Compliance Basics: Stark, Anti-Kickback and False Claims

Compliance Basics: Stark, Anti-Kickback and False Claims DEBBI JOHNSTONE JOHN KELLY Legal Issues Boot Camp For Compliance Professionals June 7, 2011 Fulbright & Jaworski L.L.P. Houston, Texas

2 Stark Law Prohibition Physician may not refer Medicare/Medicaid patients to a DHS entity if the physician has a financial relationship with the entity DHS entity cannot bill for the services Unless the financial relationship qualifies for an exception

3 Penalties for Stark Law Violation Civil sanctions: Denial of payment Refunds of amounts collected $15,000 for each bill/claim submitted 3x amount claimed $100,000 for each arrangement or scheme Program exclusion

4 Stark Timeline Stark I Stark II 1989 Enacted (OBRA 89) 1993 Enacted (OBRA 93) 1992 Effective Proposed 1995 Effective Rules 1995 Final Rules 1998 Proposed Rules 2001 Final Rules, Phase I 2004 Final Rules, Phase II 2007 Final Rules 2008 Final Rules

5 Elements of Stark Law Prohibition Financial relationship (directly or indirectly) Between Physician (or immediate family member) And DHS entity To which Physician refers M&M patients for DHS

6 Elements of Stark Law Prohibition Strict Liability Law Intent is Not Relevant Technical Violations = Violations

7 Designated Health Services Clinical laboratory services Radiology services Physical and Occupational therapy services Radiation therapy services Durable medical equipment Outpatient prescription drugs Parenteral and enteral nutrients, equipment, and supplies Prosthetics, orthotics, and prosthetic devices and supplies Home health services Inpatient/outpatient hospital services

8 Financial Relationship Ownership or Investment Interest Compensation Arrangement

9 Ownership Interest Can be through: Equity Debt Other means Includes interest in an entity that holds an ownership or investment interest in any entity providing designated health services Common ownership in entity ownership in each other

10 Ownership Interest Stock Partnership shares Limited liability company memberships Loans, bonds, or other financial instruments secured with an entity s property or revenue

11 Ownership Interest Does not include: An interest in a retirement plan Stock options and convertible securities received as compensation until stock options are exercised or convertible securities are converted to equity An unsecured loan (also a compensation arrangement) An under arrangement contract

12 Compensation Arrangement Direct or indirect arrangement involving remuneration between a physician (or immediate family member) and an entity

13 Exceptions Ownership or Investment Arrangements Compensation Arrangements Ownership and Compensation Arrangements

14 Ownership Exceptions Publicly Traded Securities and Mutual Funds Must be purchased on terms generally available to public At time of DHS referral Listed on exchange or traded under NASDAQ Shareholder equity exceeding $75 million

15 Ownership Exceptions Rural Providers Furnishes at least 75% of its DHS to residents of rural area Rural area defined as outside MSA Intrafamily Referrals Intrafamily rural referrals are permitted when there is no non-family owned DHS provider available to furnish services within home or within 25 miles of home

16 Ownership Exceptions Hospital Ownership Ownership in whole hospital Physician owner who refers to the hospital must be authorized to provide services at hospital

17 Compensation Exceptions Rental of Space and Equipment Written, signed, specifies space/equipment One year term Exclusive use by lessee FMV rental set in advance with no accounting for referrals Rental rate must be fixed; cannot vary based upon use Commercially reasonable

18 Compensation Exceptions Rental of Space and Equipment With or without cause termination provisions ok if no new lease within 1 st year of original term Month-to-month holdovers ok for 6 months on same terms Operating and capital leases ok Subleases ok

19 Compensation Exceptions Bona Fide Employment Employment for identifiable services Payment FMV and does not account for referrals Productivity bonuses based on personally performed services are permissable Productivity bonuses cannot include incident to services or profit distributions

20 Compensation Exceptions Personal Services Written, signed, agreement, specifying services Covers all services furnished by physician Services reasonable and necessary for legitimate business purpose Term one year; with or without cause termination in less than one year ok if no new agreement within the year Compensation is set in advance, FMV, with no accounting for referrals or other business generated Agreement must either incorporate all other agreements or cross-reference to a master list of contracts maintained and updated centrally by entity, which is made available to Secretary of HHS upon request

21 Compensation Exceptions Physician Recruitment Payments by hospital to physician to induce physician to relocate to geographic area served by hospital ok if: Referrals not required Amount of payment not referral influenced Written, signed agreement Physician not precluded from establishing privileges elsewhere

22 Compensation Exceptions Physician Recruitment Hospital s geographic area defined as the lowest number of contiguous postal zip codes from which hospital draws 75% of inpatients Relocation defined as moving practice at least 25 miles or 75% of revenues in new practice derived from new patients Extended to residents and physicians practicing less than one year Extended to permit FQHCs to recruit FMV exception not applicable

23 Compensation Exceptions Physician Recruitment Limited exception for recruitment to group if: Written agreement between hospital and group if payment made to group Remuneration not related to referrals from physician or group Group cannot impose unreasonable practice restrictions on recruited physician (e.g., non-compete) No violation of Anti-Kickback Law or laws addressing claims submission

24 Compensation Exceptions Physician Recruitment Remuneration passed through to recruited physician except for actual costs of group Costs allocated under income guarantee may not exceed actual additional incremental costs Group must keep record of actual costs for 5 years Record available to Secretary of HHS upon request

25 Compensation Exceptions Isolated Transactions One time sale of property or practice Installment payments allowed if set before 1 st payment made, not related to referrals, and outstanding balance guaranteed or secured FMV payment not taking into account referrals Commercially reasonable

26 Compensation Exceptions Payment by Physician Applies to purchase of clinical lab Applies to purchase of other items or services if FMV

27 Regulatory Exceptions Fair Market Value Compensation Written agreement, signed, specifies services Timeframe (term) for any period allowed as long as only one agreement during course of year for same or similar items or services Compensation set in advance, FMV, and not reflecting referrals Commercially reasonable No violation of Anti-Kickback Law or laws addressing claims submission No counseling or promotion of illegal activity

28 Regulatory Exceptions Non-Monetary Compensation Annual limit of $300, adjusted annually by CPI; $359 for 2011 Not solicited by physician Not based on referrals No violation of Anti-Kickback Law or laws addressing claims submission

29 Regulatory Exceptions Medical Staff Incidental Benefits Applies to benefits furnished to medical staff on hospital s campus Offered to all physicians practicing in same specialty without regard to referrals Provided when physicians on campus engaged in activities that benefit hospital Identification on website ok Internet access, pagers to access hospital information ok Reasonably related to provision of medical services at hospital Less than $25 limit per benefit annually increased by CPI; $30 for 2011 No violation of Anti-Kickback Law or laws addressing claims submission

30 Regulatory Exceptions Professional Courtesy Defined as free or discounted health care items to physician, immediate family member, or office staff Offered to all medical staff physicians or physicians in community without regard to referrals Services routinely provided by entity Policy must be in writing approved by governing body Not offered to physician or immediate family member who is Medicare beneficiary, unless financial need No violation of Anti-Kickback Law or laws addressing claims submission

31 Regulatory Exceptions Academic Medical Centers (AMC) AMC consists of: Accredited medical school or accredited academic hospital Faculty practice plan Affiliated hospitals (majority of physicians on medical staff are faculty and majority of admissions from faculty)

32 Regulatory Exceptions Academic Medical Centers Faculty requirements Bona fide employee of component Licensed to practice medicine Bona fide faculty appointment Provides substantial academic or clinical teaching services

33 Regulatory Exceptions Risk Sharing Arrangements Exempts compensation between managed care organization or IPA & physician for services furnished to enrollees Exemption applies to all compensation paid directly or indirectly through downstream entities

34 Regulatory Exceptions Compliance Training Held in local community Includes: elements of compliance program; requirements of federal and state health program; federal, state, or local laws Excludes CME

35 Regulatory Exceptions Charitable Donations by Physician Made to tax-exempt organization Donation not solicited Does not violate Anti-Kickback Law or laws addressing claims submission

36 Ownership/Compensation Exceptions In-Office Ancillary Services Furnished by referring physician or member of group or by individual supervised by referring physician or member of group in accordance with Medicare payment and coverage rules Furnished in same building or centralized building used by group practice Billed by physician, group, or entity that is wholly owned by group

37 Ownership/Compensation Exceptions In-Office Ancillary Services Exception (cont d) Group practice definition Single legal entity operating primarily for purpose of being group practice At least 2 physicians who are employees or owners Part-time employees qualify

38 Ownership/Compensation Exceptions In-Office Ancillary Services Exception (cont d) Group practice definition Each member furnishes substantially full range of services through group Substantially all (75%) of patient care services furnished through group 75% of physician patient encounters furnished by members of group Phase II exception for new physicians relocating from another area who would cause noncompliance with substantially all test

39 Ownership/Compensation Exceptions In-Office Ancillary Services Exception (cont d) Group practice definition Overhead expenses and income distributed by predetermined methods Group is unified business Phase II eliminated centralized UR from unified business test

40 Ownership/Compensation Exceptions In-Office Ancillary Services Exception (cont d) Group practice definition Compensation of group members not based on volume or value of referrals Overall profit and productivity bonuses based on services personally performed (including incident to) are ok Phase II clarified that all physicians in group can be bonused based on incident to services

41 Ownership/Compensation Exceptions Stand in the Shoes Applicable to compensation arrangements Owners of a physician organization (typically, a medical group) are considered to stand in the shoes of the group Requires the compensation arrangement between the physician organization and DHS entity to meet an exception

42 Federal Anti-Kickback Law Whoever knowingly and willfully offers or pays (or solicits or receives) any remuneration (including any kickback, bribe or rebate) directly or indirectly, overtly or covertly, in cash or in kind to any person to induce such person -- to purchase, lease, order or arrange for or recommend purchasing, leasing, or ordering any good, facility, service or item for which payment may be made, in whole or in part, under a Federal healthcare program, shall be guilty of a felony, shall be fined not more than $25,000 or imprisoned for not more than five years, or both. 42 U.S.C. 1320a-7b(b)

43 Purposes of Anti-Kickback Statute To prevent inappropriate medical referrals by providers who may be unduly influenced by financial incentives To prevent overutilization and increased federal health care program costs To prevent unfair competition To ensure the proper reporting of costs to the government

44 AKS Highpoints Applies to both sides: offer/pay and solicit/receive Interpreted broadly one purpose test Applicable to a wide variety of common financial relationships that do not involve obvious kickbacks or fraud Many practices common in the health care industry implicate the AKS The fact that a business arrangement is common is not a defense!

45 AKS Sanctions Sanctions for violation are severe Substantial criminal fines and up to 5 years imprisonment Exclusion from participation in Medicare, Medicaid and other federally funded healthcare programs individually and at the corporate level Civil monetary penalties up to $50,000 per offense

46 AKS Exceptions and Safe Harbors Business arrangements meeting a statutory exception/regulatory safe harbor are protected from liability A practice not meeting an exception/safe harbor may be reviewed to determine whether it is likely to result in the abuses the AKS is designed to combat Due to the one purpose test, enforcers have unlimited discretion to prosecute an arrangement that implicates the AKS but does not fully meet an exception/safe harbor

47 AKS Statutory Exceptions Bona fide employment arrangements Certain discounts Payments to group purchasing agents Risk-sharing arrangements with managed care plans Waivers of coinsurance for federally qualified health centers

48 AKS Regulatory Safe Harbors Investment interests Space rental Equipment rental Personal service and management contracts Sale of practice Referral services Warranties Discounts Employees Group purchasing arrangements Certain waivers of Part A coinsurance and deductibles

49 AKS Regulatory Safe Harbors Certain arrangements with managed care plans Practitioner recruitment OB malpractice Insurance subsidies Investments in group practices Cooperative hospital services organizations Ambulatory surgical centers Referral arrangements for specialty services Ambulance replenishing

50 Texas Anti-Kickback Statute Texas Illegal Remuneration Law Contained in the Occupations Code Criminal statute prohibiting knowing offer to pay or agreeing to accept, directly or indirectly, overtly or covertly any remuneration in cash or in kind to or from another for securing or soliciting a patient or patronage for or from a person licensed, certified, or registered by a state health care regulatory agency Not limited to government health programs Incorporates by reference federal AKS Safe Harbors

51 Common Arrangements Potentially Subject to Stark Law and AKS Equipment or space leases (e.g., hospital MOB lease to physician) Personal services arrangements with physicians or others in a position to refer (e.g., hospital medical director contracts) Physician Recruitment Arrangements Gifts and business courtesies to patients or referral sources Professional courtesy discounts Waiver of patient copayments and deductibles

52 Common Arrangements Potentially Subject to Stark Law and AKS Educational funding to providers from vendors Gifts or entertainment to referral sources Free use of demonstration products Gainsharing arrangements Group purchasing organization arrangements Joint Ventures

The False Claims Act 31 U.S.C. 3729 et seq. 53

54 False Claims Act Enacted in 1863 to protect the U.S. Treasury from fraud and abuse in Civil War defense contracts Prohibits anyone from knowingly presenting, or causing to be presented, a false or fraudulent claim to the Government Authorizes private citizen lawsuits and contains whistleblower protections Amended in 2009 for first time in 20 years Amended twice in 2010 Changes were to close judicially created limitations and perceived loopholes in the statute The government s chief weapon in policing the quality and necessity of health care

Background: Heightened Enforcement FCA prosecutorial focus is part of larger national priority of reducing health care costs by through increased enforcement and decreased waste. DOJ & HHS created inter-agency group, The Health Care Fraud Prevention & Enforcement Team ( HEAT ), to target fraud. DOJ has 1000+ civil health care fraud cases pending. Recent increase in criminal & civil prosecution of providers & executives. Can lead to fines, jail time, and/or exclusion from participation in federal programs. DOJ recovered $3 billion in civil settlements and judgments for health care fraud in 2010

56 DOJ Agenda 2010 Patient Protection and Affordable Care Act ( PPACA ) allocates $350 million for health care fraud enforcement over the next 10 years. Medicare Fraud Strike Force expansion. DOJ's Civil Division has made "increased use of the False Claims Act." See Tony West, Remarks at the American Bar Association National Institute on the Civil False Claims Act and Qui Tam Enforcement, at 1 (June 3, 2010) The DOJ is part of an "aggressive, coordinated and sustained effort at the federal level to hold perpetrators of fraud accountable, be they large companies or individuals.

57 Powerful Statute for Many Reasons 1. Large potential damages. 2. Those who qualify as a whistleblower has expanded. 3. Long statute of limitations period. 4. Liability not limited to those who directly submit claims. 5. Actually rendering the services that were billed does not necessarily negate the falsity of a claim 6. Multiple Theories of Liability (e.g. express, implied)

58 Damages and Penalties Civil Penalties for FCA violations include: $5,500 - $11,000 per claim Plus treble damages for the amount of harm in which the Government sustains No FCA framework for calculating actual damages or the number of claims, which leaves room for aggressive theories of liability damages. Qui Tam relators ( whistleblowers ) are allowed to bring an FCA action and receive 15-30% of any recovery Potential for post-conviction exclusion from federal health care programs is additional motivator for defendants to reach a settlement rather than risk losing at trial.

59 Statute of Limitations Civil action under FCA may not be brought more than six years after the date of the violation, or three years from the discovery of the fraud, but in no event more than 10 years after the violation, whichever occurs last. 31 U.S.C. 3731(b) Courts have held that the longer, 10-year limitations period is available to relators as well as the government. See United States ex rel. Parikh v. Premera Blue Cross, No. CV01-0476 MJP (W.D. Wash. Apr. 3, 2007), relying on United States ex rel. Hyatt v. Northrop Corp., 91 F.3d 1211, 1216 (9th Cir. 1995).

60 Statutory Language: False Claims Act Statutory Language: causing false claims to be presented in violation of 31 U.S.C. 3729(a)(1). using a false statement to get a false claim paid in violation of 31 U.S.C. 3729(a)(2). using a false statement to avoid or decrease an obligation to pay the U.S. in violation of 31 U.S.C. 3729(a)(7).

61 FCA Components Knowingly is defined as: Actual knowledge of information Deliberate ignorance of truth or falsity of information, or Reckless disregard of truth or falsity of information No proof of specific intent to defraud is required. Does not include innocent mistakes or negligence. The claim has to be false.

62 Falsity Sine qua non of liability Types of falsity Express falsity Something is false within the four corners of the claim form Implied falsity Claim violates a statute or regulation that makes compliance a condition of payment. E.g., Stark Law and, since PPACA, AKS Not a tool for enforcement of all other regulatory violations.

63 Fraud Enforcement and Recovery Act of 2009 (FERA) Eliminates requirement that false claims be presented to a federal official or directly involve federal funds. Previously, USSC held that FCA applied only where the defendant had actual knowledge that the claims would be paid by the government. Allison Engine. FERA also includes language clarifying that a violation occurs upon the knowing retention, not merely the receipt, of an overpayment. knowingly conceal or knowingly and improperly avoid or decrease an obligation to pay or transmit money or property to the Government. Providers reporting overpayments must state in writing the reason for the overpayment. PPACA added requirement that overpayments be refunded within 60 days of discovery.

64 Express False Certifications Services were not in fact provided as claimed Phantom services Different (unqualified) provider Services were not medically necessary No payment may be made under [the Medicare statute] for any expenses incurred for items or services which are not reasonable and necessary for the diagnosis or treatment of illness or injury or to improve the functioning of a malformed body member. Services were not supervised as required for payment

Express False Certification United States ex rel. Mallavarapu v. Acadiana Cardiology, LLC (E.D. La. Aug. 17, 2006) Relator cardiologist alleged Our Lady of Lourdes Regional Medical Center defrauded Medicare, Medicaid and the military health care plan, TRICARE, in violation of the False Claims Act. Defendant hospital allegedly performed medically unnecessary angiograms, angioplasties, and elective stenting procedures before falsely certifying such procedures as medically necessary in order to receive reimbursement. $3.8 million settlement to the United States. 65

66 Express Health Care Claims CMS 1500 http://www.cms.gov/cmsforms/downloads/cms150080 5.pdf CMS 1450 Cost Reports Enrollment Applications Electronic submissions through clearinghouses

67 Implied False Certification Cases Many courts have premised FCA liability on an implied certification of compliance with a statute or regulation that creates a precondition to payment US ex rel. Lee (9th Cir.) US ex rel Mikes (2d Cir.) US ex rel Quinn (3d Cir.) (suggesting in dicta that precondition need not be express as long as compliance is not irrelevant to payment decision)

68 Implied Certification: Illinois v. ex. rel Raymer v. University of Chicago Hospitals Qui tam action brought by 2 former NICU nurses. Alleged hospital was knowingly double-bunking newborns in violation of state health and safety regulations. Thus, hospital s certification of compliance with all such laws and regulations for Medicaid payment allegedly violated the False Claims Act. Court denied the hospital s motion to dismiss.

69 Indirect Reverse False Claims United States v. Caremark, Inc. (March, 2011) The Fifth Circuit held that a pharmacy benefits manager may be found liable under Section 3729(a)(7) of the federal FCA under a theory of indirect reverse false claims. Reverse because alleged false statements premised on denial of coverage, rather than on submission of a claim for reimbursement. Indirect because alleged false statements made to state Medicaid agencies rather than directly to federal government. Qui tam complaint by former employee alleged that Caremark had improperly denied reimbursement requests for patients that were eligible for dual coverage under the private health plan administered by Caremark as well as under Medicaid. Federal law requires states to seek reimbursement from private insurers for dual-eligible patients and do not provide for federal funding in such instances. Caremark s alleged rejection of coverage to otherwise eligible patients allegedly caused federal and state governments to pay claims that Caremark should have.

70 FCA Worthless Services Theory Quality problems so serious as to render services paid for by Medicare worthless. The performance of the service is so deficient that for all practical purposes it is the equivalent of no performance at all. United States ex rel. Mikes v. Straus, 274 F.3d 687, 703 (2d Cir. 2001). As long as some value is provided to the government, a worthless services theory of liability under the False Claims Act will not succeed. Ex: Former supervisor at a testing facility alleged that the company falsified test results of control samples when they fell outside the acceptable standard or error, then reported the incorrect test results to Medicare patients. Held: Knowingly or recklessly billing for worthless services may be actionable under the False Claims Act. United States ex rel. Lee v. SmithKline Beecham, Inc., 245 F.3d 1048, 1053 (9 th Cir. 2001).

71 United States ex rel Steury v. Cardinal Health, Inc. (Nov., 2010) Fifth Circuit rendered a decision that brings yet another potential theory of FCA liability into play whether the FCA is violated if a company sells the government medical equipment that the company knew was defective and unsafe

72 FCA s Limited Reach on Issues of Quality US ex rel Sweeney v. Manorcare Health Services, Inc., 2005 WL 4030950 (WD Wash. Mar. 4, 2005): court rejected relator's attempt to assert false claim on nursing homes' alleged failure to provide patients with nutritional supplements & snacks because nursing home did not bill separately for these items. US ex rel. Philips v. Permian Residential Care, 386 F. Supp.2d 879 (WD Tex. 2005): FCA should not be used to call into question a health care provider's judgment regarding a specific course of treatment. US ex rel. Swan v. Covenant Care, Inc., 279 F. Supp.2d 1212 (ED CAl. 2002): Granted defendant s motion for summary judgment because the relator introduced no evidence to demonstrate that the defendant certified compliance with the applicable Medicare regulations as a condition to receiving federal payment.

73 Rendering Services Does Not Negate Falsity of a Claim Claim may be false if the purported provider was not a Medicare or Medicaid participating provider or did not actually render or supervise the services as indicated. See, e.g., Peterson v. Weinberger, 508 F.2d 45 (5th Cir. 1975); United States ex rel. Riley v. St. Luke's Episcopal Hosp., 355 F.3d 370 (5th Cir. 2004) (claim that defendants cooperated in billing for services rendered by an unlicensed physician survived summary judgment). United States may recover penalties on the false claims regardless of whether the claims were paid and caused damage to the United States.

74 Liability Limit: Salina Regional Health Ctr. Qui tam action alleging FCA violation for falsely certifying that its services were in compliance with federal healthcare services statutes. Motion to dismiss granted because a statute or regulation must expressly condition payment on statutory or regulatory compliance before it gives rise to an FCA violation. Court noted that no statutes required perfect compliance as a condition for Medicare payment, since doing so promotes the federalization of medical malpractice. United States ex rel. Conner v. Salina Regional Health Center, Inc., 459 F. Supp.2d 1081 (D. Kan. 2006).

75 Relators Who are they? Current and former employees Nurses Competitors Patients and customers Professional whistleblowers Protected from retaliation because of lawful acts done by the employee on behalf of the employee or others in furtherance of an action under this section, including investigation for, initiation of, testimony for, or assistance in an action filed or to be filed under this section.

76 Qui Tam Procedures Relator must file claim under seal. Relator serves the government and provides a statement of material evidence. Government has 60 days to decide whether to intervene. Extensions for good cause can be granted. Some extensions for years. Government either intervenes or declines. If government declines, relator can litigate for the government.

77 Qui Tam Awards If government intervenes 15-25% of the award depending on their contribution Reasonable costs and attorneys fees If the government declines 25-30% Reasonable costs and attorneys fees Court may reduce award if relator planned or initiated the violation. No reward if relator is convicted of a crime relating to the FCA violation.

78 Qui Tam Defenses Jurisdiction Public Disclosure First to file Pleading Rule 9(b) Rule 12(b)(6) Most cases end here.

79 Recent Fifth Circuit Cases N.D. Tex. (3/9/11) Hospice may be liable for FCA violation if it falsely certified it complied with anti-kickback statute as condition of Medicare payment (United States ex rel. Wall v. Vista Hospice Care Inc.). 5th Cir. (2/24/11) Government may pursue allegations PBM is liable for reverse false claims in FCA suit alleging PBM failed to reimburse Medicaid with respect to dual eligibles (United States ex rel. Ramadoss v. Caremark Inc.).

80 Forest Laboratories, Inc. (2010) On September 15, 2010 Forest Pharmaceuticals, a subsidiary of Forest Laboratories Inc., entered into a $313 million settlement to resolve allegations that it illegally distributed an unapproved drug product, promoted off-label uses for a different drug, and paid kickbacks to doctors to get them to prescribe these drugs. According to DOJ, these actions allegedly caused false claims to be submitted to federal health care programs. In addition to criminal penalties, Forest paid $149 million in civil penalties to resolve allegations under the FCA.

81 SCHERING PLOUGH SETTLEMENT (2006) Qui tam action by former employees Alleged failure to disclose to Medicaid Drug Rebate Program the best price paid for Claritin Alleged kickbacks to HMOs to keep Claritin on formularies Criminal: subsidiary paid $52.5 million fine for violations of Anti-Kickback Act and agreed to exclusion. Civil: $290 million settlement payment

82 GAMBRO SETTLEMENT (2004) Qui tam action by former Chief Medical Officer Allegations included kickbacks to physicians and claims for medically unnecessary tests. Criminal: Gambro subsidiary pled guilty to health care fraud, paid a $25 million fine, and agreed to permanent exclusion Civil: Gambro paid $310 million to federal government and $15 million to states.

83 Top FCA Cases of 2010 GlaxoSmithKline (10/10): $750 million to settle allegations that it manufactured and sold contaminated drugs to Medicaid and other government health programs. Criminal fine and forfeiture totaling $150 million and a civil settlement under the FCA and related state claims for $600 million. Allergan (09/10): $600 million for allegedly promoting Botox for unapproved uses, paying kickbacks to physicians, and other FCA violations, including criminal penalties of $375 million for misbranding and $225 million to resolve claims that its unlawful marketing caused the submission of false claims. AstraZeneca (04/10): $520 million to settle allegations that it had illegally marketed its antipsychotic drug, causing false claims to be submitted. The company had been accused of marketing the anti-psychotic drug for off-label uses, as well as paying kickbacks to physicians. Novartis Pharmaceuticals (09/10): $422.5 million to settle allegations that it had illegally marketed a pharmaceutical drug, filed false claims, and paid illegal kickbacks to healthcare professionals. Also, Novartis allegedly illegally promoted "off-label" treatment with this drug. Forest Pharmaceuticals (09/10): $313 million to settle allegations of paying illegal kickbacks disguised as grants or consulting fees to physicians prescribing its anti-depressant drugs. The company has also agreed to settle pending FCA allegations that false claims were submitted. The Health Alliance of Greater Cincinnati and The Christ Hospital (05/10): $108 million to settle claims of violating the AKS and FCA through improperly inducing referrals of cardiac patients to a member hospital. The alleged improper conduct? Giving some doctors preferential treatment in scheduling time for the hospital s heart-testing unit. A cardiologist brought this whistleblower suit.

84 Top FCA Cases, Cont d Amgad Hessein (pain management physician and anesthesiologist) (11/10): $52 million of alleged false claims to Medicare and private insurers led to his arrest. Kos Pharmaceuticals (08/10): $41 million to settle allegations that the pharmaceutical company violated anti-kickback laws and promoted off-label use of its cholesterol treatment drugs. Teva Pharmaceuticals (07/10): $27 million to settle allegations of Medicaid fraud revealed by a whistleblower, claiming the company violated a state false claims act by allegedly inflating the prices of various medications, leading to the overpayment of millions of dollars in pharmacy reimbursements. Walter Janke (retired cardiovascular surgeon) and wife (11/10): $22.6 million to settle allegations they had violated the FCA by allegedly submitted false diagnostic codes to Medicare in attempts to yield greater federal reimbursements. Schwarz Pharma, (04/10): $22 million to resolve allegations it failed to advise CMS that two of its drugs did not qualify for coverage under the federal healthcare programs. Schwarz allegedly submitted false claims and allegedly submitted false quarterly reports to the government. St. Joseph Medical Center (11/10): $22 million to settle FCA allegationst that it paid kickbacks and violated the Stark Law when it entered into professional-services contract. Sushil Sheth (former cardiologist) (11/10): $20 million to settle allegations of fraudulent billing.

85 Top FCA Cases, Cont d Ameritox (11/10): $16.3 million to settle an FCA whistleblower lawsuit accusing the company of paying kickbacks to physicians. St. John's Mercy Health Care and St. John's Health System (12/10): $2.2 million to settle allegations that foot clinics at St. John's hospitals overbilled Medicare, such as for toenail trimmings and callus removals, for which Medicare does not typically pay, and which were allegedly not medically necessary. Robert Wood Johnson University Hospital Hamilton (03/10): $6.35 million to resolve allegations that it inflated charges to Medicare patients to obtain higher federal reimbursements. Whistleblowers alleged that the hospital inflated charges to obtain higher outlier payments for ineligible cases. Simi Valley (Calif.) Hospital (11/10): $5.15 million to settle allegations, based on a whistleblower suit, that the hospital filed fraudulent claims to Medicare for psychiatric services to ineligible patients. Dey (11/10): $3.5 million to settle allegations it reported inflated average wholesale prices (AWPs) of its drugs. At times, the AWPs were allegedly inflated by 1,200%. Lawrence Jaeger (owner of two dermatology clinics) (06/10): $2.75 million to settle allegations that he and his businesses submitted false claims to Medicare and Medicaid. Mylan (11/10): $2.6 million to settle the allegations it reported inflated prices of its drugs, causing false claims because Medicaid paid inflated prices.

86 Recap: FCA Trends Legislative changes and enforcement priorities will encourage: Whistleblower Suits FCA Allegations Based on Overpayments FCA Allegations Based on Kickbacks Key Issues in FCA Cases Overpayments Price Inflation Kickbacks Off-label Use Unnecessary / Ineligible Claims Additional Liability: State False Claims Acts QUESTIONS?

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