Fraud and Abuse:

2015 Year In ReviewJanuary 7, 2016

Jeffrey Fitzgerald, Esq.

jfitzgerald@polsinelli.com

Asher Funk, Esq.

afunk@polsinelli.com

52120593

Settlement Trends

� Kickback cases still yielding big settlements, but

no common thread – Novartis AG $390M (kickbacks to specialty pharmacies for pushing

Novartis drugs)

– Millennium Health $256M (free specimen testing cups)

– Warner Chilcott $125M (cash payments and expensive dinners for

referring physicians)

– Health Diagnostics Laboratories $48.5M (S&H for lab specimens,

waiver of co-pays)

– Daiichi Sanko $39M (honoraria and meals for referring physicians)

– Westchester Medical Center $18.8M (advancing money to physician

practice and forgiving debt)

2

Settlement Trends

� Hospice enforcement: smaller dollars, but more settlements– Covenant Hospice $10.1M (billing issues)

– Compassionate Care Hospice Group $6M (failure to treat based on POC)

– Good Shepherd Hospice $4M (lack of terminal illness)

– Guardian Hospice of Georgia LLC $3M (lack of terminal illness)

– Hospice of Citrus County $3.2M (length of stay issues)

– Serenity Hospice and Palliative Care $2.2M (AKS and Stark violations)

3

Settlement Trends

� Physician employment and compensation cases– Citizens Medical Center paid $21.7M

• Non-FMV payments to cardiologists

• Bonus payments to ED MDs based on cardiology referrals

– Resolution of Tuomey litigation for $72.4M

– Adventist Health System paid $115M

• Bonus payments to physicians based on volume of referrals for tests or

procedures ordered

– North Broward Hospital District paid $69.5M

• Non-FMV comp for nine employed physicians in violation of Stark

• Complaint alleged that losses on hospital-owned practice was evidence

of non-FMV compensation

4

Interesting Settlements

� Resolution of DOJ’s ICD investigation ($250M settlement with 457 hospitals)

� Sandoz Inc., $12.6M (CMP for misrepresenting drugs pricing data)

� Piedmont Pathology Associates Inc., $500,000 (providing free EMR licenses allegedly for referrals)

� Regent Management Services $3.2M (alleged swapping arrangement for ambulance transport)

� Shelby Regional Med. Center's former CFO pled guilty and sentenced to 23 months for falsely certifying compliance with meaningful use

5

Noteworthy Court Decisions

� Active year for litigation of the FCA’s public disclosure bar

– Chattanooga-Hamilton Cnty. Hosp. v. U.S. ex rel. Whipple -

anonymous tip and gov’t investigation not a public disclosure

– U.S. ex rel. King v. Solvay S.A. – off-label promotion allegations

based on elements of a New Yorker magazine article are barred

– U.S. ex rel. Antoon v. Cleveland Clinic Found – retired air force

colonel was not an “original source” of allegations regarding his

own botched surgery

– U.S. ex rel. Hartpence v. Kinetic Concepts - Ninth Circuit

overruled prior decision that an “original source” had to have

played a role in the public disclosure

6

Noteworthy Court Decisions

� Providers generally prevail in FCA cases based upon

noncompliance with condition of participation

– U.S. ex rel. Ortolano v. Amin Radiology – State regulation addressing

certification of nuclear medicine tech not a condition of payment

– U.S. ex rel. Gampie v. Gilead Scis. - Switch to unapproved

manufacturing sources for APIs (that did not have NDA) not a

condition of payment

– But, U.S. ex rel. Ecobar v. Universal Health Svcs. - First Circuit

reversed and held that Medicaid licensing and supervision

standards for psychiatric services were a condition of payment

• Supreme Court will review “implied certification theory” and need for

“conditions of payment” to be expressly set forth in statute or regulation

7

Noteworthy Court Decisions

� Reasonable interpretation of ambiguous or confusing

regulations not an FCA violation

– U.S. ex rel. Saldivar v. Fresenius – Provider did not

“knowingly” submit false claims for drug overfill based on

reasonable interpretation of ambiguous regulation

– U.S. ex rel. Donegan v. Anestesia Assocs. Of Kan. City –

Medicare regulation addressing presence of anesthesiologist

during portions of surgery was ambiguous and provider’s

reasonable interpretation of regulation did not lead to

“knowingly” submitting false claims

8

Noteworthy Court Decisions

� First decision addressing ACA’s 60-day rule

– U.S. ex rel. Kane v. Continuum Health Partners (S.D.N.Y.)

• Medicaid HMO has IT glitch that causes large NY hospitals to bill Medicaid FFS (resulting in Medicaid overpayments)

• All overpayment were refunded before DOJ intervened (but after DOJ investigation)

• Relator ran report identifying 900 claims, of which only 50% were actual overpayments; relator terminated 4 days after emailing report, and files complaint 61 days after email

• DOJ investigates for 3.25 years, then intervenes

• Court denies motion to dismiss

9

Noteworthy Court Decisions

� Resistance is not futile

– U.S. v. Bertie Ambulance – DOJ’s failure to provide 30-

days' notice before filing FCA lawsuit breached tolling

agreement with provider, resulting in DOJ’s loss of

claims

– U.S. ex rel. Green v. Inst. Of Cardiovascular Excellence –

Suspension of Medicare payments one week after

settlement talks with DOJ broke down, raised

suspicion of whether payment suspension was

retaliatory

10

Noteworthy Court Decisions

� Miscellaneous, but noteworthy, cases

– U.S. v. Patel - 7th Circuit upholds physician’s AKS

conviction, expands definition of “referral” to include

home health care recertification

– U.S. ex rel. Boise v. Cephalon Inc. – Breach of corporate

integrity agreement actionable under the FCA

– Amarin Pharma Inc., v. FDA – Truthful non-misleading

off-label promotion of drug held not to violate FDCA’s

prohibition on misbranding

11

HIPAA Privacy and Security

� Triple – S Management Corp. - $3.5M settlement

– Widespread non-compliance including disclosing PHI to third-parties without

permission and using or disclosing more than the min necessary for mailings

� Lahey Hospital and Medical Center - $815,000 settlement

– Stolen laptop exposed PHI for 599 individuals

� The University of Washington Medicine - $750,000 settlement

– PHI of 90,000 individuals exposed after employee downloaded an email

attachment that contained malicious

� Cancer Care Group PC - $750,000 settlement

– Stolen laptop from car exposed PHI for 55,000 current/former patients

� St. Elizabeth Medical Center - $218,000 settlement

– Use of unsecure internet based document sharing system, unsecured

PHI on employee’s laptop and USB drive

12

HIPAA Privacy and Security

� Large volume of individuals’ PHI exposed during

breaches based on hackers

– Anthem, Inc. (IN) – cyberattack on unencrypted PHI, 37.5M

records impacted

– Premera Blue Cross (WA) – cyberattack exposed medical, financial,

and claims data for 11M customers

– Excellus Health Plan Inc., (NY) – cyberattack allowed unauthorized

access to 10M beneficiaries information

– UCLA (CA) – cyberattack on unencrypted data allowed access to

information for 4.5M patients

– Medical Informatics Engineering (IN) – cyberattack on EHR

provider compromised PHI for 3.9M individuals

13

The Yates Memo

� September 2015 memorandum from Deputy Attorney General Sally Quillian Yates– Outlined six steps to strengthen pursuit of individual

corporate wrongdoing

– Some areas of focus new, while others were affirmation of prior policy

– Revision to USAM, particularly in regard to “cooperation credit”

� True impact is unclear at best– New articulation of old policy?

– Practical impact of pursuing individuals and ability to reach civil settlements with entities substantially implicated if DOJ strictly interprets this policy

OIG Also Focusing on Individuals

� OIG creates new litigation team to pursue CMP and exclusion

cases:

– Jump in CMP cases from 36 in FY13 to 60 in FY14

– Stated goal of holding individuals accountable

– Meant to complement DOJ’s enforcement activities (filling

enforcement gaps)

– Potential to spin-off from FCA cases and pursuit of executives or

physicians

� OIG issues Special Fraud Alert: “Physician Compensation

Arrangements May Result in Significant Liability”

– Focus on FMV and bona fide services and MD exposure

– Came before Tuomey, Adventist and North Broward settlements

Other Noteworthy Developments

� 15 OIG Advisory Opinions

– But 7 modifications of prior AOs

� CMS official reports that there have been 554 self-disclosures through the Stark/SRDP (March 2015)

– 33% increase from 2013 to 2014

– Total of 115 disclosure settled or withdrawn

� OIG Self-Disclosure Protocol

– OIG official indicates that average length to resolution is 9 months (Oct. 2015)

� DOJ hires “compliance expert” to provide guidance on effectiveness of corporate compliance programs

16

The DOJ’s “Year in Review”

� Total recoveries down by almost $2.2B

� In FY15 85% of new matters based on qui tam actions, and recoveries from qui tam

actions exceeded DOJ initiated enforcement by ~$2.2B

� Huge jump in recoveries from non-intervened cases, largest $ in FCA history17

Predictions for 2015 – How Did We

Score?

� DOJ enforcement nearly exclusively driven by

whistleblowers

� HIPAA and computer security compliance increases in

importance (trending to be bigger than FCA

compliance)

� Final 60-day refund rule issued and it creates much

ambiguity, compliance risk and headaches

� No mandatory compliance plan rule for hospitals

� More activity in enrollment and payment suspension

18

Grade

Predictions for 2016

� Supreme Court limits the use of “implied certification” in FCA cases to express “conditions of payment”

� Yates Memo does not create a substantial difference in resolution of FCA cases by providers

� But increased enforcement and rhetoric of DOJ or OIGpursuing individuals criminally, under FCA or with exclusion (including some “exemplar” cases)

� FCA enforcement continues to be dominated by whistleblower cases with little or no clear DOJ priority agenda

� Increase in FCA cases based on physician compensation

� Increased state level enforcement (MFCU and Attorney General) and growing volume of FCA cases based on Medicaid

19

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Fraud and Abuse:

2015 Year In ReviewJanuary 7, 2016

Jeffrey Fitzgerald, Esq.

jfitzgerald@polsinelli.com

Asher Funk, Esq.

afunk@polsinelli.com