Written by: Thomas S. Crane and Lauren Moldawer*
Last week, the Government Accountability Office (GAO) released a report examining group purchasing organization (GPO) practices. The GAO questioned whether the current structure of GPO funding through administrative fees is appropriate and urged the Department of Health and Human Services (HHS) to explore whether hospitals are appropriately reporting the revenue from GPO administrative fees on their cost reports when such fees are passed down to hospitals.
GPOs are purchasing intermediaries between health care providers - mostly hospitals - and vendors of medical and pharmaceutical products and services. Providers use GPOs because GPOs tend to take on the administrative burden of negotiating contracts, and they are seen as having better bargaining power given their ability to pool purchasing. GPOs are funded through an administrative fee charged to the vendors, which are permitted by a statutory exception and safe harbor under the Anti-Kickback Statute. Continue Reading
Written by: Nili S. Yolin
On November 24, 2014, the New Jersey Appellate Division affirmed a lower court’s decision to dismiss a physician’s lawsuit against a hospital based on federal and state statutory immunity provisions that shield hospitals and their peer review participants from monetary damages.
The case involved a surgeon who had his privileges revoked by the hospital’s board of trustees due to questions regarding his clinical judgment and record keeping practices, even though, following an extensive internal review process, a hearing committee comprised of medical staff members had recommended only to suspend him. The physician asserted several legal theories for the recovery of damages, including breach of contract, breach of the implied covenant of good faith and fair dealing, and violation of his due process rights.
Federal peer review immunity is a component of the Healthcare Quality Improvement Act of 1986 (HCQIA), which shields a “professional review body” and any person participating on such body from damages with respect to the action taken if it was made in the furtherance of quality health care, after a reasonable investigation, affording the physician with notice and a fair hearing, and warranted by the facts. HCQIA imposes a rebuttable presumption of reasonableness that the physician must overcome.
Similarly, New Jersey’s peer review statute provides broad immunity from damages to “any person” involved in the review of a physician “for any action taken or recommendation made” by that person within the scope of the peer review function. The state immunity will apply as long as “such action or recommendation was taken or made without malice and in the reasonable belief after reasonable investigation that such action or recommendation was warranted upon the basis of facts disclosed.”
Our Health Care Enforcement Defense Practice has published its most recent Qui Tam Update analyzing 68 recently unsealed health care related whistleblower cases. In this issue, the team analyzes overall trends in the 68 cases, and looks more closely at three notable cases. First we review a settlement that resulted in Arizona’s largest-ever False Claims Act recovery – the government may have required more from the defendant if it had not previously self-disclosed related overpayments. Then we highlight the United States’ continued interest in the billing practices of SNFs, which provide fertile ground for false claims litigation. Finally, we review a case that is being touted as yet another victory for the DOJ-HHS HEAT partnership, due to the “powerful tool” of the False Claims Act.
Read the full newsletter here.
Written by: Rachel Irving Pitts
The United States District Court for the Western District of Washington ruled recently that the state’s corporate practice of medicine doctrine does not provide a private right of action, either express or implied, and dismissed claims brought by State Farm Mutual Automobile Insurance Company and State Farm Fire and Casualty Company. State Farm sued two entities and their owners to recoup over $800,000 in payments it had made on behalf of patients receiving physical and massage therapy services from the entities. State Farm claimed that it was entitled to recoup these payments because the entities’ owners were not professionals licensed to perform all of the services the entities were providing, in violation of Washington’s corporate practice of medicine prohibition. The defendants sought dismissal, asserting that even if State Farm’s allegations were true and they were violating Washington’s corporate practice of medicine doctrine, Washington law does not provide insurance companies with a private right of action to collect a refund on that basis. The court agreed.
Written by: Sarah Beth Smith and Laurence J. Freedman
The former CFO of Shelby Regional Medical Center, Joe White, pleaded guilty to knowingly making a false statement related to the hospital’s meaningful use of electronic health records (“EHR”). Shelby Regional had received $785,655 in meaningful use incentive payments from Medicare for fiscal year 2012. White faces sentencing of up to five years in prison.
Written by: Bridgette A. Wiley
Last week, a unanimous three-judge panel of the D.C. Circuit upheld the religious accommodation to the Affordable Care Act’s (“ACA”) contraceptive coverage mandate (Priests for Life v. HHS, D.C. Cir. No. 13-5368, Nov. 14, 2014). The court held that the accommodation set out by the Department of Labor (“DOL”) and Department of Health and Human Services (“HHS”) is a simple solution that does not impose a burden for purposes of the Religious Freedom Restoration Act of 1993 (“RFRA”).
Specifically, the court held that the religious accommodation does not impose a substantial burden on the religious rights of Priests for Life because all it requires them to do “to opt out is express what they believe and seek what they want via a letter or two-page form.” They continued to say that even if the self-certification imposed a burden, it is the least restrictive means to achieve the government’s compelling interest in ensuring access to contraceptive coverage.
This is the third circuit court to reject such a challenge to the religious accommodations. The D.C. Circuit also noted that, “Many religiously affiliated educational institutions, hospitals, and social-service organizations have taken advantage of the accommodation, and courts of appeals have uniformly sustained it against challenges under RFRA and the Constitution. See Mich. Catholic Conf. & Catholic Family Servs. v. Burwell, 755 F.3d 372 (6th Cir. 2014); Univ. of Notre Dame v. Sebelius, 743 F.3d 547 (7th Cir. 2014) petition for cert. filed (Oct. 3, 2014) (No. 13-3853).” A petition has been filed to the Supreme Court for consideration of the Notre Dame case and it is expected that this D.C. Circuit decision will also be appealed to the Supreme Court.
The health care industry remains an enforcement priority for the Federal Trade Commission (“FTC”). In a recent interview, the Director of the FTC’s Bureau of Competition, Debbie Feinstein, stated that the Bureau’s top three priorities for health care antitrust enforcement are: (1) challenging reverse patent settlement cases (or pay-for delay cases); (2) challenging anticompetitive pharmaceutical company mergers; and (3) reviewing healthcare provider combinations. As health industry participants engage in mergers, joint ventures, and other competitive collaborations where an antitrust review is anticipated, it is important for deal counsel to employ effective strategies to more efficiently manage the review and investigation process. In part two of this three part series, we provide guidance regarding Strategies for Efficiently Obtaining Antitrust Clearance.
Written by: Laurence J. Freedman and Samantha P. Kingsbury
Last week, the Civil Division of the U.S. Department of Justice (DOJ) filed an indictment charging Vascular Solutions Inc. (VSI) and its CEO Howard Root with (1) selling medical devices without the approval of the U.S. Food and Drug Administration (FDA); and (2) conspiring to defraud the U.S. government by concealing their illegal activities. This case is pending in the U.S. District Court for the Western District of Texas. In July 2014, VSI entered into a civil settlement agreement with DOJ under which it agreed to pay $520,000 to resolve allegations under the False Claims Act regarding this conduct.
Under its consumer protection criminal authorities, the Civil Division charged Mr. Root and VSI each with one count of conspiracy and eight counts of introducing adulterated and misbranded medical devices into interstate commerce in connection with a sales campaign related to VSI’s Vari-Lase product line. The Vari-Lase system was designed to treat varicose veins by sealing them with a laser (“ablation”). The indictment alleges that the Vari-Lase system was only approved by the FDA for the treatment of superficial veins, not perforator veins (which connect the superficial vein system to the deep vein system).
Written by: Ellyn Sternfield
With all due credit to the Coroner from the Wizard of Oz, like the Wicked Witch of the East crushed by Dorothy’s house, the 340B Drug Discount Program mega-reg is “not only merely dead, it’s really most sincerely dead.” And to quote one of my favorite sports commentators, Tony Kornheiser, “I believe I had that.”
Let’s recap. In January 2014, HRSA announced that it would be “formalizing” existing guidance and issuing a regulation designed to cover “a number of aspects” of 340B program operations. Termed the “mega-reg,” it was intended to address such controversial issues as the definition of a “patient” eligible to receive a 340B drug, compliance requirements for 340B contract pharmacies, and mandatory criteria for hospital eligibility as a 340B covered entity. HRSA stated that the proposed mega-reg would be published and available for comment no later than June 2014. And indeed the draft rule was forwarded to OMB for review in April 2014. So what happened? Well, let’s just say that HRSA’s Orphan Drug Rule was the tornado which carried the house to Oz, causing it to land on the witch.
Written by: Brian P. Dunphy
The United States Court of Appeals for the Seventh Circuit affirmed the dismissal of a False Claims Act (“FCA”) case against Shopko Operating Stores, LLC, in which a former Shopko pharmacist asserted Medicaid billing violations. The Seventh Circuit agreed “with the district court that [relator's] legal theory is not viable no matter how detailed his factual allegations.” Importantly, the appeals court also found that Shopko was “permitted to bill in the fashion that it did.” My colleagues from Mintz Levin’s health law and litigation practice areas, Tom Crane, Ellen Janos, and Bret Leone-Quick, along with other members of the firm’s health law and litigation groups, represented Shopko before both the district court and the Seventh Circuit.