Failing to Repay is Costly

Hand Giving Back a Pile of Cash

A recent civil settlement announced by the Department of Justice reminds providers that failing to repay the government can be as costly as fraudulent billing.  Although a medical practice paid nearly $450,000 to resolve an investigation, the contested amount was only $175,000. That’s the kind of 250% penalty often associated with a false claim settlement. Similarly, this incident of failing to repay was brought to the government’s attention by a qui tam relator, as are instances of false billing.

Yet the medical practice had not submitted any false billing. To the contrary, the government’s press release went out of its way to say that “credit balances often occur in a medical practice, for example, when two insurers share responsibility for a payment and one pays too much.” The government appears to have viewed the overpayment as a typical problem that should have been resolved during account reconciliation.

Amendment to the False Claims Act

Failing to repay became actionable when Congress amended the False Claims Act in 2009. Under the amendment, knowingly failing to repay an obligation to the government within 60 days is treated as a false claim. The potential penalty is treble damages, and a qui tam relator can bring suit in order to gain part of the settlement in addition to an award of the relator’s attorney’s fees.

Of course, the mere fact of an overpayment does not create immediate liability under the False Claims Act. In order to be “knowing,” failing to repay must involve identifying the overpayment, or failing to exercise reasonable diligence to identify the overpayment. Government regulations contain a final rule allowing a reasonable amount of time to determine whether an overpayment has been identified, but also establish a six year look back period to find the overpayments.

A Warning Issued

Unquestionably, the government intended to accomplish more than collect money when pursing this overpayment. The acting U.S. Attorney warned in the press release that this settlement would “send a message that we will aggressively pursue those who seek to unjustly profit from our nation’s health care programs.” Similarly, one investigator said, “This settlement will hopefully be a deterrent for others who consider similar practices.” The takeaway is that providers are liable for identifying overpayments they receive and returning them within 60 days.



2018 Proposed Changes to the Physician Fee Schedule

On July 21, 2017, the Center for Medicare & Medicaid Services (CMS) published a proposed rule that addresses Part B Medicare payments and policies for calendar year (CY) 2018.

The major proposed rule is one of several Medicare payment rules for CY 2018 reflecting a broader strategy to relieve regulatory burdens for providers; support the patient-doctor relationship in healthcare; and promote transparency, flexibility and innovation in the delivery of care. The Physician Fee Schedule (PFS) is updated annually to include changes to payment policies, payment rates and quality provisions for services furnished to Medicare beneficiaries.

The proposed rule contains several important changes regarding physician payment, reimbursement for hospital outpatient departments, telehealth, and others.  Some notable provisions are as follows:

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What Kickback Training Overlooks

Refusing kickback

Effective training prepares healthcare providers to recognize violations of the anti-kickback and false claims statutes. However, a violation may seem just a straightforward business arrangement to those not familiar with the statutes. This article on the Squire Patton Boggs Anti-Corruption blog uses an example to explain that training must focus on remuneration, not just kickbacks.

Fundamental Right to be a Federal Healthcare Provider?

Rejecting a contrary holding in the Fourth Circuit, the Sixth Circuit decided a healthcare provider has no “fundamental right to participate in federal health care programs.” Accordingly, the Department of Health and Human Services (HHS) was correct to exclude a pharmacist from federal healthcare programs simply because he was convicted of misdemeanor misbranding.

Pharmacist Parrino pleaded guilty to introducing misbranded drugs into interstate commerce (21 U.S.C. §§ 331(a) and 352(a)) because he consistently filled prescriptions for Pulmicort with a less potent amount of budesonide. Because misdemeanor misbranding is a strict liability crime, Parrino did not need to admit that he intended to prepare the medications incorrectly as part of the plea. HHS nevertheless decided that the offense fell within the mandatory provision of its exclusion authority, ordered Parrino not to participate in federal healthcare programs for five years, and effectively ended Parrino’s livelihood as a pharmacist during that time. Parrino appealed the decision, arguing that permissive (rather than mandatory) exclusion authority applied to misbranding and that HHS acted arbitrarily in violation of his fundamental right to property.

The Sixth Circuit agreed with the Ninth, Tenth, and First Circuits that no property right exists because the government made “no clear promises” of entitlement to the providers and because federal health care programs are not intended to benefit the providers. The court decided the type of exclusion was not crucial, and HHS needed only a rational basis to justify exclusion of the pharmacist. Once it decided Parrino had no property right in being a provider, the court readily upheld the rationality of excluding a pharmacist who filled sub-potent medications and wasted government funds.


National Institutes of Health Extends Effective Date of sIRB Policy

Recently, the National Institutes of Health (“NIH”) extended the effective date of its policy on the use of the single Institutional Review Board (“IRB” or “sIRB” if a single IRB) to January 25, 2018. NIH created the sIRB policy to establish the expectation that a sIRB be used in the ethical review of multi-site, domestic, non-exempt human subject research funded by NIH. The extension will apply to all competing grant applications with due dates on or after January 25, 2018.

sIRB Policy

NIH drafted the sIRB policy to enhance and streamline the IRB review process for multi-site research studies and eliminate duplicate IRB reviews. The purpose of the policy is to establish the expectation that a sIRB would be used to conduct the ethical reviews required by 45 C.F.R. Part 46 for domestic multi-site studies involving non-exempt human subject research funded by NIH. The policy applies to domestic sites that conduct studies according to the same protocol. The policy would not apply to foreign sites that participate in the studies, career development, research training, or fellowship awards.

As part of the policy, applicant/offerors would be expected to submit a plan describing the use of the selected sIRB, including a statement confirming that the other participating sites will adhere to the sIRB policy. The participating sites will rely on the sIRB to carry out the functions that are required for institutional compliance, but are responsible for obtaining informed consent, overseeing the implementation of the approved protocol, and reporting any unanticipated problems and study progress to the sIRB. Importantly, the policy does not expressly prohibit a participating site from duplicating the sIRB, but NIH funds may not be used for the cost of this duplicate review. The applicant/offeror should also describe how communications between the sites and the sIRB will be handled.

According to the policy, sIRBs are responsible for conducting the ethical reviews of NIH-funded multi-site studies for the participating sites, including carrying out the regulatory requirements under 45 C.F.R. Part 46. sIRBs may also serve as the Privacy Board to fulfill the requirements of the HIPAA Privacy Rule, and will collaborate with the successful applicant/offeror to establish a mechanism for communication between the sIRB and participating sites.

Stakeholder Feedback

Many stakeholders commented on NIH’s draft policy, published in a Notice in the NIH Guide for Grants and Contracts in December 2014. While the comments were generally positive, academic institutions and IRBs were concerned how a non-local IRB may protect local, vulnerable populations, and that “site-specific practices for recruitment and retention, especially for vulnerable populations, would pose challenges for an sIRB.” Possibly to respond to such comments, the final NIH policy allows for exceptions to the sIRB policy when review by a sIRB would be prohibited by a federal, tribal, or state law, regulation or policy, or for a compelling reason.

HHS Task Force Identifies Critical Cybersecurity Recommendations

The recent WannaCry ransomware attack and the bevy of breaches over the past few years demonstrate that cyber risks in the healthcare arena are substantial and widespread. The Department of Health and Human Services (HHS) Health Care Industry Cybersecurity (HCIC) Task Force Report (HCIC Report), required under the federal Cybersecurity Information Sharing Act of 2015, details many risks and recommended improvements across the healthcare sector. Released on June 2, 2017, after taking into account input from a diverse group of healthcare stakeholders, including organizations, industry experts and the government, the HCIC Report identifies six “imperatives” to improve healthcare cybersecurity:

  1. Cyber Governance: Define and streamline leadership, governance and expectations for healthcare industry cybersecurity.
  2. Increase Health IT Security: Increase the security and resilience of medical devices and health IT.
  3. Education: Develop the healthcare workforce capacity necessary to prioritize and ensure cybersecurity awareness and technical capabilities.
  4. Increase Preparedness: Increase healthcare industry readiness through improved cybersecurity awareness and education.
  5. Protect IP and R&D: Identify mechanisms to protect research and development efforts and intellectual property from attacks or exposure.
  6. Improve Information Sharing: Improve information sharing of industry threats, weaknesses and mitigations.

Although some of the details recommended to achieve these imperatives may be considered controversial, the HCIC Report identifies some of the most critical risks and provides examples of measures every company can take today to mitigate cyber risk.

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Applying Escobar — Decisions on Materiality, Falsity and Other Issues

June 16, 2017, marks the one-year anniversary of the precedent-setting U.S. Supreme Court decision in Universal Health Services v. United States ex rel. Escobar (Escobar), which approved the implied false certification theory as a basis for liability under the False Claims Act (FCA). Because the decision impacts every provider who supplies goods and services to the federal government, all eyes were on the lower courts and how they will apply the decision. In an article for Bloomberg BNA Health Fraud Report, Tom Zeno and Rebecca Worthington reviewed recent FCA decisions on questions of materiality, falsity and other FCA concerns.

Escobar emphasized that the materiality inquiry is a “demanding” one. Upon remand, the First Circuit determined the language used by the Supreme Court “makes clear that courts are to conduct a holistic approach to determining materiality in connection with a payment decision, with no one factor being necessarily dispositive.” For establishing materiality, a holistic analysis of three factors is a favored test: (1) whether regulatory compliance was a condition of payment; (2) the centrality of the requirement in the regulatory program; and (3) whether the government paid claims despite actual knowledge that certain requirements were violated.

One unsettled question is whether Escobar set forth two requirements for establishing implied certification liability. In Escobar, the Supreme Court held that “implied certification theory can be a basis for liability, at least where two conditions are satisfied: first, the claim does not merely request payment, but also makes specific representations about the goods or services provided; and second, the defendant’s failure to disclose noncompliance with material statutory, regulatory, or contractual requirements makes those representations misleading half-truths.” Many courts have treated these two conditions as a mandatory two-part requirement.

Inferring insight from an active year of decisions, the authors also concluded that dismissal is likely when payments continue after actual knowledge of alleged fraud as well as when conduct such as altered invoices is alleged. Additionally, as expected, other jurisdictions are adopting the analysis of Escobar as seen in New Jersey, Chicago and the District of Columbia.

Read the full article here.

Ohio Expands Prescriptive Authority for Certain Advanced Practice Registered Nurses

On May 17, the Ohio Board of Nursing (the Board) adopted a new formulary which expands the prescriptive authority for certain of Ohio’s advanced practice registered nurses (APRNs). Specifically, this new “exclusionary” formulary applies to Ohio’s certified nurse practitioners, clinical nurse specialists and certified nurse midwives.  The new formulary was adopted pursuant to Ohio’s House Bill 216 (HB 216), which amended ORC § 4723.50 to require, in part, that the Board adopt a new exclusionary formulary permitting APRNs to prescribe any controlled substances except as prohibited by federal or state law, and except for drugs or devices to perform or induce abortions.  The exclusionary formulary also provides that the APRN’s prescriptive authority shall not exceed that of the APRN’s collaborating physician or podiatrist.

This new exclusionary formulary replaces Ohio’s previous APRN formulary which limited prescriptive authority to only those drugs specifically identified therein.  By permitting APRNs to potentially prescribe any controlled substance not otherwise prohibited by law, the new formulary appears to expand the prescriptive authority of Ohio’s APRNs.

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Lawyer Misconduct Dooms FCA Suit

A fraudulent survey of doctors sponsored by attorneys for a qui tam relator doomed a False Claims Act (FCA) complaint against a pharmaceutical company. In a forceful opinion, United States District Judge Dennis Saylor IV, District of Massachusetts, found violation of ethical rules, excised more than 100 paragraphs of the complaint as a sanction, and dismissed the truncated complaint for failure to meet the particularity standards required for an FCA complaint under Fed. R. Civ. P. 9(b).

When the government declined to intervene in an FCA suit alleging off label marketing, attorneys for the relator filed a second amended complaint based in large part on the results of a purported research study about prescribing practices for the drug. The survey, conducted via internet and telephone, by a doctor hired by the attorneys, was disclosed during discovery. The survey falsely represented that the resulting data would be used only for research purposes and would be kept confidential. Instead, the attorneys included data in the complaint such as names and addresses of 36 doctors as well as some information about their practices and some of their patients. Continue Reading

Can DOJ Impose False Claims Act on States?

The immense power wielded by the Department of Justice (DOJ) under the False Claims Act (FCA) has limits according to United States District Judge Anna J. Brown in the District of Oregon. This month the court decided DOJ cannot force the Act to apply to an “arm of the state” simply by intervening in the suit. Although a rare setback to a DOJ position on proper interpretation of the FCA, the issue may not yet be settled.

In 2013, relator Richard Doughty filed a qui tam suit on behalf of the United States alleging that Oregon Health and Sciences University (OHSU) submitted improper reimbursement rates for some projects supported by federal funds. In 2016, the United States intervened by filing its own complaint alleging violations of the FCA. OHSU moved to dismiss the complaints on the ground that it is not a “person” under the definition of those covered by the FCA because OHSU is an “arm of the state.” DOJ opposed dismissal on the ground that, when the United States intervenes and litigates in its own name, the United States may bring an FCA action against an arm of the state.

Judge Brown agreed with OHSU and dismissed the suit by relying upon a Supreme Court decision in another qui tam case, Vermont Agency of Natural Resources v. U.S. ex rel. Stevens. In that decision, the Supreme Court held the FCA “does not subject a State (or state agency) to liability” because of the “longstanding interpretative presumption that ‘person’ does not include the sovereign.” When deciding that OHSU was an “arm of the state,” Judge Brown considered these factors:

  • Would state funds pay a money judgment
  • Does the entity perform central government functions
  • May the entity sue and be sued
  • May the entity take property in its own name or only in the name of the State
  • What is the entity’s corporate status

DOJ attempted to distinguish Vermont Agency because the United States had declined to intervene in that case. Relying on concurrences in Vermont Agency, DOJ contended that, although a qui tam relator can be dismissed, DOJ’s decision to intervene makes a qualitative difference in application of the FCA. Judge Brown ruled otherwise.

In addition to concurrences in Vermont Agency, DOJ’s assertion of power over an FCA complaint may be bolstered by a recent decision of the Fourth Circuit. In that matter, DOJ declined to intervene in the litigation, but it also refused to agree to a settlement that was acceptable to the relator and to the defendant. Concluding that the United States was the real party in interest in FCA litigation, the Fourth Circuit joined with the Fifth and Sixth Circuits to hold that DOJ controls acceptance of a settlement. As the Fourth Circuit put it, “the Attorney General possesses an absolute veto power over voluntary settlements in FCA qui tam actions.”

This expansive view of DOJ’s authority over settlement conflicts with a Ninth Circuit decision holding that, “while the government may not obstruct the settlement and force a qui tam plaintiff to continue litigation, the government nevertheless may question the settlement for good cause.”

It remains to be seen whether DOJ will seek further review of the OSHU decision in order to secure the authority it seeks.