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

In June, an antitrust suit brought by plaintiff ambulatory surgery centers (“ASCs”) against a health system, health insurers, and a trade association survived a motion to dismiss. Last week, the ASCs’ case cleared the hump of summary judgment and will now proceed to trial.  Kissing Camels Surgery Center LLC et al. v. Centura Health Corp. et al., 1:12-cv-03012 (D.Col. August 28, 2015).  The district court found sufficient evidence of a conspiracy to reduce competition for ambulatory surgery services, making summary judgment inappropriate.  The attached antitrust alert, Kissing Camels Antitrust Suit Against Health System Moves Past Another Hump in the Road, provides some background on the case and considers the District Court’s ruling against summary judgment, based on its finding that there was sufficient evidence of a conspiracy to reduce competition.

Written by: Heidi Lawson and Danny Harary

A False Claims Act suit can be a company’s worst nightmare, as it may potentially result in large settlements and awards on account of the statute’s trebled damages provision.  However, the nightmare for AmerisourceBergen was compounded by the fact that the company’s insurer, ACE, denied coverage for the claim based on the “prior or pending litigation exclusion.”  Even worse, a Pennsylvania appellate court upheld ACE’s disclaimer based upon the exclusion. The impact of this recent ruling is very unsettling for many companies who may not know about a qui tam suit for several years after it is filed, which is typically the case in the qui tam context, where the complaint is filed under seal to allow the government to investigate the relator’s claims.  Continue Reading A Cautionary Tale for Companies With Potential False Claims Act Exposure

Written by Ellyn L. Sternfield

I recently co-chaired an American Conference Institute (ACI) forum on Pharmaceutical Pricing Litigation, which featured a number of key players who provided their unique perspectives on state and federal litigation involving pharmaceutical manufacturers and their products.  The presentations spurred thought-provoking discussions about potential new theories of liability as well as creative defense strategies.

Just days before the forum, Public Citizen published its Pharmaceutical Industry Criminal and Civil Penalties, An Update, 9/27/2012.  The report analyzed federal and state pharmaceutical case judgments, summarized case statistics, and drew conclusions about the states’ return on investment from pharmaceutical cases.  On the latter point, I found Public Citizen’s statistics misleading because they failed to account for mandatory Medicaid federal matching percentage credits, qui tam relators’ statutory share, and private counsel fee awards, all of which significantly reduce the states’ bottom line recoveries from these cases. Continue Reading State and Federal Pharmaceutical Enforcement Litigation: What’s Next?

Hospital chains Hospital Corporation of America (HCA) and Tenet Healthcare Corporation (Tenet) announced on April 12th that the Centers for Medicare & Medicaid Services (CMS) has admitted that it erroneously calculated the rural floor provision established by the Balanced Budget Act of 1997. According to the HCA press release:

[T]he rural floor provision establishes that a] urban hospital’s wage index within a particular state could not be lower than the statewide rural wage index. The wage index reflects the relative hospital wage level compared to the applicable average hospital wage level. . . [T]his provision [is] budget neutral, meaning that total wage index payments nationwide before and after the implementation of this provision must remain the same. To accomplish this, the Centers for Medicare & Medicaid Services (CMS) was required to increase the wage index for all affected urban hospitals, and to then calculate a rural floor budget neutrality adjustment (RFBNA) to reduce other wage indexes in order to maintain the same level of payments.

According to a Los Angeles Times article, the erroneous payments could amount to over $3 billion dollars in additional payments to over 2,200 hospitals.  Here is a partial list of the hospitals that have announced their settlements with CMS related to this matter and the amounts that they anticipate receiving from the agency:

  • HCA – $271 million
  • Tenet – $84 million
  • Long Beach Memorial Center – $6 million
  • Cedars-Sinai Medical Center – $14.3 million

A Modern Healthcare article, in questioning a CMS official, stated that the settlement comes after a ruling from the DC Circuit Court of Appeals finding that “CMS incorrectly applied the law’s budget-neutrality requirement to hospital’s rural wage index from fiscal 1999 to fiscal 2011” in a related case: Cape Cod Hospital et al. v. Sebelius and U.S. Department of Health & Human Services.  

 

BioWorld Perspectives recently published an article by Mintz Levin attorneys Sam Davenport and Matt Hurley entitled “Avoiding Litigation While Protecting Your Interests,” which discusses the essential steps for companies to take after entering into a collaboration, license, or supply agreement to avoid ending up in litigation down the road.  The article is particularly relevant for biotechnology and life sciences companies who frequently rely on these types of agreements.