Medicare Advantage Enforcement: DOJ Advances New Theories Based on Retrospective Chart Reviews

Over the past two months, DOJ has filed complaints-in-intervention in two FCA cases premised on allegedly fraudulent diagnosis codes submitted to CMS as a result of retrospective chart reviews.  These cases demonstrate how DOJ has begun to explore new legal theories that articulate a narrower view on the legality of retrospective chart reviews designed to add diagnosis codes. (more…)

District Court Issues Rare Rebuke Denying DOJ’s Belated Motion to Intervene

A federal district court recently issued a rare order denying the Department of Justice’s (DOJ) motion to intervene in a qui tam suit after the government’s initial declination months earlier.  See United States ex rel. Odom v. Southeast Eye Specialists, PLLC, 3:17-cv-00689 (M.D. Tenn. Feb. 24, 2021).  The False Claims Act allows the government to intervene in a case in which it previously declined to intervene upon “a showing of good cause.”  Although DOJ does so not frequently seek to intervene after previously declining to do so, courts are generally deferential to the government’s shift in position.  This decision provides important precedent for defendants in the position of arguing that a late intervention by DOJ is not appropriate.


DOJ Files Complaint-in-Intervention in Medicare Advantage Case Against Sutter Health

On March 4, 2019, the Department of Justice filed its Complaint-in-Intervention against Sutter Health (“Sutter”) and its affiliate Palo Alto Medical Foundation (“PAMF”) in a False Claims Act suit alleging that the Defendants knowingly submitted and caused the submission of unsupported diagnosis codes for Medicare Advantage patients in order to increase reimbursements from Medicare.  DOJ had previously announced its decision to intervene on December 11, 2018, as we previously discussed here.


DOJ Intervenes in Medicare Advantage FCA Case Against Provider

On December 11, 2018, the Department of Justice announced that it has intervened in a False Claims Act suit against Sutter Health and its affiliate Palo Alto Medical Foundation.  The suit, originally filed in March 2015 by a former Risk Adjustment Manager at Palo Alto Medical, alleges that Sutter knowingly submitted unsupported diagnosis codes for Medicare Advantage patients in order to increase reimbursements from Medicare. (more…)

Granston Memo Calls for DOJ to Dismiss More Declined Qui Tams; Courts Diverge on The Extent of DOJ’s Right to Do So

In the recently released Granston Memo, DOJ outlined its policy in favor of dismissing non-intervened qui tam suits when dismissal will advance other important government interests. [Reported on here].  While the FCA bar has been debating how much – if at all – the world of FCA enforcement will change in light of the Granston Memo, DOJ has been litigating over its right to act on the policy and dismiss declined qui tam suits.  In that regard, the statute appears straightforward:  “The Government may dismiss the action notwithstanding the objections of the person initiating the action if the person has been notified by the Government of the filing of the motion and the court has provided the person with an opportunity for a hearing on the motion.”  31 USC § 3730(c)(2)(a).  However, in the last week DOJ lost and won this issue in sharply contrasting decisions regarding the government’s right not to pursue claims.  (more…)

DOJ Backs Down From Challenge to CIDs Issued After It Declined to Intervene in FCA Case

Faced with a challenge to its authority to do so, DOJ recently withdrew several Civil Investigative Demands (“CIDs”) which it had issued after declining to intervene in a qui tam case brought by former employees who had accused their employer, Lexington Foot & Ankle Center PSC, of fraudulent billing.  In re Civil Investigative Demands 18-13-EDKY, 18-02-EDKY, and 18-03-EDKY, No. 5:18-cv-00283 (E.D. Ky.) (filed Apr. 23, 2018).  (more…)

District Court Rejects Argument That CID Should Be Quashed Because Government Has Unofficially Decided to Intervene

This month, a judge for the United States District Court for the Western District of Virginia rejected the argument of a private party, Beam Brothers Trucking, Inc. (“Beam”), that a Civil Investigative Demand (“CID”) issued by the United States should be quashed because the United States had already effected a de facto intervention in a qui tam action, despite neither formal intervention nor confirmation of the existence of the suit.  See In re Civil Investigative Demand 15-439, No. 5:16-mc-3 (W.D. Va. Aug. 12, 2016).  The government had been investigating Beam, which had government contracts for the transport of mail, to determine if Beam had used government-issued credit cards for non-government deliveries.  Approximately thirty federal agents executed a search warrant on Beam’s offices in February 2013, after which Beam met with civil and criminal government officials regarding the investigation.  Beam argued to the Court that the government recovered contracts and corporate records in the search that were responsive to the later-issued CID at issue before the Court.


Eighth Circuit Limits A Relator’s Right To Recovery Only To Those Portions Of A Settlement Attributable To His Claims

Last month, the Eighth Circuit, sitting en banc, overturned a district court’s decision to grant two qui tam relators a share of an FCA settlement that resolved multiple claims, including some claims allegedly unrelated to the relators’ complaint.  Rille v. Pricewaterhouse Coopers LLP, et al., No. 11-3514, 2015 WL 5778810 (8th Cir. Oct. 5, 2015).  Joining the Sixth Circuit, the Eighth Circuit held that the FCA only entitles a relator to share in the portion of the settlement attributable to the claims that he or she brought.  Id.


Southern District of New York Rejects Washington State’s Attempt to Amend Qui Tam Complaint

Posted by Gordon Todd and Paul Sampson

The Rule 15(a)(2) threshold for amending a complaint – that “[t]he court should freely give leave when justice so requires” – is not a high one. But from time to time even a State intervenor manages to miss it, as was the case in U.S. ex rel. Kester v. Novartis Pharmaceuticals Corp., No. 1:11-cv-08196, 2015 WL 1650767 (S.D.N.Y. Apr. 10, 2015).

In January 2014, the State of Washington filed a complaint-in-intervention naming only Novartis Pharmaceuticals Corp. (“Novartis”) as a defendant, even though a little over a year earlier the relator’s complaint—which alleged that Accredo Health Group, Inc. (“Accredo”), a specialty pharmacy through which Novartis sells its pharmaceutical products, participated with Novartis in an illegal kickback scheme—was unsealed. Id. at *5. Almost a full year later, in January 2015, Washington filed a motion to amend its complaint, seeking to add claims against Accredo for the alleged kickback scheme. Id.

The district court denied the motion for two principal reasons. First, the district court held that Washington delayed moving for leave to amend without an adequate explanation, noting that “a lengthy delay without a reasonable explanation justifies denying leave to amend.” Id. The district court rejected Washington’s “excuse” that Novartis had produced upwards of 50,000 documents beginning in March 2014, reasoning that “the State should be expected to receive and promptly review large volumes of documents in a complex case such as this one.” Id. at *6. The district court also rejected Washington’s assertion that it did not obtain certain audio recordings of phone calls between Accredo staff and Novartis patients until December 2014, and that those phone recordings “solidified” the extent of the kickback scheme. Id. at *7. The district court explained that “[t]he fact that a party later uncovers additional evidence supporting a theory that it could have raised earlier does not excuse delay in moving to amend.” Id.

Second, the district court held that “Accredo would be prejudiced by granting Washington’s motion to dismiss” because “granting the motion would prolong the disposition of this case and require additional time for discovery.” Id. Among other things, additional discovery would be needed regarding a forum selection clause contained in Accredo’s Medicaid core provider agreement with Washington. Id. at *8. Thus, “granting the motion would burden both Novartis and Accredo with added litigation time and expense—well-established forms of prejudice.” Id. at *7.

The Kester case reminds qui tam litigants that a Rule 15(a)(2) motion to amend a pleading is not automatic, and that plaintiffs must seek to amend their pleadings in a timely manner so as not to unnecessarily delay the expeditious resolution of qui tam actions.

United States Protects Right to Pursue FCA Claims Raised in Non-Intervened, Dismissed Suit

Posted by Gordon Todd and Paul Sampson

In U.S. ex rel. Prince v. Virginia Resources Authority, No. 5:13CV00045, 2014 WL 3405657 (W.D. Va. July 10, 2014), the Western District of Virginia recently held that dismissal of a relator’s suit on procedural grounds does not prejudice the United States’ ability to subsequently to pursue identical FCA claims, despite having declined to intervene in the dismissed action.

Relator Mark Prince filed suit against the Virginia Resources Authority (the “VRA”) and others, alleging FCA violations relating to federal subsidies and tax exempt status for certain bonds through the Build America Bonds program. The VRA moved to dismiss on the basis of collateral estoppel due to Prince’s involvement in prior litigation against the VRA. On April 15, 2014, the District Court granted the motion, dismissing Prince’s claims with prejudice.

The United States had neither intervened in the suit, nor had it been party to Prince’s prior litigation against the VRA. On May 12, 2014, it filed a “Motion to Clarify” the dismissal. Acknowledging that it had “declined to intervene and is therefore not a party to this action,” the Government nevertheless insisted that it “remains the real party in interest, entitled to share in any recovery that may be obtained in the qui tam action.” Accordingly, it asked the Court to amend the order of dismissal “to clarify that the dismissal with prejudice extends only to Relator, and that the dismissal is without prejudice to the United States.”

On July 10, 2014, the district court granted the government’s motion, holding that “dismissals for reasons unrelated to the merits of a FCA claim are appropriately entered without prejudice to the United States.” Prince, 2014 WL 3405657, at *3. The decision not to intervene, the Court observed, does not necessarily suggest that the Government doubts the viability of an FCA claim, but rather may result from “a cost-benefit analysis.” Id. (internal quotation marks omitted). “Accordingly,” it reasoned, “it would be inappropriate to dismiss with prejudice as to the United States … on whose behalf relator brought this claim.” Id. (internal quotation marks omitted). Because the dismissal of Prince’s claims resulted from his procedural failures and not those of the United States, the district court held that “it is proper for the dismissal of these claims to be without prejudice as to the United States.” Id.

The Prince case reminds qui tam defendants that non-intervention is not necessarily the end of the United States’ interest in a matter, and that the Government continues to monitor FCA actions brought on its behalf to maximize its returns.