Recently Unsealed Complaint Reinforces Potential Liability of Private Equity Investors in the Healthcare Industry
Recently, a court in the Central District of California unsealed a qui tam complaint against several specialty pharmacies and their private equity fund owners. See United States ex rel. Webster v. BioMatrix Holdings, LLC, 2:18-cv-09333-PSG-PLA (C.D. Cal. Oct. 31, 2018). Relator, a former Vice President for Managed Care at BioMatrix Specialty Pharmacy, alleged that the specialty pharmacy defendants (collectively “BioMatrix”), with the knowledge of their private equity owners, employed a kickback scheme to increase the number and value of prescriptions for hemophilia medications filled through their pharmacies. (more…)
Latest DOJ COVID Crackdown Features Another Defendant Accused of Abusing Telehealth Waivers
With its latest announcement this week of a criminal crackdown of 21 defendants for their alleged participation in various health care related fraud schemes, DOJ has underscored its commitment to aggressively pursue individuals and companies alleged to have exploited the COVID-19 pandemic. Among these actions are a collection involving alleged billing fraud arising from COVID testing; one set of defendants is alleged to have taken the data from patients seeking COVID tests and submitting bills to the federal healthcare programs for office visits that never occurred, while another set of actions involve obtaining patient samples and then billing for more expensive lab tests. Still others involve defendants alleged to have sold fake COVID vaccination cards. (more…)
Settlement Highlights Ongoing Interest in Kickbacks Affecting Non-Federal Healthcare Programs
Earlier this week, two laboratory testing companies paid $42.25 million to resolve allegations that they violated the California and federal FCAs, as well as the California Insurance Frauds Prevention Act (“CIFPA”), by paying kickbacks to induce physicians to order a specialized lab test for auto-immune and inflammatory diseases. The kickbacks allegedly took the form of inflated processing fees and caps on patient cost-sharing obligations. See United States ex rel. STF, LLC v. Crescendo Bioscience, Inc., No. 16-cv-2043 (N.D. Cal.). DOJ and the State of California declined to intervene, and the laboratory testing companies entered into this settlement with the relator to resolve ongoing litigation. The settlement highlights increasing enforcement risk arising from kickback allegations affecting non-federal healthcare programs, which are not directly subject to the Anti-Kickback Statute or the FCA. (more…)
DOJ Settles FCA Case Alleging Medically Unnecessary Telehealth Visits, Claws Back PPP Money
This week DOJ announced one of the first civil settlements under the FCA involving abuse of the pandemic flexibilities that the Department of Health and Human Services used to authorize broader use of telehealth during the COVID public health emergency. Physician Partners of America (“PPOA”) agreed to pay $24.5 million to resolve allegations that it violated the FCA by billing for medically unnecessary telehealth visits, and by submitting claims for medically unnecessary genetic, psychological, and urine drug tests and claims tainted by violations of the Stark Law. While DOJ has previously engaged in criminal enforcement actions relating to abuse of the telehealth waiver flexibilities, as discussed further here, this case represents an expansion of telehealth enforcement scrutiny to the civil side. (more…)
New Pharmacy, Same Result: Seventh Circuit Holds That Objective Reasonableness Dooms “Usual and Customary” Pricing Case
On April 5, 2022, in a 2-1 decision, the Seventh Circuit applied the precedent it set in United States ex. rel. Schutte v. SuperValu Inc., 9 F.4th 455 (7th Cir. 2021) (discussed here) and found once again that a defendant retail pharmacy did not act with “reckless disregard” under the False Claims Act (“FCA”) by interpreting Medicare Part D and Medicaid “usual and customary” price requirements as allowing it to charge those programs its retail cash prices rather than prices offered through discount programs. United States ex rel. Proctor v. Safeway, Inc., No. 20-3425, 2022 WL 1012256 (7th Cir. Apr. 5, 2022). (more…)
District Court Again Dismisses Anti-Kickback Statute Claim Related to Medical Devices Used in Bariatric Surgeries
A court in the District of Maryland again dismissed a declined qui tam action in which the relator, a bariatric surgeon, alleged that two medical device companies violated the AKS by providing surgeons with free advertising in exchange for physicians using the companies’ LAP-BAND medical devices in bariatric surgeries. See United States ex rel. Fitzer v. Allergan, Inc., 17-cv-00668 (D. Md. Mar. 22, 2022). We reported on the court’s prior dismissal of the relator’s second amended complaint for failure adequately to plead a knowing and willful violation of the AKS here. Relator fared no better on his third attempt; as the court found, he failed to adequately plead presentment and causation. (more…)
DOJ’s First “Cyber-Fraud” Settlement Targets Healthcare Provider
Yesterday DOJ announced its first settlement under the Department’s new “Cyber-Fraud Initiative.” This initiative, announced in October 2021, aims to “utilize the False Claims Act to pursue cybersecurity related fraud by government contractors and grant recipients.” However, as discussed further here, in addition to targeting traditional government contractors, the initiative presents broader opportunities for DOJ to use the FCA to address data protection practices by healthcare providers.
The healthcare industry is consistently the recipient of disproportionate oversight under the FCA, and thus it is perhaps no surprise that DOJ’s first settlement under the Cyber-Fraud Initiative was with a healthcare provider. As announced here, a healthcare provider furnishing medical services on air force bases paid $930,000 to resolve allegations that it “violated the False Claims Act by falsely representing to the State Department and the Air Force that it complied with contract requirements relating to the provision of medical services.” The settlement also resolved allegations relating to controlled substances. (more…)
Court Agrees With DOJ That FMV Payments Can Be Kickbacks
On February 23, 2022, a district court in the Central District of California denied a defendant’s motion to dismiss a qui tam suit premised on alleged Anti-Kickback Statute (“AKS”) violations, holding that “even some fair-market-value payments will qualify as illegal kickbacks.” See United States ex rel. Chao v. Medtronic PLC, No. 17-cv-1903 (C.D. Cal.).
The relator’s operative complaint argued that the defendant, a manufacturer of medical devices, violated the FCA by offering kickbacks in various forms to reward physicians for using the defendant’s devices. Among other arguments, the defendant urged the court to dismiss the complaint because the relator failed to allege that certain payments to physicians for proctoring other physicians on how to use the medical devices exceeded fair market value (“FMV”). As such, the defendant contended, the relator failed to address the potential applicability of the AKS’s personal services safe harbor. (more…)
Fourth Circuit Applies Safeco to FCA Claims, Accuses CMS of “Maintaining Strategic Ambiguity” Around Medicaid Drug Rebate Program Requirements
In a recent 2-1 decision, the Fourth Circuit joined every other circuit to have considered the issue in applying Safeco’s “reckless disregard” standard to legally false FCA claims based on alleged violations of ambiguous laws and regulations. Under Safeco, courts ask whether a defendant’s interpretation of the ambiguous law or regulation at issue was objectively reasonable and whether authoritative guidance might have warned the defendant away from that interpretation. The Fourth Circuit found that the Safeco standard “duly ensures that defendants must be put on notice before facing liability for allegedly failing to comply with complex legal requirements. Without such notice, defendants are not likely to receive due process.”
Remote Patient Monitoring Gains Qui Tam Attention
Last week one of the first qui tam suits alleging manipulation of the billing rules for a type of remote patient monitoring was unsealed, following the relator’s voluntary dismissal. See United States ex rel. Mathurin v. Vector Remote Care LLC (Nov. 18, 2020 E.D.N.Y.). Relators not infrequently voluntarily dismiss their case when DOJ informs them that it lacks merit. Whatever the merits of this one, given the explosive increase in remote patient monitoring during the pandemic and the predicted future increases in these patient care modalities, we expect continued whistleblower activity focused on this space. Of course, such allegations will be met with substantial challenges to establishing that these kinds of issues in fact fail to comply with the applicable coverage and reimbursement criteria or render any claims materially false.