Kusserow on Compliance: Ninth Circuit reinstates unnecessary admissions whistleblower case

Federal Court established grounds for “medical necessity” fraud cases

A compliance high-risk area worthy of attention

On March 23, 2020, the Ninth Circuit reinstated a False Claims Act (ACA) “whistleblower” suit alleging a hospital and various physicians orchestrated medically unnecessary inpatient admissions resulting in the submission of more than $1.2 million in false claims to Medicare. This reversed the District Court ruling that FCA allegations failed because “subjective medical opinions…cannot be proved objectively false.”

The Circuit Court decision follows others that established the lack of “medical necessity” claims can proceed under the FCA. The qui tam relator in the case alleged that certain admissions to the hospital were not medically necessary and were in fact contraindicated by the patients’ medical records and the hospital’s admission criteria. As a result, the hospital allegedly submitted, or caused to be submitted, Medicare claims that falsely certified that patients’ hospitalizations were medically necessary. The relator was a nurse who reported 65 admissions that “failed to satisfy the hospital’s own admissions criteria” and noted that the admission rate from related nursing homes with was over 80 percent during the relevant time period. The nursing home operator had acquired fifty percent ownership in the hospital that resulted in a spike in admissions from those facilities. After repeatedly attempts to bring the issue to the attention of management, she was fired.

The Court held that a physician’s clinical opinion must be judged by the same standard as any other representation, including whether the physician: (1) knows the clinical opinion to be false; or (2) renders the opinion in reckless disregard of its truth or falsity. This means that a physician’s certification that inpatient hospitalization was “medically necessary” can be false or fraudulent as any opinion that is not honestly held. In short, a false certification of medical necessity can therefore give rise to FCA liability.

Compliance officers at any hospital should make this message known to the executive leadership and medical staff.

 

 

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.

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Copyright © 2020 Strategic Management Services, LLC. Published with permission.

EMTALA claim for failure to provide medical screening dismissed, claim for failure to stabilize medical condition proceeds

Medical screening claims under the Emergency Medical Treatment and Active Labor Act (EMTALA) must assert a failure to screen or improper screening, a district court in Missouri held, granting in part and denying in mart a hospital’s motion to dismiss EMTALA claims. The case was allowed to proceed on the patient’s claim for failure to stabilize her medical condition in violation of EMTALA. The patient’s claims for failure to provide appropriate medical screening in violation of EMTALA and medical malpractice were dismissed (Pennington-Thurman v. Christian Hospital Northeast, October 22, 2019, Cohen, P.).

Procedural history

A patient arrived at the hospital’s emergency department with severe leg cramps, received narcotic pain medication, vomited, and objected to being discharged because she felt ill. The patient was nonetheless discharged and left in the wheelchair in the waiting room. The patient filed a complaint against the hospital and its physician seeking monetary relief for alleged violations of the EMTALA (42 U.S.C. §1395dd) and claims of medical malpractice. The patient claimed the hospital violated EMTALA by failing to: (1) provide appropriate medical screening because they believed the patient lacked health insurance; and (2) stabilize the patient prior to discharge.

EMTALA claims

The hospital moved for dismissal of the patient’s EMTALA claims because the patient failed to plead factual allegations suggesting: (1) she received no screening; (2) she received improper screening for a discriminatory purpose; (3) she received screening that was different from other patients with charley-horse cramps; and (4) she had an emergent condition that the hospital failed to stabilize.

Failure to screen

The hospital argued that the patient’s complaint failed to state a claim for any of the three categories of failure to screen: (1) failure to screen at all; (2) improper screening of patients for a discriminatory reason; (3) and screening a patient differently from other patients perceived to have the same condition. The court held that the patient did not allege that the hospital failed to screen her at all since the complaint’s factual allegations established that the hospital’s nursing staff and physician examined her, performed blood work, and treated her pain. Regarding the second and third categories, the court held that the patient did not allege that patients perceived to have insurance and the same medical condition were screened or treated differently than she was. Moreover, the patient failed to state how the hospital allegedly deviated from its normal screening process. Therefore, the court found that she did not plead facts to support a claim either that the hospital screened her differently from other patients with similar conditions or failed to appropriately screen her for a discriminatory reason. As a result, the court dismissed the patient’s claim that the hospital failed to provide appropriate medical screening in violation of EMTALA.

Failure to stabilize

The hospital argued that the patient failed to state a claim under EMTALA for failure to stabilize her medical condition because the complaint established that the patient treated her emergency medical condition with pain medication and resolved her pain prior to discharge. The court declined to find on a motion to dismiss either that: (1) a reaction to medication that includes vomiting is not an emergent medical condition; or (2) a patient who vomits and feels ill while in the emergency department is stabilized and therefore fails to state a claim under EMTALA. Accepting the allegations in the complaint as true and drawing all reasonable inferences in favor of the nonmoving party, the court found that the patient sufficiently alleged that she had an emergent medical condition and the hospital failed to stabilize her condition prior to discharge. As a result, the court denied the hospital’s motion to dismiss the patient’s failure to stabilize claim.

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.

Court finds veracity of study claiming effectiveness of Prevagen is an issue for trial

A single study of effectiveness is not sufficient evidence to preclude claims that a product does not produce the results claimed in marketing and on the label.

A magistrate judge found that a study purporting to show the effectiveness of a dietary supplement intended to boost memory may be relevant to a manufacturer’s defense that the product’s marketing is false or misleading, but it does not automatically preclude such claims. The judge noted that the study was extrinsic evidence and its reliability was not an issue to be taken up in a motion to dismiss and recommended that the district court deny the motions (Engerat v. Quincy Bioscience, LLC, October 8, 2019, Hightower, S.).

Product claims. Quincy Bioscience, LLC (Quincy) manufactures, markets, sells and distributes Prevagen, which is a dietary supplement made with the protein apoequorin. Prevagen advertising and labeling claim that the product supports a “sharper mind,” “clearer thinking,” and “healthy brain function” and will “improve memory within 90 days.” Three consumers brought a class action lawsuit against Quincy alleging claims under the Texas Deceptive Trade Practices Act, breach of express and implied warranties, and a violation of the Magnuson-Moss Warranty Act. The consumers allege that the advertisements regarding Prevagen were false and misleading and designed to dupe customers into purchasing a product that has no effect on the brain.

Apoequorin. According to the complaint, Prevagen’s only active ingredient, apoequorin, is a protein that when digested is broken down into amino acid constituent parts. As a result, Prevagen never reaches the bloodstream as apoequorin and the broken down amino acids are no different than any other protein such as those found in a regular diet, which do not improve memory or brain function. Further, if Prevagen did somehow enter the bloodstream as apoequorin, it cannot pass through the blood-brain barrier and therefore can have no effect on brain function. The consumers contend that there has never been an independent, randomized, controlled clinical trial subject to a peer review process that supports the products claims and that there is no scientific basis for the representations made about the product.

Extrinsic evidence. Quincy claims that a clinical drug trial was done on Prevagen that is made available on the product’s website, and on which the advertising claims are based. Based on this study, Quincy argued that all of the claims asserted should fail because the study demonstrates that the marketing statements were truthful and fully substantiated. The judge held that in a motion to dismiss, it can only look to the facts set forth in the complaint, the documents attached to the complaint, and matters of which judicial notice may be taken. Here, the consumers may have mentioned the study in their original complaint, however they never mentioned it in or attached it to their First Amended Complaint which supersedes the original complaint.

Additionally, the public records that a court generally may take judicial notice of, include things like government-provided records. A commercial website may be available to the public, but it is not a public record. Finally, the reliability of the study is a disputed issue of fact in the case and therefore, not appropriate for determination in a motion to dismiss. Therefore, the judge found that the study was extrinsic evidence that could not be considered and the argument that the claims should be dismissed based on the study were meritless.

Failure to plead. Quincy made the alternative argument that an element of each of the claims requires the consumers to show that the product did not comply with a promise made in the marketing or labeling or that the marketing or labeling were false or misleading. Quincy argued that the consumers failed to plead these claims because they could not show that the labels were false or misleading or the product didn’t live up to the claims made on the label, in light of the study. The judge noted again that it could not rely on extrinsic evidence when considering a motion to dismiss and the reliability of the study is a fact issue inappropriate at this stage. It therefore held that the motions to dismiss based on this theory should be denied.