Fraud & Abuse

The Department of Justice (DOJ) recently announced a $155 million settlement agreement with an electronic health records (EHR) vendor, eClinicalWorks (ECW), to settle False Claims Act allegations against the company initially brought by a whistleblower/qui tam relator.  The whistleblower was a software technician for the City of New York City who was implementing ECW software in a prison healthcare system.  The DOJ subsequently intervened and filed suit.  The May 31, 2017 announcement is the first of its kind, holding an EHR vendor accountable for claims made about their certifications.

Provider clients of ECW relied on the assertions made by ECW that their EHR software met the criteria of the Office of the National Coordinator of Health Information Technology (ONC) certification program.  Based on ECW’s software and the assertion of EHR certification, providers believed they had achieved “meaningful use” and received incentive payments under the Medicare and Medicaid EHR Incentive Programs. 

Emerging Issues in Healthcare Law is coming to the Big Easy. The American Bar Association’s 18th annual conference is slated for New Orleans March 8-11.

Husch Blackwell is a platinum sponsor of this event featuring the most emergent topics facing the healthcare bar. As the industry faces changes and continues to grow under healthcare reform and enforcement, this conference allows attendees a perfect opportunity to stay ahead of the developments.

Roughly $2.95 for each $1 overpaid (plus legal costs and the overpayment) based on an August 24, 2016, U.S. Attorney’s Office press release regarding settlement of State of New York, ex rel. Robert P. Kane v. Healthfirst, Inc. et al case in the U.S. District Court for the Southern District of New York. Defendants previously lost a motion to dismiss this case based, in part, on the fact that defendants actually identified and repaid the overpayments. Specifically, about $1 million in overpayments were presented to the defendants in the form of a spreadsheet in February 2011. Subsequently, defendants repaid the overpayments in more than 30 installments from April 2011 to March 2013. Notwithstanding, the government took the position that, under the False Claims Act, repayment should have been made within 60 days of the date of the claims were identified in the spreadsheet. Defendants argued, among other things, that there was ambiguity about the term “identify” as used in the False Claims Act and that the spreadsheet was merely the first component of an investigation into the overpayments that was ongoing through the repayment process. Almost a year after losing the motion to dismiss, defendants settled the case for $2.95 million.

The Supreme Court’s unanimous decision in Universal Health Services, Inc. v. United States ex rel. Escobar, No. 15-7 (U.S. June 16, 2016) upholds the viability of the implied certification theory of False Claims Act liability. But it also makes cases arising from minor instances of noncompliance much harder to prove. The Court held that a knowing failure to disclose a violation of a material statutory, regulatory, or contractual requirement can create False Claims Act liability. The requirement need not be an express condition of payment, but it must be material to the government’s decision to pay.

In some courts in the United States today, a government contractor or a healthcare provider seeking reimbursement from a federal program can violate the False Claims Act even when its work is satisfactory and its invoices are correct. Under the theory of “implied certification,” a minor instance of non-compliance with one of the thousands of applicable statutes, regulations, and contract provisions can be the basis for a federal investigation, years of litigation, as well as fines, penalties, suspension and debarment, even imprisonment of company personnel.

On Feb. 12, the Department of Health and Human Services’ (“HHS”) Centers for Medicare & Medicaid Services (“CMS”) published its final rule regarding reporting and returning Medicare overpayments. This final rule comes nearly four years after its proposed rule regarding the reporting and return of Medicare overpayments that left the provider community nervous and uncertain about when an overpayment would be considered “overdue” under CMS’s vague 60-day standard.

In the 2016 Physician Fee Schedule Final Rule published on Nov. 16, 2014, the Centers for Medicare & Medicaid Services (CMS) finalized the proposed exception for timeshare arrangements that we discussed in our earlier blog post [80 Fed. Reg. 70,886, 71,300 (Nov. 16, 2015)]. As we stated in our earlier post, a timeshare or part-time “space use” arrangement typically provides a physician with the use of office space during scheduled time periods. The space usually includes furnishings with basic medical office equipment, supplies and support personnel so that the physician is able to use the space, on a turn-key basis, to see patients during scheduled times. Prior to the implementation of the new timeshare exception, these types of arrangements needed to be structured to comply with the Rental of Office Space Exception, which includes “exclusive use” requirements that many hospitals and physicians found burdensome [42 C.F.R. § 411.357(a)].

The Office of Inspector General (OIG) for the U.S. Department of Health & Human Services (HHS) issued a fraud alert on June 9, 2015, targeting physician compensation agreements that potentially violate the federal Anti-Kickback Statute (42 U.S.C. § 1320a-7b). The Anti-Kickback Statute prohibits remuneration of payment in exchange for referrals of patients receiving aid from federally funded healthcare programs (i.e. Medicare and Medicaid). The OIG alert references 12 recent settlements with individual physicians who entered into “questionable” medical directorship and office staff arrangements. The key concern in those cases centered on individual physicians entering into arrangements where the compensation did not “reflect [the] fair market value for bona fide services the physicians actually provide[d].”

Proposed Stark exception could impact hospital and physicians timeshare/ part-time agreement arrangements

In July 2015, the Centers for Medicare & Medicaid Services (“CMS”) published a proposed rule pertaining to payment policies under the 2016 Medicare Physician Fee Schedule (“Proposed Rule”) (80 Fed. Reg. 41,685). In addition to changes to the Medicare Physician Fee Schedule and other Medicare Part B payment policies, the Proposed Rule addresses modifications to the Stark Law and provides guidance on CMS’s interpretation of existing Stark Law exceptions.

The U.S. Court of Appeals for the District of Columbia Circuit issued an opinion June 12, 2015, lambasting the Centers for Medicare & Medicaid Services’ (“CMS”) rationale in implementing the ban on “per-click” space and equipment leases under the Stark Law. This ban, which went into effect Oct. 1, 2009, was effectively challenged by the Council for Urological Interests (“Council”), which was also behind the successful challenge against the application of the Stark Law to hospital lithotripsy services in 2002.

Among the more colorful descriptions used by the Court in describing CMS’s position were that it was “incomprehensible,” “tortured”, and “the stuff of caprice.” And on an even more scathing note, the Court described CMS’s reading of the legislative history of the Stark Law as belonging to the “cross-your-fingers-and-hope-it-goes-away school of statutory interpretation.”