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.”
https://fcablog.sidley.com/wp-content/uploads/sites/5/2022/08/sidleyLogo-e1643922598198.png00Brenna E. Jennyhttps://fcablog.sidley.com/wp-content/uploads/sites/5/2022/08/sidleyLogo-e1643922598198.pngBrenna E. Jenny2021-11-04 10:50:252023-09-11 12:29:10DOJ Deploys the FCA on Cybersecurity Fraud
This month the U.S. District Court for the Southern District of Indiana denied Community Health Network’s (“Community”) motion to dismiss the United States’ complaint-in-intervention alleging that Community submitted false claims based on underlying violations of the Stark Law. United States ex rel. Fischer v. Community Health Network, Inc., No. 14-cv-1215 (S.D. Ind.). The complaint alleged that Community violated the Stark Law through physician compensation that exceeds fair market value (“FMV”) and is based on the volume or value of referrals. The opinion is notable in concluding that even physician compensation at the 90th percentile of rates paid in the market can plausibly allege a financial relationship that is not FMV and thus violates the Stark Law.
https://fcablog.sidley.com/wp-content/uploads/sites/5/2022/08/sidleyLogo-e1643922598198.png00Jaime L.M. Joneshttps://fcablog.sidley.com/wp-content/uploads/sites/5/2022/08/sidleyLogo-e1643922598198.pngJaime L.M. Jones2021-10-27 16:12:202023-09-11 12:29:33Allegations that Community Health Network Paid Doctors Above Fair Market Value and Rewarded Physician Referrals Survives Motion to Dismiss
As we have discussed in prior posts (here), private equity investors in the healthcare and life sciences industries increasingly face direct risk under the FCA where they actively manage portfolio companies accused of regulatory noncompliance leading to the submission of false claims. In each of the cases discussed in these earlier actions the PE fund defendant was the sole or majority investor and DOJ and the courts relied on facts demonstrating that the funds were aware of and endorsed or otherwise participated directly in the underlying fraud. (more…)
This week, in a case we previously reported on here, a PE fund and two executives agreed to pay $25M to resolve claims that they caused the submission by a portfolio company mental health center of false claims for services that were not rendered in compliance with various state law and contractual requirements. (more…)
https://fcablog.sidley.com/wp-content/uploads/sites/5/2022/08/sidleyLogo-e1643922598198.png00Jaime L.M. Joneshttps://fcablog.sidley.com/wp-content/uploads/sites/5/2022/08/sidleyLogo-e1643922598198.pngJaime L.M. Jones2021-10-15 10:19:132023-09-11 12:30:10Largest Settlement to Date Announced With a PE Investor to Resolve Claims that a Portfolio Company Healthcare Provider Violated the FCA
In advance of their webinar this Thursday, October 7, Coleen Klasmeier and Jaime Jones consider some of the effects of the final rule.
FDA’s final rule to amend its medical product ‘intended use’ regulations has now been in effect since September 1. The changes which the final rule makes to the definition of intended use, as interpreted by FDA in the accompanying preambles, expand the types of evidence that are deemed relevant to determining whether a lawfully marketed drug or device has a new intended use and whether a product is intended for use as a drug or device. (more…)
https://fcablog.sidley.com/wp-content/uploads/sites/5/2022/08/sidleyLogo-e1643922598198.png00Jaime L.M. Joneshttps://fcablog.sidley.com/wp-content/uploads/sites/5/2022/08/sidleyLogo-e1643922598198.pngJaime L.M. Jones2021-10-06 09:09:202023-09-11 12:30:27What do the FDA’s expanded ‘intended use’ regulations mean for safe-harbored communications about new uses?
A court in the District of Maryland recently 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., et al., 1:17-cv-00668-SAG (D. Md. Sept. 10, 2021). The court’s decision granting defendants’ motions to dismiss is notable in its refusal to allow relator to proceed based on conclusory allegations that the defendants knew they were acting in violation of the AKS. (more…)
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…)
Earlier this week, a court in the Eastern District of Pennsylvania dismissed a declined qui tam action in which the relator, a licensed nurse, alleged that an operator of treatment facilities for disabled individuals fraudulently billed Medicare and Medicaid for substandard care and retaliated against her for investigating that fraud.
https://fcablog.sidley.com/wp-content/uploads/sites/5/2022/08/sidleyLogo-e1643922598198.png00Matt Bergshttps://fcablog.sidley.com/wp-content/uploads/sites/5/2022/08/sidleyLogo-e1643922598198.pngMatt Bergs2021-09-02 11:07:382023-09-11 12:33:03Fraud Theories Fail Under Rigorous Standards for “Worthless Services” and Materiality
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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.
Brenna E. Jenny
Washington, D.C.
bjenny@sidley.com
Sujit Raman
Allegations that Community Health Network Paid Doctors Above Fair Market Value and Rewarded Physician Referrals Survives Motion to Dismiss
This month the U.S. District Court for the Southern District of Indiana denied Community Health Network’s (“Community”) motion to dismiss the United States’ complaint-in-intervention alleging that Community submitted false claims based on underlying violations of the Stark Law. United States ex rel. Fischer v. Community Health Network, Inc., No. 14-cv-1215 (S.D. Ind.). The complaint alleged that Community violated the Stark Law through physician compensation that exceeds fair market value (“FMV”) and is based on the volume or value of referrals. The opinion is notable in concluding that even physician compensation at the 90th percentile of rates paid in the market can plausibly allege a financial relationship that is not FMV and thus violates the Stark Law.
(more…)
Jaime L.M. Jones
Chicago
jaimejones@sidley.com
Brenna E. Jenny
Washington, D.C.
bjenny@sidley.com
Catherine Stewart
Chicago
cstewart@sidley.com
PE Investors – Even Minority – Exposed to False Claims Act Risk
As we have discussed in prior posts (here), private equity investors in the healthcare and life sciences industries increasingly face direct risk under the FCA where they actively manage portfolio companies accused of regulatory noncompliance leading to the submission of false claims. In each of the cases discussed in these earlier actions the PE fund defendant was the sole or majority investor and DOJ and the courts relied on facts demonstrating that the funds were aware of and endorsed or otherwise participated directly in the underlying fraud. (more…)
Jaime L.M. Jones
Chicago
jaimejones@sidley.com
Paul E. Kalb, M.D.
Largest Settlement to Date Announced With a PE Investor to Resolve Claims that a Portfolio Company Healthcare Provider Violated the FCA
This week, in a case we previously reported on here, a PE fund and two executives agreed to pay $25M to resolve claims that they caused the submission by a portfolio company mental health center of false claims for services that were not rendered in compliance with various state law and contractual requirements. (more…)
Jaime L.M. Jones
Chicago
jaimejones@sidley.com
Paul E. Kalb, M.D.
What do the FDA’s expanded ‘intended use’ regulations mean for safe-harbored communications about new uses?
In advance of their webinar this Thursday, October 7, Coleen Klasmeier and Jaime Jones consider some of the effects of the final rule.
FDA’s final rule to amend its medical product ‘intended use’ regulations has now been in effect since September 1. The changes which the final rule makes to the definition of intended use, as interpreted by FDA in the accompanying preambles, expand the types of evidence that are deemed relevant to determining whether a lawfully marketed drug or device has a new intended use and whether a product is intended for use as a drug or device. (more…)
Jaime L.M. Jones
Chicago
jaimejones@sidley.com
Coleen Klasmeier
District Court Rejects Anti-Kickback Statute Claim Due to “Conclusory” Assertions of Unlawful Intent
A court in the District of Maryland recently 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., et al., 1:17-cv-00668-SAG (D. Md. Sept. 10, 2021). The court’s decision granting defendants’ motions to dismiss is notable in its refusal to allow relator to proceed based on conclusory allegations that the defendants knew they were acting in violation of the AKS. (more…)
Jaime L.M. Jones
Chicago
jaimejones@sidley.com
Brenna E. Jenny
Washington, D.C.
bjenny@sidley.com
Megan Coggeshall
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…)
Jaime L.M. Jones
Chicago
jaimejones@sidley.com
Brenna E. Jenny
Washington, D.C.
bjenny@sidley.com
Jennifer Haney
Fraud Theories Fail Under Rigorous Standards for “Worthless Services” and Materiality
Earlier this week, a court in the Eastern District of Pennsylvania dismissed a declined qui tam action in which the relator, a licensed nurse, alleged that an operator of treatment facilities for disabled individuals fraudulently billed Medicare and Medicaid for substandard care and retaliated against her for investigating that fraud.
(more…)
Matt Bergs
Chicago
mbergs@sidley.com
Brenna E. Jenny
Washington, D.C.
bjenny@sidley.com
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