FCA

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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…

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 …

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…

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

On August 3, 2015, in Kane v. Healthfirst, Inc., No. 1:11-cv-02325-ER (S.D.N.Y. Aug. 3, 2015), Judge Edgardo Ramos of the Southern District of New York decided an issue of first impression under the False Claims Act (FCA) requirement to return identified overpayments from Medicare and Medicaid within sixty (60) days. In denying the defendants’ motion to dismiss, the court provided some guidance on what it means to “identify” an overpayment and start the sixty-day clock created by the Affordable Care Act (ACA). At the very least, a party with an “identified” overpayment increases its risk of incurring FCA liability the longer it takes to quantify and return the overpayment beyond the first sixty days.

The ACA requires that an overpayment must be reported and returned within sixty days of the “date on which the overpayment was identified,” and any overpayment retained beyond this period is considered to be an “obligation” with the potential for FCA liability. 42 U.S.C. § 1320a-7k(d).

The alleged overpayments in Kane stemmed from a glitch in defendant Healthfirst’s computer system which caused its participating providers in a network operated by Continuum Health Partners, Inc. to seek additional payment from Medicaid based on erroneous remittance advices. In 2010, New York state auditors asked Continuum about the incorrect billing, and Continuum tasked its employee Robert Kane (the relator) with determining which claims had been improperly billed to Medicaid. Four days after Kane submitted a spreadsheet containing claims with alleged erroneous overbillings, Continuum fired him. The complaint alleged that Continuum took no further action to investigate or repay the claims until June 2012 when the government issued a Civil Investigative Demand (CID).Continue Reading S.D.N.Y. Provides First Judicial Guidance on Identifying Overpayments and Effect on FCA Liability

On August, 20, 2014, in the case of U.S. ex rel. Absher v. Momence Meadows Nursing Center, Inc., the Seventh Circuit rejected a broad interpretation of what could constitute “worthless services,” instead setting a high bar to for False Claims Act (“FCA”) relators succeed under such a theory of liability. The court also made clear that relators proceeding under a “false certification” theory of FCA liability must specify and quantify the specific claims that they allege were false.

In Absher, the Court was presented with an appeal of a multi-million dollar jury verdict against Momence Meadows Nursing Care Center (“Momence”). The suit had been brought by two qui tam relators, who were nurses formerly employed by Momence. The United States had declined to intervene in the case before the District Court.

The relators alleged several theories of FCA liability, which the Seventh Circuit dealt with in turn. First, the relators claimed that Momence submitted “thousands” of claims for payment to Medicare and Medicaid, which were false because they were based on care that was non-compliant with Medicare and Medicaid regulations. The allegations included that the facility was understaffed and dirty, that residents experienced accidents such as falls, that there were infection and pest control issues at the facility, that employees were that the instructed not to chart pressure sores and symptoms of scabies, and that at least one resident had died due to poor care. State regulators visited the facility over 100 times during the period at issue and issued thousands of dollars in fines for noncompliance with regulatory requirements, but according to the relators, Momence did not comply with approved plans of correction. According to the relators, these and other violations rendered the care a “worthless service,” and hence it was false of Momence to seek payment from the government for this care.Continue Reading Seventh Circuit Overturns Worthless Services Jury Verdict Against Nursing Home