Applying lessons learned when conducting FCA investigations after Escobar

The Supreme Court opinion in Universal Health Services v. U.S. ex rel Escobar established that the implied certification theory may be a basis for False Claims Act (FCA) (31 U.S.C. §3729) liability if allegations satisfy both the FCA’s materiality and scienter (knowledge) requirements, Joan W. Feldman, partner at Shipman & Goodwin LLP explained during a Health Care Compliance Association webinar on June 26, 2017. She noted that the focus in FCA cases going forward will be whether the government would have refused to pay the allegedly false claim if it had known of the information allegedly omitted or misrepresented.

The Supreme Court’s opinion and remand

The Supreme Court granted certiorari in Escobar to answer whether the implied certification theory was viable and if it could only apply when a provider violated a legal requirement that the government explicitly designated as a condition of payment. Although the Court determined that implied certification is a valid theory, it stated that the FCA should not be considered a vehicle for “punishing garden-variety breaches of contract or regulatory violations…” The Court further concluded that “a misrepresentation about legal compliance does not become material simply because the Government labeled the legal requirement as a ‘condition of payment,’ but whether the defendant knowingly violated a requirement the defendant knows is material to the Government’s payment decision.” The Court remanded the case to the First Circuit (see Implied certification liability confirmed, limited to material compliance violations, Health Law Daily, June 16, 2016).

Feldman pointed out that upon remand, the First Circuit identified three factors that had to be considered when evaluating materiality and knowledge: (1) was compliance a condition of payment, (2) was compliance with a specific regulation the essence of the agreement; and (3) did the government pay the claim even though it was aware of the issue?

The First Circuit concluded, if Medicaid’s decision to reimburse Universal Health Service would have been unaffected by knowledge of the regulatory violations, the violations would not be material, and the implied false certification lawsuit could not proceed. In this case, however, the complaint stated that regulatory compliance was a condition of payment, licensing and supervision requirements were central to the regulation of mental health treatment facilities generally, and the factual allegations were limited to reimbursement claims filed during treatment (see Implied false certification lawsuit under the FCA stated a valid cause of action, Health Law Daily, November 29, 2016).

Lessons from Escobar

The Escobar case illustrates that the FCA is nuanced and complex, Feldman said. She noted that courts will closely scrutinize and evaluate materiality on a fact specific, case-by-case basis to determine whether the alleged violations are sufficient to constitute a false claim. Although she said it is not clear how the Supreme Court’s opinion will play out in the courts, she stressed the importance of claimants clearly stating their materiality and knowledge claims under the implied certification theory. She also emphasized the importance of reacting appropriately and promptly to FCA complaints or concerns.

Investigations

Feldman provided the details of several steps in conducting an FCA investigation, including where to start, maintaining attorney client-privilege, working with the government, planning and conducting an investigation, and mitigating the risk of a FCA qui tam action. She emphasized the importance of maintaining confidentiality throughout the investigation. In addition, she

  • Where to start. When confronted with a false claim allegation, providers must respond promptly. The date and time that the allegation was made must be documented and the allegation must be communicated to leadership. Legal counsel experienced with false claims should be engaged and the Medicare administrative contractor or Medicaid agency must be notified. The compliance officer must assign responsibility for the investigation but must limit the number of individuals in the sphere of knowledge and communication. Accountability and follow-up are essential as well as the preservation of documents.
  • Maintaining attorney client privilege. Consult with counsel to protect the attorney-client privilege. Ensure document production is done with counsel who creates a privilege log for documents that will not be turned over to the government. Interview witnesses separately to protect communications.
  • Working with the government. When working with the government compliance officers must be cooperative, responsive, and timely; yet maintain an advocate position for the organization. They must understand the issue, facts, and relevant law as well as the settlement if there is one. Feldman encouraged compliance officers not to be intimated by the government or assume its position is correct. She explained that the government only knows the case from the qui tam relator. She told compliance officers to “push back” and advocate the organization’s position with facts and laws when presented with the government’s case.
  • Planning the investigation. An investigative plan must be developed, a timeline created, and records of the investigation must be maintained, including the process, interview notes, and witness log. Witnesses must be identified and interviews must be scheduled.
  • Conducting the investigation. The attorney should conduct the investigation and may have deputized staff to assist. When a complaint of subpoena is received, litigation hold must be communicated throughout the organization. Documents are reviewed and interviews conducted. When appropriate, engage auditors or experts. Leadership should be kept informed throughout the process.

Additional tips

Other advice Feldman provided included circling back to complainant, avoiding whistleblower retaliation, and being mindful of the collateral effect of an investigation on employees. In addition, she emphasized that concerns raised by an individual must be taken seriously. Compliance officers should give them full attention and document the concern and how it was addressed. If the individual is not satisfied with the findings, the compliance officer should document why no further action will be taken and notify counsel. If attention is not given when a concern is raised, the individual may pursue an action.

Repeal of ACA pre-existing condition rules could leave millions of newly insured without coverage

The Republicans’ proposals to replace the pre-existing condition rules (sections 1101, 1331, 1341, and 1501) of the Patient Protection and Affordable Care Act (ACA) (P.L. 111-148) with states’ high-risk pools for individuals who would be denied insurance coverage or charged higher rates in the individual insurance market “will be insufficient to maintain the health care access gains made since 2010,” according to an Issue Brief (Brief) published by The Commonwealth Fund. The Brief, which compared coverage and access gains for people with pre-existing conditions after passage of the ACA with state high-risk-pool enrollment prior to the ACA, concluded “[i]f the ACA’s pre-existing conditions rules are repealed, millions of Americans could find it difficult to obtain affordable health care.”

Pre-existing conditions defined

The definition of pre-existing conditions includes a range described narrowly and broadly, the Brief explained. “The narrow definition includes very costly health conditions” that could result in the denial of coverage for individuals prior to the ACA provision, while “the broad definition includes sight less expensive chronic health conditions” that, without the ACA provisions, could result in unaffordable health insurance costs for most individuals with pre-existing conditions.

Key findings

A prior study conducted by The Commonwealth Fund concluded that there had been significant improvements in people with pre-existing conditions to purchase health insurance coverage on their own in 2016 relative to 2010. In this Brief, The Commonwealth Fund determined that people with pre-existing conditions gained coverage and had increased access to care and found that improvement of access to care was greatest in states where coverage gains were the greatest. The data indicated that 16.5 million more people were insured in 2015 than from 2011 – 2013. The newly insured population included 16 percent of individuals that fell into the narrow definition and 57 percent that fell into the broad definition.

High-risk pools

The Brief examined the relationship between the increase in insurance coverage and access to care among individuals with pre-exiting conditions and prior enrollment in pre-existing condition insurance plans (PCIPs) and high-risk pool programs. According to the Brief, “there was no relationship between enrollment in the PCIP or the share of the nongroup market enrolled in high-risk pools and gains in coverage or access post-2014.”

Medicaid’s role in low income individuals access to mental health services

Medicaid plays a significant role in providing treatment for low income individuals with mental health conditions. Medicaid recipients usage of mental health services “is comparable to and sometimes greater” than usage among privately insured individuals, according to a Kaiser Family Foundation (KFF) analysis. In 2015, Medicaid covered 22 percent of nonelderly adults with mental illness and 26 percent of nonelderly adults with serious mental illness. KFF found that Medicaid coverage of mental health services is often more comprehensive than private insurance coverage.

Analysis Findings

The analysis (1) describes individuals with mental health conditions, and (2) compares the mental health needs and the receipt of services among individuals without insurance, with Medicaid, and with private insurance. KFF provided the following findings:

  • Characteristics of nonelderly adults with mental illness. Twenty percent of nonelderly adults have a mental illness. They are predominantly white, female, and under 50. Five percent have a serious mental illness. Most are employed (63 percent), but 4 in ten have low incomes and 22 percent are below poverty. In addition, nonelderly adults with mental illness often have co-morbid conditions.
  • Utilization of mental health services. Most nonelderly adults with mental illness have either Medicaid or private insurance. Those with Medicaid are more likely to receive treatment than those with private insurance or without insurance. In addition, the receipt of psychiatric medication is more common among those individuals covered by Medicaid.

The role of Medicaid expansion

The Patient Protection and Affordable Care Act (PPACA) (P.L. 111-148) and the Health Care and Education Reconciliation Act of 2010 (HCERA) (P.L. 111-152), (together referred to as the Affordable Care Act (ACA)) expanded Medicaid coverage to millions of low-income Americans. Sections 2001 and 2002 of the PPACA as amended by 1004 and 1201 of HCERA enabled many low-income individuals with mental health conditions to obtain coverage and access treatment through state Medicaid programs that choose to expand.

KFF pointed out that the American Health Care Act of 2017 (AHCA) (H.R. 1628), introduced by Republicans and passed by the House of Representatives on May 4, 2017 would limit enhanced federal support for the expansion population. The Congressional Budget Office projected that the reduction in federal funds would result in a cut of $834 billion over 10 years. “A reduction in federal funds of this magnitude would likely cause states to decrease Medicaid payment rates, covered services, and/or eligibility, limiting states’ ability to reach people with mental health conditions,” KFF said.

Adoption of annual wellness visits increasing at a moderate rate

Trends in annual wellness visits (AMV) indicate a modest increase in the percentage of Medicare beneficiaries receiving an AWV from 7.5 percent in 2011 to 15.6 percent in 2014, according to a study of the trends related to annual wellness visits (AWV) published in the Journal of the American Medical Association (JAMA) on April 19, 2017. The study found that “adoption of AWV was concentrated in ACOs [accountable care organizations] and among certain PCPs [primary care physicians] and regions of the country.”

Addition of the AMV to Medicare benefits

The AMV was added to Medicare benefits by section 4103 of the Patient Protection and Affordable Care Act (ACA) (P.L. 111-148) as part of its preventive care measures for Medicare beneficiaries. Medicare pays for 100 percent of the visit. The AWV became effective in January 1, 2011. According to the study, the AWV “has been promoted as a way for physicians and other clinicians to encourage evidence-based preventive care and mitigate health risks in aging patients.”

Study findings

Among the results of the study are the following findings: (1) white individuals, urban residents, and those from higher income areas and with one or two comorbidities were more likely to obtain an AWV; (2) beneficiaries that received an AWV in previous years were more likely to receive an AWV; (3) 44.4 percent of all AMVs had a concurrent problem-based visit; (4) most AMVs were performed by primary care physicians; and (5) physician practice groups or regions using more AWVs did not deliver more health care overall. The researchers also noted that beneficiaries reported unexpected out-of-pocket costs when AWVs are billed concurrently billed with problem-based visits.

The study conclusions

The study concluded that the decision to perform an AWV was primarily driven by practice factors and noted that this conclusion aligned with reports of physicians and health systems having incorporated templates, workflows, or dedicated nonphysician health care professionals to complete, document, and bill for AWVs. According to the researchers, the study had limitations, including: (1) whether AWVs increase the use of preventive care or mitigate health risks, (2) claims data could not show how often AWVs were performed by nonphysicians under physician supervision, and (3) the extent to which AWVs represent delivery of additional visits versus substitution for other visits..