Earlier this month, the U.S. District Court for the Middle District of Tennessee dismissed a relator’s qui tam lawsuit, finding that the relator had failed to adequately allege the presentment of false claims to the government. In U.S. ex rel. Prather v. Brookdale Senior Living, Inc., the relator alleged that Brookdale submitted false claims for home health services that did not meet the technical requirements for billing under Medicare rules and regulations. Defendants argued that the allegations failed to include sufficient detail regarding the actual submission of requests for anticipated payment (RAP) claims and that the relator failed to plead the requisite legal falsity of both RAP and final episode payment claims.

Continue Reading Middle District of Tennessee Clarifies Pleading Standards for the Presentment of False Claims

Earlier this year, Deputy Attorney General Sally Quillian Yates issued new guidance outlining the DOJ’s increased focus on individual accountability during civil and criminal investigations of corporate wrongdoing. The principles announced in the “Yates Memo” serve as the basis for revisions to the U.S. Attorney’s Manual – particularly the section outlining the Principles of Federal Prosecution of Business Organizations – released November 16, 2015. While many of the principles outlined in the Yates Memo and recent revisions to the U.S. Attorney’s Manual are consistent with DOJ’s prior practice and rhetoric regarding white collar investigations, the emphasis on individual accountability requires companies to consider carefully those aspects of an internal investigation with consequences on individual executives and employees.

Continue Reading The Yates Memo and Consequences for Internal Investigations

DOJ recently reached settlements in connection with three long running enforcement efforts, amassing more than $1 billion in settlement funds. These settlements reflect the continued expansion of aggressive government enforcement in the healthcare industry. Since January 2009, DOJ claims recovery of more than $16.2 billion in healthcare-related FCA cases alone.

Swiss pharmaceutical company Novartis AG agreed to pay $390 million to settle allegations that it provided unlawful rebates to specialty pharmacies to boost prescription refills for Novartis products. While Novartis did not admit that these rebates constituted illegal kickbacks, it did acknowledge providing rebates to three specialty pharmacies to incentivize an increase of prescription refills. This settlement comes at the conclusion of Novartis’ five-year CIA resulting from a settlement with DOJ in 2010. As part of its latest settlement, Novartis has agreed to extend its CIA for an additional five year period. Additionally, Novartis has agreed to amend its CIA to include obligations covering the company’s interactions with specialty pharmacies and to provide an annual report to DOJ detailing Novartis’ compliance with the CIA.

Continue Reading Recent FCA Settlements Bring Closure to Long Running Enforcement Efforts

In addition to the most common grounds upon which dismissal is sought in FCA actions, Mount Sinai Hospital and Mount Sinai Radiology Associates recently requested that the district court throw out FCA claims based on their argument that relators relied on improperly obtained patient records in support of their allegations.  Relators, who were employed in various positions with defendants, alleged FCA violations based upon false and fraudulent billing in connection with physician services and attached patient medical records to their complaint in support of their FCA claims. Defendants argued that relators should be precluded from relying on the medical records attached to their complaint because allegedly relators obtained those records without authorization following an internal investigation at the Hospital.  Relators countered that there were no facts before the district court to support any assertion that the medical records were obtained improperly and cited HIPAA’s exception for whistleblowers to reveal information to government authorities and private counsel if those whistleblowers have a good faith belief that their employer engaged in unlawful conduct.

Continue Reading Relator’s Use of Medical Records Insufficient to Warrant Dismissal of FCA Complaint

Signed into law on November 2, 2015, the Bipartisan Budget Act of 2015 requires federal agencies to increase civil monetary penalties imposed by the FCA to account for inflation. The increase – referred to as a “catch up adjustment” – will be implemented through interim final rulemaking procedures under the Administrative Procedures Act and must be in place by August 1, 2016. The amount of the adjustment is based on the difference between the CPI in October of the calendar year in which the penalty was last adjusted and the CPI in October 2015. FCA penalties were increased to their present level in 1999. In addition, the Budget Act requires agencies to continue to make annual adjustments to penalties moving forward, also based on changes in the CPI. Those annual adjustments are automatic and will be implemented without rulemaking procedures or any agency assessment of the need for such an increase.

Continue Reading Bipartisan Budget Act Increases FCA Penalties

In U.S. ex rel. Petratos v. Genentech, Inc., the U.S. District Court for the District of New Jersey dismissed a qui tam action claiming that Genentech underreported side effects of the widely-used cancer drug Avastin. In its opinion, the district court reiterated that the FCA is not intended to reach wrongful behavior that does not lead to a false claim or regulatory violations not tied to payment.

Relator’s complaint alleged that defendants made false submissions to the FDA by relying on patient databases that contained inadequate information about drug risks and side effects and otherwise refused to provide data regarding such risks to a Key Opinion Leader based upon defendants’ false assertion that this information was unavailable. The relator claimed that this conduct cost taxpayers “hundreds of millions of dollars,” because fewer doctors would have prescribed Avastin if defendants had provided complete and accurate information, and government payers would have reimbursed for fewer Avastin indications, for lower dosages, or not at all.

Continue Reading No FCA Liability Where There Is No False Claim – Qui Tam Suit Against Maker of Avastin Dismissed

On October 16, 2015, Tuomey Healthcare agreed to pay more than $74 million to resolve a $237 million judgment in a long-standing FCA matter that had threatened to bankrupt the nonprofit hospital. The action, styled U.S. ex rel. Drakeford v. Tuomey Healthcare Systems, Inc., No. 05-2858 (D.S.C.), involved FCA allegations that Tuomey employed and compensated 19 part-time physicians in excess of fair market value and in a manner that varied with the volume of value of their referrals, in violation of the Stark Law. The settlement came after a July 2015 ruling from the U.S. Court of Appeals for the Fourth Circuit, which affirmed the district court’s $237 judgment against Tuomey following a jury trial in 2013.

The settlement agreement calls for Tuomey to pay $72.4 million to the United States—of which the relator will receive 25% ($18.1 million)—and an additional $2.5 million for the relator’s attorneys’ fees and costs. Payment of $32.4 million of the settlement amount is conditioned on the successful acquisition of Tuomey by Palmetto Health prior to December 31, 2015. In connection with settlement, Tuomey agreed to enter into a five-year CIA with HHS-OIG.

As we previously reported, physician compensation continues to be in the FCA crosshairs. In 2015 to date, there have been at least 12 FCA settlements involving alleged Stark Law violations, with the large majority of those being enforcement actions against hospitals like Tuomey.

On September 29, 2015, the Fourth Circuit granted a petition for interlocutory appeal that may result in the first significant appellate decision to determine whether an FCA plaintiff may rely on statistical sampling to prove liability or damages.

In U.S. ex rel. Michaels v. Agape Senior Community, Inc., relators asserted that a nursing home operator violated the FCA by submitting false claims with respect to hospice and other nursing home-related services. While not in complete agreement, the parties both asserted that the action, in which DOJ declined intervention, involved more than 10,000 patients and more than 50,000 claims. The district court concluded that relators would be required to prove the falsity of each and every claim based upon evidence relating to each particular claim.

Continue Reading Fourth Circuit Agrees to Hear Statistical Sampling Appeal

What do the recent multimillion dollar FCA settlements tell healthcare providers about physician compensation arrangements? Standing alone, these settlements are cautionary examples of arrangements that may subject hospitals and physicians to increased scrutiny. These settlements, however, come on the heels of the recent OIG fraud alert – “Physician Compensation Arrangements May Result in Significant Liability,” and highlight the need for healthcare providers to proactively review physician arrangements for compliance with Stark and the Anti-Kickback Statute. For further discussion of the issues raised by these settlements and suggested tips for healthcare providers evaluating physician arrangements, please see this recent article, “Under the Knife: Enforcement Actions Increase Scrutiny on Physician Compensation Arrangements.”

Among the many changes under the Affordable Care Act (ACA), few have generated as much discussion as Section 6402(d), requiring healthcare providers to report and return any overpayment within 60 days of the date the overpayment is “identified” or risk liability under the FCA for a “reverse” false claim. Providers have grappled with how and when this provision would be applied as enforcement agencies have largely remained silent in offering an interpretation. This silence changed last week as a federal district court issued a ruling defining what it means to “identify” an overpayment followed by the public announcement of a settlement resolving an FCA action based upon a provider’s failure to refund credit balances.  Both cases demonstrate the importance of providers exercising due diligence in promptly reviewing and addressing potential overpayment situations.

On August 3, 2015, the U.S. District Court for the Southern District of New York offered the first judicial interpretation of the ACA’s 60-day rule, siding with DOJ’s interpretation of  “identified” in U.S. ex rel. Kane v. Healthfirst, Inc. et al., No. 1:11-cv-02325 (S.D.N.Y.).  And, on August 4, 2015, the day following the Kane decision, providers of pediatric home nursing services reached a joint FCA settlement in two whistleblower cases, U.S. ex rel. Odumosu v. Pediatric Servs. of Am. Healthcare, N.D. Ga., No. 1:11-cv-1007, and U.S. ex rel. McCray v. Pediatric Servs. of Am. Healthcare, S.D. Ga., No. 4:13-cv-127. The FCA settlement is the first settlement of its kind based upon a healthcare provider’s failure to identify potential overpayments.

Our full discussion of these cases and the implications for healthcare providers can be found here.

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

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