Last week, the Centers for Medicare & Medicaid Services (CMS) announced that new Medicare cards would be issued starting next month. As we previously reported, the government has been planning to revamp the card to reduce fraud. Medicare cards have historically included a SSN-based Health Insurance Claim Number (HICN) that was an easy target for identity thieves and fraudsters. A new randomly-generated Medicare Beneficiary Identifier (MBI) will replace the HICN on the new cards.

The move to issue new cards was set in motion by the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA), which requires SSNs to be removed from Medicare identification cards within four years after MACRA’s enactment.

CMS will have a transition period during which either the HICN or the MBI can be used to exchange data with CMS. The transition period is set to begin no earlier than April 1, 2018, and run through December 31, 2019.

For those looking for additional information, CMS has created presentations explaining the card’s impact on different health care industry stakeholders.

Last week, the U.S. Attorney’s Office for the District of Massachusetts announced that it had entered into an agreement with a Massachusetts-based medical device manufacturer to settle allegations that the Company had violated the False Claims Act by purchasing lavish meals for physicians to induce them to use heart pumps manufactured by the Company.

The government’s allegations are not particularly novel, but do serve as an important reminder to health care providers and suppliers that it is important to institute, and remain vigilant about, sound compliance practices across all areas of their business.  These allegations also make clear that the government continues to be focused on providers’ and suppliers’ sales and marketing practices. Continue Reading Recent FCA Settlement Shows That What’s Old Is New in Health Care Fraud Enforcement

The Department of Justice (DOJ) recently intervened in a False Claims Act (FCA) case that raises a variety of interesting allegations, including payment of kickbacks by a compounding pharmacy to contracted marketing companies in the form of percentage-based compensation, to TRICARE beneficiaries in the form of copayment waivers, and to physicians who submitted prescriptions without seeing patients.  According to the complaint, Patient Care America (PCA), a Florida compounding pharmacy, implemented a scheme to manipulate the compounding formula for pain and scar creams that resulted in the submission of false claims to TRICARE.  The complaint also names two of PCA’s senior executives (one of which has since left the company) as well as the private equity firm that owns a controlling interest in PCA. Continue Reading DOJ Intervenes in False Claims Act Case Against a Compounding Pharmacy and a Private Equity Firm

As we predicted in our year-end post on civil and criminal enforcement trends, 2018 is already off to strong start in opioid-related enforcement against individual providers and associated practices.  Earlier this month, the Department of Justice (DOJ) announced that a Michigan physician, Dr. Rodney Moret, was sentenced to 75 months in prison for his role in conspiracies to distribute prescription pills illegally and to defraud Medicare. The conduct alleged against Dr. Moret is particularly extreme, but nevertheless reflects the government’s commitment to ferreting out opioid-related misconduct. Continue Reading Federal Enforcement Actions Continue to Focus on Opioid-Related Misconduct

Mintz Levin’s Health Care Enforcement Defense Group recently published its most recent Health Care Qui Tam Update. This Update analyzes the 47 health care-related qui tam cases unsealed in August and September 2017.  Highlights from this Update include:

  • a relatively high rate of intervention;
  • cases filed in 30 different courts;
  • cases brought against a variety of different health care providers;
  • almost half of the cases filed by current or former employees; and
  • faster times for unsealing cases.

Continue Reading Mintz Levin’s Health Care Enforcement Defense Group Releases New Qui Tam Update

Two new DOJ policies about False Claims Act enforcement became public last week. First, DOJ’s Associate Attorney General announced a new civil enforcement policy that instructs False Claims Act litigators not to use any sub-regulatory guidance to create legal obligations. Second, we learned that DOJ’s Civil Fraud section instructed all False Claims Act litigators to consider whether declined qui tam actions should be dismissed under the Department’s authority in Section 3730(c)(2)(A) of the False Claims Act. The central theme of this policy is that dismissal of qui tam actions is warranted when it is in the federal interest to do so, and the policy clearly sets out seven such federal interests. Continue Reading Perspective on DOJ Pivot on FCA Enforcement Policy

The Department of Health and Human Services Office of the Inspector General (OIG) has issued an Advisory Opinion (Opinion) in connection with a hospital’s gainsharing arrangement (Arrangement) with a designated group of neurosurgeons who perform spinal fusion surgeries at the hospital. According to the Opinion, the OIG would not impose sanctions because the Arrangement, when viewed in its entirety, is not designed or likely to induce the neurosurgeons to (i) reduce or limit medically necessary services to their Medicare or Medicaid patients, or (ii) increase referrals to the hospital. This Opinion is the latest in a line of earlier advisory opinions to “bless” gainsharing arrangements that meet certain criteria for minimizing the risk of fraud and abuse. Continue Reading OIG Reaffirms Permissibility of Certain Gainsharing Arrangements

In both civil and criminal enforcement proceedings, 2017 was perhaps most notable for the cases brought against individual health care providers and small physician practice owners.  Among the factors that may have resulted in the uptick in cases against individuals are the Yates Memo issued in late 2015, improved and increased reliance on sophisticated data analytics, and the aggressive focus on opioid addiction and its causes. Continue Reading Health Care Enforcement Review and 2018 Outlook: Criminal and Civil Enforcement Trends

Throughout 2017, the lower courts built upon the standard for determining materiality under the False Claims Act (FCA) established by the U.S. Supreme Court in Universal Health Servs., Inc. v. United States ex rel. Escobar, 136 S. Ct. 1989 (2016) (“Escobar”). In Escobar, decided in June 2016, the Court endorsed the “implied false certification” theory of liability under the FCA, premised on a “rigorous” and “demanding” element of “materiality.”  As expected, this decision triggered a spate of litigation over what “materiality” means, and how to apply this requirement.

By way of background, the Court held that the “implied false certification” theory has two elements:

  • “the claim does not merely request payment, but also makes specific representations about the goods or services provided,” and
  • the defendant’s “failure to disclose noncompliance with material statutory, regulatory, or contractual requirements makes those representations misleading half-truths.”

The Court described the materiality standard as centered on “the likely or actual behavior” of the agency that made the payment decision, not whether the agency had the legal authority to deny payment, as argued by the Department of Justice (DOJ) prior to the Court’s decision. To be material, the Court reasoned, the misrepresentation must go to the essence of the bargain, and noncompliance cannot be “minor or insubstantial.”  The Court noted that materiality can be determined based on a number of factors – none of which are dispositive – and held that a court’s decision, though fact-specific, still could lead to dismissal on a motion to dismiss or at summary judgment. Those looking for additional background on the Escobar decision should see our Health Care Enforcement Defense AdvisoryContinue Reading Health Care Enforcement Year in Review and 2018 Outlook: The False Claims Act’s Materiality Standard as Established by Escobar Continues to Evolve

Like prior years, 2017 saw large government recoveries and a high volume of False Claims Act (“FCA”) cases, which remain the government’s primary health care enforcement tool. The Department of Justice (“DOJ”) reported on December 21, 2017 that it obtained $3.7 billion in FCA settlements and judgments during the fiscal year (“FY”) ending September 30, 2017, down from $4.7 billion in FY 2016. Federal recoveries from the health care industry (including drug companies, hospitals, pharmacies, laboratories, and physicians), however, remained consistent:  $2.4 billion in FY 2017 compared to $2.5 billion in FY 2016.

DOJ also reported that relators filed 669 qui tam FCA lawsuits last year, an average of more than 12 new cases every week. Among this high volume of qui tam FCA cases, relators asserted myriad theories of FCA liability against many different types of health care providers and suppliers.

In 2017, courts issued numerous decisions interpreting the legal standards under the FCA and assessing the viability of a multitude of FCA liability theories. These decisions will affect the prosecution and defense of FCA cases for years to come. In particular, district and appellate courts grappled with the Supreme Court’s 2016 decision in Universal Health Servs., Inc. v. United States ex rel. Escobar, 136 S. Ct. 1989 (2016) (“Escobar”). Given the large volume of decisions under Escobar, we will discuss the application of that decision in tomorrow’s post. Continue Reading Health Care Enforcement Year in Review and 2018 Outlook: Major Case Law Developments