On March 19, 2019, the Supreme Court heard arguments in Cochise Consultancy Inc. v. United States, ex rel. Hunt regarding how the False Claims Act’s (FCA) statute of limitations applies in qui tam actions brought by a private relator in which the government declined to intervene. The Court heard lively arguments regarding a statute that has undoubtedly confused many. After oral argument, the Court appears poised to conclude that relators may appropriately take advantage of a longer limitations period.

FCA Statute of Limitations Raises Questions Regarding How and When It Should be Tolled

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:

  1. more than six years after the date on which the violation of section 3729 is committed, or
  2. more than three 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.

Continue Reading Supreme Court Wrestles with “Terribly Drafted” FCA Statute of Limitations

On March 18, 2019, the Department of Justice (DOJ) filed an amended complaint-in-intervention in the False Claims Act (FCA) case against Diabetic Care Rx, LLC d/b/a Patient Care America (PCA); two of PCA’s executives; and the company’s private equity owner, Riordan, Lewis & Haden, Inc. (RLH).  This filing comes on the heels of a March 5 decision by the U.S. District Court for the Southern District of Florida that dismissed for insufficient pleading DOJ’s FCA claim that the defendants submitted or caused the submission of false claims to TRICARE for compound prescriptions obtained through the payment of unlawful kickbacks to marketers, physicians and patients.  This case is significant and has been closely watched by the industry because it represents the first time DOJ has intervened in an FCA suit against a private equity firm alongside a healthcare portfolio company accused of submitting false claims.

Government Accused Private Equity Owner of Being Involved in Kickback Activity

This matter involves allegations that PCA paid kickbacks to marketers to target TRICARE beneficiaries for compound pain creams, scar creams and vitamins, regardless of medical necessity.  The marketers allegedly paid telemedicine physicians who prescribed the products without ever physically examining the patients, and colluded with PCA to pay many patients’ copayments to induce their acceptance of the lucrative compound drugs.  As support for its claim against RLH, as the private equity firm, the government has repeatedly cited to evidence purporting to show RLH’s material day-to-day involvement in the operations of PCA and its awareness of the facts surrounding the alleged kickback conduct.  The government has alleged that at all relevant times, RLH managed and controlled PCA through two RLH partners who also served as officers and/or directors of PCA and of two holding companies with an interest in PCA.

Continue Reading Government Files Amended FCA Complaint Against Private Equity Firm and its Portfolio Company

This is the second post of a two-part discussion of FCA pleading standards and discusses the pleading requirements for connecting a fraudulent scheme to the submission of false claims.  Read our previous post on the requirements for pleading the details of a fraudulent scheme.

Pleading Submission of False Claims

Most courts require FCA plaintiffs to round out their FCA pleadings with allegations that false claims were submitted to the government as a result of the alleged fraud scheme.  Some courts require plaintiffs to identify specific representative examples, while others permit the pleading of “reliable indicia” leading to a “strong inference” that claims were actually submitted.

Pleading Actual Claims  

The U.S. District Court for the District of Massachusetts recently laid out the level of detail generally expected for pleading the submission of actual false claims.  In U.S. ex rel. Wollman v. General Hospital Corporation, it held the relator made insufficient allegations of actual claims submitted as part of a fraudulent billing scheme involving overlapping surgeries when the complaint included “no dates, identification numbers, amounts, services, individuals involved, or length of time” for any of the surgeries at issue.

Continue Reading Recent Developments in FCA Pleading Standards – Part Two

The False Claims Act (FCA) continues to be the federal government’s primary civil enforcement tool for imposing liability on healthcare providers who defraud federal healthcare programs.  A significant portion of FCA litigation is initiated through the filing of sealed qui tam complaints by relators on behalf of the United States.  When these complaints are unsealed, whether the government intervenes or not, their first hurdle is often surviving a motion to dismiss.  Because actions under the FCA allege fraud against the government, courts require allegations sufficient to satisfy Rule 9(b) of the Federal Rules of Civil Procedure.

Determining whether an FCA complaint satisfies Rule 9(b) turns on two related questions: Does it contain an adequate description of the alleged fraud scheme? If so, does it connect that scheme to false claims submitted to the government?

This post discusses the requirements for adequately pleading a fraudulent scheme.  We have also written a follow-up post discussing the requirements for connecting that scheme to the submission of actual false claims.  To follow our discussion of recent developments in FCA pleading standards, subscribe to this blog.

Pleading Details of a Fraudulent Scheme

Generally speaking, courts agree that in order to pass muster, FCA complaints must include all of the details one would expect to find in the first paragraph of a newspaper article—that is, the “who, what, when, where and how” of the alleged fraud.  While meeting this standard may seem simple enough, courts continue to grapple with the nuances and difficulties associated with pleading fraud with the requisite specificity.

Continue Reading Recent Developments in FCA Pleading Standards – Part One

Government Settles with Several Entities, Individuals

Last week, Vanguard Healthcare and related entities reached a settlement with the Department of Justice (DOJ) for the stated amount of more than $18 million to settle allegations related to billing worthless services to Medicare and Medicaid programs from 2010 to 2015. The settlement also includes a resolution of claims against two individuals—Vanguard’s majority owner and CEO and its and former director of operations—consistent with the DOJ’s ongoing policy of focusing on individual liability (as discussed here). The CEO and director of operations will pay $212,500 and $37,500, respectively, of the total settlement sum. In its press release, the DOJ called this the “largest worthless services resolution in Tennessee history.”

The United States and the state of Tennessee sued the nursing home chain in September 2016, after the Vanguard entities had filed Chapter 11 bankruptcy proceedings.  In the complaint and in claims filed in the bankruptcy cases, the government alleged damages in excess of $56 million.  The primary allegations were that Vanguard and its subsidiaries billed Medicare and TennCare for “non-existent, grossly substandard, and/or worthless nursing home services[.]” The alleged inadequate care included staffing and supply shortages, a lack of infection control, failure to administer medications as prescribed, failure to care for wounds as ordered, lack of adequate pain management, and overuse of psychotropic medications and physical restraints, among other quality of care allegations. The government also alleged that Vanguard submitted Pre-Admission Evaluations and Preadmission Screening and Resident Reviews (certifications that TennCare uses to determine a patient’s Medicaid eligibility and required level of care) with forged physician or nurse signatures.

Continue Reading Tennessee Nursing Home Chain Reaches “Largest Worthless Services Resolution in Tennessee’s History”

Greenway Health LLC, a Tampa-based developer of electronic health records (EHR) software, recently agreed to pay $57.25 million to resolve False Claims Act (FCA) allegations that it overstated the capabilities of and failed to correct known errors with its EHR software.  In a complaint filed in the United States District Court for the District of Vermont, the United States alleged that Greenway caused its users to submit false claims to the government by, among other things, misrepresenting the capabilities of its EHR product “Prime Suite” and providing unlawful remuneration to users to induce them to recommend the product.

EHR Companies Must Be HHS Certified

The American Recovery and Reinvestment Act of 2009 established the Medicare and Medicaid EHR Incentive Program to encourage healthcare providers to adopt EHR technology and demonstrate its “meaningful use.”  To obtain certification for their product, EHR companies are required to demonstrate that their product satisfies all applicable U.S. Department of Health and Human Services (HHS) certification criteria.  This requires that developers do the following two things:

  1. Pass testing performed by an independent, accredited testing laboratory authorized by HHS.
  2. Obtain and maintain certification by an independent, accredited certification body authorized by HHS.

Continue Reading Electronic Health Records Company Pays High Price for Software Shortcomings

On January 14, 2019, Intermountain Healthcare, Inc. and Intermountain Medical Center (Intermountain) filed a petition for writ of certiorari with the U.S. Supreme Court.  Intermountain’s petition comes after the U.S. Court of Appeals for the Tenth Circuit reversed a district court’s grant of Intermountain’s motion to dismiss.  In relevant part, the district court concluded that the relator failed to identify any company employees with knowledge of the alleged fraud or when any employees knew about the fraud.  The Tenth Circuit reversed, holding that the relator need not allege those facts because they were in the defendant’s exclusive control and that allegations of knowledge need only be pleaded generally.

Intermountain’s petition raises two questions:

  • Can a plaintiff avoid Federal Rule of Civil Procedure 9(b)’s pleading requirements by asserting that only the defendant possesses the information needed to meet those requirements?
  • Do the False Claims Act’s (FCA) qui tam provisions violate the Appointments Clause of Article II of the U.S. Constitution?

Both questions have previously appeared in petitions for writ of certiorari, but neither question has been addressed by the Supreme Court.  See, e.g., Petition for Writ of Certiorari, U.S. ex rel. Joshi v. St. Luke’s Hospital, Inc. (denied Oct. 2, 2006); Petition for Writ of Certiorari, GPM Gas Corp. et al. v. U.S. ex rel. Grynberg (denied Apr. 22, 2002).

Continue Reading Supreme Court Asked to Review Pleading Standard and Constitutionality of FCA

On December 26, 2018, the U.S. Court of Appeals for the Fourth Circuit issued an opinion in United States ex rel. Grant v. United Airlines affirming dismissal of the relator’s False Claims Act (FCA) allegations on the grounds that the complaint failed to plead presentment of a false claim with sufficient particularity under Rule 9(b). In the same opinion, however, the court revived the relator’s retaliation claim on the grounds that the relator satisfied the lower standard of Rule 8(a) applicable to retaliation claims, which are not claims of fraud.

Presentment Must Follow from Conduct Alleged in Complaint

The court affirmed dismissal of the relator’s substantive FCA claims because it held that the relator failed to adequately plead presentment under Rule 9(b) in either of the two ways that the Fourth Circuit has recognized as acceptable:

  1. By alleging with particularity that specific false claims actually were presented to the government for payment, including by describing the time, place, and contents of the false representation; the person making the false representation; and what was obtained by making this representation
  2. By alleging a pattern of conduct that would “necessarily have led to a false claim being submitted”

The court focused its analysis on whether the complaint was adequately pleaded under the latter of those two options. The relator was a former maintenance technician of United Airlines who was a second-tier subcontractor on a government contract for the repair and maintenance of military aircraft. His complaint alleged that United Airlines was specifically subcontracted to repair, overhaul and inspect certain airplane engines and was required to do its work in compliance with certain regulations. The complaint alleged that United Airlines violated the FCA by failing to comply with the required regulations in completing work on these airplane engines. Continue Reading Fourth Circuit Weighs in on Standards for Pleading Presentment and Retaliation

Download Annual Healthcare Fraud & Abuse ReviewBass, Berry & Sims is pleased to announce the release of its seventh annual Healthcare Fraud and Abuse Review. The Review, compiled by the firm’s Healthcare Fraud Task Force, is an in-depth and comprehensive review of enforcement settlements, court decisions and developments affecting the healthcare industry.

The Review is intended to assist healthcare providers in developing a greater understanding of the civil and criminal enforcement risks they face during a time of great uncertainty for the healthcare industry.  Without question, understanding the key developments during the prior year is an important step in implementing necessary safeguards designed to minimize enforcement risks for healthcare providers.

Our Healthcare Fraud and Abuse Review covers:

  • Healthcare fraud issues to watch in 2019
  • Noteworthy FCA settlements from 2018
  • Comprehensive coverage of significant FCA decisions
  • Analysis of key AKS and Stark settlements and litigation
  • Discussion of pharmaceutical and medical device risk areas

Click to download Healthcare Fraud and Abuse Review

In December 2018, the Department of Justice (DOJ) updated its Justice Manual to add Title 1-20.000 et seq., Limitation on Use of Guidance Documents in Litigation. This addition formalizes guidance provided in two previous internal DOJ memoranda—the Sessions Memo and the Brand Memo—each discussing limiting the use of guidance documents and advisory opinions in both criminal and civil enforcement actions.

The Sessions and Brand Memos

The Sessions Memo, authored by then-Attorney General Jeff Sessions in November 2017, prohibited the DOJ from promulgating guidance documents “that purport to create rights or obligations binding on persons or entities outside the Executive Branch[.]” It also prohibited the DOJ from creating binding standards that could then be used to determine a person or entity’s compliance with applicable federal statutes or regulations. Importantly, the memo noted that such guidance documents were not produced through a notice-and-comment rulemaking process and were not promulgated by the agency charged with the constitutional authority to do so.

Continue Reading DOJ Formalizes Previous Directives Regarding Limiting Use of Guidance Documents to Prove Violations of Law