Healthcare Litigation Overview
Upcoming SlideShare
Loading in...5
×
 

Healthcare Litigation Overview

on

  • 295 views

 

Statistics

Views

Total Views
295
Views on SlideShare
295
Embed Views
0

Actions

Likes
0
Downloads
6
Comments
0

0 Embeds 0

No embeds

Accessibility

Upload Details

Uploaded via

Usage Rights

© All Rights Reserved

Report content

Flagged as inappropriate Flag as inappropriate
Flag as inappropriate

Select your reason for flagging this presentation as inappropriate.

Cancel
  • Full Name Full Name Comment goes here.
    Are you sure you want to
    Your message goes here
    Processing…
Post Comment
Edit your comment

Healthcare Litigation Overview Healthcare Litigation Overview Document Transcript

  • HEALTH CARE LITIGATION OVERVIEW HENRY H. ROBINSON Kelly Hart & Hallman, LLP 201 Main Street, Suite 2500 Fort Worth, Texas 76102 State Bar of Texas Soaking Up Some CLE May 15-16, 2014 South Padre Island CHAPTER 2
  • BIOGRAPHICAL INFORMATION AFFILIATIONS AND HONORS Listed in The Best Lawyers in America®, 2001-2014 Recognized as "Texas Super Lawyer" by Texas Monthly magazine 2003, 2005-2013 EDUCATION Cornell University, Masters in Industrial and Labor Relations, 1975 Cornell Law School, J.D., 1974 The University of North Carolina, A.B., 1969 SPEECHES AND PUBLICATIONS "Legal Implications of the Individual Mandate." Fort Worth Business Press, October, 13, 2013. "The Affordable Care Act's New Retaliation Claims" in the Fort Worth Business Press, July 29, 2013 issue. Speaker, Presenter, "The Calm Before the Storm"; an update on the impact of Health Care Reform, at the 2013 CareFlite Emergency Care Update Conference, May 20, 2013 "Let's Get Serious About Health Care Reform" (2012) "How Employers Can Respond to Employee Use of Technology and Social Media" (2012) "Employers and Health Care Reform" (2012) "Don't Overlook Downturn's Hidden Costs" (2010) “Supreme Court Sparks Revival of Non-Competes” (2006) “Employment Implications of Sarbanes-Oxley” (2004) "Why Corporate Reorganizations Fail or Succeed" (2002) “The Legal Side of Strategic Keys to Successful Reorganizations” (2002) (co-author) “What is the Meaning of the ‘At-Will’ Rule and What Are Its Limits?” (2001) “Successful Navigation Through the Waterways of Multiple Affirmative Action Programs and OFCCP Regulatory Requirements” (2001) “Exceptions to the Employment At-Will Doctrine in Texas” (2001) Co-Author, “A Simple Roadmap to the Intersections of Employment and Environmental Regulations” (1996) “Employment Discrimination and Harassment” (1995) “Texas Labor and Employment Law” (1992) “New and Emerging Issues in Employment Law” (1991) “Wrongful Discharge and Work-Related Torts” (1991) “Employment Law in Texas II: Employment At-Will, Negligence, and Employer Liability, Drug Testing, and Other Emerging Areas of Liability” (1989) “Employee Polygraph Protection Act of 1988: An Overview” (1989) “Workers Compensation and Unemployment Compensation” (1986) “Legislation: What Did Pass, What Didn’t, What May” (1986) Co-Author, "Companies Must Cope with Ledbetter Fair Pay Act," Fort Worth Business Press, April 13, 2009 Co-Author, "Don't Overlook Downturn's Hidden Costs," Fort Worth Business Press, November 17, 2008 Negotiability in the Federal Sector Cornell/American Arbitration Assn. 1981/1983 Co-Author, “Report of the Committee on Federal Service Labor-Management Relations Law,” Section of Labor and Employment Law, 1982 ABA Committee Reports, Vol. II, p. 75 “Challenges for Federal Sector Arbitration,” 4 Federal Service Labor Relations Review 30 (Fall 1981)
  • Health Care Litigation Overview Chapter 2 i TABLE OF CONTENTS Page I. CONSTITUTIONAL ISSUES UNDER THE MAJOR AFFORDABLE CARE ACT (“ACA”) .......1 A. Constitutionality of Employee Shared Responsibility (Employee Mandate) and Medicaid Expansion.................................................................................................................1 B. Constitutionality of Employer Shared Responsibility (Employer Mandate) ...........................1 C. Availability of Government Subsidies at Federal Exchanges..................................................1 D. Religion and Requirement that Plans Cover Contraceptives. ..................................................1 1. Conflicting Opinions Over Standing............................................................................1 2. Contraceptive Requirement Unconstitutional. .............................................................2 E. Origination Clause....................................................................................................................2 II. INCREASED EMPHASIS ON HEALTH CARE OVERBILLING, BILLING FOR UNNECESSARY MEDICAL CARE, FRAUD AND KICKBACKS.................................................2 A. Legal Focus: Money................................................................................................................2 B. The Flow of Money: Claims, Codes and Medical Necessity..................................................2 III. FALSE CLAIMS ACT.........................................................................................................................3 A. Recent Examples Demonstrating the FCA’s Application to Claims Containing Incorrect Coding.......................................................................................................................3 1. Upcoding ......................................................................................................................3 2. Billing for Services Not Medically Necessary.............................................................3 3. Billing for Services Not Actually Performed...............................................................4 B. Categories of FCA Cases. ........................................................................................................4 C. Who May Bring FCA Case. .....................................................................................................5 D. Treble Damages and Penalties. ................................................................................................5 E. Recent FCA Legal Developments............................................................................................6 IV. PHYSICIAN REFERRAL STATUTE (OR STARK LAW)...............................................................6 A. Elements of Prohibited Referral...............................................................................................7 B. Definitions Defining the Elements...........................................................................................7 1. Referral.........................................................................................................................8 2. Entity. ...........................................................................................................................8 3. Designated Health Services (DHS)..............................................................................8 4. Financial Relationship..................................................................................................8 a. Ownership or Investment Interest. ...................................................................8 b. Compensation Arrangement.............................................................................9 C. Eight Matters Outside the Scope of the Stark Law ................................................................10 D. Sanctions and Liability Under the Stark Law. .......................................................................10 E. Self-Referral Disclosure Protocol ..........................................................................................11 F. Recent Example of Application of Stark Law to Financial Relationship ..............................11 V. ANTI-KICKBACK STATUTE .........................................................................................................11 A. Examples Demonstrating Importance of Law........................................................................11 1. Criminal Liability: Referrals/Commissions ..............................................................11 2. Civil Liability .............................................................................................................11
  • Health Care Litigation Overview Chapter 2 ii B. Elements of a Violation..........................................................................................................11 C. Criminal, Civil and Administrative Penalties ........................................................................12 D. Matters/Events/Subjects to Which Anti-Kickback Statute Does Not Apply .........................12 E. Regulatory Safe Harbors ........................................................................................................13 VI. TEXAS MEDICAID FRAUD PREVENTION ACT. .......................................................................13 A. Example Demonstrating Application of TMFPA ..................................................................13 B. Unlawful Acts ........................................................................................................................13 C. Liability ..................................................................................................................................14 D. Who May Bring an Action.....................................................................................................14 E. TMFPA’s Significance to State of Texas...............................................................................14 VII. FEDERAL HEALTH CARE ADMINISTRATIVE SANCTIONS...................................................14 A. Mandatory Exclusions............................................................................................................14 B. Permissive Exclusion .............................................................................................................14 C. Administrative Civil Monetary Penalties...............................................................................14 VIII. POTENTIAL CRIMINAL LAWS APPLIED TO HEALTH CARE BILLING AND OTHER TRANSACTIONS .............................................................................................................................15 A. Health Care Fraud Statute ......................................................................................................15 B. Theft or Embezzlement in Connection with Health Care ......................................................15 C. False Statement, Concealment or Trickery Relating to Health Care Matters ........................15 D. Making or Causing to be Made False Statements or Representations in Connection with Health Care.....................................................................................................................15 E. False Statements and Entries..................................................................................................15 F. Mail Fraud..............................................................................................................................15 G. Wire Fraud..............................................................................................................................15 H. False, Fictitious or Fraudulent Claims ...................................................................................15 IX. MULTIPLE ENTITIES ENFORCE LAWS AGAINST HEALTH CARE WASTE, FRAUD AND ABUSE...............................................................................................................................................16 A. Federal Level: OIG, FBI, DOJ, MAC, RAC, ZPIC, HEAT .................................................16 1. Centers for Medicare and Medicaid Services.............................................................16 2. DHHS’s Office of Inspector General .........................................................................16 3. Medicare Administrative Contractor..........................................................................16 4. Medicare Recovery Audit Contractor ........................................................................16 5. Zone Program Integrity Contractor............................................................................16 6. Federal Bureau of Investigation .................................................................................16 7. Department of Justice.................................................................................................17 8. Combined Task Force ................................................................................................17 B. State Level: HHSC’s OIG, Attorney General, TMHP, RAC................................................17 1. HHSC’s Inspector General.........................................................................................17 2. Texas Medicaid and Health Care Partnership............................................................17 3. Texas Attorney General’s Office ...............................................................................18 4. Texas Medicaid Recovery Audit Contractor..............................................................18 C. Joint Federal/State/Local........................................................................................................18 X. DISCLOSURE OF PERSONAL HEALTH INFORMATION .........................................................18 A. Texas Law ..............................................................................................................................18 1. Hospital Disclosure of Health Care Information........................................................18
  • Health Care Litigation Overview Chapter 2 iii 2. EMS Provider Disclosure of Health Care Information ..............................................18 3. Medical Records.........................................................................................................19 B. HIPAA (Federal Law)............................................................................................................19
  • Health Care Litigation Overview Chapter 2 healthcarelaw-anoverview-140606152059-phpapp01.DOCX 1 HEALTH CARE LITIGATION OVERVIEW I. CONSTITUTIONAL ISSUES UNDER THE MAJOR AFFORDABLE CARE ACT (“ACA”) A. Constitutionality of Employee Shared Responsibility (Employee Mandate) and Medicaid Expansion The Supreme Court upheld the constitutionality of the ACA’s individual shared responsibility tax (individual mandate). National Federation of Independent Business v. Sebelius, 132 S. Ct. 2566 (2012). In the same case, the Supreme Court held that it is unconstitutional for Congress to impose compulsory Medicaid expansion on states. B. Constitutionality of Employer Shared Responsibility (Employer Mandate) The employer mandate will not go into effect until January 1, 2015. Oklahoma ex rel. Pruitt v. Sebelius, 2013 WL 40522610 (E.D. Okla. 2013). Hotze v. Sebelius, ___ F. Supp. 2d. ___, 2014 WL 109407 (S.D. Tex. 2014), appeal pending (employer mandate is a tax and is constitutional). Liberty University v. Lew, 733 F.3d 72 (4th Cir. 2013, cert denied Dec. 2, 2013) (employer mandate is constitutional under taxing authority and does not violate Free Exercise Clause or Religious Freedom Restoration Act). C. Availability of Government Subsidies at Federal Exchanges. Government subsidies are not available except when an individual (1) goes to an exchange and obtains insurance, and (2) meets the eligibility standards for a government subsidy in the form of a premium tax credit or cost sharing reduction. If a state elects not to set up an exchange, the federal government’s exchange is available to that state’s citizens. 42 U.S.C. § 18031. The argument has been raised that government subsidies are not available through a federal exchange and are available only through a state exchange. Two federal district courts rejected the argument. King v. Sebelius, ___ F. Supp. 2d. ___, 2014 WL 637365 (E.D. Va. 2014); Halbig v. Sebelius, __ F. Supp. __., 2014 WL 129023 (D.C.C. 2014). Halbig v. Sebelius is presently on appeal before the D.C. Circuit, and oral argument was heard March 24, 2014. D. Religion and Requirement that Plans Cover Contraceptives. The ACA gives the Secretary of the Department of Health and Human Services (“DHHS”) the authority to determine what should be included in basic health coverage. The Secretary determined that plans should cover contraception. The United States Supreme Court consolidated and granted certification on Sebelius v. Hobby Lobby Stores, Inc., Case No. 13-354, and Conestoga Wood Specialties Corp. v. Sebelius, No. 13-556. The broadly framed issue is whether the Religious Freedom Restoration Act, 42 U.S.C. 2000bb, et seq., allows a for-profit corporation to deny its employees the health coverage of contraceptions to which employees are otherwise entitled by federal law, based on the religious objections of the corporation’s owners. The briefing of Hobby Lobby does not object to contraception preventing the fertilization of an egg, but rather, the objection is limited to “providing coverage for contraceptives that risk destroying a human embryo.” (p. 34-35). Oral argument occurred March 25, 2014. The lower courts’ opinions are splintered. 1. Conflicting Opinions Over Standing. Eden Foods, Inc. v. Sebelius, 733 F.3d 626 (6th Cir. 2013) (for-profit organization lacks standing to raise “religious exercise” claim under Religious Freedom Restoration Act). Conestoga Wood Specialties Corp. v. Secretary of U.S. Dept. of Health and Human Services, 724 F.3d 377 (3rd Cir. 2013) (neither for-profit corporation nor shareholder may raise free exercise clause so as to challenge women’s preventive health care regulations issued pursuant to ACA). Hobby Lobby Stores Inc. v. Sebelius, 723 F.3d 1114 (10th Cir. 2014), cert granted Nov. 26, 2013 (10th Circuit ruled that corporations have standing to raise free exercise claim to challenge ACA’s contraception requirement). Gilardi v. U.S. Dept. of Health and Human Services, 733 F.3d 1208 (D.C. Cir.) (for-profit organization may not make religious challenge to
  • Health Care Litigation Overview Chapter 2 healthcarelaw-anoverview-140606152059-phpapp01.DOCX 2 ACA’s provision that health care plans cover contraception, but if the organization is owned by only a few individuals, they can raise a challenge based on their religious objections). 2. Contraceptive Requirement Unconstitutional. Korte v. Sebelius, 735 F.3d 654 (7th Cir. 2013) (ACA’s requirement of contraception coverage burdens religious exercise and is unconstitutional). E. Origination Clause. Sissel v. U. S. Dept. of Health and Human Services, 951 F. Supp. 2d. 159 (D.C.C. 2013) (ACA was to expand health coverage and is not subject to Origination Clause, and in any event, the bill originated in the House). Hotze v. Sebelius, ___ F. Supp. 2d ___, 2014 WL 109407 (S.D. Tex. 2014) (ACA does not violate Origination Clause). II. INCREASED EMPHASIS ON HEALTH CARE OVERBILLING, BILLING FOR UNNECESSARY MEDICAL CARE, FRAUD AND KICKBACKS A host of reasons contribute to health care costs. These include, among others: doctors trying to save lives, persons demanding medical care, the system’s complexity, the threat of malpractice, the fee-for-service system, patents, greed (including fraud), and a desire to lengthen life spans. The ACA increases emphasis on deterring and detecting health care providers who bill inappropriately, who engage in acts that encourage unnecessary medical care, or who engage in acts that may impair the objectivity of physicians. The ACA increases funding for fighting health care waste, abuse and fraud. A host of laws apply. Multiple government agencies and multiple private contractors conduct health care billing, audits and investigations. Court cases may be civil or criminal. Administrative sanctions are also available. A. Legal Focus: Money According to the Centers for Medicare and Medicaid Services, in 2012 health care spending in the United States was $2.8 trillion. www.cms.gov/Research-Statistics-Data-and- Systems-Trends-and-Reports/NationalHealth Expenddata. In the United States, health care spending accounts for 17.7% of GDP. www.oecd.com/unitedstates/ Briefing-Notes- USA-2013. Whether a health care expenditure is wasteful or abusive implicates moral, economic, philosophical and religious judgments. There are projections -- but no valid dollar numbers -- specifying the quantities of medical care that are unnecessary/avoidable versus necessary/ unavoidable, due to unacceptable economic greed versus not due to unacceptable economic greed, or fraudulent versus non-fraudulent. In trying to alter a spending trend that is unsustainable over the long run, much of the legal focus has been on health care dollars and practices that are wasteful, abusive or fraudulent. Audits and investigations have increased. For FY2013, the United States Department of Justice (“DOJ”) and Centers for Medicare and Medicaid Services reported recoveries totaling $4.3 billion. Whistleblowing is important. On the state level, in 2012 Texas recovered $38.3 million in Medicaid recoveries, and 95% stemmed from suits originally filed as qui tam or whistleblower cases. B. The Flow of Money: Claims, Codes and Medical Necessity Since the focus is on the flow of money, it is necessary to identify several matters prerequisite (or supposed to be prerequisite) to the flow of money through the system. Claims. The health care provider provides a service to a patient, prepares medical records, and initiates the billing process. As part of the process, the health care provider prepares a claim (except for 100% self-pay), including assignment of a procedure code to each service. As explained in the following paragraph, that code is relevant to the dollar amount billed and the dollar amount paid. The health care provider transmits the claim to a third-party payor who in turn examines the claim in making a payment decision. A claim is prerequisite to a health care provider’s collection of money from a third-party payor.
  • Health Care Litigation Overview Chapter 2 healthcarelaw-anoverview-140606152059-phpapp01.DOCX 3 Codes. Procedural codes are supposed to describe nearly every service a health care provider may render to a patient. The American Medical Association (AMA) develops and annually publishes Current Procedural Terminology codes (CPT codes). “CPT” is the AMA’s registered trademark. For example, “99397” may be used for a preventative exam for a patient over 65, “90658” may indicate a flu shot, and “12002” may indicate the stitching up of a one-inch cut on a patient’s arm. There are in the vicinity of 8,000 CPT codes. Also, there are add-ons and modifiers. Medicare uses a Healthcare Common Procedure Coding System (HCPCS); it includes CPT codes and a second set of codes for matters not included in the CPT codes, such as durable medical equipment, prosthetics, orthotics and supplies. Each CPT code has a Relative Value Unit assigned to it, and when multiplied by a conversion factor and geographical adjustment, creates a compensation level for the particular service. For example, the CPT code for thyroid imaging is 78013, and the associated 2013 payment rate might be $150.04. Medical Necessity. Every service or item billed must have been medically necessary. The medical or patient records are expected to show that the medical care was necessary and that the health care provider in fact provided the service for which the provider billed. Whether medical necessity exists may be subject to debate. Standing alone, a patient’s desire for a medical service does not constitute medical necessity. Unnecessary medical services drive up the cost of medical care; unnecessary medical services mean there is a lack of medical necessity. Certain financial relationships may encourage unnecessary medical care or drive up its costs. Kickbacks may impair medical judgment and encourage unnecessary medical care. III. FALSE CLAIMS ACT The False Claims Act (“FCA”) is a powerful civil statute. The qui tam provisions make it worthwhile for whistleblowers to file cases. The enormity of potential penalties and damages leave most health care defendants with little choice but to settle. A. Recent Examples Demonstrating the FCA’s Application to Claims Containing Incorrect Coding 1. Upcoding Ambulance services are generally coded as basic life support (“BLS”) which produces a relatively lower dollar reimbursement value or as advanced life support (“ALS”) which produces a relatively higher dollar reimbursement value. Whether an ambulance transport should be coded at a BLS or ALS level depends on the condition of the patient and whether BLS or ALS services were rendered. The United States and State of Texas contended that the City of Dallas directed its billing contractor to code every 911- dispatched transport at the ALS level, which necessarily caused what should have been any BLS codes to be “upcoded” to ALS codes. The upcodes were false and appeared on claims submitted to Medicare and Medicaid. The City of Dallas settled the case for $2.47 million. U. S. Dept. of Justice, Press Release (June 7, 2011), “City of Dallas to Pay $2.47 Million to Resolve Allegations that it Caused Improper Medicare and Medicaid Ambulance Claims,” www.usdoj.gov/ usao/txn. 2. Billing for Services Not Medically Necessary Kyphoplasty is a procedure used to treat spinal compression fractures. It can be safely and effectively performed on an out-patient basis (meaning billing charges are less). Fifty-five hospitals had kyphoplasty performed on an in- patient basis, which generated more dollars of income. Claims containing codes were submitted for the in-patient procedures. A FCA case was brought. The case argued that the claims were not legitimate because in-patient procedures were not necessary. Fifty-five hospitals agreed to pay $34 million. Press Release, U.S. Att’s Office, W.D.N.Y., Fifty-five Hospitals to Pay U.S. More than $34 Million to Resolve False Claims Act Allegations Related to Kyphoplasty (July 2, 2013), www.justice.gov/usa/nyw/press/press releases/2013/July/55Hospitals.
  • Health Care Litigation Overview Chapter 2 healthcarelaw-anoverview-140606152059-phpapp01.DOCX 4 3. Billing for Services Not Actually Performed A health care provider is supposed to bill only for services actually performed. Billing for procedures not performed is fraudulent. A diagnostic imaging group was accused of billing for tests not actually performed. The government initiated a FCA enforcement action. Diagnostic Imaging Group agreed to pay $15.5 million. OIG HHS Criminal & Civil Enforcement Archive (Feb. 2014). B. Categories of FCA Cases. The FCA creates three sources or types of liability applicable to medical billing. First Category: False or Fraudulent Claim. One type of violation occurs when a health care provider submits a false or fraudulent claim to the federal government. Under 31 U.S.C. § 3729(a)(1)(A) the elements are:  A person presents or causes to be presented to an agent of the United States  A claim for payment (“claim” is defined 31 U.S.C. § 3729(b)(2))  The claim was “false or fraudulent”  The provider acted “knowingly” 31 U.S.C. § 3729(b)(1)(A) defines “knowingly” as meaning the person (i) has actual knowledge with respect to the information, (ii) acts in deliberate ignorance of truth or falsity of the information, or (iii) acts in reckless disregard of the truth or falsity of the information. Significantly, § 3729(b)(1)(B) explicitly states that knowingly “requires no proof of specific intent to defraud.” This effectively reversed the earlier Supreme Court opinion in Allison Engine Co. v. United States ex rel Sandero, 553 U.S. 662 (2008), which had held that in a FCA case the government must provide that the false claim was made with the specific intent of inducing the government to pay or approve payment of a false or fraudulent claim. Every claim that is incorrect may be technically “false.” The FCA does not statutorily define “false” or “fraudulent.” According to the Office of the Inspector General (“OIG”) of DHHS, when honest or merely negligent billing errors or mistakes occur, the OIG will not pursue FCA liability. But the OIG will administratively ask the provider to return the funds. Final Compliance Program Guidance for Individual and Small Group Physicians Practices, 65 Fed. Reg. 59434, 59436 (Oct. 5, 2000). However, courts have imposed FCA liability where a person failed to make “minimal examination” of the records that were the basis for the false claims and the claims were prepared in a “sloppy and unsupervised fashion.” Gulf Group General Enterprises Co. W.L.L. v. U.S., 114 Fed. Cl. 258, 328-29 (Feb. Cl. 2013). Second Category: False Record or Statement. A second category of FCA violation relating to medical billing pertains to the medical records which are used to prepare the claim that goes to the federal government. A violation occurs when a person “knowingly makes, uses or causes to be made or used, a false record or statement material to a false or fraudulent claim.” 31 U.S.C. § 3729(a)(1)(B). This creates liability for an entry that is not part of the claim but is used to prepare the claim. For example, a FCA violation may occur if a physician, nurse or paramedic writes up medical records stating that a patient was seen when he/she was not actually seen, stating that a patient presented symptoms that he/she did not actually present, or stating that a test was administered when it actually was not administered. Third Category: Failure to Return Overpayment After Identification. A third type of FCA violation relating to medical billing relates to Medicare and Medicaid overpayments not returned. 42 U.S.C. § 1320a-7k(d) provides that a person who has received an overpayment shall “report and return the overpayment,” the deadline for reporting and returning the overpayment is within 60 days after it was “identified,” and the duty to report and return overpayments is enforced as an obligation for the purpose of 31 U.S.C. § 3729 of the FCA. The ACA imposes the additional obligation that the report to the government must state the “reason for overpayment.” 42 U.S.C. § 1320a-7k(d)(1) and (2).
  • Health Care Litigation Overview Chapter 2 healthcarelaw-anoverview-140606152059-phpapp01.DOCX 5 An overpayment is defined as “any funds that a person receives or retains. . .to which the person, after applicable reconciliation, is not entitled.” 31 U.S.C. § 1320a-7k(d)(4)(B). The duty to return overpayment is not limited to overpayments caused by falsity or fraud. The FCA is not the only statute providing a penalty for failure to return an overpayment. 42 U.S.C. § 1320a-7a(a)(10) provides that a person who does not report and return an overpayment under § 1320a-7k(d), is subject to – in addition to other penalties – a civil monetary penalty “of more than $10,000 for each item of service. . . .” The full impact of § 1320a-7k(d) has not yet been determined. It appears to condition liability on retention, in which case the law may potentially eliminate statute of limitations defenses that health care providers could otherwise assert. It is difficult to escape the suspicion that, in practice, § 1320a-7k(d) may perversely encourage a failure to identify overpayments. In apparent anticipation of such a potential outcome, a proposed regulation states that a person has “identified an overpayment if the person. . .acts in reckless disregard or deliberate ignorance of the existence of the overpayment. 77 Fed. Reg. 9179 (Feb. 16, 2012), proposing 42 C.F.R. § 401.305(a)(2). C. Who May Bring FCA Case. The United States Attorney General may initiate a FCA case. 31 U.S.C. § 3730. In addition, a qui tam provision allows a private person to file a complaint bringing a civil action for a FCA violation. 31 U.S.C. § 3730(b)(1). The complaint is “filed in camera,” remains under seal for at least 60 days, and is not served on the defendant until the court so orders. 31 U.S.C. § 3730(b)(2). The government may or may not intervene. 31 U.S.C. § 3730(b)(3). If the government intervenes, the qui tam plaintiff is entitled to 15% to 25% of the proceeds or settlement of the claim. 31 U.S.C. § 3730(d). If the government does not intervene, the qui tam plaintiff is entitled to 25% to 30% of the proceeds. Id. 15% to 30% of a potentially enormous verdict is a powerful motivator. Private whistleblower FCA actions have been what initiated a great number of FCA cases either settled or tried to verdict. D. Treble Damages and Penalties. The FCA imposes both damages and penalty. For each claim in violation of the FCA, a person may be liable to the United States for: (1) a civil penalty ranging from $5,000 to $11,000 for each violation, and (2) three times the amount of damages which the government sustained because of each violation. 31 U.S.C. § 3729(a); 28 C.F.R. § 85.3(a)(9). Depending on size, a health care provider generally will submit thousands to millions of claims every year. Each code for each service may potentially give rise to a separate FCA penalty and damages. The threat of an enormous amount due to FCA penalties creates enormous settlement pressure on health care providers. For example, suppose one solo physician provides 50 services per day and each is separately coded. Many of the patients would be for office visits where the patient may present symptoms that are mild, moderate or severe. Suppose that ten times a day, the billing clerk codes the office visit as moderate, but it should have been coded as mild. This produces ten false claims per day. If the physician works 280 days per year, then there would have been 2,800 false claims for the year. For the one year, the penalties alone on the single physician would range from $1,400,000 to $3,080,000. To continue the example, if hypothetically a clerk codes the one service at a level providing for a $60 reimbursement and if coded correctly the reimbursement would have been only $30, then the annual net difference for 2,800 incorrect codes would have been $84,000, and three times that would be $252,000. The aggregate of penalties and treble damages would range from $1,652,000 ($252,000 + $1,400,000) to $3,332,000 ($252,000 + $3,080,000) compared to actual damages of only $84,000. If the above hypothetical numbers for a sole practitioner were extrapolated to a large hospital system, the penalty alone could conceivably run into billions of dollars.
  • Health Care Litigation Overview Chapter 2 healthcarelaw-anoverview-140606152059-phpapp01.DOCX 6 E. Recent FCA Legal Developments. Particularity Pleading Requirement. Relators must plead false claims with particularity. Simply alleging a fraudulent scheme is not sufficient. United States ex rel. Nathan v. Takada Pharm, N.A., Inc., 707 F.3d 451, 455-56 (4th Cir. 2013, petition for certiorari filed No. 12-1348, May 10, 2013). U. S. ex rel. Ge v. Takeda Pharmaceuticals Co., Ltd., 737 F.3d 116, 123-24 (1st Cir. 2013) (dismissing relator’s complaint for failure to identify claims presented to government for reimbursement). Narrow Scope of Discovery. United States ex rel. Duxbury v. Ortho Biotech Prods, L.P., 719 F.3d 31, 39 (1st Cir. 2013) (limiting relator’s discovery to narrow set of claims of which relator had direct knowledge and which were pleaded with particularity). The Violation Alleged Must Have Established Conditions of Payment for the FCA Claims. In United States ex rel. Hobbs v. MedQuest Associates, Inc., 711 F.3d 707 (6th Cir. 2013), MedQuest certified that it met the conditions for participation in Medicare. Subsequently, MedQuest violated Medicare requirements by (1) using physicians not approved by Medicare to supervise diagnostic tests, and (2) failing to register a new facility with Medicare and instead using the former owner’s ID number when submitting reimbursement claims. The United States alleged that the false certification was a FCA violation. The Sixth Circuit disagreed, explaining that there is a distinction between a false certification to conditions of participation and a false certification to conditions of payment. Id. at 714. The Sixth Circuit held that the false certification was not as to conditions of payment. According to the Sixth Circuit, the falsifications alleged would not “tend to influence CMS’s decision to pay on the claims.” Id. at 717. Failure to comply with technical requirements do not trigger the FCA’s “hefty fines and penalties.” Id. Net Trebling Versus Gross Trebling. In United States v. Anchor Mortgage Corp., 711 F.3d 745, 748-49 (7th Cir. 2013), a brokerage company provided false information in connection with FHA mortgage application guarantees. For trebling, the trial court did not take the amount the government paid to lenders, subtract the amount the government realized by selling the properties, and treble the remainder (loss). Rather, the trial court trebled the gross amount the government paid to lenders under the guarantees. The Seventh Circuit reversed, ruling that net loss (after mitigation) is what should have been trebled. This net-versus-gross distinction applies to medical coding by health care providers. Frequently, the service is reimbursable and the issue is simply whether the service should be assigned a higher or lower code. Contractors employed by the Centers for Medicare and Medicaid Services (“CMS”) sometimes seek recovery of the total amount that was reimbursed, rather than the difference between (i) the amount reimbursed, and (ii) the amount the government/contract claims should have been reimbursed. This opinion clarifies that the net loss is to be trebled, not the gross loss. Constitutional Limitation: Excessive Fines Clause. The Eighth Amendment to the Constitution of the United States prohibits excessive fines. In United States v. Bajakajion, 524 U.S. 321, 337-38 (1998) the United States applied the excessive fines clause to a “grossly disproportionate” penalty where, through forfeiture, the government took $357,144 from a person who failed to report his taking of more than $10,000 in currency out of the United States. The excessive fines clause has now been applied to FCA penalties. United States ex rel. Bunk v. Gosselin World Wide Moving N.V., 741 F.3d 390, 405-09 (4th Cir. 2013) (in order to avoid violation of excessive fines clause, a court has discretion to accept a penalty less than the FCA’s statutorily prescribed amounts). Trial courts have been reluctant, based on the excessive fines clause, to reduce FCA judgments. IV. PHYSICIAN REFERRAL STATUTE (OR STARK LAW) The Physician Referral statute, or Stark Law, is at 42 U.S.C. § 1395nn. It is a civil law, not a criminal law, and is basically a strict liability statute. On a macro level, the Stark Law generally imposes two prohibitions and has approximately 42 exceptions.
  • Health Care Litigation Overview Chapter 2 healthcarelaw-anoverview-140606152059-phpapp01.DOCX 7 The first prohibition is that a physician may not refer a patient to any entity, in which the referring physician has a financial relationship, for certain designated health services (DHS) that will be paid by Medicare. 42 U.S.C. § 1395nn(a)(1)(A)(i); 42 C.F.R. § 411.353(a). The second prohibition is that the entity that receives the impermissible referral (under the first prohibition) may not present a claim (for the DHS) to Medicare, an individual, a third-party payor, or any other entity. 42 U.S.C. § 1395nn(a)(1)(B); 42 C.F.R. § 411.353(b). An entity that collects payment for a prohibited referral must refund the money unless the entity did not have actual knowledge of, and did not act in reckless disregard or deliberate ignorance of, the identity of the physician who made the referral. §§ 411.353(d) and (e). Significantly, an entity that bills a claim which arises from a Stark Law violation necessarily submits an impermissible claim which in turn may qualify as a false claim under the FCA, triggering its treble damages and onerous penalties. A $237.5 million example may be found in United States v. Tuomey Healthcare System, Inc., 675 F.3d 394 (4th Cir. 2012), order and opinion after remand and new trial at 2013 WL 5503695 (D.S.C. Oct. 2, 2013). Tuomey Healthcare System, Inc. (Tuomey) operated a hospital and several medical centers. Tuomey projected that over 13 years it would lose $9.6 million in facility revenue if gastroenterologists redirected endoscopy work away from Tuomey to a new competitor. *2. Tuomey recruited specialist physicians to enter part-time contracts requiring physicians to provide outpatient procedures at Tuomey. Under the contracts, the specialist physicians were paid 31% above and beyond total net collections as independent contractors (i.e., in excess of fair market value). Tuomey submitted two claims for each procedure: a professional fee for the physician’s service (“professional component”) and a facility fee for the hospital providing the space, nurses and equipment (“facility component”). *3. A doctor (with whom Tuomey had failed to successfully negotiate a contract) filed a qui tam or whistleblower suit under the Stark Law and False Claims Act. The United States intervened. A jury returned a verdict that Tuomey had submitted 21,730 claims in violation of the first prohibition in the Stark Law. *5. By submitting the claims, Tuomey violated the Stark Law’s second prohibition. By submitting prohibited claims, Tuomey also submitted false claims under the False Claims Act. In effect, Tuomey violated the False Claims Act 21,730 times. The value of the claims was $39,313,065. *10. Under the FCA, Tuomey was liable for treble damages, or $117,939,195. The court imposed 21,730 penalties of $5,500 each, which equaled $119,515,000. *14. The total judgment (including interest) was for $237,454,195. *15. A. Elements of Prohibited Referral As subsequently discussed in “C,” there are eight matters not within the scope of the Stark Law. Assuming that a matter is not outside the scope, then according to 42 C.F.R. § 411.353(a), the elements of a prohibited referral are as follows:  Physician  Makes a Referral  To an Entity  For the provision of Designated Health Services  For which Medicare payment may be made, and  Physician or an immediate family member has a financial relationship with the entity (unless one of five exceptions applies) by virtue of (i) ownership or investment interest (unless one of five exceptions applies), or (ii) compensation arrangement (unless one of 24 exceptions applies). B. Definitions Defining the Elements The definitions contribute to a complicated legal scheme.
  • Health Care Litigation Overview Chapter 2 healthcarelaw-anoverview-140606152059-phpapp01.DOCX 8 1. Referral. “Referral” is broadly defined and may be direct or indirect. 42 U.S.C. § 1395nn(h)(5). See 42 C.F.R. § 411.351. Radiologists, pathologists and radiation oncologists are excluded from “referral” when they order DHS pursuant to a consultation requested by another physician. 42 C.F.R. § 411.351. 2. Entity. “Entity” includes the person or entity that “presented a Claim” to Medicare and the person or entity that “performed the DHS,” notwithstanding that another person or entity actually bills for the services as DHS. 73 Fed. Reg. 48,434, 48,751. This appears to create “entity” status for any organization that provides services “under arrangement” to a hospital. (“Under arrangement” is a relationship in which a hospital contracts with a third party to provide a service to the hospital and its patients. The hospital bills and collects for the service and also pays the third party a fee for providing the service.) 3. Designated Health Services (DHS). The CMS website lists CPT and HCPCS codes deemed to constitute DHS. Generally, DHS would include: clinical laboratory services; physical therapy services; occupational therapy services; radiology services (except nuclear medicine and radiology/imaging services requiring the insertion of a needle, catheter, tube or probe; radiology therapy services and supplies); durable medical equipment and supplies; parenteral and entered nutrients, equipment and supplies; prosthetics, orthotics and prosthetic devices and supplies; home health services; outpatient prescription drugs; and inpatient and outpatient hospital services. 42 U.S.C. § 1395nn(h)(6). 4. Financial Relationship. A “financial relationship” may arise through (i) a direct or indirect ownership or investment interest, or (ii) a direct or indirect compensation arrangement. 42 C.F.R. § 411.354(a). a. Ownership or Investment Interest. Ownership or investment interest may be direct or indirect. Direct ownership or investment interest may arise through stock, equity, debt, partnership shares, limited liability memberships, or “other means,” 42 C.F.R. § 411.354(b), but does not include interest in retirement plans, stock options and convertible securities received as compensation (until the options are exercised or the securities are converted to equity), unsecured loans or “under arrangements” contracts between a hospital and an entity owned by a physician or physician group. Id. § 411.354(b)(3). Indirect ownership or investment interest is less clear. One definition provides that “indirect” is satisfied if “indirect” exists. 42 C.F.R. § 411.354(b)(5). Another provision provides that an indirect ownership or investment interest exists if (i) there is an unbroken chain of ownership/investment interests between the referring physician and entity furnishing DHS, and (ii) the entity furnishing DHS has actual knowledge or, or acts in reckless disregard or deliberate ignorance, of the referring physician’s ownership or investment interest in the entity furnishing DHS. 42 C.F.R. § 411.354(b)(5). To this extent, the “know or should have known” concept appears to be an element determinative of whether an indirect ownership or investment interest exists. There are five exceptions that do not constitute “ownership or investment” interest in a financial relationship. The first exception is for publicly-traded securities that meet certain criteria. 42 C.F.R. § 411.356(a). The second exception is for mutual funds (regulated investment company) that had total assets exceeding $75 million for either the most recent fiscal year or on average during the three previous fiscal years. 42 C.F.R. § 411.356(b). The third exception is ownership or investment interest in a “rural provider.” 42 C.F.R. § 411.356(c)(1). The fourth exception includes any hospital located in Puerto Rico. 42 C.F.R. § 411.356(c)(2). The fifth exception is for hospitals not in Puerto Rico and at which the referring physician performs services, the hospital is not a specialty hospital, the ownership or investment is in the entire hospital (as distinguished from in
  • Health Care Litigation Overview Chapter 2 healthcarelaw-anoverview-140606152059-phpapp01.DOCX 9 just one department), and by September 23, 2011 the hospital met the requirements of § 411.362. b. Compensation Arrangement. For the purpose of defining a “financial relationship,” a “compensation arrangement” is any arrangement involving remuneration, direct or indirect, between a physician (or his/her immediate family member) and an entity. 42 C.F.R. § 411.354(c). “Remuneration” is statutorily given a broad definition at 42 U.S.C. § 1395nn(h). Similarly, at 42 C.F.R. § 411.351, “remuneration” is defined broadly as “any payment or other benefit made directly or indirectly, overtly or covertly, in cash or in kind.” There are three exceptions to the broad definition of “remuneration”: (1) forgiveness of amounts owned for inaccurate tests or procedures or correction of minor billing errors; (2) furnishing of items, devices or supplies (not including surgical items, devices or supplies) used to collect, transport, process or store specimens or used solely to order or communicate results of tests or procedures for the entity; or (3) payments to physicians or insurers or self-insured plans or their subcontractors to satisfy a claim, submitted on a fee-for-services basis, for the furnishing of health services by that physician to an individual insured by the insurance policy or self-funded plan, provided (i) the health services are not furnished, and the payment is not made, under a contract or other arrangement between the insurer or self-funded plan (or their contractor) and the physician; (ii) the payment is made to the physician on behalf of the covered individual and would otherwise be made directly to the individual; and (iii) the amount of the payment is set in advance, does not exceed fair market value, and is not determined in a manner that takes into account directly or indirectly, the volume or value of any referrals. A “direct compensation arrangement” exists if “remuneration passes” between the referring physician (or a member of his or her immediate family) and the entity furnishing DHS without any intervening persons or entities. 42 C.F.R. § 411.354(c)(1)(i). A physician is “permitted” to “stand in the shoes” of his/her physician organization if the only “intervening entity between the physician and the entity furnishing the DHS is his or her physician organization.” § 411.354(c)(1)(iii). With one exception, a physician is deemed to “stand in the shoes” of his/her physician organization and have a direct compensation arrangement with an entity furnishing DHS if (A) the only intervening entity between the physician and the entity furnishing the DHS is his/her physician organization, and (B) the physician has an ownership or investment interest in the physician organization. § 411.354(c)(ii). “Indirect compensation arrangement” entails (1) an unbroken chain of financial arrangements linking the referring physician to the entity furnishing the DHS; (2) variation in aggregate compensation (closest to the physician) based on volume or value of the physician’s referrals to, or business generated for, the DHS entity; and (3) whether the DHS entity has actual knowledge that the aggregate compensation varies in this manner. 42 C.F.R. § 411.354(c)(2). For this purpose, a physician “stands in the shoes” of his/her physician organization if he/she has an ownership or investment interest in it. 42 C.F.R. § 411.354(c)(2)(iv). There are approximately 24 exceptions that do not come within the scope of “compensation arrangement.” 42 U.S.C. § 1395nn(e) provides that the following are not compensation arrangements: (1) rental of office space and payment from a lessee to a lessor for use of premises, provided certain criteria are satisfied; (2) rental of equipment and payments from a lessee to a lessor for use of equipment, provided certain criteria are satisfied; (3) bona fide employment relationship that satisfies certain conditions; (4) personal service arrangements that satisfy a host of criteria; (5) a physician incentive plan that satisfies certain criteria; (6) remuneration from a hospital to a physician that does not relate to the provision of DHS; (7) remuneration provided by a hospital to induce the physician to relocate to the geographic area, provided that certain criteria are satisfied; (8) isolated financial transaction (e.g., one-time sale of a practice), provided certain criteria are satisfied; (9) an arrangement, that began before
  • Health Care Litigation Overview Chapter 2 healthcarelaw-anoverview-140606152059-phpapp01.DOCX 10 and has been in continuous effect since December 19, 1989, whereby a “group practice” provides DHS that are billed by a hospital, provided certain conditions are satisfied; (10) payments by a physician to a laboratory for clinical laboratory services or to an entity as compensation at fair market value, for other items or services, but the entity providing such items or services must provide the Secretary of the DHS with specified information. 42 C.F.R. § 411.357(i), et seq., then add 14 additional exceptions to “compensation arrangement.” They are: (11) charitable donations meeting certain criteria; (12) non- mandatory compensation meeting certain criteria; (13) fair market value compensation meeting certain criteria; (14) medical staff incidental benefits meeting certain conditions; (15) risk- sharing arrangements between a physician and managed care organization (or independent practice association) meeting certain conditions; (16) compliance training meeting certain criteria; (17) indirect compensation arrangements (defined in § 411.354(c)(2)) provided certain conditions are satisfied; (18) referral services meeting all conditions set forth in § 1001.952(f); (19) obstetrical malpractice insurance subsidies provided certain conditions are satisfied; (20) professional courtesy (as defined in § 411.351), provided certain conditions are satisfied; (21) for underserved areas, hospital retention payments to physicians, provided certain conditions are satisfied; (22) sharing of information in community-wide health information systems, provided certain conditions are met; (23) hardware, software, information technology and training for receipt and transmission of electronic prescription information, provided certain conditions are met; and (24) software information technology and training for creation, maintenance, transmission and receipt of electronic health records, provided certain conditions are met. C. Eight Matters Outside the Scope of the Stark Law 42 C.F.R. § 411.355 provides that the § 411.353 Stark Law prohibition does not apply in eight contexts. First, the Stark Law prohibition does not apply to physician services personally furnished by one member of a group practice to another member of the group practice. § 411.353(a). Second, provided a host of conditions are satisfied, the Stark Law prohibition does not apply to in-office ancillary services, with certain exclusions. § 411.355(b). Third, provided that certain criteria are satisfied, the Stark Law prohibition does not apply to services furnished by an organization to enrollees in certain specified prepaid group plans. § 411.355(c) Fourth, provided certain conditions are met, the Stark Law prohibition does not apply to academic medical centers. § 411.355(e). Fifth, provided certain conditions are satisfied, the Stark Law prohibition does not apply to implants furnished by an ambulatory surgical center. § 411.355(f) Sixth, provided certain conditions are satisfied, the Stark Law prohibition does not apply to EPO and other dialysis-related drugs. § 411.355(g). EPO is erythropoietin, a hormone produced by the kidneys. Seventh, provided certain conditions are met, the Stark Law prohibition does not apply to preventive screening tests, immunizations and vaccines. § 411.355(h) Eighth, provided that certain conditions are satisfied, the Stark Law prohibition does not apply to eyeglasses and contact lenses that are covered by Medicare when furnished to patients following cataract surgery. § 411.355(i). D. Sanctions and Liability Under the Stark Law. The statute prescribes three sanctions. First, 42 U.S.C. §§ 1395nn(g)(1) and (2) provide there is not to be a payment for a service which is provided in violation of § 1395nn(a)(1), and if such a payment has been made, it is to be refunded. Second, 42 U.S.C. § 1395nn(g)(3) provides that any person who presents a claim for a service which the person knows or should know is in violation of (a)(1) is subject to a civil monetary penalty of not more than $15,000 for each service.
  • Health Care Litigation Overview Chapter 2 healthcarelaw-anoverview-140606152059-phpapp01.DOCX 11 Third, 42 U.S.C. § 1395nn(g)(4) provides that for each arrangement or scheme having the principal purpose of circumventing the Stark Law, for referrals in violation of the section, the physician or entity is subject to a penalty of not more than $100,000. As explained above, the Stark Law’s second prohibition implicates the FCA and its penalties. E. Self-Referral Disclosure Protocol Section 6409 of the ACA requires the Secretary of DHHS to establish a self-referral disclosure protocol (SRDP) setting forth a process for providers and suppliers to self- disclose actual or potential violations of the Stark Law. The Secretary has issued the SRDP. See OMB Control Number 0938-1106. Basically the provider who has violated the Stark Law may self-disclose. The self-disclosure must be accompanied by specified information. Upon self-reporting, the 60 day deadline for reporting and return of the overpayment is suspended. The CMS may negotiate a settlement with the provider who self-reports. F. Recent Example of Application of Stark Law to Financial Relationship A staffing company employed medical oncologists who treated patients at a hospital. Whenever one of the oncologists personally provided a service, the hospital billed Medicare for a professional fee and a facility fee (e.g., for items such as space and equipment). The hospital paid salaries and bonuses by transferring the money to the staffing company which in turn paid the medical oncologists. Incentive bonuses to physicians included 15% of the operating margin for the hospital’s oncology department; this included fees for services not personally provided by the medical oncologists (e.g., fees for services related to administration of chemotherapy). The court ruled that the medical oncologists made inappropriate referrals to the hospital and that the hospital inappropriately billed Medicare. U.S. v. Halifax Hosp. Medical Center, 2013 WL 6017329 (M.D. Fla. 2013). The hospital and staffing company then entered a settlement for $85 million. DOJ Press Release, Office of Public Affairs (Mar. 11, 2014). “Florida Hospital System Agrees to Pay the Government $85 Million to Settle Allegations of Improper Financial Relationship with Referring Physicians.” V. ANTI-KICKBACK STATUTE The anti-kickback statute is at 42 U.S.C. § 1320a-7b(b). It is a criminal statute but also gives rise to FCA civil liability. A. Examples Demonstrating Importance of Law 1. Criminal Liability: Referrals/Commissions Robinson owned and operated Memorial Medical Supply (“MMS”) which provided durable medical equipment to Medicare beneficiaries. Robinson paid referral fees or commissions to Lisa Jones and Shirley Chairs in exchange for referral information leading to new customers. Robinson was convicted of providing unlawful health care kickbacks and sentenced to 97 months of imprisonment. U.S. v. Robinson, 505 Fed. Appx. 385 (5th Cir. 2013). 2. Civil Liability Johnson & Johnson (along with Janssen) paid millions and millions of dollars to Omnicare, Inc., the nation’s largest pharmacy specializing in dispensing drugs to nursing homes. The money was accounted for as market share rebate payments, data purchase agreements, “grants,” and “educational funding.” The payments were intended to induce Omnicare and its consultant pharmacists to engage in “active intervention programs” to promote the use of Risperdal and other drugs. The payments worked. But then the government brought an action contending that the payments were kickbacks. Johnson & Johnson and Jannsen paid $149 million to resolve the government’s contention that the kickbacks caused Omnicare to submit false claims to federal health care programs. DOJ, Office of Public Affairs, Press Release (Nov. 4, 2013), “Johnson & Johnson to Pay More than $2.2 Billion to Resolve Criminal and Civil Investigations.” B. Elements of a Violation. A violation of the anti-kickback statute occurs if the following elements are satisfied:
  • Health Care Litigation Overview Chapter 2 healthcarelaw-anoverview-140606152059-phpapp01.DOCX 12 (1) Remuneration, in cash or kind, including any kickback, bribe, rebate, directly or indirectly, overtly or covertly, (2) offered, paid, solicited or received, directly or indirectly (3) knowingly and willfully (4) (a) to refer, or in return for referring, an individual to a person for the furnishing or arranging for furnishing of any item or service, or (b) to purchase, lease, order or arrange, or in return for or recommending or purchasing, leasing, ordering or arranging, any good, facility, service or item (5) for which payment will be made in whole or in part under a federal health care program. The anti-kickback statute already stated that the act (solicitation, receipt or offer) must be knowing and willful. § 1320a-7b(b). The ACA added a new provision stating that “a person need not have actual knowledge of this section or specific intent to commit a violation of this section.” The anti-kickback was intended to eliminate arrangements that may contribute to unnecessary medical care and/or detract from a physician making decisions based only on his/her sound objective medical judgment. But the anti- kickback statute may arguably impact some physicians who engage in collegial behavior or who try to provide financial assistance to the underprivileged. For example, the once common practice whereby physicians gave either free or reduced-rate care to other physicians and their families, is arguably now unlawful, at least if the recipient is in a position to refer patients. As another example, routinely waiving co- pays to help low-income earners may carry risks. The DHHS’s OIG believes that waiving Medicare or Medicaid co-pays is not permissible in many circumstances. Publication of OIG Special Fraud Alert, Federal Register, Dec. 19, 1994; and 67 FED. REG. 72, 896 (Dec. 9, 2002). Moreover, waiving a co-pay may inadvertently result in a health care provider overcharging and ergo submitting a fraudulent claim. Suppose that under Medicare, physicians are paid 80% of the lesser of the allowable amount or actual charge. If the health care provider accepts “whatever insurance pays,” if Medicare pays $80 of the $100 charge and the $80 is accepted as full payment because all the provider charges is what insurance pays, then the actual charge may be deemed to be $64, in which case the provider would have overbilled Medicare by $16. Furthermore, to substantiate the contention of inability to pay, the physician may want to use an appropriate form to gather evidence establishing the inability to pay. C. Criminal, Civil and Administrative Penalties A violation of the anti-kickback statute is both criminal and civil. A violation is a felony subjecting the person to a fine of not more than $25,000 and/or imprisonment of not more than five years. § 1320a-7b(b). A claim resulting from a violation of the anti-kickback statute is a per se false or fraudulent claim for the purpose of the False Claims Act, which subjects the person to a civil penalty of $5,000 to $11,000 per claim and to treble damages. § 1320a-7b(g). 42 U.S.C. § 1320a-7a(a) provides that violation of § 1320a-7(b) subjects the violator to a $50,000 fine for each act. A violation of the anti-kickback statute may lead to administrative exclusion from federal health care programs. D. Matters/Events/Subjects to Which Anti- Kickback Statute Does Not Apply The anti-kickback statute does not apply in certain specified contexts or circumstances.  Discount or other reduction in price, provided certain conditions are satisfied. 42 U.S.C. § 1320a-7b(b)(3)(A).  Amounts paid to bona fide employee for employment in provision of covered items or services. § 1320a-7b(b)(3)(B).  Amounts paid to a vendor authorized to act as purchasing agent for groups furnishing
  • Health Care Litigation Overview Chapter 2 healthcarelaw-anoverview-140606152059-phpapp01.DOCX 13 reimbursable services, provided certain conditions are satisfied. § 1320a- 7b(b)(3)(C).  Waiver of coinsurance under Part B, provided certain conditions are satisfied. § 1320a-7b(b)(3)(D).  Certain risk-sharing agreements, provided certain conditions are satisfied. § 1320a- 7b(b)(3)(F).  Waiver or reduction by pharmacies of cost- sharing imposed under Part D, provided certain conditions are satisfied. § 1320a- 7b(b)(3)(G).  Remuneration between a federally qualified health center and an AMA organization, provided certain conditions are satisfied. § 1320a-7b(b)(3)(H).  Remuneration in support of serving medically underserved populations, provided certain conditions are satisfied. § 1320a- 7b(b)(3)(I).  Drug discounts from a manufacturer to a beneficiary under the Medicare coverage gap. § 1320a-7b(b)(3)(J). E. Regulatory Safe Harbors 42 U.S.C. § 1320a-7b(b)(3)(E) authorizes the Secretary of DHHS to establish payment practices which will not constitute illegal remuneration. There are approximately 23 payment practices which “shall not be treated as a criminal offense” listed at 42 C.F.R. § 1001.952, some of which are duplicative of the statutory provisions. The payment practices include, among others: investment interests in large publicly traded entities or certain small entities; space rentals; equipment rentals; personal services and management contracts; sale of practice; referral services; warranties; discounts; employees; group purchasing organizations; certain Medicare Part A waivers of coinsurance and deductibles; increased coverage, reduced cost-sharing amounts, or reduced premium amounts offered by certain health plans (managed care); price reductions offered to certain health plans (managed care); investment interests in underserved areas; investment interests in surgeon-owned single specialty, multi-specialty and hospital/physician ambulatory surgical centers; investment interests in group practices composed exclusively of active investors who are licensed health care professionals; rural practitioner recruitment incentives; obstetrical malpractice insurance subsidies; referral agreements for specialty services; cooperative hospital service organizations; ambulance replenishment arrangements; electronic prescribing and electronic medical records; and federally qualified health centers. VI. TEXAS MEDICAID FRAUD PREVENTION ACT. Texas administers its Medicaid program. The Texas Medicaid Fraud Prevention Act (“TMFPA”) is a state civil statute aimed at Medicaid fraud and abuse. TEX. HUM. RES. CODE ANN. §§ 36.001, et seq. A. Example Demonstrating Application of TMFPA The TMFPA should not be underestimated. In Actavius Mid Atlantic LLC v. State, 2012 WL 1142711 (Tex. Amarillo 2012, no pet.), the Attorney General’s Civil Medicaid Fraud Section obtained a trial court judgment that included actual damages in the amount of $34,555,953, punitive damages in the amount of $130,961,906, and attorneys’ fees. The parties later settled the case. B. Unlawful Acts The TMFPA lists 13 unlawful acts. § 36.002. The categories are: (1) false statement or misrepresentation under Medicaid; (2) concealing or failing to disclose unauthorized Medicaid payment; (3) receipt or conversion of Medicaid benefits due another person; (4) inducing a false statement or misrepresentation; (5) solicitation or payment of extra money for continued provision of service covered by Medicaid; (6) claim for service provided by unlicensed provider; (7) claim for service that was inadequate or product that was mislabeled; (8) claim that fails to
  • Health Care Litigation Overview Chapter 2 healthcarelaw-anoverview-140606152059-phpapp01.DOCX 14 indicate the ID number of the provider who actually provided the service; (9) conspiracy; (10) provider fails to provide a required health care benefit or service; (11) obstruction of an investigation; (12) false record or statement material to transmission of money/property under Medicaid program; or (13) presents claim, receives kickback, or otherwise violates § 32.039(b) [dealing with kickbacks, bribes, rebates for certain purposes]. C. Liability A person who commits an unlawful act under the TMFPA may be liable to the State for:  The value of the payment as a result of the unlawful act, two times the value of the payment as a result of the unlawful act, and interest  for each unlawful act that results in injury to an elderly or disabled person or a person younger than age 18, a civil penalty generally ranging from $5,500 to $15,000  for each unlawful act that does not result in injury to an elderly or disabled person or a person younger than 18, a civil penalty generally ranging from $5,000 to $11,000. § 36.052. D. Who May Bring an Action The Attorney General has the authority to investigate or prosecute a case. §§ 36.007, 36.051, 36.053, 36.054. Also, a private individual has a right to bring a civil suit. § 36.101. Such a suit is filed in camera and must be served on the Attorney General. § 36.102. The State may proceed with the suit. § 36.104. If the State obtains a recovery, the private plaintiff may receive 15% to 25% of the proceeds. § 36.110(a). If the State declines to take over the action, the private person may proceed without the State’s participation. § 36.104(b). If the State does not proceed with the action, the private individual is entitled to 25% to 30% of the proceeds. § 36.110(a-1). E. TMFPA’s Significance to State of Texas In Texas, from FY2006 through FY2012, Texas recovered $821 million for Medicaid fraud under the TMFPA and FCA. Of this amount, $394 million was from cases in which Texas led the investigation and prosecution under the TMFPA. Of the $821 million, over 95% stemmed from whistleblower-initiated cases. The annual number of Texas Medicaid Fraud and Recovery cases are: 11 cases in 2006, 5 cases in 2007, 11 cases in 2008, 6 cases in 2009, 15 cases in 2010, 15 cases in 2011, and 25 cases in 2012. All information in this paragraph is from Fighting Medicaid Fraud in Texas by Jack Meyer and Chris Wolff (March 2013). VII.FEDERAL HEALTH CARE ADMINISTRATIVE SANCTIONS A. Mandatory Exclusions The Secretary of the DHHS must exclude persons criminally convicted of Medicare and Medicaid offenses or other certain felony offenses related to health care. 42 U.S.C. § 1320a-7(a)(1) and (2). B. Permissive Exclusion The Secretary of the DHHS may exclude persons, among others: (1) convicted of criminal misdemeanors relating to certain health care- related fraud, theft, embezzlement, breach of fiduciary responsibility and other financial misconduct; (2) convicted of obstructing an investigation or audit; (3) misdemeanor conviction relating to controlled substances; (4) determined to have submitted claims for excessive charges or unnecessary services or to have failed to furnish medically necessary services; (5) fails to grant immediate access, upon reasonable request, to certain federal and state agents; and (6) making false statements or misrepresentations of material facts. 42 U.S.C. § 1320a-7(b). Excluded persons are entitled to notice may request a hearing, and may seek judicial review. 42 U.S.C. § 1320a-7(f). C. Administrative Civil Monetary Penalties. 42 U.S.C. § 1320a-7a is titled “Civil Monetary Penalties” and authorizes the DHHS to levy civil money penalties of not more than
  • Health Care Litigation Overview Chapter 2 healthcarelaw-anoverview-140606152059-phpapp01.DOCX 15 $10,000 for “each item or service” plus three times the amount claimed. Conduct within the scope of § 1320a-7a includes, among other things, knowingly making claims for services not provided or for services not medically necessary, offering remuneration to a Medicare or Medicaid beneficiary for the purpose of influencing the beneficiary to obtain items or services, knowingly making or using a false statement material to a false or fraudulent claim, filing to grant timely access to the Inspector General (“IG”), or knows of but does not report or return an overpayment. 42 U.S.C. § 1320a-7a(a). Persons subjected to monetary penalties are entitled to notice, may request a hearing, and may seek judicial review. 42 U.S.C. § 1320a-7(c). VIII. POTENTIAL CRIMINAL LAWS APPLIED TO HEALTH CARE BILLING AND OTHER TRANSACTIONS As explained above, the Anti-Kickback statute carries criminal penalties. A number of additional federal criminal statutes have been applied. A. Health Care Fraud Statute 18 U.S.C. § 1347 provides that it is a crime, if in connection with the delivery of, or payment for, health care benefits, a person knowingly and willfully executes or attempts to execute, a scheme or artifice: (1) to defraud any health care benefit program; or (2) to obtain, by means of false or fraudulent pretenses, represen- tations or promises, any of the money or property owned by, or under the custody or control of, any health care benefit program, Significant, specific intent to commit a violation of the Health Care Fraud Statute is not required. Subsection (b) provides: With respect to violations of this section, a person need not have actual knowledge of this section or specific intent to commit a violation of this section. For a case based on § 1347, see United States v. Martin, 2014 465704 (5th Cir. 2014). B. Theft or Embezzlement in Connection with Health Care 18 U.S.C. § 669 is a criminal statute aimed at theft or embezzlement in connection with a health care benefit program. C. False Statement, Concealment or Trickery Relating to Health Care Matters 18 U.S.C. 1035 is a criminal statute that prohibits falsity, concealment or trickery in connection with health care benefits, items or services. D. Making or Causing to be Made False Statements or Representations in Connection with Health Care 42 U.S.C. § 1320a-7b(a) is a criminal statute that prohibits false statements or representations in connection with benefits, payments, eligibility, receipt, services by an unlicensed physician, or disposal of assets to become eligible for medical assistance. E. False Statements and Entries 18 U.S.C. § 1001 is a general criminal statute that generally prohibits the making of false, fictitious or fraudulent entries. F. Mail Fraud The mail fraud statute is at 18 U.S.C. § 1341. G. Wire Fraud The wire fraud statute is at 18 U.S.C. § 1343. H. False, Fictitious or Fraudulent Claims 18 U.S.C. § 287 is a general criminal statute aimed at false, fictitious or fraudulent claims made upon the federal government.
  • Health Care Litigation Overview Chapter 2 healthcarelaw-anoverview-140606152059-phpapp01.DOCX 16 IX. MULTIPLE ENTITIES ENFORCE LAWS AGAINST HEALTH CARE WASTE, FRAUD AND ABUSE A health care provider may have to deal with, or be a target of, multiple entities that enforce state and/or federal laws. A. Federal Level: OIG, FBI, DOJ, MAC, RAC, ZPIC, HEAT 1. Centers for Medicare and Medicaid Services DHHS oversees Medicare and Medicaid. Medicare and Medicaid together provide health insurance for approximately 25% of the population. Within the DHHS, the CMS has responsibility for the Medicare and Medicaid programs. CMS oversees billing. As part of that function, CMS focuses on health care fraud. 2. DHHS’s Office of Inspector General The CMS works with the DHHS’s OIG which, among other things, is responsible for investigating fraud and abuse in the Medicare and Medicaid programs. The OIG may pursue administrative sanctions (e.g., civil monetary penalties or barring a health care provider from participating in the Medicare and Medicaid programs). OIG investigations may be initiated, among other reasons, upon receipt of a complaint, such as one from a patient or disgruntled current or former employee. OIG investigations may also be a follow-up to audits by contractors external to the DHHS. 3. Medicare Administrative Contractor CMS does not process the millions of Medicare claims. Instead, the CMS contracts out the work to private sector Medicare Administrative Contractors (“MACs”). 42 U.S.C. §§ 1395kk-1, 1395h and 1395u. MACs make decisions to pay or deny claims; when a claim is denied, an appeal process is available. Each MAC is also charged with investigating and identifying potential fraud, waste and abuse. Although a MAC may conduct an investigation or audit, the MAC may also refer its suspicions or findings to the OIG. 4. Medicare Recovery Audit Contractor Pursuant to 42 U.S.C. § 1394ddd, the DHHS has a Medicare RACs under which outside private sector contractors are engaged to identify underpayments and overpayments and to recoup overpayments. RACs generally use data mining or similar electronic methodology to identify which health care providers to audit on a post- payment basis. RACs are paid on a contingency fee basis and may refer cases to the OIG. Once a RAC determines an overpayment has been made, notice is sent to the health care provider along with a demand for repayment. The notice and demand set forth the reasons for the RAC’s decision. There is a five-step appeal process. The RAC appeal process is not functioning properly. At the administrative law judge stage, there is a backlog of 357,000 claims. Because of the backlog, on February 18, 2014, the CMS suspended appeals to administrative law judges for two years; after the two-year suspension, the delay at the administrative law judge stage will exceed six months, for a 30 month delay. 5. Zone Program Integrity Contractor The CMS has a Zone Program Integrity Contractors (“ZPIC”) program. The CMS engages private entities whose primary focus is to investigate potential fraud, waste and abuse. See Chapter 4 of Medicare Program Integrity Manual. ZPICs conduct audits. Generally, there are three possible outcomes of a ZPIC program audit. The ZPIC may conclude that the health care provider needs to obtain additional education (or provide such to its employees). Second, ZPIC may refer audit results to a MAC for collection of overpayment. The provider may appeal the overpayment determination. Third, ZPIC may refer the case for criminal prosecution, civil litigation under the False Claims Act, or imposition of civil monetary penalties or other sanctions. 6. Federal Bureau of Investigation Each office of the FBI investigates health care fraud, among other things.
  • Health Care Litigation Overview Chapter 2 healthcarelaw-anoverview-140606152059-phpapp01.DOCX 17 7. Department of Justice The CMS, OIG and FBI do not bring criminal prosecutions or civil enforcement actions. Potential criminal prosecutions or civil enforcement actions are referred to the DOJ, specifically, to the United States Attorney’s Offices (“USAOs”). Each USAO has a Civil Health Care Coordinator. USAOs bring criminal and civil actions arising from health care fraud, waste and abuse. 8. Combined Task Force The DOJ and DHHS have a combined Health Care Fraud and Abuse Control (“HCFAC”) Program. In FY2013, it recovered $4.3 billion in taxpayer dollars. This amounted to a recovery of $8.10 for every dollar spent in combating health care fraud. Part of the HCFAC Program is the Health Care Fraud Prevention and Enforcement Action Team (“HEAT”), a combined DOJ/DHHS effort. HEAT’s purpose is, among other things, to combat fraud and recover overpayments. See HHS Press Release dated February 26, 2014. B. State Level: HHSC’s OIG, Attorney General, TMHP, RAC. 1. HHSC’s Inspector General Each state handles its own Medicaid program. The Texas Health and Human Services Commission (“HHSC”) runs the Medicaid program in Texas. 2013 legislation (SB 1803) provides that the HHSC’s IG may receive “allegations of fraud” and within 30 days must investigate to determine whether a full investigation is warranted. The HHSC recoups any improper payments. The Texas OIG may recoup Medicaid overpayment or a debt arising from a Medicaid fraud or abuse investigation. It appears that the process will be that, after review by a qualified expert, the OIG sends a Notice of Proposed Recoupment of Overpayment or Debt to the health care provider who within 30 days must request an initial Informal Resolution Meeting (“IRM”). Then, within 20 days after the initial IRM, the health care provider must request a second IRM. Then the OIG issues a Final Notice of Recoupment of Overpayment or Debt. Within 15 days of receipt of the Final Notice, the health care provider must request an administrative hearing at HHSC or State Office of Administration Hearings (“SOAH”); a provider requesting a SOAH hearing must deposit a cash security to cover one-half of the cost. After hearing, a Final Order is issued. The provider may appeal to Travis County District Court for a substantial evidence review. The Texas OIG may implement a Medicaid payment hold against a health care provider. It appears that the new process will be that, after review by a qualified expert, the OIG places a hold on payments and then, within five days, notifies the provider within 30 days of receipt of the Notice of Payment Hold, the provider must (1) first deposit a cash security to cover one-half of the cost of SOAH hearing, (2) request a SOAH hearing, and (3) request an initial IRM. Within 20 days of the initial IRM, the provider must request a second IRM. The SOAH hearing is stayed until the IRM process is complete. After the SOAH hearing, a Final Order is issued. The provider may appeal the Final Order to the Travis County District Court for substantial evidence review. On March 17, 2014, the HHSC’s OIG entered a settlement with Carousel Pediatrics. According to the HHSC’s New Release, the OIG imposed a payment hold. Apparently, the OIG demanded reimbursement of $17.9 million plus a $4 million penalty. Carousel acknowledged billing errors and contended they were not intentional. The case was settled for $3.75 million. Under the settlement, Carousel pays an initial $614,000 to be followed by monthly payments. HHSC News Release (Mar. 17 2014), “OIG Reaches $3.75 Million Settlement with Carousel.” 2. Texas Medicaid and Health Care Partnership The HHSC outsources Medicaid Claim processing to a private consortium named Texas Medicaid & Health Care Partnership (“TMHP”). As indicated, the TMHP is supposed, among other things, to look for fraud.
  • Health Care Litigation Overview Chapter 2 healthcarelaw-anoverview-140606152059-phpapp01.DOCX 18 3. Texas Attorney General’s Office In Texas, the Office of Attorney General has a Medicaid Fraud Control Unit. It conducts criminal investigations of Medicaid providers (not recipients) suspected of cheating Medicaid. The Unit employs investigators, auditors and attorneys located in Austin and eight other cities. 4. Texas Medicaid Recovery Audit Contractor Pursuant to 42 U.S.C. § 1396a(a)(42)(B), Texas has established RAC Program. 15 TAC § 354.1451. According to the regulation, RACs review, analyze and audit Medicaid claims for which payment to health care providers has been made. The RAC refers suspected fraud and abuse to the HHSC’s OIG. C. Joint Federal/State/Local. The DOJ/HHS Medicare Fraud Strike Force is an effort to coordinate federal, state and local investigators who fight Medicare fraud. Dallas, Texas, is one of the cities which has a Medicare Fraud Strike Force Facility. X. DISCLOSURE OF PERSONAL HEALTH INFORMATION Disclosure of personal health information may become important in civil discovery or criminal investigations. A. Texas Law Several Texas statutes address disclosure of health care information. 1. Hospital Disclosure of Health Care Information Texas Health and Safety Code Chapter 241 is titled “Disclosure of Health Care Information.” It applies to hospitals. A written authorization is required before a hospital may disclose health care information. § 241.152(a). The authorization must be in writing, dated, signed, identify the information to be disclosed and the recipient, and be in a document separate from the consent to medical treatment. § 241.152(b). There are twenty exceptions permitting disclosure of health information without the patient’s authorization. § 241.153. For example, the exceptions include, among others, disclosure to a health care provider rendering health care to the patient, to a prospective health care provider, to a government agency authorized to receive the information, and pursuant to the Texas Rules of Civil Procedure or Code of Criminal Procedure. A patient aggrieved by a violation may seek injunctive relief and damages. § 241.156. The cause of action may be maintained against hospitals. Public sector hospitals may assert immunity. Payne v. Center for Health Care Services, 2008 WL 4172270 (Tex. App.—San Antonio 2008, no pet.). 2. EMS Provider Disclosure of Health Care Information Texas Health and Safety Code, Chapter 773, Subchapter D, addresses Confidential Communications between emergency medical service personnel and a patient. The communications and records are confidential and may not be disclosed. § 773.091(a) and (b). The “privilege of confidentiality” does not extend to information about the patient’s age, sex, nature of injury or illness. A person aggrieved by unauthorized disclosure of EMS communications may sue for damages. § 773.094. Section 773.092(b) provides exceptions for court or administrative proceedings when there is written consent, to collect for services rendered, or in civil or administrative litigation in which the patient is attempting to recover money damages. Section 773.092(e) contains additional exceptions. The criminal proceeding exception is relatively narrow. First, there is no exception when the patient is the person being investigated or potential criminal defendant. Section 773.092(b)(5) excepts communications for a criminal prosecution in which the patient is the victim, witness or defendant, but § 773.092(c) provides that this exception “does not authorize release of confidential information to instigate or substantiate criminal charges against a patient.” Second, surprisingly, Chapter 773 does not contain -- when the patient is a civil defendant or potential criminal defendant -- an exception for the Rules of Civil Procedure or Code of Criminal Procedure. The statutory language creates a Rules of Civil Procedure/Code of Criminal
  • Health Care Litigation Overview Chapter 2 healthcarelaw-anoverview-140606152059-phpapp01.DOCX 19 Procedure exception for hospital disclosure of health care information but not for emergency medical service provider disclosure of health care information. Logically, in a criminal proceeding, the appropriate course of action is to resort to § 773.092(d). Section 773.092(d) provides that confidential records or communications are not discoverable in a criminal proceeding until the court in which the prosecution is pending makes an in camera determination as to the relevancy of the records or communications. . . .” 3. Medical Records Texas Health and Safety Code Chapter 181 addresses medical records privacy. Section 181.004(a) requires covered entities to comply with HIPAA. Section 181.101 requires covered entities to provide training to employees. Section 181.152 sets forth requirements with which a covered entity must comply before using or disclosing protected health information for marketing. With certain exceptions, § 181.153 prohibits the sale of protected health information. Chapter 81 does not create a private right of action. The Texas Attorney General may institute civil actions seeking civil penalties and injunctive relief. § 181.201. Penalties range from $5,000 to $250,000. If the covered entity is licensed, the Attorney General may institute an action for a civil penalty only if the licensing agency refers a violation to the Attorney General. § 181.201(e). B. HIPAA (Federal Law) The Health Insurance Portability and Accountability Act of 1996 (“HIPAA”), Pub. L. No. 104-191, 110 Stat. 1936 (1996) is codified primarily at Titles 18, 26, 29 and 42 of the U.S.C. HIPAA includes, among other things, privacy protections for individually identifiable health information, security provisions, standards for electronic health care transactions, breach notification, and a person’s right to access and/or amend his/her medical records. The Health Information Technology for Economic and Clinical Health Act addresses privacy and security concerns associated with electronic transmission of health information. The ACA builds upon HIPAA with new and expanded provisions. These include, among other things, requirements to adopt operating rules for each of the HIPAA covered transactions, a unique and standardized Health Plan Identifier, a standard for electronic funds transfer, and certification of steps required for compliance. On the federal level, a person files a health information privacy complaint with the DHHS’s Office of Civil Rights. See Form OMB No. 0990-0269. Failure to comply with HIPAA’s requirements may result in criminal penalties and administrative monetary penalties. 42 U.S.C. § 1320d-5. Monetary penalties may range from $100 to $50,000 or more per violation, with up to $1,500,000 for repeated violations within a year. HIPAA does not give a private right of action. Acara v. Banks, 470 F.3d 569, 571-72 (5th Cir. 2006) (concluding that Congress did not intend for private enforcement of HIPAA).