Perhaps the single most appropriate word to describe the current state of the civil and criminal healthcare fraud enforcement environment is uncertainty.  From changes in personnel and policy at the highest levels of government to a myriad of state and federal legislative developments, healthcare providers face an unsettled landscape as they move into the coming year.

Healthcare Fraud Recoveries Again Exceed $2B

To be sure, statistics would suggest that it was business as usual for the government’s healthcare fraud enforcement efforts.  While civil fraud recoveries by the Department of Justice (DOJ) dipped to more than $2.8 billion in the fiscal year ending September 30, 2018 (FY 2018) as compared to $3.7 billion in FY 2017, recoveries attributable to the healthcare industry were $2.5 billion in FY 2018 – up from $2.1 billion in FY 2017.  This is the ninth consecutive year where recoveries associated with the healthcare industry exceeded $2 billion.

Continue Reading Healthcare Fraud & Abuse Year End Review: A Look Back…A Look Ahead

In a remarkable move, the Department of Justice (DOJ) recently sought dismissal of 11 False Claims Act (FCA) cases, each of which assert that patient assistance services supplied by pharmaceutical manufacturers constitute unlawful kickbacks. The 11 complaints were brought against various pharmaceutical companies by what DOJ described as “shell companies” backed by the National Healthcare Analysis Group, a company formed for the purpose of filing FCA cases. In seeking dismissal, DOJ argued that the suits ran counter to government interests and wasted “scarce government resources.”

According to the DOJ, the 11 lawsuits involved “essentially the same theories of FCA liability” concerning “white coat marketing,” free “nurse services,” and “reimbursement support services.” Specifically, in a motion to dismiss filed on December 17, 2018, in the Eastern District of Texas, DOJ seemingly defended these manufacturer programs noting the government’s “strong interest” in ensuring that “patients have access to basic product support related to their medication, such as access to a toll-free patient-assistance line or instructions on how to properly inject or store their medication.” The government further argued that the allegations “conflict with important policy and enforcement prerogatives” of federal healthcare programs, and asserted that the relators “should not be permitted to indiscriminately advance claims…against an entire industry that would undermine common industry practices the federal government has determined are, in this particular case, appropriate and beneficial to federal healthcare programs and their beneficiaries.”

Continue Reading DOJ Moves to Dismiss 11 Patient Assistance Services FCA Cases

On December 6, Bass, Berry & Sims and the Tennessee Hospital Association hosted more than 120 attendees at the annual Nashville Healthcare Fraud Conference, a full-day seminar focusing on fraud and abuse enforcement issues in the healthcare industry.

Panelists included a number of government attorneys and compliance personnel and in-house counsel from various healthcare providers from across the country, including University of Missouri Health Care (Columbia, Missouri), Children’s National Health System (Washington, D.C.), LifePoint Health (Brentwood, Tennessee), VNA Health Group (Holmdel, New Jersey), OhioHealth Corporation (Columbus, Ohio), Atrium Health System (Charlotte, North Carolina), Adrent Health Services (Nashville, Tennessee), and Vanderbilt University Medical Center (Nashville, Tennessee), among others. Continue Reading Bass, Berry & Sims and THA Host 4th Annual Nashville Healthcare Fraud Conference

The Delaware Supreme Court recently affirmed a decision by the Delaware Court of Chancery addressing a plaintiff’s ability to acquire key documents from a defendant company based on allegations against that company in an ancillary False Claims Act (FCA) complaint.  See UnitedHealth Group Incorporated v. Amalgamated Bank as Tr. for Longview Largecap 500 Index Fund, 2018 WL (Del.).

The Underlying FCA Allegations

In two separate federal districts, UnitedHealth Group Incorporated (United) faced unsealed, factually similar FCA complaints brought by two different relators. See United States ex rel. Swoben v. Secure Horizons, No. CV 09-5013 (C.D. Cal.) (Swoben Action); United States ex rel. Poehling v. UnitedHealth Group, Inc., No. CV 16-08697 (W.D.N.Y.) (Poehling Action). (The Swoben and Poehling Actions previously were discussed here, here, here and here.)

 Both relators alleged that United engaged in a scheme whereby it overbilled Medicare through the use of improper diagnostic codes that were not supported by patients’ medical charts and failed to reimburse Medicare once learning of improper diagnostic coding. After its investigation, the government filed complaints in intervention in both the Swoben and Poehling Actions.

Based on the government’s complaints, several shareholders of United brought suit under Delaware law (8 Del. C. § 220) seeking corporate books and records from United relating to the fraud alleged in the government’s complaints. To inspect corporate books and records under Delaware law, a plaintiff must show, among other things, “a proper purpose for conducting the inspection.” One “proper purpose” for an inspection of books and records is “to investigate wrongdoing or mismanagement,” but that purpose must be supported by a “credible basis” to infer possible wrongdoing or mismanagement warranting further investigation.

Continue Reading Adding Insult to Injury: When an FCA Complaint Begets Follow-On Corporate Litigation

On November 30, 2018, the Solicitor General of the United States filed an amicus curiae brief in the closely watched False Claims Act (FCA) lawsuit, Gilead Sciences Inc. v. U.S. ex rel. Campie. In what appears to be an unprecedented move, the Solicitor General stated in an amicus brief filed with the Supreme Court – without any prior indication – that the Department of Justice (DOJ) will move to dismiss the relator’s complaint if the case is remanded back to the district court because allowing the case to proceed “would impinge on agency decision making and discretion and would disserve the interests of the United States.”

Defendant Gilead Seeks Review of Ninth Circuit Decision

Two relators filed an FCA lawsuit against Gilead Sciences, Inc. in 2010 alleging that the pharmaceutical manufacturer misrepresented to the government that it obtained an active ingredient in three of its HIV drugs from specifically approved facilities. The relators also allege that Gilead provided false or inaccurate information to the Food and Drug Administration (FDA) in an attempt to gain approval to receive ingredients from an alternate facility. The relators argue that the government would not have reimbursed Gilead for the drugs at issue had it known the truth about the source of the drugs’ active ingredients. Continue Reading DOJ Informs Supreme Court that It Will Dismiss FCA Case if Remanded to District Court

On November 16, 2018, the U.S. Supreme Court granted certiorari in Cochise Consultancy, Inc. v. U.S. ex rel. Hunt, agreeing to decide how the FCA’s statute of limitations applies in qui tam actions brought by a private relator in which the government declined to intervene. The Court’s decision in Hunt should bring sorely needed clarity to a question that has deeply divided the federal courts of appeals.

The Supreme Court Will Review the Eleventh Circuit’s Interpretation of 31 U.S.C. § 3731(b)(2)

The FCA’s statute of limitations provision, 31 U.S.C. § 3731(b), states that a civil action may not be brought under the FCA:

  • more than 6 years after the date on which the violation of section 3729 is committed, or
  • more than 3 years after the date when facts material to the right of action are known or should have been known by the official of the United States charged with responsibility to act in the circumstances, but in no event more than 10 years after the date on which the violation is committed,

whichever occurs last.

The specific question presented in Hunt is whether § 3731(b)(2), which operates as a tolling provision to the six-year limitations period of § 3731(b)(1), applies to FCA actions brought by a relator in which the government declined to intervene, and if so, whether the government’s knowledge or the relator’s knowledge is the relevant trigger for the limitations period.

Continue Reading Supreme Court Agrees to Resolve Circuit Split on FCA Statute of Limitations

A recent piece of federal legislation intended to address the opioid crisis across the United States may have some unintended consequences. In attempting to prohibit “patient brokering” in the narrow context of addiction treatment and recovery centers, Congress may have unwittingly passed an unprecedented expansion of federal prosecutorial authority over payment arrangements between providers and referral sources for private-pay patients. For the reasons discussed in this blog post, any individual or entity who provides services relating to addiction treatment or recovery (as well as all clinical laboratories, regardless of whether they provide any addiction treatment or recovery services) should examine their arrangements with all referral sources for private-pay patients, even those who do not refer patients for addiction treatment or recovery services.

On October 24, 2018, the President signed into law the Substance Use-Disorder Prevention that Promotes Opioid Recovery and Treatment (SUPPORT) for Patients and Communities Act (the “SUPPORT Act”), as discussed here. The SUPPORT Act consolidated a number of opioid-related bills, including the Eliminating Kickbacks in Recovery Act of 2018 (EKRA), which was intended to address the problem of “patient brokering” in the context of treatment centers and sober homes.

Continue Reading The Eliminating Kickbacks in Recovery Act: An Unprecedented Expansion of Anti-kickback Liability to Private-Pay Referrals?

On Tuesday, November 20, 2018, Defendants-Petitioners Brookdale Senior Living Communities, Inc. et al. (Brookdale) filed a petition for a writ of certiorari with the U.S. Supreme Court asking the Court to resolve circuit splits regarding enforcement of the materiality and scienter elements of the False Claims Act (FCA) in cases involving the implied false certification theory of liability. The relator in the case, styled Brookdale Senior Living Communities, Inc. v. U.S. ex rel. Prather, is a former Brookdale utilization review nurse who alleges that Brookdale did not obtain physician signatures on home health certifications as soon as possible after the physician established a plan of care, in violation of Medicare regulations. The U.S. District Court for the Middle District of Tennessee previously dismissed the lawsuit for failure to plead falsity, but the case was revived on appeal by a divided panel of the Court of Appeals for the Sixth Circuit, which held that the relator adequately pleaded a regulatory violation. After the relator amended her complaint in light of the Supreme Court’s 2016 decision in Universal Health Services, Inc. v. U.S. ex rel. Escobar, which addressed the FCA’s materiality requirement, the district court dismissed the case for failure to plead materiality. On appeal, however, the Sixth Circuit again reversed in a 2-1 decision, finding that the relator adequately pleaded materiality and scienter. Continue Reading Supreme Court Review Sought on FCA Materiality, Scienter Elements

Since the 2016 Supreme Court decision in Universal Services Inc. v. United States ex rel. Escobar, courts have wrestled with exactly how to apply the unanimous decision. This post highlights developments across the country in numerous substantive areas addressed in the Escobar decision. If you need a refresher on the Escobar decision, see our previous post explaining the major elements of the case.

Continue Reading No Consensus on Materiality: Courts Continue to Grapple with Escobar’s Key Holdings

The U.S. District Court for the Eastern District of Pennsylvania recently refused to extend the period during which a False Claims Act (FCA) action remains under seal while the government investigates and decides whether to intervene. In U.S. ex rel. Brasher v. Pentec Health, Inc., which involved claims of illegal kickbacks constituting FCA violations, the court denied the government’s eleventh extension request and subsequent request for reconsideration even after both the relator and the defendant joined that request. The case had been under seal for more than five years.

Settlement Discussions Were Not Good Cause to Extend the Seal Period

The court held that the matter would not remain sealed to allow the government and defendant time to reach a settlement. It noted that “the purpose of the sealing provision is not to allow the Government to prosecute a civil action entirely under seal and then to present a settlement as a fait accompli to the Court and the general public.”

Continue Reading “Significant Abuses of the Statutory Scheme:” District Court Criticizes Practice of Regular Extensions of the FCA Seal Period