DOJ Walks Back Recent Flexibilities for Corporate Resolutions
In a recent speech, Deputy Attorney General Lisa Monaco announced three important updates to how DOJ attorneys are to approach corporate resolutions (as discussed further here). These changes depart from flexibilities offered by DOJ during the last administration. While the remarks were made against the backdrop of the Deputy Attorney General’s criminal portfolio, these Department-wide policies apply with equal force to the Civil Division’s False Claims Act work. It will be particularly important for companies in the middle of ongoing FCA investigations to reassess their strategies in light of these new policies.
DOJ Deploys the FCA on Cybersecurity Fraud
Sidley lawyers Brenna Jenny and Sujit Raman recently published an article in Law360 entitled How To Minimize FCA Cyber Fraud Enforcement Risk, which analyzes the implications of DOJ’s recent formation of a Civil Cyber-Fraud Initiative to use the FCA to pursue cybersecurity-related fraud. Although the Initiative focuses generally on government contractors and grant recipients—and does not, by its terms, impose any new cybersecurity requirements—the project promises in particular to attract whistleblowers in the defense industry, as recent years have witnessed high-profile FCA cases implicating alleged cybersecurity non-compliance in that sector. The healthcare industry may also see a marked increase in cybersecurity-related qui tams, especially in light of a recent Department of Health and Human Services Office of Inspector General report taking the Centers for Medicare & Medicaid Services to task for failing to hold hospitals accountable for the cybersecurity of their networked devices. Healthcare providers and medical device manufacturers, in addition to other government contractors and grantees, would do well to heed DOJ’s warning that “cybersecurity failures…are prime candidates for potential False Claims Act enforcement.”
A copy of the article is available here.
Split Seventh Circuit Panel Spars Over Escobar Interpretation
The United States Court of Appeals for the Seventh Circuit recently allowed a previously dismissed qui tam case to proceed against Molina Healthcare of Illinois (“Molina”). The suit, brought by a relator who founded Molina subcontractor GenMed, alleges that Molina fraudulently billed Illinois’ Medicaid program for skilled nursing facility (“SNF”) services that were not actually provided. The district court previously dismissed the case at the pleading stage in June 2020, finding that the relator’s complaint insufficiently alleged that Molina knew its alleged false claims were material. The Seventh Circuit, in a split decision, reversed and remanded the case for further proceedings. (more…)
HHS Hires Four Outside Firms to Audit Provider Relief Fund Recipients
Federal records recently made available by ProPublica reveal that from late February through early April 2021, Health Resources and Services Administration (“HRSA”), the component of HHS that administers the CARES Act Provider Relief Fund, engaged multiple outside contractors for work relating to auditing and oversight of the Provider Relief Fund, with task descriptions such as “PRF audit support services,” “Audit and financial review services of HRSA Provider Relief Fund programs,” and “Program integrity support for HRSA Provider Relief Fund programs.” Amounts obligated so far for this work total more than $5.3 million. (more…)
FDA’s OPDP Studying Promotional Booths at Medical Conferences
FDA recently announced that the Office of Prescription Drug Promotion (“OPDP”) initiated a new study on pharmaceutical companies’ interactions with healthcare providers at promotional booths in medical conference exhibit halls. The study is intended to yield insights to inform OPDP policy making and review of proposed promotional materials submitted by companies seeking advisory comments. It may also generate insights that may be used by DOJ to pursue companies for potential instances of off-label promotion or making statements about safety or efficacy that could be characterized as false or misleading.
Drug Diagnosis Code Data Sought by HHS OIG May Cue Enforcement
Leadership from HHS-OIG recently advocated for new mandates that physicians include a diagnosis code with each prescription and that claims data capture this information. This followed on the heels of a Congressional Research Service report suggesting that Congress should pass legislation requiring healthcare providers to include diagnostic information in prescriptions. As Sidley lawyers Jaime L.M. Jones, Brenna E. Jenny, and Matt Bergs discuss in an article published in Bloomberg Law entitled Drug Diagnosis Code Data Sought by HHS OIG May Cue Enforcement, HHS-OIG may see diagnosis code data as a tool to engage in nuanced investigations into pharmaceutical companies for off-label promotion of prescription drugs, leveraging law enforcement’s increasingly sophisticated capacity to use data analytics to identify targets for investigation.
A copy of the article is available here.
DOJ Opposes Supreme Court Review of Granston Dismissal Standard
On May 21, 2021, the Department of Justice filed a brief in opposition to a petition for writ of certiorari filed by the relator in U.S. ex rel. Cimznhca, LLC v. UCB, Inc. The petition challenges the Seventh Circuit’s decision reversing the district court’s denial of the government’s motion to dismiss over the relator’s objection. In reversing, the Seventh Circuit determined that, so long as relators have an opportunity to be heard under 31 U.S.C. § 3730(c)(2)(A), the government may dismiss qui tams when it satisfies the standard contained in Federal Rule of Civil Procedure 41(a)(1)(A)(i). That rule provides that a plaintiff may dismiss an action by serving notice of dismissal any time before the opposing party serves either an answer or a motion for summary judgment.
DOJ Announces “First in the Nation” Fraud Charges for Abuse of Pandemic Telehealth Flexibilities
Yesterday DOJ announced another round of coordinated law enforcement actions to combat healthcare fraud related to COVID-19. One of these indictments features “first in the nation charges for allegedly exploiting the[] expanded” opportunities to receive Medicare reimbursement for telehealth services during the COVID-19 public health emergency.
Sunshine Act Enforcement No Longer Just on the Horizon
DOJ recently announced its second FCA settlement within the past half year that resolves alleged Anti-Kickback Statute (“AKS”) violations and corollary failures to satisfy Sunshine Act reporting obligations. Before this pair of settlements, neither DOJ nor CMS has publicly announced any targeted efforts to enforce the Sunshine Act, and these settlements seem to be on the cutting edge of an emerging government enforcement priority.
Judge Saris Green Lights FCA Claims Against PE Fund Based on Regulatory Non-Compliance of its Portfolio Company Healthcare Provider for Trial
Late last week, Judge Patti Saris (D. Mass.) issued an opinion on cross-motions for summary judgment filed by a qui tam relator and Massachusetts and a group of defendants that includes South Bay Mental Health Center (“South Bay”) and its private equity fund owner, permitting the vast majority of plaintiffs’ claims to proceed to the jury. The opinion addresses important questions of law as to each of the elements of the FCA related to claims to Medicaid for services allegedly provided in violation of various state regulatory requirements. However, the opinion is most notable for being the first to hold at the dispositive motion stage that a private equity fund and its principals can act with the requisite scienter and cause the submission of false claims, and thus be exposed directly to the treble damages and statutory penalties of the FCA as a result of conduct by a healthcare provider portfolio company. As such, we may expect it to add momentum to DOJ’s stated intent to pursue FCA claims against PE investors in the industry, as we previously reported here.
