The CURES For What Ails You

Speaking of prescription drugs, almost every state now has a prescription-drug monitoring program (or PDMP). The goal is to curb prescription-drug abuse by discouraging pill-pushing and doctor-shopping. So whether you’re a patient or provider, you should pay attention because law enforcement and licensing boards are watching.

In California, for example, the program is called CURES: the Controlled Substance Utilization Review and Evaluation System. By law, pharmacies must report to CURES every prescription for a Schedule II, III, or IV drug within seven days of dispensing it. And pretty soon, under a law passed last year, doctors will be required to check CURES before prescribing such drugs to a patient for the first time and every four months after that during treatment.

Last week, the California Supreme Court ruled that the California Medical Board could freely access CURES at any time. It didn’t need to get a warrant or show good cause beforehand. The doctor who was being investigated argued that this violated the privacy of his patients. But the Court held that, on balance, the Board’s access was justified by the need to protect the public from drug abuse and protect patients from impaired or negligent doctors.

Even if your state’s law is different, remember that federal law remains supreme. Last month, a federal court decided a case in which the Drug Enforcement Administration (DEA) subpoenaed data from Oregon’s PDMP. Unlike California’s program, Oregon required all agencies—even federal ones—to get a court order before it would respond to a subpoena. It sued to compel the DEA to comply with its law, but it lost. Federal law authorizes the DEA to issue subpoenas on its own, so Oregon couldn’t force it to follow state law.

When Medicare Says You Can’t Sit With Us

Earlier this year, the U.S. Department of Health and Human Services issued new regulations on its power to exclude healthcare providers and suppliers from participation in a federal healthcare program. The agency excludes some 3,500 people or entities per year. You’ll want to avoid being one of them.

Here are some important takeaways.

The agency is empowered to cast a wider net. It may exclude not just the providers and suppliers who submit claims or receive payments but any person or entity that furnishes items or services for which others request or receive payment.

You can be excluded if you’re convicted of interfering with an audit. The agency doesn’t define the term “audit” for this purpose. Before, you had to have obstructed a criminal investigation, not just an audit or the like. The new rule also makes changes to the factors that extend or reduce the presumptive three-year exclusion under this provision.

You can be excluded for not providing information to support a claim even if you didn’t furnish the items or services in question. You can be excluded if you referred the items or services to others to furnish or certified that they were needed.

The agency has ten years to exclude you for false claims or illegal kickbacks. This timeframe follows the outer ten-year statute of limitations for violations of the False Claims Act. Before, there was theoretically no limit on how far back the agency could look to exclude you under these provisions.

The rule makes several changes to the aggravating and mitigating factors that extend or reduce the length of exclusions. Most of these changes affect the dollar-loss thresholds. For example, it’s now aggravating if the government’s loss amounts to $50,000 or more, when it used to be $15,000. And it’s mitigating if the loss is less than $5,000 when it used to be $1,500. Or, for excessive or unnecessary billing, it’s aggravating if the loss is $15,000 or more when that threshold used to be $1,500. Also, in most cases, it’s no longer mitigating if you provide access to care that’s otherwise not available in your area. Instead, the agency will consider that in deciding whether to exclude you rather than for how long.

You may be eligible for early reinstatement. You can request it if you were excluded because your professional license was revoked, suspended, or surrendered in a disciplinary investigation. There’s a presumption against it for the first three years that you’re excluded or for the length of your suspension or revocation, whichever is longer. There’s no such presumption if you’re still licensed in a different state or by a different licensing authority or if you were able to get a new license after full disclosure. But you’re not eligible at all if you lost your license because of patient abuse or neglect.

CMS Puts Out New Physician Self-Referral Disclosure Protocol

If you’re a healthcare provider or supplier, take note.

Starting June 1, 2017, there is a new process for self-reporting actual or potential violations of the Stark Law to the Centers for Medicare & Medicaid Services.

Remember, Stark says that doctors can’t refer certain, designated health services that are payable by Medicare or Medicaid to entities in which they have a financial interest. The same goes if an immediate family member is the one with the financial interest. The entity that receives the referral can’t bill for those services, either. But exceptions apply.

Why in the world would you self-report? Well, if there is discretion to keep you in the program, your cooperation will go a long way. You’ll pay less in penalties. You’ll reduce or eliminate your liability for not reporting and returning the overpayments sooner. And you’ll probably put the matter behind you more quickly than if the government gets wind of it.

Now, there’s a new way to do it. Up to this point, you would submit your self-disclosure to CMS by letter. From June 1, you must submit a packet of forms and enclosures that you certify. You should submit all information necessary for the agency to analyze the actual or potential violation. You may also submit a cover letter with additional, relevant information.

You’re well-advised not to do any of this without appropriate counsel.

The new protocol doesn’t apply to non-Stark-related disclosures of potential fraud, waste, or abuse involving a federal healthcare program.

So if you wish to disclose actual or potential violations of other laws like the Anti-Kickback Statute, you should use a separate process for it.

After you talk to your lawyer.

 

The Lowdown on California’s Proposition 57

Last week it was Proposition 64; this week, it’s Prop 57.

Voters approved it by a wide margin, but what does it do?

Two things.

First, it amended the California Constitution to ensure parole eligibility for people who have been convicted of a nonviolent felony, once they have served the full term for their primary offense. In layman’s terms, that means that you’re eligible for parole once you’ve served the meat and potatoes of your sentence, even if you were sentenced to additional, consecutive time on lesser counts or for sentencing enhancements. But this just means you’re eligible; it doesn’t mean you get released. It just means you’ve got a shot at parole, and something to work toward. No one is automatically released, and no one is entitled to parole.

Second, Prop 57 mandates that a judge must always decide whether a minor age 14 or older should be prosecuted and sentenced in adult court. (Kids 13 and younger don’t go to adult court.) Before, you automatically went to adult court, even at 14, if you were charged with murder or an aggravated sex crime. Or the prosecutor could file your case directly in adult court if you were 16 or 17 and charged with a serious or violent felony or you were 14 or 15 and charged with an especially serious or violent felony. In all cases, the prosecutor could request the juvenile court to transfer your case to adult court, even for a misdemeanor.

Under Prop 57, there’s no direct filing of juvenile cases in adult court, and prosecutors have less discretion to request their transfer. For ages 14 or 15, they may request a transfer only if the kid is charged with a serious or violent felony. For ages 16 or 17, it can be any felony but not a misdemeanor.

Some things haven’t changed, like the criteria for deciding whether a minor’s case should be transferred to adult court. These include the following:

  • the nature and seriousness of the charges
  • the degree of criminal sophistication he displayed, given his age, maturity, intelligence, environment, and upbringing
  • his prior history of delinquency, if any
  • whether he can be rehabilitated by the time he comes of age or close to it

If At First You Don’t Succeed

Here’s that DUI case we alluded to last week.

It’s based on a driver’s challenge to his license suspension after his arrest. His post-arrest blood test showed a blood-alcohol concentration (or BAC) of 0.23 percent. He challenged this finding at the DMV’s administrative hearing and lost. He then petitioned the superior court to overturn that finding and lost again.

After twice losing before the agency and the trial court, he took another swing in the court of appeal, and there, he won.

The issue was whether his blood-test result was reliable.

The crime lab had tested his sample using a machine called a gas chromatograph. It has a heated chamber with two columns through which a sample is passed in gaseous form, and therein lies the rub. You’ve got to use both of those columns. One isn’t enough. Otherwise, you may get a false positive or the machine may indicate more alcohol than actually exists.

According to the driver’s expert and even the machine’s own manufacturer, one column could “tentatively identify” alcohol but “simply [could not] confirm its identity” or “how much might be present.”

In this case, the lab used the right machine, but the test results showed data from only one column, and the DMV didn’t offer any proof to show otherwise.

Thus the DMV could not rely on the test results because, as a matter of scientific principle, one column’s result was incapable of establishing the driver’s BAC.

And so the court of appeal reversed.

Patient Privacy Gives Way for Good Cause

If you’re a doctor in California, here’s a healthy reminder that the Medical Board can subpoena your patients’ records for good cause, over their objection and yours.

In a recent decision, the California Court of Appeal upheld an order that compelled a doctor to produce three of his patients’ records even though all three didn’t want them released.

It all started when the Board got a complaint from a private investigator that the doctor, an ophthalmic plastic surgeon, was billing for services he didn’t render, misrepresenting some of the services he did render, and falsifying documents.

The Board began to investigate the complaint, and later, it issued subpoenas for the three patients’ records on the ground that the doctor had departed from the standard of care in their treatment. Two of the patients wrote to the doctor to say they didn’t want their records produced and were happy with their quality of care. The third wrote that he hadn’t received notice of any subpoena, but he didn’t want his records produced, either.

The doctor moved to quash the subpoenas, and the Board opposed it and moved to compel his compliance.

The trial court sided with the Board but limited the subpoenas to a three-year range. It doesn’t appear that the patients pursued their objections in court.

On appeal, the court upheld the order, and in the process, it surveyed the case law on what constitutes good cause for breaching the privacy rights of patients.

In three prior cases, the courts had found no good cause. In one, the evidence consisted of a declaration from the Board’s investigator that supplied no facts, only a conclusion that the records “may offer evidence to substantiate” an allegation of gross negligence. In another, the Board supplied experts who suggested, based on their review of pharmacy records, that two doctors were overprescribing, but they didn’t explain why, and the doctors submitted competent evidence to rebut them.

In the most recent case, however, the court found good cause for the subpoena because of specific billing irregularities and other evidence that a doctor was overprescribing. He’d prescribe large amounts of an amphetamine to one patient. He’d prescribe to the same patients at two different pharmacies on the same day. He’d prescribe the same drugs to multiple family members and refill their prescriptions before the due date.

In this case, too, the court held that substantial evidence supported the trial court’s finding of good cause because the investigator’s partial records revealed serious problems with the claims paperwork, which the Board’s expert reviewed. In some instances, the doctor’s paperwork didn’t support the services he billed for. In others, there was no documentation at all. In some, there were no signatures; in others, no dates of service; and his reports used canned, cut-and-paste language. So the court affirmed the order.

The SEC Wants You to Self-Report

At a conference in November, the SEC’s Director of Enforcement, Andrew Ceresney, announced that, from now on, you must self-report violations of the Foreign Corrupt Practices Act if you want the Enforcement Division to recommend a non-prosecution or deferred-prosecution agreement. Even then, Mr. Ceresney warned, you may not get an NPA or DPA, but the Division won’t even consider it if you fail to self-report. To self-report, in other words, is now a necessary, threshold condition to negotiating an NPA or DPA.

On the heels of that announcement, last month, one company that had self-reported its FCPA violations was able to resolve civil and criminal charges on relatively favorable terms.

First, the company settled the civil SEC investigation that commenced after it reported that two of its subsidiaries were making improper payments to foreign officials to win business. The improper payments included non-business-related travel, gifts, and entertainment that totaled $1.5 million over five years. To settle the case, the company agreed to cease and desist from further violations and to surrender $14 million in profits.

Next, the company settled the parallel, criminal investigation by entering into an NPA with the Justice Department. The three-year NPA requires the company to pay $15 million in fines, improve its compliance program, and report on its progress to the government.

Finally, one of the company’s employees earned a three-year DPA of his own based on his substantial cooperation during the SEC investigation. It was the Commission’s first DPA with an individual in an FCPA case.

To be clear, self-reporting has long been a factor in the Commission’s framework for evaluating cooperation by people or businesses. Generally, the SEC will credit your cooperation based on how much you helped, how important the case was, how culpable you were personally, and how much of a threat you continue to pose.

But going forward, self-reporting appears to carry significantly more weight with the agency, at least in FCPA cases.

 

The CFTC’s First Ever Case of Insider Trading

Two months ago, for the first time, the Commodity Futures Trading Commission flexed its new anti-fraud powers under the Dodd-Frank Act to punish insider trading in the futures markets.

How so? The agency filed and settled an enforcement action against an employee whose job was to trade energy futures for a large corporation. Allegedly, the employee used access to confidential information about the timing, volume, and prices of the company’s trades to profit his own personal accounts at his employer’s expense. He allegedly executed trades between the company’s account and his personal accounts, thus playing both sides of the deal, and he allegedly placed other personal orders just ahead of orders he placed for the company, thus benefiting from price movements caused by the company’s much larger trades. These actions violated the Commodity Exchange Act and its regulations.

Under the terms of the settlement, the employee did not admit or deny the agency’s findings and conclusions, but he agreed to pay restitution in the amount of $217,000, a monetary penalty of $100,000, and post-judgment interest on both. He also consented to a permanent bar from trading in commodities directly or indirectly.

For more details, here’s a copy of the Commission’s press release, and here’s a copy of the order itself. For more in-depth analyses on what this may mean for the agency’s enforcement efforts going forward, see here and here.

The SEC’s Home-Court Advantage

As noted in a series of reports over the last year or so, the Securities and Exchange Commission has steadily been sending more of its cases, including contested cases, to be heard before its own, administrative judges rather than litigating them in federal court. The trend follows passage of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, which amplified the agency’s ability to exact civil penalties in administrative hearings without having to sue in federal court.

According to the Wall Street Journal, the Commission won 90% of contested cases before its own judges from October 2010 through March 2015, compared to 69% of such cases in federal court. The agency did even better from September 2011 through September 2014, winning 22 of 23 cases before its judges, compared to 67% of such cases in federal court.

According to another, competing analysis, the agency won just 70% of the time before its own judges, but only if winning were defined as the agency’s running the table and getting everything it wanted. Otherwise, it did a lot better than that, and as far as actually losing, that happened in just six out of 359 cases, or less than 2% of the time.

Finally, on administrative appeals from these decisions, the Commission agreed with its own judges in 90% of cases from January 2010 through March 2015.

In response to all this, some defendants have filed constitutional challenges in federal court, some of which have gained traction. Other critics include business lobbies, federal judges, and even former agency officials, including one former SEC judge who says she retired under pressure from peers who questioned “her loyalty to the SEC” based on her decisions.

In rebuttal, the Commission has explained the spread in part by noting that many administrative cases are routine cases in which the outcome is not in doubt. These include defaults in which the defendant doesn’t bother to show up as well as cases limited to imposing administrative penalties after the defendant has already lost in court.

The criticism, however, may have struck a nerve.

Last month, the Commission proposed amendments to its procedures to align them more with the rules in federal court. These amendments, which the agency is soliciting public comment on through December 4, propose to do the following things among others:

  1. afford defendants up to eight months to prepare for a hearing in complex cases instead of the current four months;
  2. afford defendants the right to subpoena documents as well as depose up to three witnesses in complex, single-defendant cases or up to five witnesses in complex, multi-defendant cases;
  3. require the exchange of expert reports and disclosures before the hearing;
  4. introduce limits on the use of hearsay evidence; and
  5. set deadlines of eight to ten months for the agency to rule on appeals, which have dragged on in some cases.

Some argue these amendments don’t go far enough. They don’t give the defense enough time or discovery to work with; they don’t eliminate hearsay evidence altogether; and they don’t stop the Commission from hearing appeals on cases decided by its own judges.

Still, the criticism has struck a nerve. On Monday, the Wall Street Journal reported that the Commission has begun to curb its use of administrative judges in contested cases, and lately, it’s begun to lose more cases before those judges.

Even so, the words of one SEC official ring true: “Whatever forum we’re talking about, we win … the vast majority of the time.”

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