Deputy Associate Attorney General Stephen Cox Addresses FCA Enforcement Issues
On January 27, 2020, Deputy Associate Attorney General Stephen Cox provided insight into current DOJ False Claims Act enforcement priorities and topics such as dismissals under the Granston Memo and reliance on subregulatory guidance as the basis of enforcement. A copy of his remarks can be found after clicking Read More.
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.”
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.”
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.
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.
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.
HHS Memo Announces Violations of Sub-Regulatory Payment Rules and Guidance Cannot Form the Basis of Enforcement Actions
As we reported here, the Supreme Court in Azar v. Allina Health Services, 139 S. Ct. 1804 (2019) held that the Medicare Act expressly requires HHS to engage in notice-and-comment rulemaking prior to adopting any “substantive legal standard.” One court recently relied on Allina to conclude that FCA claims premised on a CMS rule articulated in payment manuals must fail because the rule constitutes a “substantive legal standard” that did not go through notice-and-comment rulemaking. Polansky v. Executive Health Resources, Inc., No. 12-4239, 2019 WL 5790061 (E.D. Pa. Nov. 5, 2019). (more…)
Court Grants DOJ’s Motion, Consistent with the Granston Memo, to Dismiss Patient Support Services FCA Litigation
The District Court has ruled on motions filed by DOJ to dismiss FCA cases against certain drug manufacturers in declined qui tam suits, consistent with the principles articulated in the Granston Memo. We previously described DOJ’s motions here. On Friday, the District Court for the Eastern District of Texas adopted in part the recommendation of a Magistrate Judge that DOJ’s motion be granted. Specifically, the Court agreed that the government had satisfied the heightened standard for dismissal adopted by the Ninth and Tenth Circuits, as articulated by the former in Sequoia Orange; namely, that the government has a legitimate interest in preserving its resources, that dismissal was rationally related to that interest, and that there is no evidence that the government’s decision was “fraudulent, arbitrary and capricious, or illegal.” In particular, the Court found the government’s interest in controlling litigation costs to be legitimate and held that avoiding the need to make employees available for deposition is rationally related to that interest. As such, the Court found it unnecessary to address the Magistrate’s recommendation that it instead adopt the view, embraced by the D.C. Circuit in Swift and other courts (as reported here and here), that DOJ has “unfettered discretion” to dismiss FCA claims. The court’s opinion is here.
Friday’s ruling bolsters DOJ’s efforts to dismiss meritless qui tam suits but fails to sharpen the split of authority on the breadth of its right to do so. We will continue to monitor and report on updates on this important issue.
DOJ Defends Medicare Advantage Upcoding Claims Against Sutter
On August 28, 2019, the United States filed a brief in opposition to Sutter’s June 14, 2019 motion to dismiss the Department of Justice’s Complaint-in-Intervention in a False Claims Act suit alleging Sutter knowingly submitted and caused the submission of unsupported diagnosis codes for Medicare Advantage Organization (MAO) patients in order to inflate Medicare reimbursements. On the same day, the Relator, Kathy Ormsby, also filed a similar brief in opposition to Sutter’s motion to dismiss. We previously discussed Sutter’s motion to dismiss here and the Department of Justice’s Complaint-in-Intervention here.
Medicare Advantage Providers Pay $5M to Settle FCA Allegations Relating to Unsupported Diagnosis Codes
On August 8, 2019, Beaver Medical Group L.P. (“Beaver”) and a Beaver-affiliated physician, Dr. Sherif Khalil, agreed to pay a combined total of $5 million to resolve allegations that the providers knowingly submitted diagnosis codes that were not supported by the medical records in order to inflate reimbursements from Medicare. The qui tam action was brought by a former employee of Beaver, Dr. David Nutter, and DOJ intervened. The settlement reflects DOJ’s continuing efforts to use its enforcement power to pursue fraud in the Medicare Advantage space despite recent setbacks in the UnitedHealthcare Insurance Co. v. Azar, 330 F. Supp. 3d 173 (D.D.C. 2018), which vacated a portion of CMS’s 2014 Final Overpayment Rule applicable to the Medicare Advantage program, previously discussed here. Indeed, in its press release, DOJ emphasized that preventing Medicare Advantage fraud remains a top priority: “As enrollment in Medicare Advantage continues to grow, investigation into accuracy of diagnosis data becomes ever more important….Those who inflate bills sent to government health programs can except to pay a heavy price.” We will continue to monitor and provide updates on these issues as they develop.
DOJ’s press release can be found here.