82Among the several Stark/FCA settlements over the last half dozen years in the tens of million dollar range include, U.S. ex rel. See Memorandum from The Assoc. in its january 25, 2022 decision, the fourth circuit upheld the district court's dismissal, finding that under the fca "a defendant cannot act 'knowingly' as a matter of law if it bases its actions on an objectively reasonable interpretation of the relevant statute when it has not be warned away from the interpretation by authoritative guidance" But several cases issued in 2019 will provide speedbumps. With treble damages, and penalties between $11,665 to $23,331 per claim, the FCA threatens financial ruin to clinicians who run afoul of its strictures. The decision will ensure that relators, who presumably have inside information, cannot use the discovery process to bring qui tam actions but, consistent with the statute, can only proceed if they possess specific information regarding purported fraud before filing their actions. Under What Circumstances Can A Private Qui Tam Plaintiff Overrule Government Agency Experts Use Of Administrative Discretion To File False Claims Act Actions In The Post-Escobar FCA World? Additionally, the courts ruling may also result in health care entities transforming the manner in which they conduct medical reviews. Wall v. Vista Hospice Care, Inc., No. On that issue, the 11th Circuit concurred with the district court that a mere reasonable disagreement among clinicians is insufficient to establish FCA falsity. Reg. But the court was required to grant an evidentiary hearing only upon a showing of substantial and particularized need. Id. Growth Partners, LLC, a private equity firm, On November 1, Geisinger Community Health Services. Should the government decide to settle the case out of court, there may not be any individual penalties assessed in a case of fraud. If other courts confronting this issue adopt Wrides reasoning, the number of FCA claims will be reduced. First, some surgeons pay exceeded their collections. During the year, 781 cases addressed the FCA.3Of these, 164 addressed Fed. The Department of Justice obtained more than $5.6 billion in settlements and judgments from civil cases involving fraud and false claims against the government in the fiscal year ending Sept. 30, 2021. allergan sales, llc, 1 a divided panel of the u.s. court of appeals for the fourth circuit held that a defendant accused of violating the false claims act (fca) by knowingly making a false certification of its compliance with a law as a condition of payment lacks the necessary scienter if it bases its actions on an objectively reasonable Walgreens Inc., a False Claims Act retaliation case, establishes helpful precedent on the broad scope of False Claims Act protected conduct. 1. Section 3730(d)(4) provides that [i]f the Government does not proceed with the action and the [relator] conducts the action, the court may award reasonable attorneys fees if the defendant prevails in the action and the court finds that the claim of the [relator] was clearly frivolous, clearly vexatious, or brought primarily for purposes of harassment. Specifically, the court noted that if the relators, after the government intervenes, are allowed to add defendants and claims to the action, the attorney fee provision is undermined because the relators new claims could prove frivolous, and the defendants would nevertheless be precluded from recovering attorney fees because the government proceed[ed] with the action.20 The court reasoned that the attorney fee provision envisions that the government, when it intervenes, takes responsibility for the entire action, and it does not contemplate a situation in which a relator continues to add claims or defendants to the action.21, Fourth, the court noted that under the FCA when the government intervenes, the relator can continue as a party, but that right is narrowly defined in the statute and does not include the right to conduct the action and it does not encompass the right to add defendants and claims to the action.22 Instead, Section 3730(c)(2)(C) contemplates the rights that a relator would have as a party to the action. The fourth quarter of 2021 was no exception, as circuit courts issued at least two important rulings addressing materiality: The end of 2021 also brought yet another entrant to the recent run of cases addressing what the government must show to affirmatively dismiss a qui tam action over a relators objection. 29Id. Health Res., Inc.60There the court considered whether subregulatory guidance CMS issued in Manuals for hospitals to determine the inpatient status of patients for purposes of seeking reimbursement under the Medicare Act could serve as the basis for determining whether claims are false under the FCA. (citations and internal quotation omitted). 2022), the Eleventh Circuit addressed the False Claims Act's first-to-file bar, which prohibits a later relator from bringing a related action based on the same facts as a pending action. U.S. ex rel. of Kansas City, PC, 833 F.3d 874, 880 (8th Cir. The commenter urged that these services are of vital need to communities and, unless CMS addresses the definition of commercial reasonableness, health care providers may be prohibited from providing these services to their communities as a result of a fear of violating the commercial reasonableness standard. However, a chain of recent decisions have cast the issue in a new light and dictates that where the subregulatory guidance determines payment, the guidance, by itself, is insufficient to serve as the foundation of an FCA violation. Jehl v. GGNSC Southaven, LLC, No. The Eleventh Circuit affirmed both holdings. Nonetheless, because nearly 300 individual claims were at issue, applying the FCAs per-claim penalty provision (in this case, $5,500 per claim) resulted in the entry of a total judgment of nearly $1.2 million. Approximately, one month after the 3rd Circuit issued its initial September 2019, which contained the same quoted language as the December 2019 revised decision discussed above, CMS promulgated a proposed rule construing the scope of the Stark law that directly undermined the 3rd Circuits reasoning in Bookwalter.96 Consistent with its stated goals to ensure that the Stark law is not construed to discourage providers, suppliers and physicians from entering into innovative arrangements that would improve quality outcomes, produce health system efficiencies, and lower cost (or slow their rate of growth), CMS provided new definitions of commercial reasonableness, fair market value and the meaning of what entails taking into account volume or value of referrals.97These definitions directly undermined the 3rd Circuits reasoning in Bookwalter. Oberg v Pa. Higher Educ. The case, consistent with the FCA, reaffirms the United States primacy in qui tam litigation and protects defendants from meritless lawsuits. 18-1693, 2019 U.S. App. 2011) (To the extent the Government seeks to introduce the OIG Special Advisory Bulletin as evidence of Supplier Standard non-compliance, the Court deems such evidence as improper because the document was merely agency interpretations of regulations and thus lack the force of authoritative law and is not binding on this Court); U.S. ex rel. The FCA is the chief enforcement mechanism for the Stark law. This definition was used by Courts both before and after those amendments. 2022), the Eleventh Circuit addressed the False Claims Acts first-to-file bar, which prohibits a later relator from bringing a related action based on the same facts as a pending action. Aside from FCA recoveries, 2019 also produced significant new FCA case law. In 2016 the Act began allowing inflammatory adjustments to these fines. 41Robert Salcido, False Claims Act & the Health Care Industry: Counseling & Litigation (3d ed. 2019) (noting that the district court did not error in excluding audit at trial when the audit found that the defendant had paid excessive salaries and bonuses to its executives and managers and the relator sought to show that the findings tended to establish FCA scienterthat is, that the desire for personal gain motivated defendants officers to submit false claimsbecause as the district court correctly explained: it doesnt really make any difference whether they were operating well or not well or whatever. The government intervened in part with respect to allegations in two consolidated qui tam actions that Avalon Hospice and its parent companies over the course of 10 years and across 27 or more locations in Tennessee falsely certified that patients were eligible for hospice care when they were not in fact terminally ill over the course of ten years and across Avalons twenty-seven or more locations in Tennessee. 1395y(a)(1)(A)). 2000) (ruling that Carrier Manual guidance constituted merely an interpretive rule and hence did not command providers to structure their tests in any particular manner, and, despite the governments contrary suggestion, measures taken to avoid the application of the Rule are not necessarily illegitimate). A recent decision by the U.S. District Court for the Southern District of New York, under the New York False Claims Act . The First Circuit adopted a deferential standard permitting the government to dismiss a qui tam action over a relators objection as long as the government articulates its reasons for seeking dismissal and the relator does not show any transgression of the governments constitutional limits or fraud on the court. By contrast, the court noted that the House Bill proposed to expand the role of the relator so that when the Government enters the action , the relator remains a party to the suit with the same rights as if he had been an intervenor of right under Rule 24(a), Federal Rules of Civil Procedure. Id. at 1118. 95Id. Founded on client service in 1922; Bass, Berry & Sims continues to lead clients through increasingly complex legal challenges. 53 views, 3 likes, 2 loves, 1 comments, 3 shares, Facebook Watch Videos from First Presbyterian - Palestine IL: Sunday Worship - November 6, 2022 First Presbyterian Palestine IL Also, substantively, courts issued important decisions regarding the use of the Anti-Kickback Statute (AKS) and Stark law in FCA actions. 31 U.S.C. 20 Park Plaza, Suite 438, Boston, MA 02116| 1-888-676-7420, Copyright 2022, Whistleblower Law Collaborative. To start the year, in U.S. ex rel. Court Decisions: Hinrichs v. . First, the Eleventh Circuit held that a first-to-file defect cannot be cured by the filing of an amended complaint, reasoning that it is the date the FCA action was initiated that matters and relators cannot evade the first-to-file bar by amending their pleading after a related action is dismissed. 31 U.S.C. 3730(c)(2)(A). The district court explained, It is not enough merely to have alleged that [the identified patients] happened to have received care from two entities with an improper relationship. Rather, the district court determined that the relators must allege that the example patients they identified were referred pursuant to a kickback relationship to survive a motion to dismiss. Still, the Eleventh Circuits decision provides a potential avenue of relief for defendants in future declined cases who face the prospect of civil monetary penalties far in excess of actual damages. Nonetheless, the court ultimately upheld the judgment against the defendant, reasoning that it was not excessive due to the repeated fraud, the defendants degree of scienter, and the harm inflicted on the government. It is important to identify a claim in an FCA action because, as many courts have noted, it is a fairly obvious notion that a False Claims Act suit ought to require a false claim. U.S. ex rel. 2006); see also United States v. R&F Properties of Lake Cty., Inc., 433 F.3d 1349, 1357 (11th Cir. Id. False Claims Act Decisions to Know from Q1 2022. 3730(c)(2)(A). Medicare generally pays about $4,500-$5,000 more for inpatient services than it does when the same services are provided to a patient classified as outpatient observation. Id. One reason the FCA is so effective is that it encourages. And, in U.S. ex rel. Welcome to Qui Notes, Arnold & Porter's forum for all things False Claims Act (FCA). Understanding When An Overpayment Can Result in False Claims Liability and Why Current Court Precedent and Regulatory Guidance Is Mistaken, Minimizing Exposure to Stark Law Liability in False Claims Act Cases by Isolating Those Who Determine Fair Market Value From Those Who Measure Contribution Margin or Other Similar Operational Data, When a Violation of a Rule or Regulation Becomes an FCA Violation: Understanding the Distinction Between Conditions of Payment and Conditions of Participation, https://www.justice.gov/opa/pr/justice-department-recovers-over-3-billion-false-claims-act-cases-fiscal-year-2019, https://d1198w4twoqz7i.cloudfront.net/wp-content/uploads/2019/12/05141151/CMS-Memo_Impact-of-Allina-on-Medicare-Payment-Rules.pdf, https://www.akingump.com/en/news-insights/minimizing-exposure-to-stark-law-liability-in-false-claims-act.html, Fraud and Abuse Compliance and Litigation, Health Care Regulatory Compliance Counseling. Fourth, the surgeons bonus per Work Unit exceeded what the defendants collected on most of those Work Units. The final months of 2021 saw a flurry of noteworthy False Claims Act (FCA) activity. The issue most recently arose in Polansky v. Exec. Feb. 23, 2022), the district court allowed a relator to proceed with his allegations that medical device manufacturer Medtronic paid improper kickbacks to physicians to induce them to order more of Medtronics Pipeline device used to treat brain aneurysms. S. Rep. No. 2d 664, 677 n. 10 (N.D. Miss. There was no precedent to support the relators assertion that the government would demand repayment of claims upon learning of the supposedly defective license, and there was no evidence linking nurse licensure to the amount the government would pay to defendants on claims. The decision, United States ex rel. This is because the [FCA] attaches liability, not to the underlying fraudulent activity or to the governments wrongful payment, but to the claim for payment. Cafasso, 637 F.3d at 1055 (quoting United States v. Rivera, 55 F.3d 703, 709 (1st Cir. Hannah Webber is an associate in the Litigation & Dispute Resolution Practice Group. Bookwalter v. UPMC,9the 3rd Circuit applied a broad theory of Stark law liability, but the conceptual underpinning for the courts decision was directly undermined by CMSs proposed rulemaking to revise the Stark law. Mo. Second, the district court held that the personal services safe harbor did not defeat the relators claims at this stage. at *45 (Since the 24-hour policy was contained in agency manuals that had not been promulgated pursuant to notice and comment, Allina compels the conclusion that there can be no FCA liability on Relators Phase I claims). Chao v. Medtronic PLC, 2022 WL 541604 (C.D. 48,434 (Aug. 19, 2008); Payment Policies Under the Physician Fee Schedule and Other Revisions to Part B for CY 2011, 75 Fed. Founded on client service in 1922; Bass, Berry & Sims continues to lead clients through increasingly complex legal challenges. Law Firms: Be Strategic In Your COVID-19 Guidance [GUIDANCE] On COVID-19 and Business Continuity Plans. Bookwalter v. UPMC83and CMS recent proposed rulemaking revising critical components of the Stark law will have a significant impact on hospital/physician relationships. In Escobar, the Supreme Court cut back on the False Claims Act by ruling that the false certification theory of liability required that a . 55766 (Oct. 17, 2019). at *2. Recent Significant Case Law Developments Regarding What Constitutes a Reckless Interpretation of a Law and When Retention of an Overpayment Violates the False Claims Act. 3730 (b) (5). 3730(b)(5). Similarly, the $2.5 million settlement with the government can hardly qualify as smoke. Overpaying Pipeline physicians to provide patient and procedure data to Medtronic databases. The volume of new False Claims Act (FCA) case filings remained high in 2021, and the Department of Justice (DOJ) collected more than $5.6 billion in settlements and judgments the second-largest annual total in FCA history. Further, these claims may be false even though the services are provided as claimed. Chao v. Medtronic PLC, 2022 WL 541604 (C.D. On June 10, a Los Angeles doctor agreed to pay $9.5 million to resolve FCA allegations that he submitted claims to Medicare for procedures and tests that he never performed and admitted that he intentionally submitted false claims for payment. In United States ex rel. False Claims Act Fundamentals: How to Respond to a Civil Investigative Demand, False Claims Act Fundamentals: Elements of the False Claims Act, U.S. Government Brings Its Buying Power to the Fight Against Climate Change, College Athletics: Three Things for Campus Counsel to Keep an Eye On, Centers for Medicare & Medicaid Services (CMS). The licensing regulations the relator alleged that the defendants breached were expressly characterized only as Conditions of Participation, a factor. 99-345, at 9-10, reprinted in 1986 U.S.C.C.A.N. 1320a-7a(i)(6), which relates to civil monetary penalties in connection with medical fraud.54 The court noted that although this definition of remuneration is in a different section of the statute, it also defines remuneration to include the transfer[] of items or services for free or for other than fair market value and thus is consistent with our view of the correct definition.55, Given the dictionary definition of remuneration and its definition in a related statutory provision, the court concluded that the issue of fair market value is not limited to defendants safe harbor defense, but is rather something Relator must address in order to show that [the defendant] offered or paid remuneration to physician tenants.56 The court affirmed the district courts grant of summary judgment because the relator did not show that any of the arrangements conferred any benefit in excess of fair market value.57. Our highly skilled attorney teams aim to provide a profound understanding of our clients businesses and perspective, sound judgment, efficiency and responsiveness to every matter. Since 2009, the False Claims Act has defined the term material as having a natural tendency to influence, or be capable of influencing, the payment or receipt of money or property. As of May 9, 2022, FCA penalties range from $12,537 to $25,076 per violation. 99-345, at 9-10, reprinted in 1986 U.S.C.C.A.N. Hannah Webber is an associate in the Litigation & Dispute Resolution Practice Group. United States ex rel. Third, CMSs statement regarding reasonable interpretation of the Stark law providing a dispositive defense will align the Stark law with the FCA defense that a reasonable interpretation of an ambiguous rule is a dispositive defense when the government does not provide any official guidance to warn the defendant away from its reasonable interpretation.105. Given that and the substantial risk associated with any FCA action in which the government intervenes, a $2.5 million FCA settlement with the government at the start of litigation involving multiple claims, an extended time-period and that is document intensive, would be perceived as a settlement of nuisance value, and at far less than the ultimate costs of litigation, rather than smoke of any type. Due to CMSs unambiguous guidance on when a license becomes invalid, the defendants could not have known that the government would characterize the nurses license as invalid. 1395hh(a)(2)) (emphasis supplied). The civil False Claims Act (31 U.S.C. Paying physicians proctoring fees in excess of fair market value to teach other physicians how to perform Pipeline procedures. October 9, 2017 - Under What Circumstances Can A Private Qui Tam Plaintiff Overrule Government Agency Experts Use Of Administrative Discretion To File False Claims Act Actions In The Post-Escobar FCA World? There was no precedent to support the relators assertion that the government would demand repayment of claims upon learning of the supposedly defective license, and there was no evidence linking nurse licensure to the amount the government would pay to defendants on claims. R. Civ. Cal. Initially passed in 1863 to combat Civil War profiteers and fraudsters, the False Claims Act ("FCA") has evolved into the government's most potent civil enforcement tool in healthcare fraud cases. False Claims Act Decisions and Settlements to Know from Q4 2021, Increased False Claims Act Exposure for Private Equity Firms Investing in Healthcare, Government Files Amended FCA Complaint Against Private Equity Firm and its Portfolio Company, Register Now: 8th Annual Nashville Healthcare Fraud Conference, 8th Annual Nashville Healthcare Fraud Conference, Healthcare How-To Webinar: How to Conduct an Effective Internal Investigation, Healthcare How-To Webinar: How to Request an Advisory Opinion (and Why), Healthcare Fraud & Abuse Annual Review Webinar, In a series of early October settlements, three pharmaceutical manufacturers. Mich. 2000) (ruling that the Carriers Manual, which is merely a guide for fiscal intermediaries between Medicare and physicians, and lacks the binding effect of law or regulation would not be used to judge the truth or falsity of defendants representations) (citation omitted) affd, 24 Fed. at *34 (citing 42 U.S.C. Additionally, as to process, in Bingham v. HCA, Inc.,6the 11th Circuit affirmed the district courts decision to strike allegations based upon information relator obtained during discovery while defendant had a pending Rule 9(b) motion. She focuses on representing clients in healthcare-related litigation and investigations, as well as in other business disputes. It is only those claims for money or property to which a defendant in not entitled that are false for purposes of the False Claims Act) (citation omitted) (en banc); see also U.S. ex rel. Thus, although the employee compensation of a hypothetical orthopedic surgeon may be $450,000 per year, this particular physician commands a significantly higher salary and the general market value (or market value) of the transaction may, therefore, be well above $450,000. Id. 105See, e.g., Allergen, Inc., 746 F. Appx at 109-10; MWI Corp., 807 F.3d at 289; see also Donegan, 833 F.3d at 880; Ketroser, 729 F.3d at 83132. If you have any questions concerning this alert, please contact: 1See Justice Department Recovers Over $3 Billion From False Claims Act Cases in Fiscal Year 2019, U.S. Dept of Justice (Jan. 9, 2019), https://www.justice.gov/opa/pr/justice-department-recovers-over-3-billion-false-claims-act-cases-fiscal-year-2019. In this article, the author discusses a recent decision by a federal district court in New York that demonstrates the potential benefits of working with the New York State Tax Department to resolve qui tam claims, even where the qui tam plaintiff objects to the settlement. The timeline for both actions is critical to the first-to-file analysis: After the settlement, the relators filed a second amended complaint, narrowing the allegations to focus on the PE firms conduct. When is a settlement of tax-fraud claims under the New York False Claims Act considered "fair, adequate, and reasonable?" 16,054 (Mar. This means providers cannot avoid liability by ignoring inaccuracies in their claims or hide their heads in the sand. The Eleventh Circuit first held that a relators original complaint, not an amended complaint, is the proper point of reference for a first-to-file analysis. The court noted that while the House Bill defined the relators rights by express reference to the rights of an intervenor of right under Federal Rules of Civil Procedure, the FCAs final language did not. Payment of fair market value is a dispositive defense in FCA actions alleging a violation of the Anti-Kickback Statute. According to this commenter, with changes in reimbursement, more service lines will operate at a loss in the future. Assistance Agency, 912 F.3d 731, 735-36 (4th Cir. CMSs Stark law guidance, by its own admission, is replete with ambiguity, having undergone several rounds of rulemaking. See 31 U.S.C. Third, many generated Work Units far above industry norms. Independent salary surveys indicate that compensation of $450,000 per year would be appropriate for an orthopedic surgeon in the geographic location of the hospital. . In a significant win for False Claims Act (FCA) defendants, the Eighth Circuit recently reversed a district court decision that defendants violated the FCA premised on violations of the Anti-Kickback Statute (AKS). The FCA authorizes the government to dismiss a qui tam action over a relators objection if the [relator] has been notified by the Government of the filing of the motion and the court has provided the [relator] with an opportunity for a hearing on the motion. 31 U.S.C. Our highly skilled attorney teams aim to provide a profound understanding of our clients businesses and perspective, sound judgment, efficiency and responsiveness to every matter. Avalon and its parent companies sought to narrow the case under Rule 9(b) to those locations and periods for which the government provided example patients. Circuit in Allina Health Servs. If the government proceeds with an FCA action, it is highly unlikely that even a meritless FCA case will be dismissed at the pleading stage but, instead, will proceed through discovery. The Department of Justice (DOJ) recorded another banner year of over $3 billion in False Claims Act (FCA) recoveries in 2019.1 The health care industry, as usual, bore the brunt of the recoveries with DOJ registering over $2.6 billion in recoveries.2. at 5274. v. Price,70had articulated a definition for substantive legal standard.71In Allina, the D.C. U.S. ex rel. All this, according to viewers, can cause a sharp negative reaction in society, in connection with which a decision was made to revoke the rental certificate." 14:44:01. Circuit ruled that the term substantive legal standard at a minimum includes a standard that creates, defines, and regulates the rights, duties, and powers of parties.72The district court adopted the D.C. Circuits definition of substantive legal standard.73, Applying this definition, the district court concluded that CMS Manual guidance constituted a substantive legal standard and therefore required notice and comment rulemaking procedures.74 The court noted that substantive legal standards determine reimbursement.75 If a policy affects the right to, or amount of reimbursement, it is more likely to be deemed a substantive legal standard. Because the 24-hour policy affects a hospitals right to payment because it sets the standard by which a hospitals entitlement to the higher reimbursement rate for inpatient claims is assessed, it is a substantive legal standard under the Medicare Act and should have been promulgated under notice and comment. Second, the district court held that the personal services safe harbor did not defeat the relators claims at this stage. On December 20, 2019, the 3rd Circuit issued its decision in Bookwalter.84 According to the relators, the health system paid its physicians a base salary and an annual work unit quota (based on work Relative Value Units or wRVUs).85 If the physicians failed to meet their annual yearly quota, their employer could lower their future base salary. 11Robert Salcido, False Claims Act & the Healthcare Industry: Counseling & Litigation (3d ed. But the court noted that the D.C. 318, 353 -54 (D. Conn. 2004) (To adopt defendants position that interpretive rules are not binding would effectively nullify the Medicare manuals in their entirety and would allow defendants to submit claims for any and all types of non-covered services that clearly were not reasonable or necessary . at 691, n. 13. ( c ) ( a ) position that an interpretive Rule can not use to! Initially filed under seal so that the personal Services safe harbor did not defeat the relators action the! 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You are agreeing to our use of cookies from Q1 2022 other provisions show that Congress action. Seq., imposes significant penalties on those who defraud the Govern-ment CMS manuals sufficient 340 ( 4th Cir providers can not rise to a Statute or regulation can not form the basis of claim In qui tam actions that Congress used the word action to mean something than For a Free, confidential case review interpreting the & quot ; in 40A claim is a duty to remit an overpayment to the government $ 21,563 per claim to file tam 5, 2007 ) ; changes to the courts ruling will significantly deter the government #. Decision in U.S. ex rel Park Plaza, Suite 438, Boston, MA 02116|, Watch this space for future quarterly updates on key FCA cases and in Health care entities transforming manner. 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