Welcome to Original Source: The Sidley Austin False Claims Act Blog

The False Claims Act (FCA) has long been a key enforcement tool for the federal government in matters involving government contracts or other expenditures of government funds. FCA enforcement has traditionally focused primarily on two industries receiving a substantial amount of government funds: healthcare and defense and other government contractors. Recently, however, FCA enforcement has expanded to other industries, including financial services. Through the False Claims Act Blog, lawyers in Sidley’s White Collar, Healthcare, FDA, Government Contracting, Financial Services, Appellate, and other practices will provide timely updates on new and interesting developments relating to FCA enforcement and litigation.

The Illinois False Claims Act: Key Provisions and Current Trends

On August 23, 2019, Bloomberg Law published an article by Kathleen Carlson and Suzanne Notton of Sidley Austin discussing key provisions of the Illinois False Claims Act and recent trends in Illinois False Claims Act case law.  This article is the first in a series of articles addressing the False Claims Acts of states that see relatively frequent state FCA lawsuits.  In addition to Illinois, these states include California, Florida, Massachusetts, and New York.  A copy of the article can be downloaded here.

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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.

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District Court Dismisses FCA Suit in Medicare Advantage Upcoding Case

On August 6, 2019, the United States District Court for the Western District of Texas granted a motion to dismiss filed by Baylor Scott & White Health (“Baylor”), a network of inpatient short-term acute care hospitals, in a False Claims Act suit alleging that Baylor submitted “more than $61.8 million in false claims” by upcoding certain diagnosis codes.  The Court dismissed all claims with prejudice, finding that the Relator, Integra Med Analytics LLC, alleged only “naked assertions devoid of further factual enhancement” that were “insufficient under Rule 8’s pleading standards.”  The Department of Justice declined to intervene in the suit.

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Court Establishes a Test to Determine the Scope of the FCA’s “News Media” Provision

On July 16, 2019, the United States District Court for the Central District of California granted in part and denied in part motions to dismiss a declined FCA suit against defendants Providence Health & Services (“Providence”), its affiliates, and J.A. Thomas and Associates, Inc. (“JATA”), a clinical documentation consultant.  The suit alleges that Providence perpetrated an upcoding scheme whereby it trained its doctors to describe medical conditions with language that would support increasing the severity levels of the DRGs that Providence reported to Medicare, leading to inflated Medicare reimbursements.

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Eleventh Circuit Holds That It Is Relator’s Burden To Prove Lack of Fair Market Value As An Essential Element of AKS-Based Claims

Last week, the Eleventh Circuit issued an opinion holding that a Relator bringing an FCA claim premised on an AKS violation – at least when relating to lease arrangements – must show that the financial arrangements were not at fair market value.  See Bingham v. HCA, Inc., Case No. 1:13-cv-23671 (11th Cir. 2019).  Significantly, this ruling provides that proving fair market value (or lack thereof) is not a burden imposed solely on defendants as part of a safe harbor defense, but is instead an essential element to establishing the existence of remuneration in the first instance.  In the same opinion, the court also held that a Relator cannot rely upon information gleaned in discovery to satisfy Rule 9(b)’s pleading requirements.

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Minnesota District Court Orders Government to Identify Specific False Claims and Provide Witness Interview Materials

A recent decision from the District of Minnesota denied the government’s appeal of a federal magistrate judge’s order requiring that, as part of discovery, the government detail specific false claims and turn over notes and reports of witness interviews.  The underlying case is a qui tam alleging that Precisions Lens and its founder provided kickbacks to physicians to induce the use of its eye surgery products.

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D.C. Circuit Rejects Expansive Theory of FCA Liability Predicated on Failure to Pay an Unassessed Penalty

On July 5, 2019, the D.C. Circuit affirmed the dismissal of a qui tam lawsuit against several chemical manufacturers alleging that they violated the False Claims Act by failing to pay civil penalties owed under the Toxic Substances Control Act, 15 U.S.C. §§ 2601 (1976) (“TSCA”) for the manufacturers’ repeated failures to report “information regarding the dangers of isocyanate chemicals” to the EPA.  The law firm Kasowitz Benson Torres LLP, which is the relator in the case, urged the D.C. Circuit “to become the first court to recognize FCA liability based on the defendants’ failure to meet a TSCA reporting requirement and on their failure to pay an unassessed TSCA penalty.” The D.C. Circuit declined that invitation.

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