompliance or wrongdoing.

DOJ previously published guidance on its evaluation of corporate compliance programs in 2017.  As with the previous version, the revised guidance eschews a “rigid formula” for assessing compliance programs.

Continue Reading DOJ Asks “Fundamental Questions” of Corporate Compliance Programs

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

I recently provided comments for an article in Hospice News detailing the False Claims Act case against hospice provider, Heartland Hospice, that also details the government’s focus within this broader long-term care industry. The qui tam case against Heartland recently was dismissed with prejudice by a federal judge.

“Overall, qui tam cases continue to be filed in increasingly high numbers year over year,” I stated in the article. “We continue to see an increase in both civil and criminal investigations involving hospice providers.  Hospice fraud continues to feature prominently in [U.S. Department of Health and Human Services Office of the Inspector General’s] Work Plan.”

The full article, “Court Dismisses Fraud Case Against Heartland Hospice,” was published by Hospice News on June 27, 2019, and is available online.

For a detailed overview about healthcare fraud, please download Bass, Berry & Sims’ Healthcare Fraud and Abuse Review, an in-depth and comprehensive review of enforcement settlements, court decisions and developments affecting the healthcare industry.

We wrote an article examining recent enforcement actions by the government within the long-term care industry for McKnight’s Long-Term Care News. In the article, we point out that “recent cases reinforce the notion that long-term care providers should pay particular attention to the government’s efforts to police arrangements and business practices that implicate the federal Anti-Kickback Statute and similar regulatory prohibitions.”

We also provide some best practices for long-term care providers to potentially lower the risk of fraud, including:

  1. Careful evaluation of any arrangements that involve payment that could be viewed as a kickback or referral
  2. Continual monitoring of enforcement actions by the government to stay up-to-date on risk areas.

The full article, “Providers Facing Heightened Kickback Scrutiny,” was published by McKnight’s Long-Term Care News on June 5, 2019, and is available online.

The U.S. Department of Justice (DOJ) routinely encourages the subjects of False Claims Act (FCA) enforcement actions to make voluntary disclosures and fully cooperate with the government on the premise that cooperation leads to reduced liability. The DOJ recently issued guidance on the types of activities that will earn “cooperation credit.” But how much is cooperation worth, in terms of actual dollars? According to recent data and an analysis by Seton Hall Law School Professor Jacob T. Elberg, perhaps not much.

Discretion over Damages Multiplier Incentivizes Cooperation

The government’s basis for incentivizing cooperation lies primarily in its discretion in seeking damages and penalties allowable under the FCA. A defendant can be liable under the FCA for three times the amount of damages the government sustains, plus a civil penalty for each false claim. But such severe damages and penalties are not required, particularly where the government and a defendant negotiate a settlement to resolve FCA allegations without a court judgment or any finding of liability.

Continue Reading Mixed Messages: DOJ Releases New FCA Cooperation Guidelines, while Study Questions Whether Cooperation Actually Garners Credit

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 <em>Qui Tam</em> Actions

On March 19, 2019, the Supreme Court heard arguments in Cochise Consultancy Inc. v. United States, ex rel. Hunt regarding how the False Claims Act’s (FCA) statute of limitations applies in qui tam actions brought by a private relator in which the government declined to intervene. The Court heard lively arguments regarding a statute that has undoubtedly confused many. After oral argument, the Court appears poised to conclude that relators may appropriately take advantage of a longer limitations period.

FCA Statute of Limitations Raises Questions Regarding How and When It Should be Tolled

The FCA’s statute of limitations provision, 31 U.S.C. § 3731(b), states that a civil action may not be brought under the FCA:

  1. more than six years after the date on which the violation of section 3729 is committed, or
  2. more than three years after the date when facts material to the right of action are known or should have been known by the official of the United States charged with responsibility to act in the circumstances, but in no event more than 10 years after the date on which the violation is committed, whichever occurs last.

Continue Reading Supreme Court Wrestles with “Terribly Drafted” FCA Statute of Limitations

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

This is the second post of a two-part discussion of FCA pleading standards and discusses the pleading requirements for connecting a fraudulent scheme to the submission of false claims.  Read our previous post on the requirements for pleading the details of a fraudulent scheme.

Pleading Submission of False Claims

Most courts require FCA plaintiffs to round out their FCA pleadings with allegations that false claims were submitted to the government as a result of the alleged fraud scheme.  Some courts require plaintiffs to identify specific representative examples, while others permit the pleading of “reliable indicia” leading to a “strong inference” that claims were actually submitted.

Pleading Actual Claims  

The U.S. District Court for the District of Massachusetts recently laid out the level of detail generally expected for pleading the submission of actual false claims.  In U.S. ex rel. Wollman v. General Hospital Corporation, it held the relator made insufficient allegations of actual claims submitted as part of a fraudulent billing scheme involving overlapping surgeries when the complaint included “no dates, identification numbers, amounts, services, individuals involved, or length of time” for any of the surgeries at issue.

Continue Reading Recent Developments in FCA Pleading Standards – Part Two

This is the first post of a two-part discussion of FCA pleading standards and discusses the requirements for pleading the details of a fraudulent scheme. Read our post on the pleading requirements for connecting a fraudulent scheme to the submission of false claims.

The False Claims Act (FCA) continues to be the federal government’s primary civil enforcement tool for imposing liability on healthcare providers who defraud federal healthcare programs.  A significant portion of FCA litigation is initiated through the filing of sealed qui tam complaints by relators on behalf of the United States.  When these complaints are unsealed, whether the government intervenes or not, their first hurdle is often surviving a motion to dismiss.  Because actions under the FCA allege fraud against the government, courts require allegations sufficient to satisfy Rule 9(b) of the Federal Rules of Civil Procedure.

Determining whether an FCA complaint satisfies Rule 9(b) turns on two related questions: Does it contain an adequate description of the alleged fraud scheme? If so, does it connect that scheme to false claims submitted to the government?

This post discusses the requirements for adequately pleading a fraudulent scheme.  We have also written a follow-up post discussing the requirements for connecting that scheme to the submission of actual false claims.  To follow our discussion of recent developments in FCA pleading standards, subscribe to this blog.

Pleading Details of a Fraudulent Scheme

Generally speaking, courts agree that in order to pass muster, FCA complaints must include all of the details one would expect to find in the first paragraph of a newspaper article—that is, the “who, what, when, where and how” of the alleged fraud.  While meeting this standard may seem simple enough, courts continue to grapple with the nuances and difficulties associated with pleading fraud with the requisite specificity.

Continue Reading Recent Developments in FCA Pleading Standards – Part One

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