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.

Complaints

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.

Is statistical sampling in audits, FCA cases, and recoupment valid?

The government has used random sampling for a very long time as a way to provide sufficient evidence of valid audits and intent or “reckless disregard” False Claims Act (FCA) cases. While the government considers a random sample a valid sample, “’random’” is not necessarily ‘valid’, according to Tracy M. Field, partner, Parker, Hudson, Reiner & Dobbs, LLP and Sandra Miller, partner, Womble Carlyle, Sendridge & Rice LLP. Health care providers must manage and defend against statistical evidence derived from a government audit or presented to a court. Field and Miller presented their viewpoints and practical tips in a session on March 26, 2017, at the Health Care Compliance Association Annual Compliance Institute.

Statistics in audits

Inferential statistics include a probe audit to ensure that there is a good understanding of the population and study design, according to the presenters. By definition, inferential statistics samples items to determine what a population might look like by selecting a random sample. Providing the example of 20 quarters pulled at random from a box of coins, the presenters asked “What do you know about the population based on the sample selected?” Do the quarters represent the actual coin content of the box? Are the sampled items, in this example, coins, providing a normal distribution or a skewed distribution that could be biased? Can the 90 percent confidence interval be “correct” for very imprecise data? Their answer was that we don’t always know how many quarters versus nickels are in the box and what how that concept relates to statistical samplings in claims audits.

Multiple strata. For audits to be more precise, claims are audited by identifying multiple strata. The presenters noted that a sampling unit for an Office of Inspector General (OIG) is a claim, but they stressed that “a beneficiary’s claim is really a cluster of claims which is less precise.” In another example of government audits, the multiple strata involved Current Procedural Terminology® (CPT®) codes but the audits did not take into account the payment variables or the number of claim lines sampled.

Error rates. According to the presenters, the government threshold for error rates is 5 percent in settlements. In addition, for Discovery Samples, OIG uses a 5 percent error rate to determine the full sample size, however, error rates can vary, specifically in Provider Reimbursement Review Board cases. Presenters recommended that providers speak to their legislators regarding audit issues and error rates.

Statistical sampling in False Claims Act cases

In FCA cases, statistics are used to prove the intent of the provider and establish damages. The presenters referred to court cases as they identified questions for providers to ask including whether the case involve medical necessity of the services, whether a realtor can use statistical sampling to prove both liability and damages, whether the sampling reflects patients that may need more rehabilitation, and whether patients are individually considered?

The presenters specifically pointed out the arguments in the brief of the U.S. ex rel Michael and Whitesides v. Agape case before the fourth circuit court, where the defendants argued that “statistical evidence is poorly adapted to providing the falsity and knowledge of elements of FCA liability generally, […] particularly in this case, which involves clinical judgments, such as whether a patient is terminal ill, which is “a highly individualized, context- specific, and uncertain.” In addition, the brief noted that “courts have consistently rejected attempts to use statistical sampling to prove liability in fraud cases.”

Recoupment

The brief in the Agape case explained the recoupment process as an administrative proceeding initiated by a claims processor to recover overpayments through the reduction of future Medicare payments, is a contractual set-off and is far different from an FCA case, according to the presenters. The recovery is limited to the actual amount of the overpayment plus interest while the FCA exposes defendants to treble damages and a fine of at least $5000 per claim. The burden of proof is on the payee to prove that it is entitled to the amount paid.  Further, sampling and extrapolation in recoupment action are authorized by statute if there is evidence of sustained or high level payment error (42 U.S.C. §1395ddd(f)(3)).

Feds snare 16 hospice providers in $60M Medicare fraud scheme

Sixteen individuals were charged with offenses related to a health care fraud scheme in a federal court in Texas. The scheme alleges that from July 2012 to September 2016, Novus Health Services, owned and operated by the 16 individuals, billed Medicare and Medicaid more than $60 million for fraudulent hospice services, of which more than $35 million was paid to Novus. The individuals submitted false claims for hospice services and continuous care hospice services, recruited ineligible hospice beneficiaries via kickbacks to physicians and health care facilities, and falsified and destroyed documents to conceal these activities. The grand jury indictment was the result of an investigation into Novus by the Federal Bureau of Investigation, HHS Office of Inspector General (OIG), and the Texas Attorney General’s Medicaid Fraud Control Unit (MFCU).

Scheme

Novus and Optim Health Services, Inc. were operated and co-owned by one of the individuals, a certified public accountant without any medical licenses. Licensed physicians who were paid Novus medical directors provided little to no oversight of Novus’s hospice patients. Some of the indicted individuals were not physicians and they would determine whether a beneficiary would be certified for, recertified for, or discharged from hospice; whether they would be placed on continuous care; and how and to what extent they would be medicated with drugs. These decisions on medical care were often driven by financial interest rather than patient need.

The scheme also involved directing that beneficiaries be placed on continuous care, whether the beneficiaries needed the service or not, and often without any consultation with a physician. Continuous care physician’s orders were falsified and uploaded into Novus’s electronic medical records database. When a beneficiary was on continuous care, the Novus nurses would unnecessarily administer high doses of Schedule II controlled medications such as morphine or hydromorphone. The Schedule II medications were obtained with prescription forms unlawfully pre-signed by medical directors. The investigators found instances when these excessive dosages resulted in serious bodily injury or death to the beneficiaries.

If convicted, each count of conspiracy to commit health care fraud and substantive health care fraud count carries a maximum statutory penalty of 10 years in federal prison and a $250,000 fine.

Fraudsters sentenced for various schemes, medical device company settles allegations for $36M

The Department of Justice (DOJ) has continued to crack down on health care fraud in a variety of areas. From a multi-million dollar home health scheme to a mother-son pharmacy fraud team, several perpetrators have been sentenced to prison and ordered to pay restitution for their crimes.

Home health

A Detroit home health care company co-owner was sentenced to 96 months in prison for his part in a fraud scheme. Evidence presented at trial revealed that from 2006 to 2011, he and co-conspirators paid kickbacks to recruiters who passed on cash to patients in order to induce them to sign up for home health care services. Physicians also received kickbacks in exchange for referrals for home health services that were not medically necessary and not provided. This scheme ultimately caused about $33 million in losses to the federal government.

Another co-conspirator was recently sentenced to 360 months in prison for his part in the fraud scheme.

Pharmacy fraud

A mother and son team received prison sentences following their guilty pleas to conspiracy to commit health fraud through their pharmacies. The mother co-owned and operated some Miami-area pharmacies, through which she submitted false and fraudulent claims through Medicare Part D. She led a fraud scheme in which Medicare beneficiaries and patient recruiters were paid for medically unnecessary prescriptions, and various co-conspirators were directed to make kickback payments and conceal fraudulent funds. The son wrote checks to money launderers from the pharmacy in order to facilitate the kickbacks.

In their guilty pleas, the mother admitted that she caused $9.5 million in losses to the government, while the son caused losses of at least $1.5 million. She was sentenced to 120 months in prison, while he was sentenced to 30 months.

Medical devices

Biocompatibles Inc., a medical device manufacturer, pleaded guilty to misbranding an embolic device that was originally designed as a chemotherapy drug delivery device. This device had been cleared for placement in blood vessels to block or reduce blood flow as needed, but was not approved or cleared as a drug-device combination product or a drug-eluting bead. However, Biocompatibles marketed the product for drug delivery for and trained representatives to aggressively penetrate the relevant market. Biocompatibles will pay $36 million to resolve criminal and civil liability, which first stemmed from a qui tam lawsuit brought by a company professional responsible for marketing and management of Biocompatibles’ medical products.