Whistleblowers remain a steady source of False Claim Act (FCA) suits against health care and life science companies each year. Join our upcoming webinar – “Qui Tam Relators: What You Need to Know” on July 12 at 1pm ET. Colleagues in our Health Care Enforcement Defense Practice Group will help companies better understand how to deal with FCA cases, which result in billions of dollars of recovery for the government each year. Hope Foster, Larry Freedman, Karen Lovitch and Ellyn Sternfield will share insights to the relator process, help companies understand how to react if it is named in a whistleblower suit, and provide tips for how to prevent them.
Last week, the Department of Justice (DOJ) entered into a $34 million settlement with Mercy Hospital Springfield (“Hospital”) of Springfield, Missouri, and its affiliate Mercy Clinic (“Clinic”). The settlement resolves an allegation that the Clinic violated the Stark Law by compensating twelve Clinic physicians in a manner that took into account the volume and value of the physicians’ referrals to the Hospital’s infusion center. The U.S. contended that the defendants’ Stark Law violations caused their reimbursement claims to Medicare for infusion services to violate the False Claims Act. Continue Reading Hospital and its Clinic Agree to $34 Million Settlement to False Claims Act Allegation that Compensation to Oncologists Violated the Stark Law
Earlier this month, Mintz Levin’s Health Care Enforcement Defense Group published its most recent Health Care Qui Tam Update that looks at 18 health care-related qui tam cases unsealed in October and November of 2016.
The Update presents two unique cases in-depth and covers some of the trends revealed in these recently unsealed cases:
- The cases identified were filed in federal district courts in 12 states, including California (5), New York (3), Alabama (1), Arkansas (1), Florida (1), Hawaii (1), Kansas (1), New Jersey (1), New Mexico (1), North Carolina (1), Oklahoma (1), and Pennsylvania (1).
- The federal government declined to intervene in nine of the 18 cases. Five more cases were voluntarily dismissed before any action was taken by the government. The federal government intervened, in whole or in part, in three cases. In the two remaining cases, the government’s intervention status could not be discerned from the unsealed filings.
- Nature of the Claims
- Nine of the recently unsealed cases included both state and federal claims.
- Four involved allegations of unlawful kickbacks. Of these, two also alleged violations of the Stark Law (42 U.S.C. § 1395nn).
- Claims for relief under state or federal anti-whistleblower retaliation provisions appeared in nine of the 18 recently unsealed cases.
- The cases remained under seal for an average of just over two years (774 days). The median number of days cases remained under seal was 573.5. United States ex rel. DiBenedetto v. Vahedi, which was heard in the U.S. District Court for the Central District of California, was under seal for the shortest amount of time, at 104 days. United States ex rel. Harmsen v. Moore County Dental Care Center, which was filed in the U.S. District Court for the Middle District of North Carolina, was under seal the longest, at 2,075 days (over five and a half years)
- In nearly three-quarters of the unsealed cases (13 of 18), relators were current or former employees of the defendant.
See HERE for the full Update and to find our key takeaways from the cases discussed.
In a closely watched False Claims Act (“FCA”) case, the Fourth Circuit Court of Appeals decided that the Department of Justice (“DOJ”) has an unreviewable right to object to a proposed settlement agreement between a relator and a defendant when the Government has declined to intervene in the case. United States ex rel. Michaels v. Agape Senior Community, Inc., No. 15-2145 (4th Cir. Feb 14, 2017). In addition, as most expected, the court declined to decide the legal issue whether FCA plaintiffs may rely on statistical sampling of claims to prove FCA liability and damages, concluding that it had “improvidently granted” an interlocutory appeal of the lower court’s ruling on the use of statistical sampling. This decision thus leaves intact the district court’s decision that rejected the relator’s proposed use of statistical sampling to prove FCA liability and damages. The Fourth Circuit’s decision not to address the use of sampling in FCA cases leaves many open questions. Continue Reading Fourth Circuit Permits DOJ to Reject an FCA Settlement, But Punts Decision on Statistical Sampling
Back in early October, we were all transfixed by the announced Mylan settlement with the U.S. Department of Justice (DOJ) over Mylan’s alleged underpayments of Medicaid Drug Rebates for the EpiPen. Although Mylan indicated that its $465 million settlement resolved all potential liability to government programs over EpiPen’s classification for Medicaid Drug Rebate purposes, DOJ would not confirm the specifics of the settlement and it appeared that no actual settlement documents had even been drafted. We blogged our thoughts that the “settlement” was actually a handshake deal that had not been reduced to writing, had not been agreed to by the states, and had left the extent of any releases and future compliance to be negotiated. And we said Congressional scrutiny would not end due to the announced settlement.
Multiple state and government officials decried the announced settlement as inadequate. Senator Grassley went so far as to schedule a Senate hearing on the settlement, but was forced to postpone it when no one from DOJ or Mylan would agree to attend and testify.
Then the election intervened, and EpiPen rebates were yesterday’s news. However, Senator Grassley, for one, is not letting go. But at this point, his focus is more on government action, or inaction, over drug classifications. And depending on what his inquiry reveals, it may end up hurting, not helping, any government case against Mylan, and potentially other drug manufacturers, based on classification of drugs for purposes of Medicaid Drug Rebates.
The civil monetary penalties for violations of myriad health care laws continue to rise. In June, we discussed the enormous increase in penalties under the federal False Claims Act (“FCA”). Through an interim final rule, the Department of Justice nearly doubled the per-claim FCA penalty. The minimum per-claim FCA penalty increased from $5,500 to $10,781 and the maximum per-claim FCA penalty increased from $11,000 to $21,563. The FCA penalties nearly doubled because the Federal Civil Penalties Inflation Adjustment Act of 2015 (the “2015 Adjustment Act”) required federal agencies to update civil monetary penalties (“CMPs”) within their jurisdiction by August 1, 2016 to catch-up with inflation.
Because of the 2015 Adjustment Act, numerous other CMPs—in addition to the FCA—recently have increased or likely will increase. Continue Reading Penalties For Health Care Law Violations Surge
Mintz Levin’s Health Care Enforcement Defense Group published its most recent Health Care Qui Tam Update on August 4, 2016. This Update covers 31 health care-related False Claims Act cases that have been unsealed since the last Health Care Qui Tam Update.
The Update takes an in-depth look at three noteworthy cases and analyzes the trends observed in recently unsealed cases:
- A substantial majority of the unsealed cases had been under seal for periods well in excess of the required statutory period. Of the 31 complaints, 28 were filed before 2015, with three unsealed complaints dating back to 2010. Of the remaining complaints, four were filed in 2012, eight in 2013, 12 in 2014 and three in 2015. As these cases illustrate, lengthy extensions of the seal on qui tam actions continue to be routine.
- The cases identified were filed in federal district courts in 18 states, including multiple cases in California (3), New York (4), Florida (4), Kentucky (2), Massachusetts (2), Ohio (2), and Pennsylvania (3).
- The federal government declined to intervene, or elected not to intervene at this time, in 23 of the 31 cases. The federal government intervened, in whole or in part, in eight cases.
- Nature of the Claims
- 15 of the recently unsealed cases involved both state and federal claims.
- Nine involved allegations of unlawful kickbacks. Of these nine, five also alleged violations of the Stark Law.
- Claims for relief under state or federal anti-whistleblower retaliation provisions appeared in six of the 31 recently unsealed cases.
- In nearly two-thirds of the unsealed cases (20 of 31), relators were current or former employees of the defendant. In two cases, the relator’s relationship to the defendant was not revealed by the unsealed filings.
The full Update is available here.
On May 6th, we posted about the possibility that the Department of Justice (“DOJ”) might dramatically increase False Claims Act (“FCA”) penalties after the Railroad Retirement Board (“RRB”) nearly doubled the per-claim penalties it imposed under the FCA. After nearly two months of anticipation, DOJ published an Interim Final Rule yesterday announcing that it intended to increase the minimum per-claim penalty under Section 3729(a)(1) of the FCA from $5,500 to $10,781 and increase the maximum per-claim penalty from $11,000 to $21,563. These adjusted amounts will apply only to civil penalties assessed after August 1, 2016, whose violations occurred after November 2, 2015. Violations that occurred on or before November 2, 2015 and assessments made before August 1, 2016 (whose associated violations occurred after November 2, 2015) will be subject to the current civil monetary penalty amounts.
The penalty increases proposed by DOJ are the same as those proposed by the RRB back in May. The RRB’s increase resulted from a section of the Bipartisan Budget Act of 2015, called the Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015 (the “2015 Adjustment Act”), which required federal agencies to update civil monetary penalties (“CMPs”) within their jurisdiction by August 1, 2016. The 2015 Adjustment Act amended the Federal Civil Penalties Inflation Adjustment Act of 1990—which is incorporated into the text of the FCA—and enacted a “catch-up adjustment.” Under the “catch-up adjustment,” CMPs must be adjusted based on the difference between the Consumer Price Index (“CPI”) in October of the calendar year in which they were established or last adjusted and the CPI in October 2015.
DOJ last raised the civil penalty amounts under the FCA to their current levels in August 1999, but because the 2015 Adjustment Act repealed the legislation responsible for the 1999 adjustment, DOJ looked back to 1986 when civil penalties were set at a minimum of $5,000 and a maximum of $10,000. This calculation resulted in a CPI multiplier of more than 215% resulting in the new minimum per-claim penalty of $10,781 ($5,000 x 2.15628) and a maximum per-claim penalty of $21,563 ($10,000 x 2.15628). Under the 2015 Adjustment Act, the increases are required unless DOJ, with the concurrence of the Director of the Office of Management and Budget, makes a determination to increase a civil penalty less than the otherwise required amount. As to the FCA civil penalty, as well as scores of other civil penalties under DOJ’s jurisdiction, DOJ declined to seek this exception.
DOJ is providing a 60-day period for public comment on this Interim Final Rule. Like the rest of the health care industry, we will be watching closely to see if commenters are able to convince the Department to reconsider these astronomical penalty amounts.
A unanimous Supreme Court issued its long-awaited and closely watched decision today on the scope of the False Claims Act (“FCA”), and the Court affirmed the FCA’s long reach. Universal Health Services, Inc. v. United States ex rel. Escobar et al., No 15-7. The decision has momentous implications for health care providers and suppliers, and other entities, who seek or cause others to seek Medicare and Medicaid reimbursement.
This post summarizes today’s decision. Mintz Levin’s Health Care Enforcement Defense Group will be providing additional insight and commentary on the decision in the coming days.
The already enormous per-claim penalties under the federal False Claims Act (“FCA”) may nearly double by August 1, 2016, ratcheting up the stakes of FCA cases for health care providers, pharmaceutical and medical device manufacturers, and life sciences companies subject to the FCA. This week, the Railroad Retirement Board (“RRB”) published an interim final rule raising the minimum per-claim penalties under the FCA and the Program Fraud Civil Remedies Act (“PFCRA”) to $10,781 from $5,500, and increasing the maximum per-claim penalties to $21,563 from $11,000 (aspects of the penalties under the FCA and the PFCRA are within RRB’s jurisdiction). Although the RRB’s position may not affect the health care industry, other federal agencies are required to follow suit and adjust the per-claim penalties by July 1, 2016 and to make them effective by August 1, 2016.
An FCA violation results in “a civil penalty of not less than $5,000 and not more than $10,000, as adjusted by the Federal Civil Penalties Inflation Adjustment Act of 1990 (28 U.S.C. 2461 note; Public Law 104–410), plus 3 times the amount of damages which the Government sustains because of the act of that person.” Currently, the Department of Justice (“DOJ”) has set FCA penalties at a minimum of $5,500 and a maximum of $11,000 per claim. Even at the current level, many stakeholders think the per-claim penalties are out of line with any damage to federal health care programs. For example, a single claim for which the government reimbursed a provider $100 could result in a penalty of up to $11,000. And that penalty applies to every false claim.
What is behind the increase?
A section of the Bipartisan Budget Act of 2015, entitled the Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015 (“2015 Adjustment Act”), requires federal agencies to update the civil monetary penalties within their jurisdiction. The 2015 Adjustment Act amended the Federal Civil Penalties Inflation Adjustment Act of 1990—which is incorporated into the text of the FCA—and enacted a “catch-up adjustment.” Notably, the “head of an agency” must adjust civil monetary penalties through an interim final rule (rather than through a proposed rule with a notice and comment period) by July 1, 2016, and the adjustment must take effect by August 1, 2016. Continue Reading Already Enormous False Claims Act Penalties Set to Increase