Welcome to Original Source: The Sidley Austin False Claims Act Blog

The False Claims Act (FCA) has long been a key enforcement tool for the federal government in matters involving government contracts or other expenditures of government funds. FCA enforcement has traditionally focused primarily on two industries receiving a substantial amount of government funds: healthcare and defense and other government contractors. Recently, however, FCA enforcement has expanded to other industries, including financial services. Through the False Claims Act Blog, lawyers in Sidley’s White Collar, Healthcare, FDA, Government Contracting, Financial Services, Appellate, and other practices will provide timely updates on new and interesting developments relating to FCA enforcement and litigation.

DME Supplier Pays $37.5M to Settle AKS-Based FCA Claims Across Five Qui Tam Suits

DOJ has announced that ResMed Corp., a manufacturer of durable medical equipment (DME) that treats sleep apnea and other chronic respiratory diseases, has agreed to pay $37.5 million to settle claims under the False Claims Act based on allegations that ResMed paid kickbacks to DME suppliers, healthcare providers, and other entities in violation of the federal Anti-Kickback Statute.  In particular, DOJ alleged that ResMed “(a) provided DME companies with free telephone call center services and other free patient outreach services that enabled these companies to order resupplies for their patients with sleep apnea, (b) provided sleep labs with free and below-cost positive airway pressure masks and diagnostic machines, as well as free installation of these machines, (c) arranged for, and fully guaranteed the payments due on, interest-free loans that DME suppliers acquired from third-party financial institutions for the purchase of ResMed equipment, and (d) provided non-sleep specialist physicians free home sleep testing devices.”

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Court Orders DOJ to Articulate Factual Basis for Allegation that AKS Violations Caused the Submission of False Claims

Earlier this month, a federal judge in Minnesota held that DOJ was required to articulate the factual basis for its allegation that Defendants’ claims for payment resulted from kickbacks, rejecting the argument that such information was irrelevant based on a legal presumption of causation.  The Government alleges that defendants Precision Lens and Paul Ehlen provided kickbacks to physicians, including “lavish hunting, fishing and golf trips, private plane flights, frequent-flyer miles and other items of value,” to induce them to use products that Defendants supplied.  The Government further alleges that these kickbacks violated the Anti-Kickback Statute (AKS), causing the submission of false claims to the Government.

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OIG Report Raises Concerns About Medicare Advantage Organizations Using Chart Reviews to Obtain Billions of Dollars in Inflated Risk-Adjusted Payments

On December 10, 2019, HHS-OIG issued a report examining the extent to which Medicare Advantage Organizations (“MAOs”) leverage chart reviews to increase risk-adjusted payments. OIG undertook its review due to concerns that MAOs “may use chart reviews to increase risk adjusted payments inappropriately.” Based on its analysis, OIG estimated that MAOs received approximately $6.7 billion in additional payments based on codes added during chart reviews. While OIG did not conclude that these payments constituted overpayments, it raised concerns about “the completeness of payment data submitted to CMS, the validity of diagnoses on chart reviews, and the quality of care provided to beneficiaries.”

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Healthcare Enforcement Trends to Watch in 2020

According to the statistics published by the Department of Justice (“DOJ”) in December of 2018, fraud recoveries, including under the False Claims Act, declined in 2018 for the third straight year.  While the majority of the dollars recovered by the government in these actions continues to come from the providers of healthcare services, technologies that enable those services, the manufacturers of the drugs, devices, and the private insurers who pay for healthcare, recoveries from the healthcare sector have also declined.  While we await the official 2019 statistics from DOJ, we know that this year has continued this Administration’s trend of decreasing enforcement recoveries.  That said, recoveries from the industry continue to be counted in the billions of dollars and outstrip levels seen a decade ago.  While this Administration’s enforcement priorities have shifted from those of the last, and while DOJ is taking steps to exercise discretion and preserve its enforcement resources in some matters, both DOJ and the U.S. Department of Health and Human Services (“HHS”) continue to devote substantial resources aggressively to pursuing high priority enforcement issues, particularly those that potentially impact patient safety and substantially increase costs to the federal healthcare programs.

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Sutter and Physician Group Pay $46 Million to Resolve Kickback and Stark Law Allegations Brought by Former Compliance Officer Whistleblower

On November 15, 2019, Sutter Health (“Sutter”) and Sacramento Cardiovascular Surgeons Medical Group Inc. (“Sacramento”) agreed to pay a total of $46 million to resolve FCA claims based on whistleblower allegations made by a former Sutter compliance officer that Sutter provided kickbacks to Sacramento physicians in exchange for referring patients to Sutter.  The settlement also resolved Stark Law allegations relating to above fair market value payments made by certain of Sutter’s hospitals to Sacramento physicians. The underlying FCA complaint was filed in 2014 by a former Sutter compliance officer.  The settlement only resolves some of the fraud allegations included in the former compliance officer’s complaint.

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Third Foundation Settles in Industry-Wide Charity Patient Assistance Program Investigation

On November 20, 2019, the US Attorney’s Office for the District of Massachusetts announced that The Assistance Fund (“TAF”), an independent charity patient assistance program (“PAP”), agreed to settle allegations that it violated the False Claims Act and agreed to pay $4 million to the government.  That amount was calculated on an ability to pay basis.  TAF is the third charity to settle in this ongoing, industry-wide investigation led by the District of Massachusetts. To date, the government has collected approximately $10 million from charity PAPs and over $800 million from eight drug manufacturers.

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