On August 24, 2018, the Ninth Circuit addressed the Supreme Court’s decision in Universal Health Services, Inc. v. U.S. ex rel. Escobar, holding that Escobar sets forth the exclusive test for establishing FCA liability under the theory of implied false certification. In that case, U.S. ex rel. Rose v. Stephens Institute, the Ninth Circuit also grappled with Escobar’s materiality requirement, providing further guidance on how the past government action factor of the materiality analysis should be applied.
Detroit Health System Pays $84 Million to Settle AKS/Stark Claims
On August 2, 2018, DOJ announced that Detroit-based Beaumont Health would pay $84 million to settle claims that between August 31, 2004, and January 31, 2012, its arrangements with eight physicians violated the Anti-Kickback Statute (AKS) and the Stark Law by providing improper remuneration in the form of free or below-market value office space and employees and providing them with compensation in excess of fair market value. The settlement agreement also settles claims that from 2006 to 2012, Beaumont misrepresented that one of its CT radiology centers qualified as an outpatient department of the hospital. As part of the settlement, Beaumont is entering into a five-year Corporate Integrity Agreement, during which time its referral arrangements will be reviewed by an independent review organization.
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Impact of DOJ Memo on Government Enforcement Actions
Bass, Berry & Sims attorney Taylor Chenery provided insight in a Bloomberg article on the effect that a Department of Justice (DOJ) Memorandum is having on healthcare fraud enforcement actions and corresponding defense strategies. The Brand Memo, named after then-Associate Attorney General Rachel Brand, was issued by the DOJ in January 2018 and limits the use of guidance documents in civil enforcement actions and prevents DOJ attorneys from using “informal agency guidance as binding law.”
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DOJ Stakes Out its Position on Escobar and Post-Payment Conduct in the Wake of Ruckh
Following the recent high-stakes trial in U.S. ex rel. Ruckh v. Salus Rehabilitation, LLC, a federal district court overturned the $350 million verdict handed down against the owners and operators of 53 skilled nursing facilities who were accused of “upcoding” patient Resource Utilization Group scores, “ramping up” treatment during assessment periods and failing to maintain comprehensive plans of care for their patients.
As set out in a previous post, in overturning the verdict, the district court held that the relator failed to offer sufficient evidence at trial to satisfy the “rigorous and demanding” requirements of materiality and scienter as set forth in the Supreme Court’s landmark decision in Universal Health Services, Inc. v. U.S. ex rel. Escobar.
Ninth Circuit Reaffirms Group Pleading Standard in FCA Cases
The Ninth Circuit recently revived a False Claims Act (FCA) suit against Medicare Advantage Organizations (MAOs) related to risk adjustment payments for Medicare Advantage plans in U.S. ex rel. Silingo v. WellPoint Inc. et al. As previously discussed in this blog post, MAOs provide Medicare benefits under a capitated payment system, whereby government reimbursement is based on an individual’s risk adjustment data. The Centers for Medicare and Medicaid Services (CMS) increase monthly payments to MAOs when an individual’s medical diagnoses support a higher level of risk or cost of care. Recently, both relators and the government in a number of cases have challenged the validity of diagnostic patient information utilized to support risk adjustment data, as discussed here and here.
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FCA Settlement Regarding Provision of Hyperbaric Oxygen Therapy
In June 2018, Healogics, Inc., the nation’s largest provider of advanced chronic wound care services, agreed to pay to up to $22.51 million to resolve False Claims Act (FCA) allegations that, from 2010 to 2015, it caused wound care centers to submit claims to Medicare for medically unnecessary and unreasonable hyperbaric oxygen (HBO) therapy. Healogics manages almost 700 hospital-based wound care centers where HBO therapy is provided. HBO therapy is a modality wherein a patient’s full body is enclosed in a pressurized chamber and exposed to high concentrations of oxygen. Medicare covers the therapy only when used to treat certain conditions (e.g., diabetic foot ulcers) and only when administered in certain circumstances (e.g., after no measurable signs of healing for prior 30 days of treatment with standard wound therapy).
Pursuant to the settlement agreement, Healogics paid $17.5 million and could pay an additional $5.01 million if its earnings exceed certain levels over the next five years. Healogics also agreed to enter into a five-year Corporate Integrity Agreement with the U.S. Department of Health and Human Services, Office of Inspector General (HHS-OIG) as part of the resolution.
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Public Disclosure Bar Analysis in False Claims Act Case
Bass, Berry & Sims attorney Taylor Chenery commented on a decision from a federal district court in Pennsylvania allowing a whistleblower’s case to proceed and rejecting the defendant’s argument that the claims at issue were barred because the allegations were previously publicly disclosed. The case involves False Claims Act (FCA) allegations against Medtronic Inc. that the company provided improper kickbacks to healthcare providers to encourage them to prescribe Medtronic devices.
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Answers to Questions about the Healthcare Fraud Landscape in 2018
Bass, Berry & Sims attorney Brian Roark answered several questions about healthcare fraud enforcement trends in 2018 for the High Stakes blog. As a follow-up to the release of the firm’s Healthcare Fraud and Abuse Review 2017, Brian provided insights on the following questions:
- Despite deep partisan divides on virtually every other healthcare issue, bipartisan support for aggressive healthcare fraud enforcement remains constant. What factors explain that?
- We have heard a lot in the news about the Trump administration’s push to simplify the regulatory environment for business. Do you see evidence of that in healthcare?
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Matt Curley Provides Insight on Supreme Court’s Refusal to Weigh In on Pleading of FCA Suits
Bass, Berry & Sims attorney Matt Curley provided insight to Law360 for an article analyzing the Supreme Court’s decision to deny certiorari concerning a case that may have addressed the discrepancies surrounding how False Claims Act (FCA) suits are pleaded. There is currently a split within the federal appellate courts regarding how the heightened pleading requirements of Rule 9(b) should be applied to FCA claims.
DOJ Memos Outlining Use of Guidance Documents in Enforcement Actions
In an article for Nashville Medical News, Bass, Berry & Sims attorney Taylor Chenery examined two recent Department of Justice (DOJ) memoranda that limit the use of guidance documents in civil enforcement actions. These memos may signal a change in how the government will approach enforcement efforts involving allegations of healthcare fraud and provide insight into how providers may be able to contest such allegations.
The memos – the first released in November 2017 by Attorney General Jeff Sessions and the second released in January 2018 by then-Associate Attorney General Rachel Brand – “relate to the government’s use of guidance documents — as opposed to codified statutes or regulations — to educate regulated parties and to enforce existing statutory or regulatory requirements.”
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