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.

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.

 

When It Sounds Too Good To Be True

Last week, it was the SEC; this week, it’s the FTC or Federal Trade Commission. That’s the agency that, among other things, enforces federal laws against unfair or deceptive business acts or practices, including false advertising.

So what happened?

The FTC settled a lawsuit against a chiropractor who sold a “breakthrough” weight-loss system for $1,895 a pop. He also licensed and franchised the system to other chiropractors and professionals to sell.

Although the defendant didn’t admit or deny the allegations, he agreed to stop making the following claims about his system:

  1. That you could lose twenty to forty pounds, or more, in forty days.
  2. That you could do that safely and without cutting calories or exercising.
  3. That you could burn between 2,000 and 7,000 calories per day.
  4. That you could treat diabetes, psoriasis, and other conditions.

I’m no doctor, but as far as I know, it’s not possible to lose that much weight or burn that many calories without starving yourself or exercising like you’re on meth. According to the complaint, the people who bought the system were told—only after the fact—to eat about 500 calories per day. To put that in perspective, the bowl of cereal you had this morning was at least 200 calories. Good luck getting through the rest of the day.

The defendant also agreed to pay $2 million in refunds; to pay $30 million more if he violates the settlement agreement; to stop presenting friends, relatives, or business partners as satisfied customers who endorsed his system; and to stop using a non-disparagement clause in his contract that punished people for criticizing the system.

Buyer, beware: All that glitters ain’t gold, and there’s no substitute for good nutrition, exercise, and sleep.

The Scope of Fraud for Government Contractors

This summer, the U.S. Supreme Court issued an important decision for government contractors and the whistleblowers who sue them under the federal False Claims Act.

The bottom line may be this: contractors must abide by a myriad of rules, regulations, and contractual provisions in doing business with the government, but if they don’t, not ever misstep, only the material ones, can give rise to liability for fraud.

The case began with the tragic death of a teenage girl.

For five years, the girl had received counseling services at a clinic owned by a Medicaid contractor. When she was seventeen, she died from a bad reaction to a drug that she was prescribed there after being diagnosed with bipolar disorder.

Afterward, her parents learned that only one of the five employees who treated her was properly licensed. The employee who prescribed the drug had claimed to be a psychiatrist but, in fact, was a nurse who lacked the authority to prescribe without supervision. The employee who diagnosed her had claimed to be a psychologist but, in fact, had graduated from an unaccredited online school and been denied a license.

Those employees weren’t the only ones, either. Some 23 employees at the clinic weren’t licensed to provide mental-health services but did it anyway, counseling patients and prescribing drugs in violation of Medicaid’s regulations. The clinic’s director knew about it and helped misrepresent their qualifications.

Thereafter, the girl’s parents filed a whistleblower lawsuit under the False Claims Act. They alleged that the contractor had defrauded Medicaid by billing for services that its employees were not licensed or qualified to render and by not disclosing that fact. First, the trial court dismissed the case on the ground that, even if the contractor had violated Medicaid’s rules, its violations didn’t make its bills false because those rules were not an express condition of payment. Then, the court of appeals reversed, holding that such rules were implied conditions of payment even if they weren’t expressly identified as such.

By the time the case got to the Supreme Court, the issue had boiled down to whether the parents could sue under a theory of implied false certification. Under this theory, when the contractor submitted its bills, it impliedly certified that it had complied with all conditions of payment. Therefore, since it knowingly failed to disclose its regulatory violations, its bills were false, and they triggered liability under the False Claims Act.

So did the Court endorse this implied-certification theory?

Yes and no.

The Court held that liability depends on whether a defendant’s misrepresentation about its compliance was material to the government’s payment decision. In other words, the question is whether the government would have paid the bill if it knew of the defendant’s noncompliance. In this case, the contractor had used billing codes that corresponded to specific job titles when it knew that its staff didn’t measure up, so the Court sent the case back down for the lower courts to decide whether that misrepresentation was material.

The Court also held that liability doesn’t depend on whether the government calls something a condition of payment. That may be relevant, but it’s not conclusive. The question remains whether the condition was material to the government’s payment decision. Otherwise, the government might label every applicable rule or regulation an express condition of payment, and there are just too many of them for that.

To illustrate the difference, the Court used two examples. First, suppose the government orders guns but doesn’t specify that they actually be able to shoot. Obviously, that would be a material condition whether or not the government spelled it out. Second, suppose the government contracts for health services but expressly requires providers to use American-made staplers for the paperwork. That likely wouldn’t be a material condition, especially if the government routinely paid out on claims knowing that foreign staplers were used.

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.

SCOTUS Stands Up for the Sixth Amendment

We’ve asked this question before. What if the government charged you with a crime, and you wanted to defend yourself but couldn’t—not because you didn’t have any money, but because the government had blocked all access to it?

Twenty-five years ago, the U.S. Supreme Court said the government can freeze your money before trial if there’s probable cause to believe the money’s traceable to the alleged crime, even if you have no other funds for legal fees.

Tough cookies if the government can drive trucks through a hole the size of probable cause. That’s your problem; the presumption of innocence be damned.

But last month, the Court was called on to decide whether the government could take the extra step of freezing assets that you need to fund a defense even if they’re not traceable to the alleged crime.

This time, the answer was no. Here’s how it went down.

The government had accused the defendant of a $45 million Medicare fraud, but when she was indicted, she had a mere $2 million to her name, which (the government agreed) included clean funds unrelated to the alleged fraud. The defendant wanted to use some of that money to pay for her defense.

Even so, the government moved for an order freezing all of it, and the court granted it. The government argued that the forfeiture statute authorized a freeze of both property traceable to the alleged crime and “property of equivalent value.” The defendant countered that, for God’s sake, she had a constitutional right to use her own money to fund a defense. The court, however, concluded that there was “no Sixth Amendment right to use untainted, substitute assets to hire counsel.”

The trial court’s order was affirmed on appeal, but the Supreme Court reversed, ruling that the government violated the defendant’s right to counsel when it restrained her legitimate, untainted assets in a way that deprived her of the ability to retain her counsel of choice.

Otherwise, the Court noted, the government could effectively prevent people from hiring private lawyers and law firms to defend them.

Then everyone would have to rely on a public-defense system that included “overworked and underpaid public defenders.”

Imagine that.

CMS Issues Final “Overpayments” Rule for Medicare Parts A and B

Speaking of healthcare—providers, suppliers, and other stakeholders should take note that, last week, the Centers for Medicare & Medicaid Services (CMS) published its long-awaited final rule for reporting and returning overpayments under Medicare Parts A and B.

The rule defines “overpayments” to include any funds you receive or retain that you’re not entitled to after applicable reconciliation. The CMS published its rule for Medicare Parts C and D two years ago, and there’s no rule for Medicaid yet. With or without an administrative rule, however, you’re still subject to a statutory 60-day rule under the Affordable Care Act.

The rule confirms that you must report and return an overpayment within sixty days of the date on which you “identify” it or by the due date of any corresponding cost report, if applicable, whichever is later. After that, the overpayment becomes an obligation that you owe the government, and it triggers liability under the False Claims Act and the Civil Monetary Penalties Law, among other consequences.

The rule provides that you identify an overpayment when you either have or should have, through the exercise of reasonable diligence, both determined that you received an overpayment and been able to quantify its amount to a reasonable degree of certainty.

What’s reasonable diligence? The agency deems it to include both (1) reactive investigations by qualified individuals in response to credible information about a potential overpayment; and (2) proactive compliance activities by qualified individuals to screen for overpayments.

Once alerted to a potential overpayment, you have up to six months to complete your investigation, except in extraordinary circumstances; then the 60-day clock begins to run.

How far back do you need to look? The rule says six years, which is consistent with the base statute of limitations under the False Claims Act.

The rule goes into effect on March 14, 2016. You can read the text and extensive commentary for yourself here.

California Medical Association Says Legalize Marijuana

On February 1, the California Medical Association endorsed the Control, Regulate, and Tax Adult Use of Marijuana Act. Here’s the story from the Sacramento Bee, which features a short video running down the big questions about the ballot initiative. And here’s the press release from the CMA, which is the largest representative body of physicians in the state.

Meanwhile, the Obama administration has signaled that it will not revisit federal law in its last year unless Congress does.

All while people continue to suffer at the hands of prohibition.

Here are a couple of stories about a Missouri man who is 21 years into a life-without-parole sentence for nonviolent marijuana offenses. He will die in prison if the governor doesn’t grant him clemency.

Here’s one from San Francisco, of all places, where police took a guy down over $20 of pot because they were collecting overtime pay for their sting operation. They charged the guy with felony possession for sale, but a jury acquitted him in three hours flat.

Here’s another about a military veteran and father of two from Virginia who was deported for a nonviolent marijuana offense.

And here’s one about a Florida man who was mistakenly shot to death when a SWAT team raided his house over $200 of pot.

They’re a dime a dozen: casualties of a counter-productive policy that persists in 2016.

Federal Healthcare Fraud Is A Continuing Offense

Which means the statute of limitations won’t matter if the government can characterize your conduct as one, continuous scheme that extended into the limitations period.

So held a decision last week by the U.S. Court of Appeals for the Ninth Circuit, which covers California and eight other states.

The decision affirmed a podiatrist’s conviction for violating the federal healthcare fraud statute, 18 U.S.C. § 1347. That statute punishes you for knowingly executing, or attempting to execute, a scheme to defraud a federal healthcare benefit program like Medicare. If convicted, you face up to ten years in prison, a $250,000 fine, or both. That maximum sentence rises to twenty years if your conduct results in serious bodily injury, and it rises to life in prison if your conduct results in death. This doctor saw his patients through Medicare and Medicaid as well as workers’ compensation and private insurance programs.

After he was indicted, he moved to dismiss sixteen of the counts against him because they were based on allegedly false bills from a single date of service (at a nursing home) that fell outside the five-year statute of limitations.

The court agreed that all but one of the counts fell outside the five-year statute, so it dismissed those counts, but it preserved the one count because the doctor hadn’t submitted and received payment on that bill until a year later, on dates within the five-year period.

The government then returned to the grand jury and got a new indictment—called a superseding indictment—that combined the one surviving count and the several dismissed counts into one count alleging a continuous scheme that extended into the five-year period.

The doctor moved to dismiss this superseding indictment on the same ground, but the court denied his motion this time, and after a seven-day trial, a jury convicted him on multiple counts, including that one.

So can the government do that? Can it simply rewrite an indictment like that to avoid the statute of limitations? Can it simply re-file multiple counts as one continuing offense when it charged them the first time as separate counts?

In this case, the answer was yes.

The court of appeals held that healthcare fraud under section 1347 is a “continuing offense” that punishes each fraudulent scheme as a whole, rather than each act in furtherance of the scheme. The court reasoned that section 1347 was modeled after the federal bank-fraud statute, which is section 1344, so it should be interpreted the same way.

The court did note that, in a prior case, it had permitted the government to charge each bill as a separate execution of a fraudulent scheme on the ground that, with each bill, the defendant owed the insurer an independent obligation to be truthful.

But just because the government could’ve charged the case that way—and even did so, initially—didn’t mean that it had to do it that way. As long as the new indictment alleged one execution of a single, ongoing scheme, the government could charge it that way even though several acts in furtherance of the scheme fell outside the statute of limitations.

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