Webinar provides multiple perspectives on FCA cases

To avoid federal False Claims Act (FCA) (31 U.S.C. §3729 et seq.) liability, providers should implement an effective compliance program, stay ahead of the government’s investigation of possible FCA violations, and fix problems first. In a Health Care Compliance Association (HCCA) webinar entitled, “False Claims Act Cases—Perspectives from Both Sides of the Aisle,” Rachel V. Rose, principal at Rachel V. Rose—Attorney at Law, PLLC, and Sean McKenna, shareholder at Greenberg Traurig LLP, provided an overview of the process for filing federal FCA complaints and how to respond to investigations and lawsuits under the FCA.


Qui tam relators file their complaints under seal, on behalf of the government. The Department of Justice (DOJ) has 60 days to investigate and decide whether to intervene, which happens only about 10 percent of the time. Even then, the government will prosecute only the strongest aspects of the case. The presenters warned that relators should use “an abundance of caution” when discussing an FCA case or the underlying allegations with anyone other than the whistleblower’s attorney or the government agents assigned to the case, as “breaking the seal” can result in dismissal or sanctions.

False claims

The type of false claim that most frequently leads to FCA liability is a claim for services not provided. Other categories of false claims include legally false claims (express), legally false claims by implied certification, and reverse false claims. In United Health Services, Inc. v. United States ex rel. Escobar, (2016), the U.S. Supreme Court upheld the implied certification theory and relied on whether the claim was material to payment, what McKenna called a “groundbreaking approach” (see Implied certification liability confirmed, limited to material compliance violations, Health Law Daily, June 16, 2016).

Since November 2, 2015, the range of penalties for violating the FCA increased from $5,500-$11,000 to $10,781-$21,562, plus treble damages and the relator’s attorney fees. FCA violations can also lead to exclusion, “the death penalty for health care providers.” Exclusion applies only to conduct from the past 10 years (42 C.F.R. Sec. 1001.901(c); see HHS OIG’s exclusion authority loosens, allows more discretion, Health Law Daily, January 12, 2017).

In parallel proceedings, simultaneous civil/criminal/administrative investigation of the same defendants occurs. It can be federal and state/local or multi-district. Not every case is appropriate for parallel proceedings, however. Examples of common parallel matters include procurement and government program fraud, health care fraud, internet pharmacies, and antitrust investigations.

Yates memo

The past several years in health care fraud and abuse prosecutions have seen an increased focus on individual actors such as executives, as reflected in a September 9, 2015 memo from former acting attorney general Sally Yates, known as the “Yates Memo.” The Memo emphasized the DOJ’s commitment to combat fraud “by individuals” and recommended that: (1) to qualify for a cooperation credit, a corporation must provide facts relating to the individuals responsible for the misconduct; (2) investigations should focus on individuals from the inception of the investigation; (3) culpable individuals should not be released from liability absent extraordinary circumstances; and (4) DOJ attorneys should not resolve matters with a corporation without a clear plan to resolve related individual case.

Best practices

If an FCA investigation occurs, providers should evaluate all liability (civil, criminal, administrative, state, licensure, and private), determine if anyone needs separate counsel or has talked to the government, preserve documents, and compile the right team, including consultants, billing and coding experts, and statisticians.

Equities rest with agency in administrative enforcement actions

Administrative enforcement is quicker than an investigation but still “deadly” for the provider or supplier, concluded Judith Waltz, partner at Foley & Lardner LLP, at the American Health Lawyers Association’s 2017 Institute on Medicare and Medicaid Payment Issues. “Administrative enforcement” means the tools available to HHS, CMS, and the HHS Office of Inspector General (OIG) without or with limited formal involvement of the Department of Justice, including civil money penalties (CMPs), payment suspensions, and billing privilege or enrollment denials and revocations. In administrative enforcement actions, the equities and more discretion may rest with the agency, and a lesser burden of persuasion applies for the agency to prove its case.

Exclusion regulations

In December 2016 the OIG revised its exclusion regulations (see 81 FR 88334) in part to implement the Patient Protection and Affordable Care Act (ACA) (P.L. 111-148). Waltz explained that the Final rule did the following: (1) expanded its permissive exclusion authority for convictions related to obstruction of an investigation to include audits; (2) added permissive exclusion authority for making false statements, omissions, or misrepresentations in enrollment applications; (3) added early reinstatement for loss of license in a different state; and (4) added a 10-year look-back period for exclusions.


Waltz noted that CMPs are being updated annually for inflation pursuant to a final rule issue in December 2016 (see 45 C.F.R. Part 102). For example, a CMP for failing to grant timely access is up to $15,000 per day, $16,312 after inflation, and the CMP for false statements, omissions, or misrepresentations in enrollment or similar documents is up to $50,000 per false statement, $54,732 after inflation. Waltz said, “After inflation, numbers are unbelievable.”

Kusserow on Compliance: OIG imposed penalties for noncompliance with corporate integrity agreements

Health care organizations continue to enter into corporate integrity agreements (CIAs) with the HHS Office of Inspector General (OIG) in exchange for the OIG not seeking an exclusion from participation in federal health care programs. There are serious “stipulated penalties” or, in the case of a material breach, possible exclusion from Medicare and Medicaid for non-compliance with CIA terms and conditions.

Carrie Kusserow, a nationally recognized expert on CIA compliance, found that a real “game changer” has been the inclusion of certifications in CIAs by members of the board, executive leadership, and compliance officers. Under the CIA, there are stipulated penalties for false certifications.  Furthermore, they could also be considered a material false statement or representation implicating the False Claims Act. To take away any defenses to false certifications by board members, the OIG requires they engage a compliance expert to assist them in meeting their obligations. The expert reports must be included with those provided to the OIG. This places direct burden on board members for compliance with the CIA and subjects them to personal peril for non-compliance.  This, in turn, adds pressure on the compliance officer and executive leadership to be able to evidence meeting all the compliance obligations.  Many boards and executive leadership members wake up after a CIA is signed to realize how much must be done to meet the tight deadlines required under the agreement.

Stipulated penalties

Stipulated penalties include:

  • Daily penalties for failure to (a) comply with terms and conditions related to the compliance program; (b) engage and use an independent review organization (IRO); (c) submit a complete implementation report, annual report, or any certifications on time; and (d) submit any mandated claims review report.
  • $50,000 per false certification in (a) implementation reports, (b) annual reports, and (c) other OIG requested documentation.
  • $1,000 per day for each compliance failure with any obligation of the CIA.

Material breaches

Material breaches include:

  • Not responding to an OIG demand letter;
  • Not reporting a reportable event;
  • Not taking corrective action of CIA violations;
  • Not making appropriate refunds of overpayments;
  • Not responding to demands for stipulated penalties payments; and
  • Not engaging and using an IRO.

Enforcement actions

Tom Herrmann, J.D., former executive in the Office of Counsel to the Inspector General and an appellate judge for the Medicare Appeals Board, notes an organization can request a hearing before an HHS administrative law judge to dispute the OIG’s determination of noncompliance resulting in a stipulated penalty or exclusion, but this rarely proves to be a viable alternative. The OIG is not reluctant to use its authority to enforce compliance with CIAs and noted the following recent examples of enforcement actions taken by the agency for violations of CIA terms and conditions:

  1. Special Care Hospital Management Corp. and its CEO paid $30,000 for failure to conduct legal review of new, renewed, and existing focus arrangements and to timely submit its first annual report.
  2. Kindred Healthcare paid $3,073,961 for failing to correct improper billing practices in the fourth year of its CIA.
  3. A Maryland cardiology practice and physicians paid $2,800 for failure to timely submit its second annual report.
  4. A North Carolina physician paid $10,000 for not prominently posting the HHS OIG Fraud Hotline telephone number; failing to provide the required amount of compliance training within 60 days of the CIA; not screening employees and contractors; and submitting the implementation report late.
  5. Roberts Physical and Aquatic Therapy and its owner were excluded for six years for failing to report and to repay an IRO-identified overpayment and stipulated penalties.
  6. A pain management company was excluded for five years for not paying stipulated penalties of $34,000 and $239,961.80 in overpayments identified by its IRO.
  7. A Florida physician paid $20,000.00 for late submission of his first annual report.
  8. A renal dialysis company paid $450,000 for failure to comply with focus arrangements procedures and requirements.
  9. A Florida physician paid $12,000 for failure to: timely submit his third quarterly claims review report, provide training, retain an IRO, perform sanction screening, and timely submit an implementation report.
  10. A health services company was excluded for failing to timely retain an IRO and had to retain a quality monitor and extension on its CIA.
  11. A sleep clinic paid $5,000 for failure to disclose two reportable events involving the Anti-Kickback Statute.
  12. A Florida medical device company paid $15,000 for failure to: screen employees and contractors, distribute revised policies and procedures, and provide parties to focus arrangements with a copy of its code and Anti-Kickback Statute policies and procedures.
  13. A Puerto Rican physician paid $6,300 for failure to engage a new IRO within 60 days of terminating his previous one.
  14. A Maryland practice management company was penalized for failure to timely submit an implementation report and thereafter filed for bankruptcy.
  15. A health management company was excluded for failure to: implement compliance policies and procedures; report quality of care reportable events; develop and maintain a disclosure program and log; hire regional dental directors; perform onsite review; report and refund overpayments; conduct training and education; provide accurate certifications; and report quality of care reportable events.
  16. A pain management company, ambulatory center, and owner paid $5,000 for failure to designate and maintain a compliance contact, as required.
  17. A California hospital paid $105,000 for failing to comply with arrangements procedures and focus arrangements requirements.

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