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.

When the Doctor Is Not In

Last week, it was the California Medical Board, but Medicare ain’t playing around either, doc.

It will revoke your billing privileges if you submit inaccurate claims, and it will test the accuracy of those claims by mining data about you and your travels.

Recently, for example, the government revoked a clinic’s privileges because it determined the doctor who supposedly rendered the services wasn’t present on the dates of service. It’s not clear how the government knew that, but the implication is that it cross-referenced the doctor’s travel records. The clinic challenged the decision, and the case went to an administrative law judge.

The clinic admitted that the doctor wasn’t there on the dates of service, but it argued that the claims weren’t fraudulent because they covered services that were medically necessary and performed by other doctors on staff.

That’s not the point, said the judge. The government didn’t need to prove fraud, only an abuse of billing privileges. Under Medicare’s regulations, one way to abuse them is to bill for services that couldn’t have been furnished on that date. And one example of that is when the billing doctor was not in the state or country at the time. See 42 C.F.R. § 424.535.

So be careful out there. There have been a spate of government actions lately that used people’s travel and location data to build a case. Here’s a good article that cites a few of them. Be careful because even clerical errors can prove costly when the doctor’s not in.

Don’t Keep The Change, Doc

Meaning, don’t just pocket the difference when the government overpays you for healthcare goods or services.

Recently, a medical group agreed to pay $450,000 to settle allegations that it refused to return $175,000 in overpayments that it received from federal healthcare programs like Medicare and Medicaid. Here’s the government’s press release.

The overpayments at issue tend to happen in medical practices when two insurers share responsibility for a payment, and one pays too much.

But the thing is, you have to return the surplus, whether it’s big or small; you can’t keep it, and you can’t dawdle, either. If you do, you may incur significant liability under the False Claims Act, as we’ve explained before.

The rule is that you have sixty days to return the money once you know (or should know) about the overpayment. For more on the 60-day rule, see here.

In this case, the government alleged that the medical group failed to return the money despite repeated warnings, until it learned the Justice Department was investigating. Apparently, it didn’t know that one of its employees had filed a whistleblower lawsuit, which the government joined and took over. (For more on that process, see here.) The former employee will receive $90,000 of the settlement proceeds, or twenty percent.

This isn’t the first time the feds have moved to enforce the 60-day rule, and it sure won’t be the last. They’re just getting started.

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.


Double, Triple Whammies and Rewards

Speaking of the False Claims Act, get ready to buckle up.

Starting Monday, an interim final rule by the U.S. Justice Department will nearly double the statute’s civil monetary penalties for each false claim. The minimum penalty will go from $5,500 to $10,781, and the maximum penalty will go from $11,000 to $21,563.

For defendants, this means you’re looking at a minimum fine of $10,781 for every allegedly false claim. Multiply that by hundreds or thousands of bills that the government may deem suspect, and you quickly run up some big numbers.

Already, the FCA’s penalties have implicated the Eighth Amendment’s ban on excessive fines in cases where they’ve far surpassed the government’s actual losses. In many of those cases, the Justice Department has avoided the constitutional question by forgoing or reducing the penalties it sought under the statute.

Now throw these new penalties in with the specter of treble damages, which means the government can recover three times its actual losses in addition to the penalties, and you’ve got double and triple whammies for government contractors—with corresponding rewards for the whistleblowers who sue them.

The new rule was required by the Bipartisan Budget Act of 2015, which directed all federal agencies to update their civil monetary penalties every year to account for inflation. For the False Claims Act, this first update catches up on inflation since 1986, which was the last time the Justice Department raised the penalties in such cases. Actually, that’s not true; the last time was 1999, but the new rule disregarded that because the Bipartisan Budget Act had repealed the underlying legislation.

The DOJ’s new penalties apply in both its civil and criminal division and across constituent agencies like the Drug Enforcement Administration (DEA), the Federal Bureau of Investigation (FBI), and the Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF).

The rule may also budge many states to conform their own penalties to federal law. That’s because the federal government lets states keep ten percent more than their pro-rata share of a Medicaid-fraud recovery when they bring a case under state law. To be eligible, however, a state’s civil penalties must meet or exceed the federal ones.

The new rule is effective August 1, and it will apply to all cases that allege false claims after November 2, 2015, which is when the Bipartisan Budget Act became law. Although the Justice Department is soliciting public comment through August 29, the rule is already final and will go effective next week.

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.

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.

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