Feds Raise Healthcare Penalties Again

If you’re a healthcare provider who takes Medicare or another federal program, take note.

We didn’t get a government shutdown, but the budget law from last week more than doubled the civil and criminal penalties you face when the government accuses you of fraud, waste, or abuse. To see for yourself, click the link and scroll all the way down to section 50412. You need to go about three-fifths of the way down.

The maximum civil penalties have doubled and, in some cases, more than doubled. Where they used to be $2,000 per violation, they’re now $5,000; where $5,000 before, they’re now $10,000; if $10,000, they’re now $20,000; if $15,000, now $30,000; and where they were $50,000 before, they’re now $100,000. Generally, the penalties apply per violation.

The maximum criminal penalties have doubled or quadrupled. A felony charge that used to threaten five years in prison and a $25,000 fine now carries up to ten years in prison and a $100,000 fine. A misdemeanor charge that carried a $2,000 or $10,000 fine could now cost $4,000 or $20,000 respectively in fines alone.

These changes apply to conduct after the law was enacted on February 9, 2018.

New DOJ Policy on Foreign Business Bribery

On the eve of the fortieth anniversary of the Foreign Corrupt Practices Act, the Justice Department has unveiled a policy that strongly encourages businesses to self-report any violations to the government on their own.

Those that do can presume that the government won’t prosecute them criminally as long as they fix the problem timely and cooperate fully. That’s probably good for shareholders and boards of directors, among others, but less so for managers, executives, or foot soldiers who get thrown under the bus.

The new policy was announced last week at a conference on the FCPA. It’s been added to the official policy manual for federal prosecutors. It takes most parts of the government’s recent pilot program and makes them permanent.

What does it mean to self-report voluntarily, cooperate fully, and remediate timely? It means a company must report a violation promptly and before the government gets wind of it. Also, it must share everything it knows about anything and anyone involved. Then it must create a sound compliance program based on its size and resources. And it must return all the money or property that’s subject to restitution, forfeiture, or disgorgement.

The government may still prosecute if aggravating factors make the business more culpable. That may happen, for example, if executive management was involved, or the conduct was widespread, or the company made a lot of money from it, or it’s happened before.

But even then, if the business has voluntarily self-reported, fully cooperated, and timely remediated, the government will recommend a criminal fine that’s at least 50% lower than it otherwise might be (unless the business is a repeat offender). Also, if the business has created an effective compliance program, the government likely won’t require the appointment of an outside monitor.

Finally, if a business doesn’t self-report but later cooperates and remediates fully, the government will recommend a fine that’s at least 25% lower than it otherwise might be.

Feds Arrest Hundreds in Healthcare Raids

Last week, the federal government conducted nationwide raids of healthcare providers and facilities based on $1.3 billion in allegedly false billings.

In one day, the feds arrested 412 people in a coordinated takedown that netted 115 doctors, nurses, and other licensed professionals. The government also brought legal action to exclude 295 providers—including doctors, nurses, and pharmacists—from further participating in federal healthcare programs.

The government says the defendants schemed to defraud Medicare, Medicaid, and Tricare, which is the health-insurance program for veterans, servicemembers, and their families. It alleges that defendants billed for prescription drugs and other treatments or services that were medically unnecessary or never even provided.

The raids were spearheaded by the Department of Justice (DOJ) and the Department of Health and Human Services (HHS). Here’s DOJ’s press release about it, and here’s a factsheet by HHS that tallies up the numbers. The raids were concentrated in Florida, Texas, Michigan, California, Illinois, New York, Louisiana, and Mississippi. But they also captured targets in over two dozen other states across the country.

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.


To Have the Quid But Not the Quo

As you may know, the U.S. Supreme Court ended its term this year by reversing the bribery conviction of Virginia’s former governor, Bob McDonnell.

Suppose the governor of your state met a local businessman while campaigning for office, and the two cultivated a relationship.

What would it take for your governor to be guilty of corruption?

In Mr. McDonnell’s case, the businessman was the chief executive of a Virginia company that sold a nutritional supplement, and he wanted the federal Food and Drug Administration to approve the supplement as an anti-inflammatory drug. But that required the company to obtain independent research studies supporting its health benefits.

To get there, the executive wanted the state’s universities to study the supplement, and he thought the governor could help with that, so he plied him with gifts and money. He loaned him $70,000, bought him a Rolex, lent him a Ferrari for a weekend, bought his wife $20,000 worth of designer clothes, and gave him $10,000 as a gift for his daughter’s wedding. Overall, it added up to $175,000.

In return, the governor set up a couple meetings for him, hosted a couple events for his company, and contacted other officials about the supplement.

For example, the governor arranged for the executive to meet the state’s health secretary, and he emailed the secretary articles about the company. He later set up a second meeting between the executive and one of the secretary’s aides. But neither the secretary nor his aide felt pressured to do anything more than have a meeting, and the secretary straightforwardly declined to help initiate the research studies.

Similarly, the governor hosted a couple events to which he invited both the executive and some researchers from the state universities. At one event, he asked the researchers for their thoughts on the supplement: whether there was any reason to explore its scientific validity, and whether it could be good for jobs and the economy. But when the executive asked him whether he’d support funding for the research, he demurred that he had limited decision-making power in that area. At another event, the governor made no mention of the company, the supplement, or the executive.

Was that enough?

To convict him, the government had to prove that he committed or agreed to commit an “official act” in exchange for the loans and gifts. It alleged that he did so by arranging meetings, hosting events, and contacting other officials to promote the supplement.

At trial, the court sided with the government, instructing the jury that “official acts” could include those that an official customarily performed, especially if they were “in furtherance of longer-term goals” or “in a series of steps to exercise influence or achieve an end.”

The governor, instead, had wanted to instruct the jury along the lines that merely arranging meetings, hosting events, or making calls were not official acts unless he intended to influence a specific decision that was actually pending before the government, like passing a law, issuing a license, awarding a contract, or implementing a regulation.

The Supreme Court agreed with him unanimously.

It may be a mouthful, but the Court defined “official act” as an action or decision on a concrete, focused question, matter, or proceeding that involves a formal exercise of governmental power that’s similar in nature to a civil lawsuit, legislative hearing, or administrative determination.

The trial court’s instructions, however, permitted the jury to convict the governor for nothing more than setting up meetings, hosting events, and making calls. These were the types of things he’d done a thousand times before to help other constituents or promote business in the state. But according to the record, he hadn’t exercised governmental power to actually initiate the research studies or pressure anyone to do so.

Because the jury may have convicted him for conduct that was not unlawful, the Court reversed and remanded the case for further proceedings.

Public Corruption Meets Semantic Magic

Okay, so there’s a crime called extortion, and there’s also one called conspiracy to commit extortion, but here’s the question.

Can the government convict you of both extorting people and conspiring with those same people to extort themselves?

In a divided opinion this month, the U.S. Supreme Court said yes.

The case involved a police officer who participated in a kickback scheme with an auto-repair shop. When the officer would arrive at the scene of a car accident, he’d persuade people to tow their cars to the repair shop, and the owners would pay him $150 to $300 each time.

The scheme worked like a charm. It revived the repair shop’s fortunes, and it grew to enlist as many as sixty other officers in the police department.

It ended, however, when the officer, the owners, and nine other cops were indicted for extortion under a federal racketeering statute known as the Hobbs Act. The statute defines extortion to include the obtaining of property from another with his consent but under color of official right. In a prior case, the Supreme Court had described this type of extortion as roughly equivalent to taking a bribe, which seemed to fit the bill here. Everyone ended up pleading guilty except the officer.

But curiously, the government charged the officer with both extortion and conspiring with the shop owners to commit extortion, even though the owners were the ones paying up. It’s unclear why the government decided to pursue this theory of conspiracy rather than one in which the officer conspired with other officers to take bribes. At trial, the officer argued that he couldn’t be guilty of a conspiracy to commit extortion unless he conspired against someone outside the alleged conspiracy. He asked for a jury instruction to that effect, but the court denied his motion and refused his instruction. A jury convicted him on all counts.

On appeal, the officer didn’t challenge his conviction for extortion, but he argued that he couldn’t be guilty of the conspiracy count because the crime didn’t involve taking property from anyone outside the conspiracy itself.

But a razor-thin majority of the Court said yes, he could, thus giving federal prosecutors another way to charge bribery cases involving state or local officials.

Another Massive Medicare-Fraud Roundup

In case you missed it, two weeks ago, the federal Medicare Fraud Strike Force announced a nationwide sweep that ensnared 243 people for their alleged participation in fraudulent schemes to bill Medicare over $700 million. The individual cases are not all related, but the coordinated takedown was the largest we’ve seen so far—both in the number of targets and in the dollar amount of alleged loss. Among the targets were nineteen doctors and 27 nurses or other, licensed medical professionals.

The Medicare Fraud Strike Force is a joint task force of the Department of Justice and the Department of Health and Human Services that prosecutes fraud, waste, and abuse in the Medicare program. Since 2007, it has brought cases against 2,300 people and expanded its base operations to nine cities: Baton Rouge, Brooklyn, Chicago, Dallas, Detroit, Houston, Los Angeles, Miami, and Tampa.

This time around, the Strike Force descended on seventeen cities across Florida, Texas, Michigan, Louisiana, New York, and California. Miami alone accounted for 73 defendants.

The charges include healthcare fraud, illegal kickbacks, money laundering, and aggravated identity theft (which we recently covered here). They allege schemes involving home health care, physical therapy, psychotherapy, durable medical equipment, and pharmacies.

According to Attorney General Loretta Lynch, “the defendants … billed for equipment that wasn’t provided, for care that wasn’t needed, and for services that weren’t rendered.”

At least 44 of the targets were charged in connection with Medicare Part D, the prescription-drug-benefit program, which is the fastest-growing part of Medicare and thus a rising priority of enforcement. These charges include billing for drugs that either were not dispensed, were expired or adulterated, or were trafficked in for illegitimate use.

Here’s the Justice Department’s press release.

You Can Go Your Own Way

Go your own way, if you must, but in whistleblower cases, it’s better to have a partner, especially when that partner is the Department of Justice. Under the whistleblower, or qui tam, provisions of the False Claims Act, citizens may sue on behalf of the government, and if they do, they stand to collect anywhere from 15-30% of the recovery. That can translate into many millions of dollars, as we’ve explained here before, but a lot depends on whether the government decides to join your lawsuit in a process called intervention. That’s because the lawsuit is initially filed under seal and served only on the government, not the defendant, until the government can review it and decide what to do.

If the government intervenes in your case, you’re not only on the right track but, often, the fast track to resolving the case favorably and for dollar values that dwarf the value of settlements when the government doesn’t intervene.

But that’s not always the case. Last summer, for example, saw a big settlement of $124 million in a case in which the government had declined to intervene. Of that, the primary whistleblower in the case will receive over $17 million. It is reportedly the largest settlement to date in a non-intervention case. The settlement resolved allegations that a major pharmacy company paid kickbacks by swapping below-cost discounts on Medicare Part A business for referrals to Medicare Part D and Medicaid business.

Besides, the government usually doesn’t decide quickly and, sometimes, it doesn’t decide at all, agreeing to unseal the case but deferring its decision whether to intervene. That may encourage whistleblowers to push their cases along in discovery in the hope of eventually persuading the government to take over.

Still, going your own way can be risky. Just last month, one whistleblower whose case was declined by the government and then dismissed by the court suffered another blow: he was ordered to pay over $10,000 in litigation costs to the other side.

That might feel like a lonely day.

Just Say No, Doc

Suppose you’re a doctor, and some of your patients are Medicare beneficiaries who need home healthcare services.

Suppose you’re approached by a company that provides such services and offered cash (or other remuneration) in exchange for sending your patients there.

If you take the money and steer your patients to that provider, you’re guilty of violating the federal Anti-Kickback Statute. See 42 U.S.C. § 1320a-7b(b)(1)(A). That’s easy enough.

But what if you take the money without steering your patients to any provider?

What if, instead, you simply give your patients information on twenty different providers, have them choose their provider from the list, and then certify their independent choices for payment by Medicare?

Can you still be guilty for taking the money even though your patients chose their providers on their own?

The answer is yes, according to a prominent federal court of appeals that covers Wisconsin, Illinois, and Indiana. The court upheld the conviction of a doctor who never recommended any provider, or directed his staff to recommend a provider, or even discussed the list of providers with patients personally. The court upheld his conviction even though there was no question his patients needed home health care or received adequate care from the providers they chose. And it upheld the conviction even though most of his patients continued to use other providers even after he began taking money from the one.

Even if the doctor had nothing to do with his patients’ choices, the court held that his certifications were “referrals” within the meaning of the Anti-Kickback Statute because he served as a “gatekeeper to federally-reimbursed care,” and as such, he had confirmed his patients’ choices and blessed the need for the services he referred them to. If the rule were otherwise, the court reasoned, a doctor could refuse to certify a patient to a provider who didn’t pay him a kickback, or if he got the kickback, he could certify (or recertify) a patient even if he thought the provider’s services were substandard, unnecessary, or inferior to those of another provider. The court noted that its interpretation of the statute was not new and had been publicized by the Department of Health and Human Services nearly twenty years ago. See 60 Fed. Reg. 40,847 (Aug. 10, 1995).

What Is A Kickback, Anyway?

When is it a bribe, when is it business, and when is it speech? We know it’s a bribe if you toss some cash in someone’s lap, but what if you just give them some good business advice? Well, that may have value, too, so it could be a kickback, but then what if you charge them for it? Okay, well, that doesn’t sound like a kickback, but then what if you charge them for it cheap? Hmm. It can get complicated.

Welcome to the world, and welcome especially to the world of health-care-fraud and false-claims-act litigation, where a pending case out of Pennsylvania illustrates the complexity well.

Five years ago, two putative whistleblowers sued Allergan, a manufacturer of prescription eye-care drugs and other products, on behalf of the federal government and about twenty individual states under the whistleblower, or qui tam, provisions of the federal False Claims Act and analogous state laws.

Five years later, the litigation is not much further along; all of the federal and state governments (who are supposedly victims of the fraud) have declined to intervene in the case, and the plaintiffs, who are referred to as “relators” in false-claims-act litigation, have switched their theory. They first alleged an off-label-promotion scheme, but now they’re alleging a violation of the federal Anti-Kickback Statute. How? They allege that Allergan offered eye doctors a kickback in the form of business consulting and practice-management advice, including access to a restricted, Allergan-hosted website, along with other benefits. Although the company charged an annual subscription fee of around $900 to access the website, the relators allege that the fair-market value of these expert services “far exceeds the nominal annual membership fee for access to Allegan’s exclusive website.”

The Anti-Kickback Statute makes it illegal for someone to knowingly and willfully offer or pay any remuneration to any person to induce or reward the referral of business in a federal healthcare program. 42 U.S.C. § 1320a-7b(b)(2). Under the statute, remuneration is broadly defined to include transfers of goods or services either for free or for non-fair-market value. Id. § 1320a-7a(i)(6).

On April 29, Allergan filed a motion to dismiss on the grounds that the relators didn’t plead a valid claim under the False Claims Act, a proper violation under the Anti-Kickback Statute, or a proper fraud under the Federal Rules of Civil Procedure, among other reasons.

But the company argued something else as well. It argued that the relators’ theory of liability violated the First Amendment because the practice-management advice and consulting it provided was protected speech, not remuneration under the Anti-Kickback Statute.

Well, the Department of Justice didn’t care for that, apparently, and on June 6, it filed a brief in the case saying, in effect, let’s not go there. The government noted that, even though it didn’t intervene, it remained a real party in interest, and it retained a keen interest in the interpretation of the False Claims Act and Anti-Kickback Statute. It urged the court not to adopt the company’s interpretation that speech does not or cannot constitute remuneration, because if speech has value, it can be used to induce or reward business. The government took no other position on the merits of the motion.

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