UpdateUpdate: False Claims Act Litigation:Cure for Caffeine?

Tracy M. Field, M.S., J.D. Womble Carlyle Sandridge & Rice, LLP 271 17th Street, NW – Suite 2400Atlanta, GA 30363(404) 962-7539

Georgia Hospital AssociationCompliance Officers RetreatSeptember 3-5, 2014

Sandra L.W. Miller, R.N., M.N., J.D.Womble Carlyle Sandridge & Rice, LLP 550 S. Main Street, Suite 400Greenville, SC 29601(864) 255-5425

Agenda

Department of Justice Statistics – FYE 2013

Selected Recent Cases, Settlements, CIAs

The Future?

The Remedy…

False Claims ActThe DOJ 2013 Numbers

$3.8 billion in settlements/judgments from civil cases$2.6B in Health care matters:

- $1.8B collected from drug/device settlements- “Off label” promotion

- $1.5B from Abbott- $762M from Amgen

- $505M for counterfeit drugs- $237M for Tuomey Hospital - $26M from Florida dermatologist, AKS with laboratory

False Claims ActThe DOJ 2013 Numbers

$2.6B in Health care matters:• $1.8B collected from drug/device settlements• $237M -- Tuomey Hospital • $134M -- national kyphoplasty settlements with 53

hospitals • $26M – Dr. Wasserman, dermatologist paid

kickbacks by pathology lab

False Claims ActDrug - Devices

FDA-Approved Drug Marketed• But if misrepresented or failed to disclose clinical

trial data• Off label or free speech?

Abbott: $1.5 billion DepakoteGlaxoSmithKlein: $3 billion Paxil

False Claims Act LitigationMedical Devices

Medtronic: June 2014, $9.9 M SettlementKickbacks to physicians• Speaking engagement: compensation• Tickets to sporting events• Providing marketing plans for doctors

False Claims ActThe DOJ 2013 Numbers

Qui Tam Relator Filings753 Cases in Fiscal Year 2013

- 101 more than previous year’s “record”- majority (66%) in healthcare

DOJ: $3.8 billion in settlements/judgments from civil cases

- $345 million to Relators

False Claims ActNumber of FCA New Matters,

Including Qui Tam Actions 

False Claims ActLegal Changes

• Civil War Statute• Healthcare: 1986 Amendments− Fraud Enforcement and Recovery

Act of 2009 (“FERA”) Amendments− Affordable Care Act (“ACA”)

False Claims ActFERA

Increased Ability of Department of Justice to Issue Civil Investigative Demands (“CID”)Increased number of CIDs being issued

Expands “reach” of DOJ of what is “false claim”Liability extends to subcontractors

False Claims ActACA

Liability for retention of Medicare and Medicaid Overpayments

• within 60 days of being “identified”• Proposed rule: 10 year look-back₋ Where are we??

Health FraudWakeMed

January 17, 2013 Hearing Judge Boyle rejected Deferred Prosecution Agreement:•Under the Federal Rules of Criminal Procedure

₋ Judges accept or reject plea deals, not “dictate terms” or “participate”

oNeither Hospital CEO nor Board members attended hearing

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Health FraudWakeMed

January 13, 2013DOJ Files Memorandum in Support of DPA

February 5th Hearing; February 8, 2013

Order Accepts DPAStatement of facts clear that WakeMed responsible for acts of officers, directors and employees and can be used against them if breach

Government can continue investigation(s)

No interruption to essential health care

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WakeMedThe Legal Debate

First criminal prosecution of hospital asserting material/false statements to government

$8M settlement:

$6M civil penalty

$2M criminal

Judge: “slap on the hand”; conviction “erased” in 2 years; use for “teenagers smoking pot”

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WakeMedThe Legal Process

Deferred Prosecution Agreement (DPA):DOJ tool since 1999

File Criminal Information: Admission of Facts

Deferral Avoids “Arthur Andersen Effect”

Judge: Convict and Defer Sentencing…

Debarment!

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WakeMedThe Investigation

2007 Program Safety Contractor Audit•Data mining of claims•For NC, WakeMed with highest Zero-Day stay billings for Oct. 1, 2003 – Sep. 30, 2006•On-site interviews at WakeMed – conflicting information o Be on-site with auditors!

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False Claims ActMedical Necessity

Community Health Systems: $98M August 2014• Settlement for Medical necessity of Inpatient Admissions

– “corporate driven” • Requires Board of Director Resolution:

₋ Affirmatively state BOD has made “reasonable inquiry” into effectiveness of Corporate Compliance/Privacy program,

o else explain why Notify OIG if Change in Board Composition

False Claims ActMedical Necessity

CHS Settlement:Medical Necessity

• 0-1 day stays for inpatient admissions: • What if observation day 1?

• Ensure “proper and accurate documentation of medical records”• Ensure the “proper and accurate assignment and designation of

patients into inpatient, outpatient or observation status”• Medical record documentation accurate including preadmission,

admission, case management, billing, coding and reimbursement

False Claims ActMedical Necessity

CHS Settlement:Medical Necessity

• “Personal obligation of each individual involved in medical documentation process” to ensure accurate documentation

• Ensure proper order authorization process₋ Ensure employees do not “disregard” physician orders

• IRO review: ₋ 50 paid claims in discovery sample; 5% error rate thresholdo compare to OIG hospital audits??

FALSE CLAIMS ACTMedical Necessity

CHS Settlement:• Must refund overpayment: ₋ in 60 days, or ₋ within 90 days notify government as to when they

can reasonably expect calculation of overpayment and refund

FALSE CLAIMS ACTMedical Necessity

Health Management Associates (HMA)•Medical Center of Southeastern OK, $1.4M settlement (April 2014)₋Medically unnecessary surgeries on children (sinus surgeries) billed by Dr. Castro and hospital

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FALSE CLAIMS ACTMedical Necessity

Health Management Associates (HMA)•Employed physician as whistleblower – first to Joint Commission, not validated

•Allegations of free office space, medically unnecessary admissions from ED

•CEO named individually as well as HMA

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FALSE CLAIMS ACTMedical Necessity

Maryland St. Joseph’s Medical Center: $4.9M settlement for unnecessary hospital admissions •Related prosecution of cardiologist (Dr. Midei) for medically unnecessary admissions under fraud theory

•Malpractice case: Class action: $37M for 200+ patients (April 2014); others pending

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False Claims ActMedical Necessity

Baptist Health System: April 2014 : $2.5 MQui Tam Action: “Misdiagnosis and subsequent mistreatment” of patients with neurological disorders” Multiple sclerosis

• Treatment by providers and drug regimens false

• Failure by Hospital to disclose physicians’ misdiagnosis after disclosing improper use of Botox for treatment

False Claims ActMedical Necessity

US ex rel Ryan v. Lederman• Radiologist for Staten Island University Hospital

allegedly improperly billed Medicare for cancer treatments (stereotactic/gamma knife)

• Hospital settled - $25M

• DOJ: LCD does not cover below-neck procedures

• Court: Specific LCD controls, therefore IF KNOWLEDGE of noncoverage proven, violation of FCA

False Claims ActMedical Necessity

Ohio Cardiac Providers: April 2014 : $1 M • Improper compensation arrangements between

hospital and physicians led to referrals• Note: Ohio Valley Hospitals settled previously for

$3.8 M

False Claims ActMedical Necessity

Carondelet Health Network: August 2014; $35M settlement•Unnecessary Inpatient Rehabilitation Services •Relator assertions 2004-11 admissions not necessary•Hospital investigated, disclosed $24M already•Government: disclosures not timely or adequate

FALSE CLAIMS ACTMedical Necessity

Kentucky St. Joseph’s Medical Ctr: $16.5 M settlement settlement for unnecessary cardiac hospital admissions (January 2014)

•Exclusive arrangement between hospital and Cumberland Clinic to provide cardiac services

•3 other cardiologists were whistleblowers

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False Claims ActMedical Necessity

King’s Daughters Medical Center: June 2014; $41M

• Unnecessary Cardiac Procedures and Kickbacks (prohibited financial arrangements with physicians)

• Alleged falsification of medical records to support MN

• Stark violations: Cardiologists compensation “unreasonably high and in excess of fair market value”

FALSE CLAIMS ACTAggressive Litigants

Contractors as whistleblowers: • Reported concerns to compliance, but issues not

addressed

• Data Mining

• More sophisticated whistleblowers

• Whistleblowers “going all the way”

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False Claims ActPhysician Arrangements

All Children’s Health System: April 2014 - $7MQui Tam: “Aggressive acquisition program” to secure exclusive physician referral relationships

• “Lucrative compensation plans”

• Not all terms in contract

False Claims ActPhysician Arrangements

All Children’s Health System •Compensation plan

- Guaranteed base salary

- Salary at “median of the medians” for FMV

- Hospitalists paid at 100% FMV

- Incentive bonuses and merit bonuses for teaching, research, professionalism

- If practice produces net profit, incentive payment to physician

False Claims ActPhysician Arrangements

All Children’s Health System: • includes payment in salary and bonuses• call pay• practice purchase price

• Government declined to intervene, but issued Statement that Stark law applies to Medicaid and Medicare referrals

False Claims ActPhysician Arrangements

Amedisys, Inc.: April 2014 settlement; $150M• improper financial relationship with referring

physicians and home health agencies

False Claims ActSpecial Relator

Holzer Health System (ongoing) Qui Tam by VP of Compliance

Allegation: Overuse of one air ambulance provider

Retaliatory Discharge Claimsurvives dismissal since employer knew of the

seriousness – “protected conduct” – there were 6 pending investigations

- hired attorney

- directed not to write findings

OIG Special Fraud AlertJune 2014: Lab Payments

to Referring Physicians

• Compensation to collect specimens• Registry Payments* Antikickback Statute Implication

HHS OFFICE OF INSPECTOR GENERALOctober 2013 Report

Responds to Congressional Request

Focused on Spinal Fusion Devices (1000 claims)•For FY 2011, POD devices used in 1 in 5 spinal fusion surgeries•Concerns₋Costlier per case₋Increase in volume and rate of growth of surgeries once POD in place

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Other FCA, Stark IssuesPrivilege Issues

Halifax Hospital:Whistleblower suit: unlawful compensation of physicians violating Stark, AKS – $200M

Government intervened: Discovery of regulatory compliance, communication with legal

Court: Business advice, not protected with in-house counsel

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Other FCA, Stark IssuesPrivilege Issues

In re Kellogg Brown & Root

US Court of Appeals for DC Circuit – June 27, 2014 opinion•Privilege for in-house investigations!

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QUESTIONS?

Tracy M. Fieldtfield@wscr.com

Womble Carlyle Sandridge & Rice, LLP271 17th Street, N.W., Suite 2400

Atlanta, Georgia 30363(404) 962-7539

Sandra Millersamiller@wcsr.com

Womble Carlyle Sandridge & Rice, LLP550 S. Main Street, Suite 400

Greenville, SC 29601(864) 255-5425