As the holiday season approaches and New Yorkers struggle with finances due to COVID-related limitations imposed on business, the government has been searching for ways to alleviate the hardships faced by many. For example, Attorney General Letitia James and Governor Andrew Cuomo recently announced that the Office of the Attorney General (OAG) renewed, for the eighth time, an order to halt the collection of medical and student debt owed to the State of New York, including those matters specifically referred to the OAG for collection. However, when one hand giveth, the other taketh away. Because the State treasury has also suffered tremendously during the pandemic, agencies are under pressure to recoup losses. Thus, like other agencies, the Medicaid Fraud Control Unit (MFCU) of the OAG is working harder than ever to prosecute health care fraud and recapture State funds and penalties.
When a person insured by Medicare or Medicaid receives medical services, the service-provider is often required to certify that the services are medically necessary. The Ninth Circuit Court of Appeals recently joined the Third, Fifth, and Tenth Circuits in finding false certifications of medical necessity actionable under the False Claims Act.
On February 7, 2020, the Tenth Circuit affirmed a district court’s decision to grant summary judgment in favor of the defendant hospital. See United States ex rel Janssen v. Lawrence Memorial Hospital, __ F.3d __ (10th Cir. 2020). In doing so, the Tenth Circuit reinforced the rigorous materiality standard set forth in the Supreme Court’s 2016 Escobar decision.
Large frauds can generate hundreds of thousands of false claims for payment. The whistleblowers who uncover such frauds rarely have proof of every single false claim. Instead, they will usually have evidence of the overarching scheme—from emails, company memos, or conversations with insiders—along with some examples of the false claims that the scheme has generated. Now more than ever, that could be enough to win, as long as the whistleblower and their lawyers know how to use inferential statistics to their advantage.
The U.S. Department of Justice announced last week that it had settled allegations involving violations of the Anti-Kickback Statute by skilled nursing facilities in the United States. Specifically, Hebrew Homes Health Network Inc., its operating subsidiaries and affiliates, and William Zubkoff, the former president and executive director of the network, agreed to pay $17 million to resolve allegations that it violated the False Claims Act by improperly paying doctors for referrals of Medicare patients requiring skilled nursing care. This is the largest FCA settlement to date involving a skilled nursing facility.
Radiation oncology provider Adventist Health System Sunbelt Healthcare Corporation has agreed to pay more than $5 million to resolve False Claims Act allegations that it provided “radiation oncology services to Medicare and TRICARE beneficiaries that were not directly supervised by radiation oncologists or similarly qualified persons,” according to a recent Department of Justice press release.
Adventist operates a large network of hospitals in the South and the Midwest. According to the release, “[r]adiation oncology services provided to patients served by Medicare and TRICARE, the Department of Defense’s health care program, must be directly supervised by a radiation oncologist or similarly qualified personnel.” The qui tam FCA case alleged that Adventist “violated this supervision requirement for radiation oncology services provided to federal health care program beneficiaries at several Florida locations, including in Altamonte Springs, Daytona Beach, Deland, Kissimmee, Orange City, Orlando, Palm Coast and Winter Park. These services included radiation simulation, dosimetry, radiation treatment delivery and devices, and intensity-modulated radiation therapy.”
The case had been initiated by a physician who had been employed as a radiation oncologist. The whistleblower will receive $1,082,500 as his relator’s share.
On October 10, 2014, the Justice Department and the U.S. Department of Health and Human Services Office of Inspector General (HHS-OIG) jointly announced that Extendicare Health Services Inc. (Extendicare) and its subsidiary Progressive Step Corporation (ProStep) agreed to pay $38 million to the United States and eight states for False Claims Act liability. Approximately $2 million of the total settlement amount will be awarded to the whistleblowers who revealed the fraudulent conduct at issue by bringing suit under the False Claims Act.
Recent gatherings of False Claims Act attorneys —who represent whistleblowers, the government, and the defense — revealed a consensus that medical devices offer fertile ground for future whistleblower activity. Medical device fraud can take at least three forms and may arise for durable medical equipment as well.
- First, defective medical devices, sold in connection with Medicare or Medicaid reimbursement, may lead to FCA liability. On this point, manufacturer quality management systems, supplier controls and monitoring, attention to customer complaints, and corrective measures are all key issues that may impact FCA liability. Medical devices that are not safe, effective, and reliable create FCA risk for their manufacturers.
- Second, off-label promotion of medical devices brings up issues similar to off-label pharmaceutical promotions. FCA approval of devices should guide marketing. If marketing goes off-label, there may be FCA liability.
- Third, kickbacks paid to medical professionals in connection with medical device sales would trigger FCA liability.
Federal government spending on health care is ever-growing. The government frauds in this area, along with qui tam activity, are expected to increase as well.
John Sinatra is a partner in the Business Litigation Practice at Hodgson Russ LLP. You can reach him at jsinatra@hodgsonruss.com.
According to a recent Justice Department press release, a D.C. federal court entered a $17 million False Claims Act judgment against Dr. Ishtiaq Malik and his two companies, Ishtiaq Malik M.D., P.C. and Advanced Nuclear Diagnostics, for submitting “false nuclear cardiology claims to federal and state health care programs.”
Keith Schenker, MD, a client of Hodgson Russ, will receive a substantial portion of the $15 million settlement ISTA Pharmaceuticals will pay to resolve allegations that the company aggressively and systematically promoted the off-label use of the prescription drug Xibrom, resulting in the submission of fraudulent claims to the United States for Medicare and Medicaid reimbursement.
The federal government recently settled a $15 million False Claims Act (FCA) case against American Sleep Medicine LLC, according to a recent Justice Department press release. In particular, American Sleep Medicine will pay $15,301,341 to resolve Medicare fraud and TRICARE fraud allegations that it charged for ineligible sleep diagnostic services.
The Justice Department yesterday reported $4.9 billion in False Claims Act recoveries for fiscal year 2012, which is the largest single-year recovery in history.
The recoveries spanned several sectors of the economy. In the health care arena, the Justice Department reports that, “[e]nforcement actions involving the pharmaceutical and medical device industry were the source of some of the largest recoveries this year.” The department recovered nearly $2 billion in cases alleging false claims for drugs and medical devices under federally insured health programs and, in addition, returned $745 million to state Medicaid programs.” The recoveries from major pharmaceutical companies addressed several drugs allegedly marketed for off-label use. They also addressed cases involving the alleged payment of kickbacks to physicians to prescribe certain drugs. Some of the cases addressed alleged false and misleading statements concerning drug safety and the alleged underpayment of rebates owed under the Medicaid Drug Rebate Program, and they include cases alleging inaccurate, unsupported, or misleading statements about drug safety to increase sales.
The U.S. attorney for the Eastern District of New York yesterday announced that the United States will intervene in a False Claims Act case that began in April 2007, when a qui tam relator first filed the whistleblower lawsuit under seal. In this case, the federal government is joining in the whistleblower’s lawsuit against the City of New York, seeking $2 million in damages, penalties, and costs for overcharging Medicaid.
The U.S. Department of Justice recently announced an $18.5 million False Claims Act settlement in a case brought by two whistleblowers against LifeWatch Services Inc., an Illinois-based company. The firm allegedly improperly billed Medicare for ambulatory cardiac telemetry (ACT) services, which, according to the Justice Department’s press release, are “a form of cardiac event monitoring that use cell phone technology to record cardiac events in real time without patient intervention.”
March 1, 2012, was a big day for New York State taxpayers, as both the state and federal governments announced significant settlements impacting the state. First, New York Attorney General Schneiderman announced two large settlements under the New York False Claims Act. Both settlements involve pharmaceutical companies, Dava Pharmaceuticals, Inc. and KV Pharmaceutical Company, with Dava misclassifying drugs to evade payments to Medicaid, and KV failing to advise the Centers for Medicare & Medicaid Services (CMS) that two unapproved drugs were not covered by federal and state health care programs, thereby improperly receiving reimbursement for those drugs.
A qui tam case filed in federal court in Maryland has yielded an $11 million False Claims Act settlement. According to the Department of Justice, Dava Pharmaceuticals, Inc. has agreed to settle allegations that it violated the False Claims Act “by misreporting drug prices in order to reduce its Medicaid Drug Rebate obligations.” The settlement resolves allegations that “Dava and its corporate predecessors knowingly underpaid their rebate obligations under the Medicaid Prescription Drug Rebate Program,” which requires drug companies to pay quarterly rebates to state Medicaid programs “based, in part, on whether a drug is a ‘generic’ or ‘branded’ product and the difference between what the health care program paid for the drug and prices paid by other purchasers.”
Data released by the U.S. Department of Justice reveal a substantial increase in False Claims Act recoveries over the past two years. These statistics, along with comments from Department of Justice officials, indicate that the False Claims Act whistleblower provisions have become the government’s tool of choice in attacking fraud, particularly in the health care and pharmaceutical industries.
During fiscal year ending September 30, 2011, the Department of Justice secured more than $3 billion through settlements and judgments in civil cases involving fraud against the government. This marked the second year in a row where the Department of Justice reached or exceeded $3 billion. Since January 2009, the Department of Justice has recovered approximately $8.7 billion. This is the largest three-year total in the Justice Department’s history.
Parties frequently battle over whether the conduct at issue was “false” such that False Claims Act liability is appropriate. Courts have recognized two types of false claims: factually false claims and legally false claims. A factually false claim is false as to a matter of fact (for example, a claim to have provided goods that were never provided). A legally false claim involves false certifications of compliance with laws or regulations that are prerequisites to payment. Courts have further divided legally false claims into express certification and implied certification claims.
Late last week, the Justice Department announced that a large for-profit health care concern has joined the growing list of health care companies settling False Claims Act cases. In this case, the business will pay the government $30 million plus interest to settle allegations that one of its recently acquired (2004) affiliates violated the FCA by causing Medicare to overpay for a radiopharmaceutical used in certain cardiac diagnostic imaging procedures. According to the Justice Department press release, the pharmaceutical is “distributed in multi-dose vials of powder. In a process known as reconstitution, nuclear pharmacies mix the powder with a radioactive agent to prepare individual doses that are injected into patients as part of the cardiac imaging procedures.” Medicare payment was based, in part, on the number of doses available from vials of the drug. The government alleged that the affiliate provided false or misleading information regarding the number of doses available from vials, causing Medicare to pay artificially inflated rates.
On November 22, 2011, the Department of Justice announced that it filed a complaint in a False Claims Act case against BestCare Laboratories, Inc. and its founder. The whistleblower case was originally commenced by a qui tam relator. The case is pending in the U.S. District Court for the Southern District of Texas.
According to the DOJ press release, the FCA suit alleges the defendants “knowingly misrepresented the distances traveled by its lab technicians to artificially increase reimbursement from Medicare for mileage-based technician travel allowance fees.” The lawsuit alleges that BestCare “transported laboratory test specimens as air cargo from nursing home customers located in the Austin, Dallas/Ft. Worth, El Paso, San Antonio, and Waco areas to BestCare’s laboratory close to Houston, but claimed mileage for ground travel as though its technicians personally drove the specimens one way or round trip between those cities and its lab in Houston.”
False Claims Act liability has been based on defendants falsely certifying their compliance with laws and regulations. But in deciding which laws and regulations can be used as a basis of this type of liability, such that defendants deserve the huge fines and penalties of the False Claims Act, courts often have to make subjective decisions about what laws and regulations are “important” enough for this type of liability.
To take a recent example, in United States ex rel. Wilkins v. United Health Group, Inc., the U.S. Court of Appeals for the Third Circuit had to decide which laws and regulations among the hundreds of thousands imposed on Medicare participants were sufficiently seriously to merit False Claims Act liability through their violation.
Teleradiology is becoming more and more common. This technology involves transmitting images, such as x-rays, CT scans, MRIs, and ultrasounds, over the Internet to a radiologist at another location to read and interpret. In many cases, this allows radiologists to work from home or other remote locations. And in some cases, radiologists in non-local time zones can help out on urgent issues that develop overnight in distant locations.
So far so good. But what if the radiologist is in another country? In fact, radiology reads have been outsourced to many locations around the world in recent years. India, Australia, Brazil, Switzerland, and Israel are common sources. Many have referred to this practice as “nighthawk” teleradiology.
On March 24, Senate Finance Committee leaders Orrin Hatch and Max Baucus sent a letter to the Department of Health and Human Services (HHS) Office of the Inspector General (OIG) and the Centers for Medicare & Medicaid Services (CMS) deputy administrator requesting data, benchmarks, and updates on the number of fraud cases and the amount of money recovered. The letter requested quarterly reports on how resources allocated for fighting waste, fraud, and abuse are being used and on the results. These reports are sought to better use additional resources to support fraud-fighting efforts in an HHS-based complement to False Claims Act enforcement.
The Department of Justice recently intervened in and settled a False Claims Act case filed by two nurses against their employer, CareSource, an Ohio managed health care company. The settlement resolves allegations that the company caused Medicaid to make payments for assessments and case managements they failed to provide. According to the government’s February 1 press release, as part of the settlement, the whistleblower employees will receive a $3 million share of the federal portion of the $26 million settlement.
False Claims Act settlements are increasing dramatically in the medical industry, and many of the growing number of settlements are being paid by an unlikely target: hospitals. Over the past few months, Brookhaven Memorial Hospital Medical Center, in Long Island; Mercy Hospital, in Springfield, Massachusetts; and Southern New Hampshire Medical Center, in Nashua, New Hampshire, all resolved False Claims Act cases with considerable settlements. Most of the whistleblower claims were based on allegations of improper charges to obtain Medicare and Medicaid reimbursement.