Fraud & Abuse: 2016 Year in Review

transcript

Fraud and Abuse:2016 Year In Review

February 14, 2017

Jeffrey Fitzgerald, Esq.jfitzgerald@polsinelli.com

Asher Funk, Esq.afunk@polsinelli.com

Settlement Trends

Pharma cases still here but dwindling– Pfizer ($785M - alleged drug pricing)

– Genentech ($67M – effectivenessmisrepresentations)

– Valeant ($54 - kickback allegations including freedinners and sham speaker payments)

– Biocomparables ($36M – off-label marketing)

– Forest Laboratories ($38M – off-label marketing)

– Cardinal Health ($44M - failure to report suspiciousopioid orders)

Settlement Trends

Increase in long term care

– Kindred ($125M – unnecessary therapy)

– Life Care Centers ($145M – unnecessary therapy)

– Medford Center for Living ($28M – quality)

– No. American Health ($28.5 - medical necessity)

– Westlake Convalescent ($3.5M – medical necessity)

– Daybreak Partners ($5.3M – worthless services)

Settlement Trends

Anti-Kickback Statute allegations continue

– Olympus ($646M – marketing & other inducements)

– Respironics ($35M – free call center support, but onlyfor purchasers)

– Tenet Health ($513M – payments to pre-natal clinics)

– Lexington Medical Center ($17M – employed MDcomp above FMV for 28 MDs)

– Memorial University ($10M – employed MD compover FMV and losses on medical practices)

Noteworthy Settlements

FDNY paid $4.3 for ambulance transports thatlacked medical necessity documentation

Continuum Health Partners paid $2.95M toresolve litigation over $800K in late refundedoverpayments

CVS paid $3.5M for filling 500 forged opioidprescriptions

3 separate ortho clinics collectively paid $2.4Mfor using re-imported drugs

Enforcement Trends

Focus on individual is increasing

– Fall 2015: DOJ issues the Yates Memo

– Bostwick Lab owner pays $3.75M to settle FCAsuit (company paid $6.5M in 2015)

– No. American Health (required board chair to pay$1M of total $28.5M settlement)

– Former CEO of Tuomey excluded and fined $1M

– Theranos CEO banned from owning a lab underCLIA

Enforcement Trends

Focus on individual is increasing

– But, Warner Chilcott CEO acquitted

– Bohner v. Burwell, court upheld the four-yearexclusion of a pharma executive who pled guilty toan FDA misdemeanor count

– Dec. 2016: Forest Park Hosp. - 21 people indictedrelated to payments from private pay hospital

Court Decision Trends

General increase in Court of Appeals decisions

– 63 appellate decisions during the last year

– May reflect relator’s investment in cases and easeof filing an appeal

– Hard to see a trend in appellate rulings

– Pleading standards and application of Rule 9(b)loomed large

Courts confirm the ambiguity cannot be basis forFCA liability– U.S. ex rel. Olson v. Fairview Health Servs. of Minn, 8th

Cir., (definition of “children’s hospital” was ambiguousand hospital’s interpretation was not unreasonable)

– U.S. ex rel Donegan v. Anesthesia Assocs. of Kan. City,8th Cir., (definition of “emergence” from anesthesiawas ambiguous and group’s interpretation was notunreasonable)

– U.S. ex rel. Wall v. Vista Hospice Care and U.S. ex rel. etal, v. Aseracare Inc. (differing opinion on hospiceeligibility insufficient)

Limits of False Claims Act liability to be tested– U.S. ex rel. D’Agostino v. EV3, Inc., 1st Cir., upheld

dismissal and ruled that alleged false statements toFDA were not material to CMS for payment

– U.S. ex rel. Greenfield v. Medco Health Sys., dismissedclaims that drug companies donations to a hemophiliacharity were kickbacks

– U.S. ex rel. Bingham v. HCA, dismissed claim that “freeparking” to physicians violated AKS and Stark Law

– U.S. ex rel. Swoben v. United Healthcare Ins. Co., 9thCir., reversed dismissal of action alleging MedicareAdvantage Organizations inflated risk adjustmentscores in violation of the FCA

Rule 9(b) continues to be effective for defendants…– U.S. ex rel. Eberhard v. Physicians Choice Lab. Servs., LLC,

6th Cir., dismissed claims where relator failed to include“representative examples” or plead the submission offalse claims

– U.S. ex rel. Kelly v. Novartis Pharm. Corp., 1st Cir.,affirmed dismissal because relators did not pleadparticular allegations about specific fraudulent claims forpayment

– U.S. ex rel. Chase v. LifePath Hospice, Inc., dismissedclaims against Hospice provider where relator failed toallege facts about which Medicare claims were fraudulent

Noteworthy Court Decisions

U.S. ex rel. Ecobar v. Universal Health Svcs. (USSC)(6/16/2016)

– Court held that claims to the government implicitlyrepresent compliance with regulations

– FCA liability turns on whether compliance with aregulation is material to government’s decision to paythe claim

– Little guidance as to what material means• Rejected DOJ argument that a legal right to deny

payment for noncompliance constitutes material

• Condition of payment v. condition of participationdistinction continues to have meaning

– Evidence of materiality must be pled with particularity12

Noteworthy Court Decisions

State Farm Fire & Cas. Co. v. U.S ex rel. Rigsby, SupremeCourt ruled that violations of the FCA seal requirementdo not result in automatic dismissal

U.S., ex rel. Johnson v. Kaner Med. Grp., P.A., 5th Cir.,upheld dismissal of claims involving incorrectlycompleted reimbursement forms based on merenegligence

U.S. ex rel. Sheldon v. Kettering Health Network,individual data breaches not sufficient to establish aviolation of the HITECH Act and the FCA

HIPAA Privacy & Security

OCR guidance on patient right to accessrecords under Privacy Rule (Jan. 2016)

Cybersecurity attacks continue

– Banner Health notifying 3.7M of cyber-attack

– Newkirk Products (issues health plan ID cards)cyber-attack potentially affects 3.4M

HIPAA Privacy & Security

OCR publishing enforcement actions

– 13 resolutions in 2016 (up from 6 in 2015)

– Largest to date: Advocate Health ($5.5M for issuesaffecting ~4M)

– First enforcement against Business Associate:Catholic Health Care Services of the Archdioceseof Philadelphia—theft of mobile device

Other Enforcement Developments

OIG issued 13 advisory opinions, but terminatedor modified 6 prior opinions

OIG and DOJ increased penalties

OIG issued new safe harbors for co-payreductions, retailer coupons and access to care

OIG touting data analytics looking at aggregateMedicare payment data by geographic area

The DOJ’s “Year in Review”

Notable shift in percentage of settlement dollars from cases initiated by DOJ

Qui tam actions are 83% of new matters, but only 61% of dollars recovered

Recoveries from non-intervened cases returned to traditional levels

Predictions for 2016 –How Did We Score?

Supreme Court limits the use of “implied certification” in FCAcases to express “conditions of payment”

Yates Memo does not create a substantial difference inresolution of FCA cases by providers

But increased enforcement and rhetoric of DOJ or OIGpursuing individuals criminally, under FCA or with exclusion(including some “exemplar” cases)

FCA enforcement continues to be dominated bywhistleblower cases with little or no clear DOJ priority agenda

Increase in FCA cases based on physician compensation

Increased state level enforcement (MFCU and AttorneyGeneral) and growing volume of FCA cases based on Medicaid

Predictions for 2017

Appellate courts weigh in on the FCA’s materiality standard,but no consistency or clarity

Enforcement focused on AKS and financial relationshipscontinues to be at high levels

No decrease in focus on long term care, hospice and homehealth

Government commences / continues dragnet targetingopioid and controlled substances prescriptions in a widevariety of settings

Enforcement and rhetoric by DOJ and OIG about pursuingindividuals (more “exemplar” cases involving exclusion)

Jeffrey FitzgeraldShareholder | Polsinelli PC

Denver, CO303.583.8205

jfitzgerald@polsinelli.com

Asher FunkShareholder | Polsinelli PC

Chicago, IL312.873.3635

afunk@polsinelli.com

Fraud and Abuse:2016 Year In Review

February 14, 2017

Jeffrey Fitzgerald, Esq.jfitzgerald@polsinelli.com

Asher Funk, Esq.afunk@polsinelli.com