Fraud & Abuse

On March 6, 2014, the District Court for the District of Columbia issued an opinion in United States ex rel. Barko v. Halliburton Company et al. requiring Kellogg, Brown & Root Engineering Corporation (“KBR”) to produce documents originally withheld on the basis of attorney-client privilege and the work product doctrine. The Court found that the documents, which related to internal investigations of possible violations of KBR’s code of conduct, were ordinary business records created to satisfy regulatory requirements and were not created for purposes of obtaining or receiving legal advice. The Court’s decision was based on the fact that KBR’s internal investigation was required under the Federal Acquisition Regulation and internal KBR policy, and that the investigation was conducted by non-lawyers. The Court’s holding raises significant questions about existing corporate compliance and investigation programs in regulated industries, including healthcare.

In Barko, the plaintiff brought a qui tam complaint alleging that KBR employees subcontracted to certain third parties who inflated invoices for substandard work, resulting in overcharges to the government. Barko sought, in the course of discovery, documentation from the internal review performed by KBR’s Office of Business Conduct into these allegations. After an in camera review of the documents at issue, the Court determined that the documents were not protected.

On March 10, 2014, the parties to U.S. ex rel. Baklid-Kunz v. Halifax Hospital Medical Center et al. entered into a Settlement Agreement to the resolve the claims in the United States’ Complaint in Intervention in this matter. Under the terms of the Settlement Agreement, Halifax must pay the settlement amount of $85 million by…

This morning, March 3, at what was to be the commencement of the jury trial in U.S. ex rel. Baklid-Kunz v. Halifax Hospital Medical Center (Case No: 6:09-cv-1002-Orl-31TBS), the parties informed the Court that they had reached a tentative settlement.  The parties were given until March 10, 2014 for file a Joint Motion to …

A recent OIG Advisory Opinion (Adv. Op. 13-15) is, to a certain degree, more interesting for one of its footnotes than the body of the opinion itself. The footnote addresses a hotly debated issue, originally raised in an OIG Management Advisory Report (MAR) in 1991. That MAR took the position that an agreement between a hospital and a hospital-based physician group was a “suspect arrangement” under the Anti-Kickback Statute because the physician group was essentially required to split its revenue with the hospital–including requiring the group to provide uncompensated services to the hospital.

The OIG modified this position somewhat in the Supplement Compliance Program Guidance for Hospitals in 2005. In that compliance guidance, the OIG stated that an exclusive arrangement that required a hospital-based physician group to provide “reasonable administrative or limited clinical duties directly related to the hospital-based profession services at no or a reduced charge” would be permissible. The Compliance Guidance cautioned, however, that uncompensated or below-market-rate services would still be subject to “close scrutiny.”

Husch Blackwell attorney Joe Geraci was recently quoted in an AIS Health Reform Week article titled HHS’s Statements on Exchange QHPs Stir Confusion, Complicate Copay Assistance.  The article reports that the Obama administration is sending mixed messages on whether Qualified Health Plans (QHPs) on the insurance exchanges will be considered federal health programs.  A…

On November 13 and November 18, the federal district court handed down separate rulings on summary judgment motions in a Florida Stark Law case that many consider the new Tuomey–U.S. ex rel. Baklid-Kunz v. Halifax Medical Center. In the first decision, the Court granted the U.S. partial summary judgment on the Stark violation with respect to compensation paid to certain medical oncologists employed by the hospital. In the second decision, the Court denied the hospital’s motion for summary judgment with respect to certain neurosurgeons employed by the hospital. Both decisions tee up important hospital/physician employment issues for trial.

The case stems from a qui tam False Claims Act lawsuit filed in 2009 in which Elin Baklid-Kunz, the former compliance officer, made allegations regarding Halifax Hospital Medical Center (“Halifax Hospital”) and Halifax Staffing, Inc. (“Halifax Staffing”) (collectively, “Halifax”). The compliance officer alleged that Halifax:

  1. Had financial relationships with physicians that did not meet a Stark exception, and as a result the physicians inappropriately referred Medicare services to Halifax; and
  2. Inappropriately billed other services to Medicare.

The Department of Justice chose to intervene in the lawsuit in 2011 with respect to the Stark Law issues. Halifax filed a Motion for Summary Judgment and the U.S. filed a Motion for Partial Summary Judgment with respect to the Stark Law issues.

Ruling on the Government’s Motion for Partial Summary Judgment

Two different compensation arrangements were the subject of these decisions. In the first decision, the Court considered the Government’s motion for partial summary judgment with respect to compensation paid to the medical oncologist employed by Halifax and the resulting designated health service referrals from those physicians. The alleged Stark violations were the result of employment agreements entered into with six medical oncologists in 2005 that provided for an incentive bonus pool equal to 15% of the “operating margin for the Medial Oncology program” of the Hospital. Even though the physicians were permitted to divide that pool among themselves as they determined, which they did based on individual production, the Hospital admitted that the pool included revenue from services that were not personally performed by the medical oncologists, such as fees related to the administration of chemotherapy.

When was the last time you thought about your compliance program? As we know, an effective compliance program is important for healthcare companies. It’s also important to review your compliance program periodically and update it according to the latest guidance. OIG guidance and recent Corporate Integrity Agreements (CIAs) are informative about what the OIG is…

Husch Blackwell attorney Joe Geraci weighed in on recent guidance provided by HHS related to whether the federal anti-kickback statute applies to patients who purchase subsidized health insurance products on the new state or federal healthcare exchanges.  Specifically, the anti-kickback regulations apply to “federal healthcare programs” that are defined to include the following:

Any plan

…

On August 20, the Fifth Circuit Court of Appeals rejected a whistleblower claim by a former employee of Cardinal Health, Inc., affirming dismissal of the former employee’s complaint, which alleged that Cardinal Health sold hospitals run by the U.S. Department of Veterans Affairs defective medical equipment, in violation of the False Claims Act (FCA).

Before her termination from Cardinal Health, the plaintiff marketed Cardinal Health’s “Signature pump”—an electronic device that regulates the rate at which intravenous fluids flow into patients—to various hospitals, including hospitals run by the VA.  The plaintiff alleged that the Signature pump had a dangerous defect, causing air bubbles to accumulate and be released into a patient’s intravenous fluids flow, potentially resulting in serious injury or death.

The plaintiff claimed that she became aware of the defect in late 2000 and discussed it with a Cardinal Health area manager in early 2001.  In mid-2001, Cardinal Health suspended shipment of the Signature pump for three months and undertook a review of the possible defect.  Cardinal Health terminated the plaintiff at the end of the three-month review period.  Cardinal Health suspended production and sale of the Signature pump for independent reasons in 2006.

“Implied False Certification” Theory of FCA Product Liability

The crux of the plaintiff’s FCA claim was that Cardinal Health falsely certified to the VA that the Signature pump was in compliance with the warranty of merchantability in the parties’ contract each time it requested payment from the VA for the pumps—a so-called “implied false certification” theory.

On June 14ththe Governor signed into law SB 1803. It amends Chapter 531 by limiting the Texas Health and Human Services Office of Inspector General’s (HHSC-OIG) ability to implement payment holds, improving providers’ rights to expedited appeals before the State Office of Administrative Hearings, redefining the liability for hearing costs, creating new requirements…