Last week, our tax experts summarized certain provisions of the House tax reform bill which would affect the exclusion from gross income of interest on tax-exempt bonds. This week, we summarize the Senate’s version of the bill which, in contrast, makes no changes to the existing provisions of the Internal Revenue Code that permit the issuance of certain tax-exempt bonds. This summary may be found on our Public Finance Tax blog, located here.
Doctors are personally paying more settlements under the False Claims Act. In that regard, the Yates memorandum appears to be having its intended effect. The 2015 memo required investigators to focus more on individual liability when resolving fraud investigations. That year only 6 settlements forced doctors to pay when settling complaints filed under the False Claims Act. According to an analysis by Eric Topor of Bloomberg BNA (subscription required), personal settlements paid by doctors have more than tripled. This year the number is up to 26 — and the year is not over yet.
The trend is likely to continue. A recent post reported that Deputy Attorney General Rosenstein wants to incorporate the Yates memo into the United States Attorney’s Manual. Although Rosenstein will review the policy at that time, he indicated that he intends to maintain pressure on individuals.
Torpor’s analysis suggests doctors working for hospitals may be safer because they are farther away from billing. True as far as it goes; a doctor probably has greater exposure when the doctor owns the entity. However, the Yates memo is not concerned with entrepreneurial risk. A doctor remains liable when the doctor participates in fraudulent practices regardless of who owns the entity. If the investigation reveals a doctor’s involvement, the government is much more likely to demand a personal settlement from that doctor. Not surprisingly, Topor’s article shows qui tam relators also want a greater payout from doctors.
The analysis reveals an increase in clauses requiring individuals to cooperate with ongoing fraud investigations. Use of cooperation clauses in settlements appears to have doubled since 2008. This increase is not necessarily ominous. The Yates memo encourages government attorneys to keep the option of additional settlements where possible. Although a cooperation clause does not mean an additional false claims settlement is inevitable, doctors must recognize the clause allows an investigation to continue.
The House Committee on Ways and Means has released the first draft of the federal tax reform bill. This bill, if adopted, would profoundly affect the exclusion from gross income of interest on tax-exempt bonds. Our public finance and tax experts have prepared a detailed summary for our Public Finance Tax blog. A link to the post may be found here.
U.S. Deputy Attorney General Rod Rosenstein promises an enforcement environment in which businesses can thrive. In a keynote address given at the U.S. Chamber Institute for Legal Reform, he emphasized the Department of Justice’s (DOJ) commitment to “avoiding unnecessary interference in law-abiding enterprises.”
Rosenstein’s reassurance to the business community also included an apparent slight to the prior administration’s enforcement practices. “Corporate enforcement and settlement demands must always have a sound basis in the evidence and the law.” DOJ “should never use the threat of federal enforcement unfairly to extract settlements.” This seems to address criticism of DOJ’s negotiating tactics under the False Claims Act and the Foreign Corrupt Practices Act.
Rosenstein alleged that he offered “no breaking news” about DOJ policies. However, as second in charge at DOJ, his views shed light on DOJ’s enforcement and compliance expectations. His vision for how to implement existing policies will affect resolution of future investigations.
Rosenstein urged companies to go beyond their legal obligations for compliance measures and cooperation. DOJ will continue to reward businesses that self-report and cooperate with federal investigations. “The Department can move forward not only to punish wrongdoers, but also to identify and implement policies that deter future crimes.” Prompt self-reporting by a company will influence an enforcement decision. DOJ “notices and evaluates carefully whether a corporate compliance program is applied faithfully.” He believes a company will thrive in the long term by working with, not against, the Department.
Another effort by Rosenstein to support those that “follow the rules” is the Working Group on Corporate Enforcement and Accountability. The Working Group will recommend ideas on promoting individual accountability and corporate cooperation. Additionally, the Department will evaluate whether to continue the Financial Fraud Enforcement Task Force.
Rosenstein also plans to clean up DOJ’s administrative landscape by working to “reduce regulations and to control costs.” This will allow companies to understand and comply with their obligations more easily. The U.S. Attorneys’ Manual will be updated by consolidating and incorporating policy memoranda. Rosenstein also supported President Trump’s January 2017 Executive Order requiring that for every new administrative regulation proposed, two had to be identified for repeal. Rosenstein believes making policies cleaner and more easily accessible will be good for both DOJ and for business.
Rosenstein may offer major policy changes ahead. In the meantime, in this and other recent speeches, he has made clear that the way forward for the DOJ will not be business as usual.
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.
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:
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.
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.
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.
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.
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.
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:
- Cyber Governance: Define and streamline leadership, governance and expectations for healthcare industry cybersecurity.
- Increase Health IT Security: Increase the security and resilience of medical devices and health IT.
- Education: Develop the healthcare workforce capacity necessary to prioritize and ensure cybersecurity awareness and technical capabilities.
- Increase Preparedness: Increase healthcare industry readiness through improved cybersecurity awareness and education.
- Protect IP and R&D: Identify mechanisms to protect research and development efforts and intellectual property from attacks or exposure.
- 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.