Chiding parties, court grants doctor sanctions for manufacturer’s failure to disclose witnesses

In an animated opinion, a judge grants a request for sanctions against Boston Scientific for failure to disclose witnesses after a long history of discovery disputes.

Noting that it was “[c]learly. . . not enamored with the parties’ conduct,” a district court judge in Minnesota found that Boston Scientific Corporation (BSC), a medical device manufacturer, failed to fully disclose certain witnesses and therefore granted, in part, a doctor’s motion for sanctions in a False Claims Act (FCA) (31 U.S.C. §3729 et seq.) action. Although the court found that both parties “share the blame as to certain discovery woes,” it found that the medical device manufacturer engaged in a shell game by failing to disclose four individuals as having specific knowledge of certain relevant information (U.S. ex rel Higgins v. Boston Scientific Corp., October 16, 2019, Rau, S).

Discovery proceedings

Initially, the doctor filed a qui tamaction on behalf of the government, alleging that the manufacturer violated the FCA. The doctor claimed that the manufacturer sold defective medical devices and that it provided kickbacks. Following the outcome of several procedural motions, the doctor filed his Second Amended Complaint. The court began the road of guiding the parties through discovery. Initially, the parties appeared to work cooperatively and productively, parsing out electronically stored information (ESI) search terms and custodians. However, later, the parties reported that they were at an “impasse” regarding certain issues. The court provided a step-by-timeline of discovery, including agreements and disputes. At some point, it became apparent that discovery had broken down. During the course of discovery, the doctor filed several motions to compel. In each instance, the court found in the doctor’s favor.

Later, the doctor raised several issues, including the manufacturer’s last-minute amendment to its initial disclosure. Specifically, on the last day of discovery, the manufacturer disclosed seven new individuals it might use to support its claims or defenses, four of which had information about FDA correspondence and submissions. Those four, along with others, were not disclosed as custodians. The doctor subsequently filed this motion for sanctions.

The court found that the manufacturer left off from its initial disclosure the individual who was a “central witness” regarding the manufacturer’s communications with the FDA about the relevant medical devices, along with several other individuals. The court rejected the manufacturer’s contention that it had no affirmative obligation to amend its disclosure to add the individuals. With respect to one individual, the manufacturer claimed he was referenced in hundreds of documents, but according to the court, those represented only a small number of the total documents produced. In its ruling, the court found the manufacturer’s logic was flawed. Among other things, the court questioned how, if the manufacturer made a truthful and fulsome response to the government’s FCA investigation, it failed to recognize the import of the newly-disclosed individual’s knowledge. Instead, the court said it was convinced that the manufacturer engaged in malfeasance.

According to the court, manufacturer misled the doctor. The initial disclosures were the foundation for all discovery, and the manufacturer’s failure to disclose the newly-disclosed individuals prejudiced the doctor throughout discovery. The court suggested that the manufacturer knew what it was doing. The court claimed that the manufacturer’s failure to disclose was not an oversight, but a strategy that coincided with baseless legal arguments regarding that and other discovery issues, leading to gamesmanship the court said it wound not reward.

Turning to the sanctions to be levied, the court said that rules of procedure makes exclusion of evidence the default, self-executing sanction in the event a party fails to comply disclosure rules. However, the rule permits imposition of alternative sanctions. In this instance, exclusion of the witnesses’ testimony would be detrimental to the doctor and would reward the manufacturer. Accordingly, the court ordered the manufacturer to produce documents from the newly-disclosed witnesses and the doctor was granted leave to depose the four individuals. Additionally, the manufacturer was barred from using documents or testimony that it could not affirmatively show was produced to the doctor during discovery or in light of the ruling at hand. The manufacturer was also ordered to pay the doctor’s costs and attorneys’ fees incurred in filing the motion for sanctions and for the additional discovery.

Kusserow on Compliance: Understanding and addressing whistleblowers

The vast majority of the cases resolved by the Civil Division of the Department of Justice (DOJ) were cases brought by “whistleblowers” under the qui tam provision of the False Claims Act (FCA). Whistleblowers are responsible for an even higher percentage of cases resulting in OIG Corporate Integrity Agreements (CIAs). Although most compliance officers are well aware of this program, many remain unclear as to how the process works. Tom Herrmann, J.D., who served over 20 years in the Office of Counsel to the OIG and as an Appellate Judge for the Medicare Appeals Board, explained that Congress permitted a whisltleblower called the “Relator” to file a case with the DOJ under the FCA.  Since this provision of law went into effect in 1986, there have been over 10,000 qui tam cases filed with a current average of one such case being filed every day of the year. The intent was to create incentives for private parties to detect and pursue fraud under the FCA. In return for reporting this information, Relators receive a portion (usually about 15 to 25 percent) of any recovered damages.  Once the lawsuit is filed, it is placed “under seal”, meaning that it is kept secret from everyone but the government, in order to give the DOJ enough time to investigate the allegations in deciding whether to join (“intervene”) in the case. Intervention by the DOJ occurs only in about one in five qui tam lawsuits, leaving whistleblowers the option to pursue cases on their own, however the chances of success are much lower than in cases when the government joins. Most successful qui tam cases are resolved through settlement negotiations rather than a court trial, although trials may occur.

Kash Chopra, J.D., noted that the overwhelming number of cases that result in a CIA, arise from whistleblowers and these, in turn, are based upon violations of the federal Anti-Kickback Statute (AKS). It is the government’s position that all claims arising from a corrupt arrangement violating the AKS or in some cases, the Stark Law, are considered fraudulent. This is even when the services rendered were needed and provided appropriately.  She advises here clients that the best ways to manage the whistleblower risk is to ensure that they are channeled through internal communication channels and their complaints are promptly evaluated, investigated, and resolved.  It is worth considering the following:

  1. Using outside experts to independently audit arrangements with physicians and evaluate compliance communication channel effectiveness.
  2. Ensuring a 24/7 hotline operated externally by experts in recognizing health care compliance issues.
  3. Reviewing/updating hotline-related polices/procedures (confidentiality, anonymity, non-retaliation, duty to report, etc.).
  4. Making sure that the duty to report suspected wrongdoing is explained in the Code, policies and training.
  5. Having trained and competent people on hand to conduct prompt and competent investigations of matters raised through the hotline.
  6. Moving quickly to use CMS and OIG self disclosure protocols when there is credible evidence of violations; and not wait until the DOJ gets involved.

For more information on this subject, Kashish Parikh-Chopra can be reached at kchopra@strategicm.com or via telephone at (703) 535-1413.

Richard P. Kusserow served as DHHS Inspector General for 11 years. He currently is CEO of Strategic Management Services, LLC (SM), a firm that has assisted more than 3,000 organizations and entities with compliance related matters. The SM sister company, CRC, provides a wide range of compliance tools including sanction-screening.

Connect with Richard Kusserow on Google+ or LinkedIn.

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Copyright © 2018 Strategic Management Services, LLC. Published with permission.

Kusserow on Compliance: Stark law to undergo interagency review

The CMS Administrator announced plans to convene an inter-agency group to focus on how to minimize the regulatory barriers created by Stark law, which was established in 1989 and underwent expansion in the 1990s. Providers have raised concerns from the beginning of the implementation of the Stark law. The agencies involved in the review will include CMS, OIG, HHS General Counsel, and the DOJ. The Stark law prohibits doctors from referring Medicare patients to hospitals, labs and colleagues with whom they have financial relationships unless they fall under certain exceptions. It also prevents hospitals from paying providers more when they meet certain quality measures, such as reducing hospital-acquired infections, while paying less to those who miss the goals. The result is the law is viewed as making it difficult for physicians to enter innovative payment arrangements because they are not susceptible to fair market value assessment—a Stark requirement. These prohibitions are seen as interfering with key factors related to value-based care. Unlike the Anti-Kickback Statute, which is enforced by the OIG, the Stark law is considered regulatory and falls under CMS jurisdiction. From a regulatory standpoint, there is only so much that CMS can do to make substantive changes. Any real changes in the law will have to come from Congress.

This is not the first time the CMS has tried to move the easing of rules concerning the Stark law.  In 2015, CMS published a Proposed rule relaxing aspects of the Stark law, including easing of some of the strict liability features of the law and CMS’ burden in dealing with the interpretation of key terms, requirements, and other issues. After reviewing an enormous amount of self-disclosures, CMS realized that a large part of the docket involved arrangements that may technically violate the statute but do not actually pose significant risks of abuse. Therefore, it appears that CMS seeks to reduce the number of self-disclosures reported. However, the proposed update is also intended to account for recent changes relating to health care reform and advancements in patient care and payment methodologies. CMS wanted to ensure that Stark does not inhibit Patient Protection and Affordable Care Act (ACA) (P.L. 111-148) reforms and these are the same concerns driving the latest initiative.

Richard P. Kusserow served as DHHS Inspector General for 11 years. He currently is CEO of Strategic Management Services, LLC (SM), a firm that has assisted more than 3,000 organizations and entities with compliance related matters. The SM sister company, CRC, provides a wide range of compliance tools including sanction-screening.

Connect with Richard Kusserow on Google+ or LinkedIn.

Subscribe to the Kusserow on Compliance Newsletter

Copyright © 2018 Strategic Management Services, LLC. Published with permission.

Kusserow on Compliance: Changes in the Stark Law

Over the years, the Stark law has evolved considerably from regulatory requirements to use by the DOJ in enforcement of the False Claims Act. Unlike the Anti-Kickback Statute, which is enforced by the OIG, the Stark law is considered regulatory and under CMS jurisdiction. The Stark law was designed to prohibit doctors from referring Medicare patients to hospitals, labs, and colleagues with whom they have financial relationships, unless they fall under certain exceptions. Stark prevents hospitals from paying providers more when they meet certain quality measures, such as reducing hospital-acquired infections, while paying less to those who miss the goals. Providers have registered numerous concerns that the Stark Law is inhibiting their ability to participate in Patient Protection and Affordable Care Act (ACA) (P.L. 111-148) reforms. The CMS Administrator, Verma, has acknowledged the difficulty of reconciling the Stark Law’s restrictions with the current shift to value based payment structures, noting that that the Stark Law “was developed a long time ago” with current payment systems and operations being different, requiring some changes in the rules. This is not the first time CMS has tried to move the easing of rules concerning the Stark law. In 2015, CMS published a Proposed rule relaxing aspects of the Stark law, including easing of some of the strict liability features of the law and the CMS burden in dealing with the interpretation of key terms, requirements, and other issues.  After reviewing an enormous amount of self-disclosures, CMS realized that a large part of its docket involved arrangements that may technically violate the statute but do not actually pose significant risks of abuse, thus necessitating some changes and clarifications.

Inter-Agency Group formed to focus on easing Stark Barriers

During a January, 2018 American Hospital Association webinar, the CMS Administrator announced plans to convene an inter-agency group consisting of CMS, the OIG, HHS General Counsel, and the DOJ to focus on how to minimize the regulatory barriers of the Stark law that began in 1989 and underwent expansion in the 1990s. Verma noted that the review is in line with CMS’s “Patients Over Paperwork” initiative, which is in accord with the President’s Executive Order that directs federal agencies to “cut the red tape” to reduce burdensome regulations.

Congress Acts

Regardless of the results of the inter-agency review, the fact remains that only so much can be done by regulatory policy changes. All real changes must be made in the law will necessarily have to come from Congress. The Bipartisan Budget Act of 2018 imposed changes on laws related to health care fraud and abuse. On one side they quadrupled fines and doubled potential prison time from five to ten years for violation of the Anti-Kickback Statute.  The Civil Monetary Penalties (CMP) law penalties were doubled. On the other side, Congress moved to reduce some of the burdens by codifying CMS regulatory guidance. Some specific relief involved expired leases and personal services contracts that, if otherwise compliant, will remain protected as long as the terms and conditions continue unchanged.

 

Richard P. Kusserow served as DHHS Inspector General for 11 years. He currently is CEO of Strategic Management Services, LLC (SM), a firm that has assisted more than 3,000 organizations and entities with compliance related matters. The SM sister company, CRC, provides a wide range of compliance tools including sanction-screening.

Connect with Richard Kusserow on Google+ or LinkedIn.

Subscribe to the Kusserow on Compliance Newsletter

Copyright © 2017 Strategic Management Services, LLC. Published with permission.