Earlier this month, DOJ filed its complaint-in-intervention alleging FCA claims in the long pending Medicare Advantage case U.S. ex rel. Swoben v. Secure Horizons. The U.S. Court of Appeals for the Ninth Circuit revived this matter last year when it held that the design of a retrospective review to avoid discovery of unsupported diagnoses submitted for risk adjustment can give rise to FCA liability resulting from false certifications. DOJ intervened in March 2017 only as to the UnitedHealth Group parties in the case. DOJ had intervened previously as to the SCAN defendants, who settled their portion of the case for $322 million in August 2012.
The FCA continues to be the federal government’s primary civil enforcement tool for investigating allegations that healthcare providers or government contractors defrauded the federal government. In the coming weeks, we are taking a closer look at recent legal developments involving the FCA. This week, we examine recent court decisions considering the level of specificity required of a relator under Rule 9(b) in pleading the alleged FCA fraud scheme.
Physician employment arrangements with hospitals have remained a significant area of regulatory scrutiny in recent months with the announcement of several high profile settlements and decisions in key FCA cases involving Stark and AKS-related issues.
In July 2016, DOJ announced a $17 million settlement in U.S. ex rel. Hammett v. Lexington County Health Services District. The lawsuit resolved allegations that Lexington County Health Services District, Inc. d/b/a Lexington Medical Center (LMC) in West Columbia, South Carolina violated the Stark Law and FCA by acquiring physician practices and employing physicians on terms that were in excess of fair market value and on terms that were not commercially reasonable.
The FCA continues to be the federal government’s primary civil enforcement tool for investigating allegations that healthcare providers or government contractors defrauded the federal government. In the coming weeks, we are taking a closer look at recent legal developments involving the FCA. This week, we examine recent court decisions requiring relators to plead actual claims to satisfy the requirements of Rule 9(b) in order to avoid dismissal.
Federal courts have continued to examine the particularity of the pleading required by Rule 9(b) in the context of FCA claims. Although courts generally agree that a relator must plead the “who, what, when, where, and how” of the alleged fraud, the manner in which courts have applied this standard and the types of allegations considered sufficient to satisfy Rule 9(b) continues to vary significantly.
Bass, Berry & Sims is pleased to announce the release of its fifth annual Healthcare Fraud and Abuse Review 2016. The Review, compiled by the firm’s Healthcare Fraud Task Force, is an industry-leading guide to healthcare fraud developments and provides an outlook as to what lies ahead in 2017.
The Review details all healthcare-related False Claims Act settlements from last year, organized by particular sectors of the healthcare industry. It also provides a comprehensive review of developments in FCA-related litigation, covers enforcement-related litigation involving the Stark Law and Anti-Kickback Statute, and looks at the unfolding implications of the DOJ’s Yates Memo and its emphasis on individual accountability.
Topics covered in the Review include:
- Noteworthy Settlements
- Issues to Watch
- False Claims Act Update
- Stark Law/Anti-Kickback Statute
- Pharmaceutical and Medical Device Developments
Click here to view the Review.
A recent jury verdict in an FCA lawsuit pending in the United States District Court for the Middle District of Florida resulted in a not-so-subtle reminder of just how high the stakes can be in such litigation. On February 15, 2017, in U.S. ex rel. Ruckh v. Genoa Healthcare, LLC, a case in which both the United States and the state of Florida declined to intervene, the jury returned a verdict finding that the operators of 53 skilled nursing facilities(SNFs) had committed FCA violations resulting in more than $115 million in damages. The FCA violations resulted from the submission of false claims to Medicare and Medicaid stemming from the inflation and upcoding of Resource Utility Group (RUG) levels for patients and false certifications that the SNFs had created timely and adequate patient care plans.
The jury’s verdict represented only actual damages. On March 1, 2017, the district court assessed a statutory penalty of $5,500 per claim to 446 false claims and trebled the jury’s damages number, the result being a staggering judgment of almost $348 million. This dwarfs even the largest of the long-term care settlements that have preceded it.
Recently, the DOJ intervened in one of several currently pending qui tam cases involving Medicare Advantage (MA) and the Risk Adjustment process used to determine the amount of payments to Medicare Advantage Organizations (MAO). The government filed its notice of election to intervene in US ex rel. Poehling v. UnitedHealth Group, a case that has been pending in the U.S. District Court for the Central District of California, and which is now unsealed.
After granting the relators’ petition for an interlocutory review of the district court’s rejection of the use of statistical sampling to establish FCA liability, the Fourth Circuit ultimately declined to reach that issue in its opinion recently issued in U.S. ex rel. Michaels v. Agape Senior Community, Inc. This conclusion comes as no surprise based on the comments and questions posed by the panel during the course of oral argument, as we covered here.
A number of recent FCA decisions have grappled with the question of objective falsity, particularly in the context of FCA claims where the alleged falsity is premised on a lack of medical necessity in connection with the medical services provided. The most recent in this line of cases considered whether a relator alleging nothing more than a difference of medical opinion regarding medical necessity of a particular cardiac procedure failed to plead objective falsity as required to state an FCA claim as a matter of law.
In U.S. ex rel. Polukoff v. St. Mark’s Hospital, 2017 WL 237615 (D. Utah Jan. 19, 2017), the relator alleged that a cardiologist and two Utah hospitals fraudulently billed the government for medically unnecessary cardiac procedures involving the surgical closure of a patent foramen ovale (PFO), which is a “a small opening in the wall separating the two upper chambers of the heart” that exists in about 25% of the population and is typically asymptomatic. Adults with a PFO have an increased risk of suffering a stroke; although, according to the district court, “[o]pinions regarding the use of a PFO closure to prevent strokes have varied over the past decade.”
A recent Sixth Circuit opinion in U.S. ex rel. Hirt v. Walgreen Co. should come as welcome news for FCA defendants concerned about the implications of the Sixth Circuit’s application last year, for the first time, of a “relaxed” standard for pleading false claims under Rule 9(b) in U.S. ex rel. Prather v. Brookdale Senior Living Communities, Inc.