Fraud & Abuse

Last week, Judge Richard J. Leon of the Federal District Court for the District of Columbia vacated the “third-party” regulation on the federal companionship exemption, which would have prevented third-party employers from utilizing the companionship exemption from minimum wage and overtime, as well as the “live-in” exemption from overtime.

On Dec. 31, 2014, the judge temporarily stayed the regulations that would have significantly altered the duties an exempt companion could provide. The regulations, which were set to go into effect at midnight on Dec. 31, would have prevented exempt companions from providing any “general household work” at all, and would have prevented them from engaging in any “care” of the client for more than 20 percent of their working time.

The American Health Lawyers Association (AHLA) Fundamentals of Health Law conference, Nov. 12-14 in Chicago, featured Husch Blackwell Partner Cori Turner as a speaker and key member of the planning committee.

The conference primarily focused on ensuring attendees gained an understanding of laws and regulations for the health law industry, including Stark and Anti-Kickback, False Claims Act, antitrust, tax and HIPPA regulations. Its goals also included increasing knowledge of the legal challenges faced by hospitals, physicians, long-term care providers and managed care organizations, as well as learning about the impact of the health reform law on the healthcare industry.

The U.S. District Court for the Eastern District of Tennessee answered what it acknowledged was a novel question: whether statistical sampling and extrapolation are appropriate to establish liability under the False Claims Act (FCA). The court found the government could extrapolate from a sample of patient records to prove FCA liability. While the court’s decision approved the use of sampling, it emphasized the defendant could challenge the government’s methodology and that the government was not using sampling to prove all of the elements of the alleged FCA violations.

The attorney-client privilege applies with equal force to internal investigations today as it did 30 years ago thanks to the D.C. Circuit’s recent decision in In re: Kellogg Brown & Root, Inc., No. 14-5055 (D.C. Cir. June 27, 2014). The appeals court decision vacates the March 6, 2014, district court decision in the same case. At the district court, Judge James Gwin ruled that the attorney-client privilege did not protect documents developed during KBR’s internal investigations of potential fraud relating to its LOGCAP III contract. According to Judge Gwin, KBR’s investigations were not privileged because they were conducted “pursuant to regulatory law and corporate policy rather than for the purpose of obtaining legal advice.”

The U.S. Department of Justice (DOJ) and the New York State Attorney General intervened in a federal False Claims Act (FCA) case on June 27, 2014, accusing Mount Sinai Health System of failing to report and return Medicaid overpayments within 60 days of identifying them. See U.S. ex rel Kane v. Healthfirst, Inc., et al., No. 11-2325 (S.D.N.Y). This case is one of the first examples of litigation involving “the 60-day repayment provision” under the Affordable Care Act (ACA).

Based on OIG enforcement action excerpts for the past week, tips for staying ahead in healthcare regulatory compliance efforts include:

Read the press about Judge James Gwin’s decision in United States ex rel. Barko v. Halliburton Co., No. 1:05-cv-1276 (D.D.C. Mar. 6, 2014), and you might see it as the beginning of the end for the attorney-client privilege in internal investigations. While the ultimate implications of the decision remain to be seen, that’s not how we see it.

The attorney-client privilege and the work product doctrine are alive and well, as is their application to internal investigations. The FAR clause implementing the requirement for a Code of Business Ethics and Conduct preserves the contractor’s right to conduct an internal investigation subject to the protections of the attorney-client privilege and the work product doctrine. See FAR 52.203-13 (Dec. 2008). The Justice Department’s Principles of Federal Prosecution of Business Organizations explicitly states that a company is not required to waive privilege in order to get credit for cooperating with a government investigation. “[W]aiving the attorney-client and work product protections has never been a prerequisite under the Department’s prosecution guidelines for a corporation to be viewed as cooperative.”

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 …