On Nov. 29, 2018, Deputy Attorney General Rod J. Rosenstein announced several amendments to policies on individual accountability set forth in the 2015 Yates Memo. As a result, companies facing FCA actions—especially defendants in health care cases—should consider following three strategy tips:  (1) Establish clear benchmarks for cooperation.  (2) Advocate for individual releases.  And (3) Emphasize that litigation costs outweigh the potential recovery in appropriate cases.

To learn more please read this Bloomberg BNA article written by Partner William S.W. Chang and Associate Spencer Churchill.


On August 24, 2016, Judge Edgardo Ramos of the Southern District of New York approved a settlement in which Mount Sinai Health System (Mount Sinai) will pay $2.95 million to New York and the federal government to resolve allegations that it violated the False Claims Act (FCA) by withholding Medicare and Medicaid overpayments in contravention of the 60-day overpayments provision of the Affordable Care Act (ACA).  The provision creates FCA liability for healthcare providers that identify overpayments but fail to return them within 60 days, and the Mount Sinai settlement is the first one that specifically resolves allegations of violations of the provision.

The settlement stems from the qui tam action Kane v. Healthfirst, Inc., No. 1:11-cv-02325-ER, in which it was alleged that employee Robert Kane alerted Continuum Health Partners, Inc. (now a part of Mount Sinai) to hundreds of potential overpayments, and, instead of pursuing the refund of overpayments, Continuum fired Kane and delayed further inquiry.  Last year, as we discussed in a previous post, Judge Ramos denied Mount Sinai’s motion to dismiss and provided first-of-its-kind guidance on what it means to “identify” an overpayment and start the 60-day clock created by the ACA.  He opined that a provider has identified an overpayment if it has been “put on notice” that a certain claim may have been overpaid.  In February of this year, CMS released its final 60-day overpayment rule, largely adopting the same interpretation of “knowledge” and “identified” that Judge Ramos used.

Although the Kane court did not hold that the “mere existence” of an obligation under the ACA established an FCA violation, the 60-day period in the statute clearly carries a heightened risk of potential liability for providers that fail to carry out compliance activities or undertake an investigation once they have been given credible evidence of the existence of overpayments.  The settlement further signals to providers the importance of taking any allegation related to overpayments seriously, and to take swift action in order to be ready for the start of the 60-day clock deadline for returning any overpayments.

On Tuesday July 12, 2016, the Senate Finance Committee (“Committee”) will hold a hearing on “Examining the Stark Law: Current Issues and Opportunities.” Crowell & Moring Partner Troy Barsky will be testifying before the Committee as a Stark Law subject matter authority.

In advance of this hearing, the Committee released last week the white paper “Why Stark, Why Now? Suggestions to Improve the Stark Law to Encourage Innovative Payment Models.”  Amid growing support for Stark law reform, the white paper deems the Stark law, as currently drafted, both an impediment to implementing health care reform, e.g., the Medicare Access and CHIP Reauthorization Act of 2015 (“MACRA”), and of limited value given shifts from fee-for-service to alternative payment models that reward quality health care rather than the volume of services.

The white paper focuses predominantly on modifications to the Stark law that would remove obstacles to implementing health care reform. After a roundtable held in December, 2015, that was co-moderated by Troy Barsky, the Committee had solicited and received a range of stakeholder comments that proposed various Stark law reform solutions: repeal the law in its entirety; repeal the compensation arrangement prohibitions; implement new exceptions and modify existing exceptions; implement new or expand existing waivers; and expand CMS’s regulatory authority pertaining to waivers, exceptions, and advisory opinions. These comments are catalogued and discussed throughout the white paper. The white paper also examined the need to distinguish between technical, e.g. documentation requirements, and substantive violations of the Stark law.  Commenters generally agreed that a separate set of sanctions should apply to technical violations and that such violations should not give rise to False Claims Act exposure.

Continue Reading In Advance of Senate Finance Committee Hearing on Stark Law Next Week, the Committee Releases Stark Law White Paper

In a unanimous decision last week that impacts healthcare providers, vendors and health plans that receive Medicare and Medicaid reimbursements or contract with federal health care programs, the United States Supreme Court in Universal Health Services v. United States ex rel. Escobar held that a defendant may be liable under the implied certification theory under the False Claims Act (FCA) and clarified on how the materiality requirement of the FCA should be enforced.  Our colleagues from the Government Contracts Group analyzed the Court’s opinion, the legal and factual context in which it arose, and its likely effect on contractors and stakeholders in a “Feature Comment” published in The Government Contractor.

The high court resolves the conflict as to the validity and scope of the so-called implied certification theory.  The eight-member panel determined that there may be FCA exposure where a claim for payment makes specific representations about goods or services provided, and the defendant fails to disclose noncompliance with a material statutory, regulatory, or contractual requirements that makes those representations “misleading half-truths.”

At the same time, the Court also rejected the First Circuit’s expansive view that any violation is deemed to be material if the defendant knows that the government would merely be entitled to refuse payment were it aware of the violation.  The Court made clear that the question of whether violation of a law, regulation, or contractual provision is material to the government’s decision to pay will be analyzed according to common law tort and contract principles.  The question is not whether the Government could refuse payment based on the violation at issue, but something more – whether the government was objectively likely to do so or the defendant knew that the government would refuse payment.

The Office of the Inspector General of the Department of Health and Human Services (OIG) last week replaced a 20-year old policy statement, and issued guidance on the criteria the agency will use to evaluate whether to exclude certain individuals and entities from billing or “participation in” Federal health programs under its permissive exclusion authority. The new guidelines supersede and replace the OIG’s December 24, 1997 policy statement and set forth “non-binding” criteria that the OIG may consider in exercising this authority under circumstances involving fraud, kickbacks and other prohibited conduct. The newly-memorialized policy is yet another effort by the agency to encourage healthcare providers to implement robust compliance mechanisms that can timely identify and voluntarily self-disclose to the government any unlawful conduct.

Under Sections 1128(b)(1)-(b)(15) of the Social Security Act (the “Act”), the Secretary, by delegation to the OIG, has discretion to exclude individuals and entities based on a number of grounds. This so-called “permissive exclusion” authority grants significant discretion to the OIG.  The new policy provides guidelines for permissive exclusions that are based on Section 1128(b)(7) of the Act, which permits the OIG to exclude persons from participation in any Federal health care program if the OIG determines that the individual or the entity has engages in fraud, kickbacks and other prohibited activities.

Continue Reading OIG Updates Policy on Permissive Exclusions Based On Fraud and Kickbacks

Our Health Care Group attorneys have authored a new alert explaining the implications of the final rule on the reporting and return of overpayments (the “Overpayment Rule”) the Centers for Medicare & Medicaid Services (CMS) issued earlier this month.  CMS promulgated the Overpayment Rule nearly two years after the agency issued its final rules governing overpayments in the Medicare Part C (Medicare Advantage) and Part D programs and six years after the statutory enactment of the so-called “60-Day Rule” under Section 1128J(d) of the Social Security Act (as enacted by Section 6402 of the Affordable Care Act (ACA)).  The Overpayment Rule’s effective date is March 14, 2016.

Providers should be especially attentive to how the Overpayment Rule clarifies when an overpayment has been “identified” and how efforts precedent to identifying such overpayments will be important to future enforcement efforts under the False Claims Act (FCA). Of note, the Overpayment Rule did not adopt the proposed rule’s plan to adopt the FCA knowledge standard itself.  Rather, the Overpayment Rule sets a six-month timeframe starting from the receipt of credible information about a possible overpayment for providers to exercise “reasonable diligence” in an internal investigation.  The six-month timeframe is not absolute and CMS understands that extraordinary circumstances, such as complex investigations of potential violations under the Physician Self-Referral Law might take longer.  The Overpayment Rule also explicitly allows for providers to “toll” the overpayment reporting obligation by submitting the relevant information through the Office of Inspector General’s Self-Disclosure Protocol (SDP), or the CMS Voluntary Self-Referral Disclosure Protocol (SRDP).

The alert also discusses the implications of the six-year lookback period covered by the Overpayment Rule, particularly in relation to information uncovered during contractor reconciliation processes, as well as through audits performed by Medicare Administrative Contractors, Recovery Audit Contractors, and the HHS Office of the Inspector General.

The Overpayment Rule, along with the other guidance on overpayments issued by CMS for Medicare Parts C & D attempts to resolve issues that have arisen in the courts, particularly in the Kane ex rel. U.S. v. Healthfirst, Inc. case that we discussed in a previous post. Providers should ensure that they update their internal investigation policies and procedures to ensure that timelines, information sources, and final reporting mechanisms align with the Overpayment Rule.

On February 8, 2016, the United States District Court in the Southern District of Georgia approved the settlement agreement ending a whistleblower lawsuit initiated on March 9, 2011 against Memorial Health University Medical Center (“Memorial Medical Center”) and three affiliated entities in a case that highlights the Department of Justice’s (“DOJ”) vigorous scrutiny of physician compensation arrangements. The non-profit hospital, based in Savannah, Georgia, agreed to pay $9.89 million with $2.29 million going to the relator, the hospital’s former president and CEO, who initiated the action under the qui tam provision of the False Claims Act (“FCA”).  The settlement is the largest civil healthcare fraud recovery recorded by the U.S. Attorney’s Office for the Southern District of Georgia.

The underlying lawsuit alleged that Memorial Medical Center acquired a physician practice for compensation in excess of fair market value (“FMV”), and that the acquisition resulted in a projected financial loss of approximately $670,000 per year over a five-year period.  According to the complaint, the defendant hospital engaged in a complex scheme to compensate its employed and contracted physicians at rates above FMV in return for the promise of patient referrals–thereby violating both the federal Anti-Kickback Statute (“AKS”) and the physician self-referral law (“Stark Law”), and tainting Medicare and Medicaid payments.

Continue Reading $9.9 Million Settlement To Resolve Allegations That Hospital System Overpaid Physicians Approved by Georgia Federal Court

Last week, in a case that will have a significant impact on future False Claims Act (FCA) suits against health care entities, the Supreme Court granted certiorari in Universal Health Services, Inc. v. United States ex rel. Escobar.  By agreeing to hear the case, the Court will resolve the circuit split over the so-called “implied certification” theory of legal falsity under the FCA.  For more information about the circuit split, read the post co-authored by Jason Crawford and Jared Engelking on the Whistleblower Watch blog.

In short, FCA cases based on the “implied certification” theory allege that claims submitted by the defendant are “false” or “fraudulent” because of noncompliance with a statutory, regulatory, or contractual provision even though no express certification of compliance has been made.  While cases based on this theory often include an allegation that compliance is a condition of payment not all courts require it. Of note, both whistleblowers and the government have increasingly relied on this theory to prosecute health care FCA cases alleging noncompliance with the Physician Self-Referral (“Stark”) Law, which is a strict liability statute that bans physicians in prohibited financial relationships from submitting claims to Medicare and Medicaid for reimbursement.  The Court’s decision on whether and to what extent implied certification is viable will likely prove a turning point in the use of the FCA and eliminate diverging outcomes for attaching FCA liability under factually identical circumstances dependent on where the case is filed.  We will monitor the case and provide more insights in future posts. 


Earlier this month, Judge Karen Bowdre ordered a new trial in the United States v. AseraCare Inc., No. 2:12-CV-245-KOB (N.D. Ala. Nov. 3, 2015).  Judge Bowdre’s decision to do so sua sponte marks yet another unusual turn of events in this qui tam action in which the government intervened, which is the largest brought against hospice care providers thus far.  Our colleagues Robert Rhoad, John Brennan, and Jason Crawford recount all of the twists and turns of this case in their piece on the Whistleblower Watch blog.

AseraCare was already famous because (1) the judge allowed the government to use of statistical sampling to establish falsity for FCA liability and for potential damages and (2) the trial proceedings had been bifurcated to force the government to bring separate cases to address the elements of falsity and scienter under the FCA.  Judge Bowdre’s recent order may indicate that the second trial phase will never occur, especially since she found that her own jury instructions did not “accurately reflect the law” with respect to how falsity may be proven under the FCA.  The Whistleblower Watch post provides additional details about the important implications of this case on the use of statistical sampling as well as the potential for future bifurcations of FCA proceedings.


On September 15, 2015, the U.S. Department of Justice (DOJ) announced the settlement of a qui tam action in the amount of $69.5 million with North Broward Hospital District (NBHD). The amount is a small fraction of the $442 million in treble damages to the Medicare and Medicaid programs alleged in the Third Amended Complaint. The settlement resolves allegations that NBHD violated the False Claims Act and the Stark Law by engaging in improper financial relationships with referring physicians. This settlement is an example of a troubling trend in which the DOJ imposes its views of the fair market value (FMV) and commercial reasonableness of employment compensation arrangements upon hospitals and providers. As the DOJ continues to successfully challenge physician compensation by analyzing the monetary impact of such compensation on hospitals’ profits and losses, hospitals are increasingly hamstrung in their ability to rely on FMV opinions to set physician compensation.

NBHD is a special taxing district of the state of Florida that operates hospitals and other health care facilities in the Broward County, Florida region. NBHD was named in a whistleblower suit originally filed in 2010 by Dr. Reilly, an orthopedic surgeon who held staff privileges to practice medicine at Imperial Point Medical Center, a hospital within the NBHD system. The Third Amended Complaint alleged that nine employed cardiologists and orthopedic surgeons were provided compensation packages in excess of FMV, in a system that illegally compensates physicians for the volume or value of their referrals to NBHD. It alleged that from 2004 to present, the overcompensation of the orthopedic surgeons generated net operating losses of over $40 million – an amount offset by referral profits monitored by NBHD in purported “secretive Contribution Margin Reports.”

Continue Reading South Florida Hospital System Settles Stark Allegations for $69.5 Million