Private Enforcement of Healthcare Fraud & Abuse Laws

Transcription

1 Private Enforcement of Healthcare Fraud & Abuse Laws Thursday, June 21, 2018 Sean McKenna Former 10 year Assistant U.S. Attorney, Attorney with U.S. Office of Counsel to the Inspector General for HHS and U.S. Department of HHS, Office of General Counsel Now represents healthcare providers in all manner of litigation, regulatory, and enforcement matters 2 1

2 Nathan Fish Nathan counsels health care clients on a wide range of regulatory issues, including fraud and abuse, Medicare/Medicaid enrollment and reimbursement, and licensure Nathan also has wide ranging experience with health care transactions, internal investigations, and compliance reviews, and government enforcement actions, investigations, and audits 3 Brad Smyer brad.smyer@alston.com Brad represents health care clients in complex litigation, government and internal corporate investigations, enforcement proceedings, whistleblower suits, and payor audits Brad frequently draws on his unique industry experience, including a multi year position with the U.S. Federal Judiciary, a Certification in Healthcare Compliance (CHC), and his experience working for a large hospital system, to help prevent and resolve regulatory compliance issues 4 2

3 Agenda Overview of Enforcement Agencies Summary of Fraud and Abuse Laws Expansion of Federal Travel Act allegations in Healthcare Enforcement Developments in Private Enforcement of Fraud and Abuse Laws Conclusion & Questions 5 Overview of Healthcare Fraud Enforcement Agencies 6 3

4 U.S. Department of Justice (DOJ) Attorney General Deputy Attorney General Solicitor General Office of the Solicitor General Associate Attorney General Office of Legislative Affairs Office of Legal Policy Office of Tribal Justice Office of Legal Counsel Office of Public Affairs Federal Bureau of Investigation Drug Enforcement Administration Criminal Division Bureau of Prisons National Security Division Office of the Inspector General Office of Professional Responsibility Office of Pardon Attorney Office of Justice Programs Community Oriented Policing Services (COPS) Civil Rights Division Civil Division Executive Office for U.S. Attorneys U.S. Marshals Service Justice Management Department U.S. Parole Commission Executive Office for U.S. Trustees Office of Information Policy Antitrust Division Environment & Natural Resources Division U.S. Attorneys Interpol Washington Executive Office for immigration Review Executive Office for Organized Crime Drug Enforcement Task Force Office on Violence Against Women Foreign Claims Settlement Commission Tax Division Community Relations Service Bureau of Alcohol, Tobacco, Firearms & Explosives Professional Responsibility Advisory Office 7 DOJ, continued Commitment to prosecute healthcare fraud Criminal/Civil/Antitrust Divisions Consumer Protection Branch FBI/DEA Healthcare Fraud Unit Coordinators within 94 United States Attorneys' Offices Yates Memorandum Relationships with federal & state enforcement agencies with distinct funding sources Partnerships with private payors 8 4

5 Other Enforcement Players Centers for Medicare and Medicaid Services (CMS) TRICARE Management Authority Offices of Inspectors General Federal and State Medicaid State Agencies Medicaid Fraud Control Units Licensing Boards Local District Attorneys Federal/State Contractors Commercial Special Investigative Units Whistleblowers Private Litigants 9 Summary of Fraud and Abuse Laws 10 5

6 Health Care Fraud Statute (18 U.S.C. 1347) Federal criminal statute for public AND private health care fraud Knowingly and willfully execute/attempt a scheme or artifice to: Defraud health care benefit program; or Obtain by false or fraudulent pretenses property under custody/control of program in connection with delivery or payment for items or services 10 year imprisonment, restitution, and fine 11 False Claims Act (31 U.S.C. 3729) A false claim or statement (or conspiracy) for payment to the United States Claim must be submitted "knowingly" Actual knowledge Deliberate ignorance Reckless disregard No specific intent to defraud required Reverse false claims is the knowing retention of a known overpayment AKS and Stark are bases for liability 12 6

7 Anti Kickback Statute (42 U.S.C. 1320a 7b(b)) Federal criminal statute Prohibits knowingly and willfully offering, paying, soliciting, or receiving remuneration for recommending/arranging items/services paid for by a federal healthcare program Remuneration is anything of value One purpose test Includes non clinicians 13 AKS, continued Advisory Opinions address industry concerns, not precedential Violation is a felony, punishable by: Criminal fines of up to $25,000 per violation Imprisonment for up to 5 years Civil monetary penalties Exclusion Penalties and criminal liability apply to both sides of the arrangement Violation can also be the basis of an FCA claim State analogs may limit kickbacks in cash / private plans 14 7

8 AKS, continued Several statutory exceptions and regulatory safe harbors including: Personal services and management contracts Bona fide employees Investment interests Space and equipment rentals Discounts Generally, must be commercially reasonable and fair market value (FMV) 15 AKS, continued If no safe harbor, the totality of the facts and circumstances are analyzed FMV / commercial reasonableness generally means less risk OIG s principal concerns in assessing potential risk are: Overutilization Increased federal healthcare program costs Interference with clinical decision making Patient safety and quality of care concerns Decrease in patient freedom of choice Unfair competition 16 8

9 Stark Law (42 U.S.C. 1395) Prohibits physician self referrals Must involve physician referral Ownership interest or compensation arrangement Designated health services (e.g., outpatient drugs, DME) Medicare and Medicaid only Strict liability Must fully satisfy statutory or regulatory exception Remedy is payment disallowance for entire period of noncompliance Exclusion and CMP liability May be violation of FCA State law may limit non Medicare business agreements 17 Stark Law, continued Stark exceptions include: Publicly traded securities and mutual funds Bona fide employment relationships Personal service arrangements Rental of office space and equipment Fair market value compensation Indirect compensation arrangements Must meet every requirement of a Stark exception Generally must be commercially reasonable and FMV 18 9

10 Civil Monetary Penalties Law (42 U.S.C. 1320a 7a(a)) HHS OIG administrative remedy Permissive exclusion and money damages for specific violations, including: Beneficiary inducement Payment or receipt of illegal kickbacks Mirrors FCA but not governed by civil rules of procedure or evidence Limited discovery Hearsay admissible OIG usually releases this authority in exchange for Corporate Integrity Agreement 19 State Fraud and Abuse Statutes Many states have enacted their own anti kickback statutes, which vary widely Other state healthcare laws include: Self referral prohibitions/restrictions (i.e., mini Stark laws) False claims ( mini FCA or similar statutes) Worker s compensation Commercial bribery Consumer protection Out of Network (OON) billing and collection co pays 20 10

11 Growth of Federal Travel Act Allegations in Healthcare Enforcement 21 The Federal Travel Act (18 U.S.C. 1952) Anti racketeering statute used to prosecute AKS violations Prevents use of mail or interstate/foreign travel or commerce with intent to promote, manage, establish, carry on, or facilitate the promotion, management, establishment, or carrying on, of any unlawful activity Unlawful activity includes bribery in violation of the laws of the State in which committed or of the United States Can transform a state misdemeanor (commercial bribery) that is seldom prosecuted separately in state court into a federal felony Penalties include imprisonment up to 5 years, fines, or both 22 11

12 Travel Act, continued USA v. Forest Park Med. Ctr., No. 3:16 cr (N.D. Tex) Physician owned, out of network hospital Alleged scheme involved $40M in kickbacks, bribes, and other inducements (e.g., copayment waivers) for referrals to FPMC $200M in claims paid from 2009 to 2013 Federal payors included TRICARE, Federal Employees Health Benefits (FEHB) Program, Federal Employees' Compensation Act (FECA) program FPMC agreed to pay around $475K to settle kickback allegations relating to TRICARE and FECA referrals 21 executives and doctors charged December 2016 Conspiracy to pay and receive healthcare bribes and kickbacks under AKS and Travel Act Multiple parties have pleaded guilty to Travel Act violations, including the anesthesiologist/founder 23 Travel Act, continued Biodiagnostic Laboratory Services, LLC (D.N.J.) More than 50 convictions, including 36 physicians, in connection with a scheme operated by BLS, a New Jersey blood testing lab Payments to physicians included bribes, sham lease, and consulting payments In June 2016, BLS pleaded guilty to one count of conspiracy to violate the AKS and the Travel Act and one count of conspiracy to commit money laundering Multiple physicians have pleaded guilty to Travel Act and AKS violations, money laundering, and other charges In March 2017, a federal jury convicted a physician of conspiring to violate and actual violations of the AKS and the Travel Act, as well as wire fraud See, e.g., United States v. Nicoll, No. CRIM.A SRC, 2015 WL (D.N.J. July 9, 2015), aff'd, 711 Fed. Appx. 108 (3d Cir. 2017); United States v. Greenspan, No. CR (WHW), 2016 WL (D.N.J. Aug. 16, 2016) 24 12

13 Travel Act, continued Pacific Hospital (C.D. Cal.) Hospital allegedly paid tens of millions of dollars in illegal kickbacks to doctors and others for referring patients Patients underwent spinal surgeries that led to more than $580M in fraudulent bills being submitted over eight years Former CFO pleaded guilty to participating in a conspiracy that engaged in, among other things, paying or receiving kickbacks and violating the Travel Act (specifically, interstate travel in aid of a racketeering enterprise) Orthopedic surgeon pleaded guilty to conspiracy to commit mail fraud, honest services fraud, and violations of the Travel Act, as well as a separate, substantive Travel Act violation See U.S. v. Canedo, case no. 8:15 cr 00077, U.S. v. Cohen, No. 8:15 cr 00142, U.S. v. Ivar, No. 8:15 cr JLS, U.S. v. Sobol, No. 8:15 cr 00148, and U.S. v. Randall, No. 8:12 cr 00023, all in the U.S. District Court for the Central District of California. The underlying case is State Compensation Insurance Fund v. Michael D. Drobot Sr. et al., No. 8:13 cv 00956, in the same jurisdiction. 25 Developments in Private Enforcement of Fraud and Abuse Laws 26 13

14 Private Enforcement Qui tam actions under FCA DOJ New Civil Matters Qui Tam v. Non Qui Tam Actions Non Qui Tam Qui Tam $4,500,000,000 Relators Share of Qui Tam Settlements & Judgments $4,000,000,000 $3,500,000,000 $3,000,000,000 $2,500,000,000 $2,000,000,000 $1,500,000,000 Qui Tam Settlements & Judgments Relators' Share $1,000,000,000 $500,000,000 $

15 2017 FCA Settlements & Judgments Non Healthcare $1,300,000,000 Healthcare $2,400,000, Providers, suppliers, and others alleging illegality to terminate contracts Medical Development Network, Inc. v. Professional Respiratory Care/Home Medical Equipment Services, Inc., 673 So. 2d 565 (Fla. Dist. Ct. App. 1996) DME supplier agreed to pay an independent marketer a percentage of DME sales it generated When marketer sued for breach of contract, DME supplier defended on the ground that the agreement was illegal under the federal anti kickback statute A Florida appeals court affirmed the trial court s conclusion that the agreement was illegal and unenforceable 30 15

16 Beneficiaries suing commercial payors Potential class action by UnitedHealth members arguing that their plans did not permit UnitedHealth to charge more for copays than their prescriptions actually cost and pocket the difference Example: Pharmacy charged $11.65 for a prescription, customer paid a $50 copay, and UnitedHealth allegedly kept the $38.35 difference Alleged violations of ERISA, RICO, breach of contract, fraud, and state laws, including consumer protection and insurance laws 31 Commercial payors suing providers to recoup/avoid tainted payments Blue Cross & Blue Shield of Mississippi v. Sharkey Issaquena Cmty. Hosp., No. 3:17 CV 338 DPJ FKB, 2017 WL (S.D. Miss. Dec. 13, 2017) Mississippi hospital allegedly entered into contract with labs that allowed them to submit claims using the hospital s name and billing number for services not performed at or by the hospital $9.8M in claims paid by Blue Cross (in network) In May 2017, Blue Cross sued the hospital for breach of contract and the labs for fraud, civil conspiracy, negligent misrepresentation, and unjust enrichment Blue Cross asked the court to enjoin further submission of misrepresented claims and for a declaration that it is not required to pay for pending misrepresented claims The claims were settled 32 16

17 Aetna Inc., et al. v. The People s Choice Hosp., LLC, et al., No. 5:18 CV 0323 OLG (W.D. Tex. June 11, 2018) Similar suit involving the same laboratories Allegedly acquired control over a financially vulnerable Oklahoma hospital and caused Anthem to pay $21.6M in claims between January 2016 and April 2017 Increase from an average of 6 claims/month to 834 claims/month Civil RICO, fraud, negligent misrepresentation, money had and received, unjust enrichment, civil conspiracy, tortious interference, injunctive relief Ongoing 33 RightCHOICE Managed Care, Inc., et al. v. Hosp. Partners, Inc., et al., No. 5:18 CV DGK (W.D. Mo. June 8, 2018) Allegations: Defendants used a 15 bed hospital in Missouri to bill BCBS plans for lab tests performed by various labs for patients who were never present at the hospital, were never seen by providers credentialed at the hospital, and were located outside the hospital s service area Since August 2016, Defendants billed Plaintiffs more than $258M for lab testing purportedly performed at the hospital, causing Plaintiffs to reimburse the hospital more than $91M Resulted in staggering increase in urine drug testing claims, from 85 in the first six months of 2016, to more than 37,000 in the first six months of 2017 Fraud, negligent misrepresentation, tortious interference, civil conspiracy, unjust enrichment, money had and received, ERISA, injunctive relief Ongoing 34 17

18 Aetna Life Insurance Co. v. Bay Area Surgical Management LLC, No JT, 2016 Cal. Super. LEXIS 145 (Cal. App. Dep t Super. Ct.) Aetna sued network of ASCs for fraud, intentional interference with contractual relations, and unjust enrichment Out of network overbilling and kickback scheme In 2016, a California jury awarded Aetna $37.4M in damages 35 Aetna Life Ins. Co. v. Humble Surgical Hosp., LLC, No. CV H , 2016 WL (S.D. Tex. Dec. 31, 2016), appeal dismissed sub nom. Aetna Life Ins. Co. v. Humble Surgical Hosp., L.L.C., No , 2017 WL (5th Cir. Apr. 5, 2017) Similar kickback case against Texas hospital In 2016, a federal court awarded Aetna $41.4M Hospital prevailed in a similar lawsuit brought by Cigna 36 18

19 Cigna v. Sky Toxicology,No. 9:15 cv WJZ (S.D. Fla.) Cigna sued Texas based out of network diagnostic laboratories which provide testing on urine samples, alleging a widespread fraudulent scheme causing Cigna to incur over $20 million in damages, in violation of federal and state law Sky Labs engaged in alleged fee forgiveness scheme, failing to bill patients for their required cost share obligations, and promising not to seek reimbursement from the patients for any other portion of its bill that the plan does not cover Sky Labs also allegedly induced physicians and drug treatment centers to refer patients to its OON labs by offering kickbacks The claims were settled 37 United Healthcare v. Sky Toxicology, et al., Case No. 9:16 cv RLR (S.D. Fla.) United sued Sky Toxicology and other defendants, alleging medical testing lab executives cost it $50 million by offering kickbacks in the form of partnership shares to treatment facilities and doctors in exchange for often unnecessary urine test referrals, disguising payments as partnership distributions The lab defendants allegedly encouraged addiction treatment facilities and pain management physicians to refer large quantities of urinalysis tests, which the labs then billed to United without requesting payment from the insureds The action was dismissed without prejudice after the court concluded that the plaintiffs lack standing to assert ERISA claims 38 19

20 United Healthcare Serv., Inc., et al. v. Next Health, LLC, et al., No. 3:17 CV 243 (N.D. Tex.) United sued Next Health and its subsidiaries, Texas based companies which perform drug and genetic lab testing Labs allegedly paid bribes and kickbacks to referral sources in exchange for test orders, improperly utilized standing test protocols regardless of patients conditions or needs and performed and billed for testing services that were neither necessary nor ordered Complaint asserted claims for fraud, conspiracy, unjust enrichment, and violations of the Texas Theft Liability Act and Lanham Act Case remains pending 39 State Farm Mut. Auto. Ins. Co. v. Physicians Grp. of Sarasota, L.L.C., 9 F. Supp. 3d 1303 (M.D. Fla. 2014) State Farm alleged that accident referral service ( Ask Gary ) orchestrated a fraudulent referral scheme to lure automobile accident victims to the referral service owner s Florida clinics According to the Complaint, Defendants unlawfully collected accident victims' PIP and medical benefits, in violation of the Anti Kickback Statute, Patient Brokering Act, and Patient Self Referral Act In addition to the statutory claims, State Farm sought declaratory judgment that it is not liable for any bills submitted by the defendants, and asserted common law claims for fraud and unjust enrichment, with damages of at least $480,000 in fraudulent bills The Court denied the motion to dismiss, and matter was subsequently settled 40 20

21 Conclusion & Questions Attendees can submit questions via the chat feature on the webinar interface 41 21