In the last year, the Department of Justice (DOJ) has brought more than 100 criminal cases relating to Paycheck Protection Program (PPP) Fraud.  These criminal prosecutions started at a blistering pace, with the first indictments coming within the very first months of the program’s inception. This wave of criminal prosecutions and convictions related to some of the more flagrant abuses – individuals who fraudulently obtained funds from the program and then went on spending sprees for things like Lamborghinis, mansions, and private jet travel.

These prosecutions focused on individuals and organized groups who obtained or used PPP funds fraudulently, often including charges for false statements (18 U.S.C. § 1001), aggravated identify theft (18 U.S.C. § 1028A(a)(1)), false statements in a loan application (18 U.S.C. § 1014), wire fraud (18 U.S.C. § 1343), bank fraud (18 U.S.C. § 1344), and Title 26 tax charges. Along with these prosecutions came significant resources, including new fraud coordinators and data analytics teams across the country.

Now, we are starting to see the first civil enforcement actions relating to the program. This signals a new phase of enforcement for the DOJ and all organizations who benefited from the program must pay close attention.

Continue Reading PPP Investigations, Settlements and Litigation on the Horizon

How should a court evaluate the FCA’s materiality requirement when the government’s ability to deny claims is constrained? According to a recent decision from the Eleventh Circuit, the court should “broadly” consider the government’s “pattern of behavior as a whole,” and may find evidence of materiality in administrative actions that might not support materiality in other cases.

Background

The case, U.S. ex rel. Donnell v. Mortgage Investors Corporation, was brought by two mortgage brokers who specialized in originating mortgage loans guaranteed by the United States Department of Veterans Affairs (VA). Under the program at issue, VA regulations limited the fees and costs lenders could collect from veterans and required lenders seeking VA guarantees to certify compliance with the fee-and-cost restrictions. The relators alleged that the defendant, Mortgage Investors Corporation (MIC), defrauded the VA by charging veterans prohibited fees and falsely certifying they had not done so.

After originating loans and obtaining VA guarantees, MIC typically sold its loans on the secondary market to holders in due course. This introduced an “important wrinkle,” the appeals court noted, because the VA is statutorily required to honor its guarantee when borrowers default on loans possessed by holders in due course.

Continue Reading Eleventh Circuit Broadens Materiality Analysis for Some Cases

The United States District Court for the Northern District of Alabama recently ordered that a relator’s qui tam lawsuit must be unsealed upon the case’s voluntary dismissal, denying the relator’s request to maintain the action under seal post-dismissal. This ruling in U.S. ex rel. Meythaler v. Encompass Health Corporation serves as an important reminder that public access to court records is vitally important and that whistleblowers’ allegations and identities will almost certainly be made public, even where the case is dismissed without litigation.

FCA Complaint Filed Under Seal

The relator, a physician formerly employed by the defendant, filed suit under the False Claims Act (FCA) against an inpatient rehabilitation facility operator and the CEOs of two of its Alabama facilities. The complaint alleged numerous schemes, including allegations that the defendants sought reimbursement for treatment of patients who were not eligible for rehabilitation benefits, delayed discharges and other orders to increase reimbursement, and made improper referrals to a home health agency. Per the FCA’s procedural requirements, 31 U.S.C. § 3730(b)(2), the relator filed his complaint under seal, giving the government a statutory period of at least 60 days to investigate the allegations and determine whether to intervene in the case.

The government declined to intervene in the action last fall. The relator then filed a notice of voluntary dismissal with prejudice, to which the government later consented. The relator also filed a motion asking the court to maintain the action under seal even after the case was dismissed to prevent the defendants from learning that the relator had filed a qui tam action against them. The government took no position on the relator’s motion.

Continue Reading Relator Cannot Maintain Dismissed Qui Tam Action Under Seal, District Court Rules

A common feature of False Claims Act (FCA) litigation is the pursuit of liability under the FCA’s so-called “reverse” false claims provision, 31 U.S.C. § 3729(a)(1)(G).  Reverse false claims liability applies when a person or entity knowingly does either of the following:

  1. Makes, uses, or causes, to be made or used, a false record or statement material to an obligation to pay or transmit money or property to the government.
  2. Conceals or knowingly and improperly avoids or decreases an obligation to pay or transmit money or property to the government.

The reverse false claims provision of the FCA is especially significant for healthcare providers, in part because the 2010 Affordable Care Act (ACA) (as well as associated regulations) expressly linked the knowing retention of overpayments from federal healthcare programs to reverse false claims liability under the FCA.  Specifically, the relevant statutory provision of the ACA defines the term “obligation,” as used in the FCA, to include any overpayment that is not “reported and returned” within 60 days after it is “identified,” a term courts and Centers for Medicare & Medicaid Services (CMS) have interpreted somewhat broadly.   See 42 U.S.C. § 1320a-7k(d).  Thus, by “improperly avoid[ing]” this “obligation”—i.e., knowingly or recklessly failing to return the overpayment within the ACA’s 60-day timeframe—a provider violates the FCA.

The upshot for providers is that a failure to diligently investigate and appropriately address a potential overpayment may lead to a host of problems, including whistleblower lawsuits, intrusive government scrutiny, and ultimately, FCA liability for treble damages and civil penalties.  What’s more, this may be true even in cases where the receipt of the overpayment was not itself the result of any fraudulent conduct.  Indeed, as the cases discussed below demonstrate, that risk is far from just hypothetical.

Continue Reading Provider Beware: Recent FCA Cases Emphasize the Importance of Diligently Addressing Potential Overpayments

For several years, courts have wrestled with the question of whether subjective clinical decisions regarding the type and amount of treatment patients may need can be false for purposes of establishing False Claims Act (FCA) liability.  The question of whether the FCA requires a showing of objective falsity has divided appellate courts in a number of recent high-profile cases.

For their part, practitioners have kept a close eye on whether the Supreme Court might bring much-needed clarity to this issue.  On February 22, the Supreme Court declined to do so, denying a petition for certiorari with respect to the Third Circuit’s opinion in U.S. ex rel. Druding v. Care Alternatives.

In Druding, the relators, who were former employees of a hospice provider, filed a qui tam action alleging that the hospice provider submitted false claims by routinely certifying patients who were not terminally ill for hospice care.  During the litigation, the relators’ expert examined the medical records of nearly 50 patients and concluded that the documentation did not support a certification of terminal illness for approximately 35% of those patients.  The hospice provider produced its own expert who testified a physician could have reasonably concluded that the patients at issue were terminally ill and needed hospice care.

Continue Reading Supreme Court Declines to Weigh in on Key Falsity Question

We released our Healthcare Fraud & Abuse Annual Review earlier this month. To serve as a companion to the Review, we’re hosting a complimentary webinar on Thursday, February 18, 2021 from 8:00-10:00 a.m. PT / 10:00 a.m.-12:00 p.m. CT / 11:00 a.m.-1:00 p.m. ET. that will take a deeper dive into key focus areas covered throughout the Review, including:

  •  Enforcement update and issues to watch.
  • False Claims Act update.
  • Stark Law/Anti-Kickback Statute enforcement updates.
  • Managed care and pharma/medical device developments.

We hope you can join us for this timely discussion of healthcare fraud issues from the past year and how they will impact proceedings in 2021. If you have not done so already, please click to download your copy of the current edition of the Healthcare Fraud & Abuse Annual Review.

Who Should Attend?

  • In-house legal counsel
  • Compliance officers
  • Privacy officers
  • C-level executives, consultants and principals

Accreditation

Tennessee CLE
This program is pending approval for two hours General Tennessee CLE credit. Please provide your BPR number upon registration in order for Bass, Berry & Sims to report your participation to the Tennessee CLE Commission following the conference.

Other State CLE
Bass, Berry & Sims does not seek direct accreditation from states outside of Tennessee, but some states allow attorneys to earn credit through reciprocity or self-submission. Certificates of completion and other common supporting documents will be provided for use in jurisdictions outside of Tennessee.

Questions?

Submit your questions for presenters upon registration or email questions to Claire Krummenacher.

Bass, Berry & Sims is pleased to announce the release of the newest edition of its Healthcare Fraud & Abuse Annual Review examining important healthcare fraud developments in 2020. Compiled by the firm’s Healthcare Fraud Task Force, the Review provides an in-depth and comprehensive analysis of the past year’s court decisions involving the False Claims Act, settlements involving significant fraud and abuse issues, and enforcement developments affecting the healthcare industry.

When we released last year’s Healthcare Fraud & Abuse Review in early 2020, none of us could have predicted what the year ahead would bring. By March 2020, we saw healthcare professionals standing at the forefront of one of the greatest health crises in a generation and we saw our healthcare system quickly stressed to the breaking point by the COVID-19 pandemic. Over the next several months, we saw trillions of stimulus dollars distributed by the federal government to provide economic relief to individuals and businesses. By 2020’s end, we saw the beginnings of a massive and historic vaccine rollout designed to stem the continued rising tide of COVID-19 infections against the backdrop of leadership changes at the highest levels of government.

Along the way, we continued to pay close attention to the fraud and abuse issues facing the healthcare industry. Our Healthcare Fraud & Abuse Review covers these issues and looks ahead to the challenges likely to come for healthcare providers facing the prospect of increased government scrutiny, whistleblower lawsuits under the False Claims Act, and government regulators pursuing civil and criminal healthcare fraud enforcement.

This year’s Healthcare Fraud & Abuse Review examines:

  • Issues for the healthcare industry to watch in 2021.
  • Enforcement implications of the Coronavirus Aid, Relief, and Economic Security (CARES) Act /COVID-19 relief.
  • Noteworthy False Claims Act settlements from 2020.
  • Comprehensive coverage of significant False Claims Act decisions.
  • Notable developments involving the Stark Law and Anti-Kickback Statute.

Enforcement developments impacting the pharmaceutical and medical device industries.

Learn More at the Healthcare Fraud & Abuse Annual Review Webinar

As a companion to this year’s Review, the firm will host a webinar on Thursday, February 18 from 11:00 a.m. – 1:00 p.m. ET / 10:00 a.m. – 12:00 p.m. CT / 8:00 – 10:00 a.m. PT. The webinar will take a deeper dive into key focus areas covered throughout the Review, including:

  • Enforcement updates and issues to watch.
  • False Claims Act updates.
  • Stark Law/Anti-Kickback Statute enforcement updates.
  • Managed care and pharma/medical device developments.

The webinar is complimentary and pending approval for two hours General Tennessee CLE credit. Please provide your BPR number upon registration in order for Bass, Berry & Sims to report your participation to the Tennessee CLE Commission following the webinar.

Bass, Berry & Sims does not seek direct accreditation from states outside of Tennessee, but some states allow attorneys to earn credit through reciprocity or self-submission. Certificates of completion and other common supporting documents will be provided for use in jurisdictions outside of Tennessee.

Questions? Please email Claire Krummenacher.

One of the first indicators that may tip off a healthcare provider or government contractor that their organization may be the subject of a False Claims Act (FCA) investigation is contact with a government investigator.  That contact may take many forms – service of a subpoena or Civil Investigative Demand (CID), an interview of an employee, or simply a phone call by a government regulator or investigator.  How an organization responds to those earliest contacts often sets the tone for how the government investigation unfolds.

Organizations with well-developed policies and procedures addressing how the organization will respond to contacts by government regulators often have a more orderly process to guide the organization in responding to government investigations (referred to herein as a Government Response Policy).  A Government Response Policy can set a clear tone of cooperation by the organization with any appropriately authorized government inquiry, while at the same time making clear that the organization will assert all protections afforded by law in any such investigation or inquiry.  And, a well-crafted Government Response Policy also can make clear to employees that concealment, alteration or destruction of information or the making of false or misleading statements to regulators will not be tolerated.

An effective Government Response Policy depends upon educating employees regarding the types of contacts that an organization or an employee may receive from government regulators and on establishing clear points of contact and lines of communication within the organization.  Typically, the organization will establish its legal department as a central point of contact for government inquiries or investigations (and organizations without a legal department would have to think through an alternative appropriate point of contact) as the entity within the organization best suited to coordinate the organization’s response either directly or through outside counsel.  Below we provide broad principles and guidelines that should be considered in preparing an organization’s Government Response Policy.

This post contains five parts and looks at the following:

  • Responding to a subpoena or CID.
  • Responding to visits by investigators at an office/facility.
  • Responding to a search warrant.
  • Responding to an interview request.
  • Responding to inbound calls from government officials.

Continue Reading An Ounce of Prevention: Effective Corporate Policies for Dealing with Government Investigations and Inquires

Improper billing for electro-acupuncture using a “P-Stim” device (or peri-auricular stimulation device) has been the subject of two False Claims Act (FCA) settlements already in 2021, following a trend of such enforcement actions within the past year.

Each of the recent settlements, detailed further below, involve providers billing federal healthcare programs for acupuncture using P-Stim devices under HCPCS Code L8649.  Unlike P-Stim devices, though, which are attached to the ears of a patient using needles and adhesives without surgery or anesthesia, HCPCS Code L8649 applies to a product that is surgically implanted into a patient using anesthesia. Medicare, TRICARE and the Federal Employees Health Benefit Program (FEHBP) do not reimburse for acupuncture devices like P-Stim, nor do they reimburse for P-Stim as a neurostimulator or an implantation of neurostimulator electrodes.  In addition to P-Stim, the brand names for these devices include ANSiStim, E-pulse, Stivax and NeuroStim.

Notably, none of these enforcement actions originated from qui tam whistleblowers but rather were the product of affirmative government investigations by the U.S. Department of Justice, U.S. Attorneys’ Offices, the U.S. Department of Health and Human Services Office of Inspector General (HHS-OIG), and CMS’s Center for Program Integrity. These settlements—coming from different jurisdictions and concerning different types of providers and practices—demonstrate the government’s ongoing, nationwide effort to investigate the improper billing of electro-acupuncture devices:

Continue Reading Improper Billing of “P-Stim” Devices is Focus of Recent FCA Settlements

As 2020 draws to a close, we take a look back at a number of the most significant False Claims Act (FCA) cases of the prior 12 months.  Although no blockbuster cases emerged, such as the Supreme Court’s 2016 decision in Escobar, there were a number of noteworthy cases that will have lasting impact on future FCA litigation.  We discuss those cases briefly below.  We expect to cover these cases and much more in our Healthcare Fraud and Abuse Review, which we will release in early 2021.

Materiality

U.S. ex rel. Janssen v. Lawrence Memorial Hospital, 949 F.3d 533 (10th Cir. 2020)

Background.  In 2016, the Supreme Court held in Escobar that whether a defendant can be held liable under the FCA for violating a statute, rule, regulation, or contract provision turns, in part, on the elements of materiality and scienter, which the Court said are “rigorous” and “demanding.”  Post-Escobar, courts have grappled with specific applications of these standards, with some courts appearing to apply them less “rigorously” than others.

Allegations.  In U.S. ex rel. Janssen v. Lawrence Memorial Hospital, the relator primarily alleged that the defendant hospital falsified patient arrival times associated with certain CMS pay-for-reporting and pay-for-performance programs.  The relator introduced proof that the hospital had knowingly falsified arrival times in patient records by recording actual arrival times on patient triage sheets but then entering later times in the medical record or delaying patient registration until after the administration of some tests.

Continue Reading Key False Claims Act Cases in 2020