The FCA Insider

The FCA Insider

Insights and updates on False Claims Act Litigation


DOJ Announces Plan for Coordinated Civil Rights Response to COVID-19

On April 2, 2021, Pamela S. Karlan, the Principal Deputy Assistant Attorney General for Civil Rights at the U.S. Department of Justice Civil Rights Division (DOJ), issued a public statement regarding the Division’s intent to lead a coordinated civil rights response to the Coronavirus (COVID-19) pandemic. The statement, which attached a resource guide, is intended to assist Federal agencies, state and local governments, and recipients of Federal funds, including healthcare providers, in addressing ongoing civil rights challenges related to the COVID-19 pandemic.\

The statement advised healthcare providers and long-term care facilities (LTCs), among other entities, that the DOJ intends to “vigorously enforce Federal civil rights,” and that civil rights obligations still apply during emergencies like the COVID-19 pandemic. The statement addressed the need to combat disability discrimination by ensuring that all people with disabilities have equal access to healthcare. The statement cited to the Americans with Disabilities Act (ADA) and Section 504 of the Rehabilitation Act (Section 504) and the need for healthcare providers to comply with these laws “when making decisions about who will receive medical care, including vaccines and hospital beds.” Furthermore, the statement discussed that providers must comply with disability laws when “crafting and implementing policies such as crisis standards of care, visitation rules, and vaccine distribution plans.”

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DOJ, Investigations

COVID-19 Fraud Surge: Criminal Enforcement of Pandemic-Related Fraud Reaches “Unprecedented Pace,” DOJ Warns

While the spread of COVID-19 may finally be slowing, government enforcement of pandemic-related fraud is not. It is surging. And that may explain why you are hearing from the government more than usual, or will soon.

The U.S. Department of Justice (DOJ) announced last week that it has now charged nearly 500 defendants with crimes involving COVID-19 related fraud, warning that its coordinated enforcement efforts are moving at an “unprecedented pace and tempo.”

“The Department of Justice has led an historic enforcement initiative to detect and disrupt COVID-19 related fraud schemes,” said Attorney General Merrick B. Garland. “The impact of the department’s work to date sends a clear and unmistakable message to those who would exploit a national emergency to steal taxpayer-funded resources from vulnerable individuals and small businesses.”

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DOJ, FCA Defenses, Individual Liability

Eleventh Circuit Affirms 11-year Prison Sentence for Substance Abuse Treatment Center Physician

Last month, the Eleventh Circuit upheld the conviction and 11-year prison sentence of a physician-Medical Director of two substance abuse treatment centers in Florida who was convicted by a jury of participating in a conspiracy to commit healthcare fraud.  On appeal, Arman Abovyan, a board-certified internal medicine physician, challenged his convictions based on insufficiency of evidence. In U.S. v. Abovyan, No. 19-10676 (11th Cir. Feb. 22, 2021), the court rejected Abovyan’s argument that the government’s failure to provide direct evidence of his participation in the scheme should have been fatal to their prosecution, holding that the government may rely upon circumstantial evidence or inferences from the defendant’s conduct to prove a defendant agreed to join a healthcare fraud conspiracy.

At trial, the defendant, Abovyan, argued that he was an “unwitting patsy” entangled in a healthcare fraud scheme orchestrated by Kenneth Chatman, the owner of two substance abuse treatment centers.  Chatman recruited Abovyan to be the medical director of two outpatient facilities named Reflections Treatment Center (“Reflections”) and Journey to Recovery (“Journey”), both of which provided substance abuse treatment, including ordering drug testing services and prescribing drug treatment medication.  In this role, Abovyan was paid $16,000 per month by Chatman.   The scheme at issue involved payment of kickbacks by lab owners to Reflections and Journey in exchange for sending urine and saliva samples to the labs for expensive confirmation drug testing that cost between $1,000 and $6,000 per test and caused total false billings of over $11 million (by comparison, uninsured “scholarship” patients at Reflections and Journey were prescribed one 12-panel point of care test per month at a cost of a few dollars).

The court pointed to evidence presented at trial of the defendant’s “full cooperation” with Chatman to advance the healthcare fraud scheme.  At trial, the government presented evidence that Abovyan, while serving as Medical Director of the two facilities, ordered and authorized excessive lab drug tests that were medically unnecessary. Abovyan wrote “standing orders” directing testing of all insured patients (including government healthcare program beneficiaries) at least 2-3 times a week, using pre-signed requisition forms that left the patient information and diagnoses sections blank, but pre-checking boxes for full comprehensive confirmation tests for over 100 substances (including drugs that are not addictive or that were not suspected of abuse in the patient’s history).  By contrast, uninsured patients were given one test per month costing “a few dollars.”  The pre-signed forms used for the insured patients were photocopied and filled in by staff members without physician involvement to avoid Abovyan having to “continually sign off on each individual form” and occasionally staff used their own urine or saliva for specimen tests when patients did not show up for appointments.  Additionally, evidence at trial pointed to Abovyan’s pattern of prescribing Suboxone to his patients despite the fact that he was not licensed with the DEA to do so.

Abovyan’s trial lasted eight days and the government presented over 20 witnesses and what the Circuit Court referred to as “overwhelming evidence” of the healthcare fraud scheme.  Several former patients of Abovyan testified at trial, indicating their very limited interactions with Abovyan and described his general lackadaisical practices without ever discussing the lab test results. The court noted that during an interview with the FBI, Abovyan described his attitude about patients’ drug use after they left daily treatment at his facilities as “whatever happens happens.”  In another interview, Abovyan said that working at the treatment facility was “easy money” but also “the biggest mistake of his life.”  In sum, the Eleventh Circuit ruled there was sufficient evidence that “[a]lthough ordering drug tests and prescribing buprenorphine, Abovyan did so without actually examining patients, making assessments or creating individualized treatment plans.”

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This case highlights how physicians involved in day-to-day operation of healthcare facilities can be held responsible for the results of their care and the imperative for prescribing physicians to make individualized assessments of medical need based on a reasonable examination.  The courts are unlikely to turn a blind eye to practitioners who allow bad actors to use their license for abusive billing practices and who neglect to properly oversee patient treatment, diagnoses and prescriptions.  Especially where you have egregious practices, such as those found here, like standing orders for excessive and over-inclusive drug testing and pre-filled prescription forms completed by non-physicians.  Even in the Eleventh Circuit, which has a deferential standard for evaluating the validity of physicians’ clinical judgments regarding medical necessity and a heightened standard for proving falsity (requiring evidence of an “objective false statement”), risky practices like the standing orders and the pre-signed, blank prescription pads Abovyan signed will not be viewed as an appropriate exercise of individualized clinical judgment entitled to any presumption of reasonableness.  The government takes seriously the central requirement in the Social Security Act that bills only be submitted for “expenses incurred for items or services, which . . . are . . . reasonable and necessary for the diagnosis or treatment of illness or injury.”  And the government expects that necessity decision to be made by the treating physician and informed by appropriate individualized patient evaluation.

If you have any questions about the contents of this alert or about healthcare fraud laws, please do not hesitate to reach out to the authors or any member of the McGuireWoods healthcare team.

OIG, Regulatory

Free FQHC COVID-19 Testing Approved by OIG

As previously discussed, on April 3, 2020, the U.S. Department of Health and Human Services Office of Inspector General (OIG) issued a process for inquiries to be submitted to OIG about whether administrative enforcement discretion would be provided for certain arrangements directly connected to the 2019 novel coronavirus (COVID-19). OIG established this process to provide regulatory flexibility to ensure necessary care responding to COVID-19, particularly with respect to the federal anti-kickback statute (AKS) and civil monetary penalty (CMP) beneficiary inducement prohibition provisions. OIG responses are publicly available through a frequently asked questions (FAQ) posting on the OIG COVID-19 portal. OIG has continued to update this FAQ since its initial publication, including the inquiry discussed in our March 2 post, and also providing guidance on the following question in late 2019:

Can a Federally Qualified Health Center (FQHC), including an entity that receives grant funds or designation under section 330 of the Public Health Service Act, conduct free COVID-19 diagnostic testing that has been cleared or approved by the Food and Drug Administration (FDA), is subject to an FDA-issued Emergency Use Authorization, or is covered by the Medicare program, including for Federal health care program beneficiaries, at community health fairs and via mobile testing in underserved communities impacted by COVID-19?

After receiving funding from a non-governmental donor for free COVID-19 testing to populations that may otherwise have difficulty accessing testing, an FQHC asked OIG if there would be concerns in providing these services to federal healthcare beneficiaries. According to the FAQ response, the FQHC would implement a number of prophylactic safeguards. These safeguards include that (a) the free testing would be provided on a first-come, first-served basis, (b) the test would not be dependent on receiving any other services from the FQHC, (c)  the FQHC would not offer any special discounts or additional services to recipients of the free testing, (d) if the patient received a positive result, the FQHC would not direct the patient to the FQHC or any other specific provider, (e) the FQHC would not bill any payor or patients for these tests, and (f) the COVID-19 tests being utilized have been cleared by the FDA, are subject to an FDA-issued Emergency Use Authorization, or are covered by the Medicare program.

Ordinarily, free services, including testing could present risk under the CMP beneficiary inducement provisions because the services have financial value and could lead a patient to choose the provider of the free services for additional billable federal healthcare program items or services. Such a prohibition is broad under the CMP (as well as the AKS). The OIG, recognizing this broad prohibition, has promulgated exceptions to the definition of “remuneration” prohibited under the beneficiary inducement. These exceptions include (i) incentives given to promote preventive care, (ii) items or services given to improve the ability to obtain items and services payable by Medicare or Medicaid, and (iii) items or services for less than fair market value. Notwithstanding this offering being unlikely to qualify for the OIG’s promulgated requirements to meet any of these exceptions, OIG did not really discuss these exceptions yet still approved the free offering by an FQHC of such COVID-19 testing.

In approving the plan, OIG noted how it previously recognized the important role that FQHCs play in delivering care during the COVID-19 pandemic to some of the most vulnerable individuals and communities, and this offering is no exception. The availability of COVID-19 testing remains critical to combatting the current public health emergency. Indeed, while not a focus of OIG’s response, the FQHC applying for discretion appeared from the OIG stated question to stress how it would offer this testing at community health fairs and via mobile testing programs—i.e., in the underserved communities at least in part outside its facility. Likely the FQHC was making clear how it would be targeting underserved communities with necessary testing through their received grant funding. Such test expansion, utilizing skilled and experienced FQHC clinical staff, likely supports efforts of the federal government to increase testing and vaccination sites in communities often harder to serve. Due to these considerations and the safeguards noted above, OIG determined that there is a significantly low risk of fraud and abuse under the AKS and the beneficiary inducements CMP to grant discretion not to bring enforce activity with respect to the proposed arrangement.

The OIG did caution, however, that the arrangement could present additional fraud and abuse risks that they could consider enforcing—the potential direct or indirect financial relationships between the non-governmental donor entity, the FQHC, and the federal healthcare program beneficiaries. Since the FQHC submitting their question did not provide information about its donor, the OIG could not provide comfort on those relationships. One can imagine that if the donor was another healthcare provider, such as a pharmaceutical or device manufacturer and that was advertised, the OIG may have a different answer for the beneficiary inducement consideration. Further, if another provider donated funding to the FQHC in exchange for referrals for other services, OIG may still have significant AKS concerns. Therefore, the OIG asked parties reading this FAQ to assess any fraud and abuse risks that may arise with respect to any direct or indirect financial relationships involving the donor separately.

Ultimately, though, under the narrower discussion on an FQHC providing COVID-19 testing for free, the safeguards listed above were sufficient in OIG’s view to allow such a testing plan without enforcement for improperly inducing federal healthcare beneficiaries.

McGuireWoods will continue to monitor OIG’s release of further FAQs as additional providers utilize this inquiry mechanism. Providers may welcome the flexibility provided by OIG exercising enforcement discretion during the COVID-19 pandemic, recognizing the statements do not bind all investigative bodies who could take a different view. OIG will likely continue to require such arrangements to end at the end of the COVID-19 public health emergency declaration, and therefore, providers should plan for the post-pandemic period depending on the arrangement when utilizing these statements.

McGuireWoods has published additional thought leadership related to how companies across various industries can address crucial COVID-19-related business and legal issues, and the firm’s COVID-19 Response Team stands ready to help clients navigate urgent and evolving legal and business issues arising from the novel coronavirus pandemic.

See related update: Free FQHC COVID-19 Testing Approved by OIG (March 22, 2021)

Defense Arguments, FCA Defenses, FCA Litigation

Fifth Circuit Vacates Fraud Conviction after Denying Codefendants’ Appeal

The U.S. Fifth Circuit recently reversed a former home health agency employee’s conviction and vacated his sentence related to three counts of healthcare fraud and abuse. Jonathan Nora was convicted by the trial court of conspiracy to commit health care fraud, aiding and abetting healthcare fraud, and several violations of the Federal Anti-Kickback Statute (AKS) alongside five codefendants, all employed by home health agency Abide Home Care Services, Inc. (“Abide”). This reversal comes soon after a separate Fifth Circuit panel denied an appeal from Nora’s codefendants, as previously discussed in a Nov. 2020 FCA Insider post.

United States v. Nora, No. 18-31078, 2021 WL 716628 (5th Cir. Feb. 24, 2021), concerned Nora’s separate appeal apart from the other defendants. As discussed in our prior alert, Nora’s codefendants were not successful in appealing their convictions related to Abide. The government had indicted 23 individuals with conspiracy to commit health care fraud, conspiracy to violate the AKS, and several counts of substantive health care fraud. In the previous appellate decision, Barnes, the Fifth Circuit found a reasonable juror could have convicted the defendants. Here, by contrast, the Fifth Circuit agreed that there was insufficient evidence that Nora “willfully” acted with knowledge with respect to each count of fraud and abuse.

Central to the charges and convictions were Medicare’s regulatory requirements that skilled services for “homebound” patients be certified by the patient’s physician. Such physician certification is necessary to receive reimbursement for home healthcare services and requires that a physician review an in-home assessment completed by a nurse and approve a plan of care using forms, which are then submitted to Medicare. Patients require recertification every sixty days.  Payment for home health services varies depending on the complexity of the patient’s diagnosis, with more complex diagnoses receiving higher Medicare reimbursements. Medicare also anticipates this care will not be long-term, meaning that too many recertifications of a patient in a row raises a “red flag” to Medicare.

The Government alleged that the codefendants committed fraud by billing Medicare for medically unnecessary home health services, which included diagnoses that were not medically supported, making payments when a referral successfully resulted in a new patient for Abide, and “ghosting” or pausing patient billing for a short period so that a “red flag” was not identified with respect to a long-term homebound patient and other improper arrangements.  The defendants included Nora, formerly employed Abide “house doctors,” and a spouse of one of the physician-defendants who served as a biller for Abide. In his role, Nora engaged in patient recruiting efforts, as well as patient screenings and scheduling that were central to the Government’s case that patients were improperly recertified.  Despite his objections that he lacked knowledge of the unlawfulness of Abide’s practices, the jury convicted Nora and the district court sentenced Nora to a concurrent sentence of 40 months’ imprisonment on each count followed by one year of supervised release, and ordered Nora to pay $12,921,797 in restitution to Medicare.

What distinguishes Nora’s conviction from the other defendants, according to the Fifth Circuit, was his level of knowledge as to the healthcare fraud.  Nora was hired as a full-time data entry clerk earning $13 an hour as a 22-year old with a high school diploma and a few college credits.  Nora was eventually promoted to a salaried office manager without any alleged improper referral bonuses.  Nora was responsible for assigning doctors, patients and nurses for certification and recertification for home health services, and, as such, “the Government contended [he] was complicit in this practice.”

On appeal, the Fifth Circuit disagreed, finding that Nora’s role “entangled” him in practices that were central to Abide’s fraud and kickback schemes, but that there was not evidence sufficient to prove that Nora understood Abide’s practices were unlawful or fraudulent. Therefore, the Government failed to prove that Nora acted with “bad purpose” in carrying out his responsibilities at Abide.  Evidence that Nora “received training on compliance, Medicare, and home health” was not sufficient to support the Government’s contention that Nora was alerted to the unlawful nature of Abide’s practices absent information about what the training entailed.  Nor could testimony that Abide had a pervasive culture of disregard for healthcare regulations impute “bad purpose” to every single employee working there. Some employees may be mere “pawns” being manipulated by other conspirators because they do their job “without asking questions.” While the Fifth Circuit had previously held that “proximity to fraudulent activities” can support an inference of knowledge of unlawfulness, when the proximity was “devoid of specifics” and did not include evidence that Nora “directly observed” or “deliberately closed his eyes to” fraudulent behavior, the Government did not present sufficient evidence to support a conviction.

Even with his conviction vacated, Nora’s prosecution provides a cautionary tale on the wide net cast when fraud and abuse is suspected. Such net may catch or “entangle” employees in any enforcement actions when such employee did not have significant authority or knowledge of the prosecuted fraud.  Abide’s owners entered a plea deal and testified against their former employees. Companies need to develop a culture of compliance, both to avoid a court finding that they had a pervasive culture of disregard for the rules and also to protect their employees. Here, even with Nora’s success, other codefendants part of the Abide scheme face significant criminal penalty from the Government’s successful prosecution.

OIG, Regulatory

American Rescue Plan Funds OIG’s Provider Relief Fund Oversight

On March 11, 2021, President Joe Biden signed into law H.R. 1319, the American Rescue Plan Act of 2021. The American Rescue Plan’s $1.9 trillion in spending, contains numerous provisions impacting healthcare, including medical insurance, services delivery and providers.

The American Rescue Plan also provides $5 million to the HHS Office of Inspector General (OIG) for oversight activities with respect to the public health and social services emergency fund (the Provider Relief Fund). The Provider Relief Fund was created through congressional appropriations now totaling $178 billion to reimburse healthcare providers’ eligible expenses and lost revenues attributable to COVID-19. HHS developed the Provider Relief Fund through multiple rounds of payment distributions, including both General Distributions and Targeted Distributions to specific provider categories.

We anticipate significant government interest in how healthcare providers utilized the funds they received from the Provider Relief Fund and whether the providers who received the funds complied with the terms and conditions of the Provider Relief Fund. At this time, only recipients of payments exceeding $10,000 in the aggregate from the Provider Relief Fund will need to comply with reporting requirements set by HHS, but all recipients may be subject to reporting obligations and auditing in the future.

In late February 2021, the U.S. Department of Justice announced its first Provider Relief Fund-related criminal indictment. With the American Rescue Plan funding, OIG will have the financial support to increase its planned efforts to audit and review Provider Relief Fund spending. Provider Relief Fund recipients should continue to ensure that they are appropriately spending this federal support and prepare for future reporting and external auditor engagements.

For more information on the healthcare provisions of the American Rescue Plan, please review, “President Signs American Rescue Plan — Five Key Healthcare Themes”. Please contact an author of this post, with questions on the Provider Relief Fund.




FCA Insider Blog Interview with Michael Podberesky: Part II

As mentioned in our previous article, last month we were pleased to welcome former DOJ prosecutor Michael Podberesky to McGuireWoods.  The below is the continuation of our Q&A with Michael:


What is some advice that you would provide to a client that is responding to a Civil Investigative Demand (CID) or subpoena?



I like to remind clients that the CID itself will provide some useful information.  It will include the basis of the investigation and whether the matter is being handled as a delegated matter managed primarily by a local U.S. Attorney’s Office or as a matter handled jointly by a U.S. Attorney’s Office and DOJ (generally matters where the gross amount of the original claim exceeds $10 million).  I would also advise clients to not delay in retaining counsel and formulating a plan of action as there are tight statutory response deadlines of a minimum of twenty days for the production of documents and information, and seven days for the provision of oral testimony under oath.


Clients should also be proactive when dealing with a CID or subpoena and have counsel reach out to the prosecutor as soon as possible and meet with them, preferably face-to-face.  Prosecutors often write very broad requests, in case they need to move to compel, but are usually willing to work with defense counsel to narrow and prioritize the document universe, limit discovery burdens and costs (e.g., search terms and focused, iterative custodian lists) and establish reasonable timelines.  They will also tend to be generous with extension requests so long as defense counsel remains communicative and demonstrates good faith efforts to respond (“feed the beast”).  This early proactive communication can also hopefully provide clients more information about the basis of the investigation.


I would also recommend conducting a thorough internal investigation as quickly as is prudent to get your arms around what transpired and catch up to and get ahead of the government’s investigation.  This will help in formulating a defense and potential-litigation strategy going forward and may enable the client to self-disclose to the government and earn cooperation credit that can reduce the size of a potential settlement.


It is a good idea to establish a healthy dialogue and rapport with the prosecutors as early as possible.  The vast majority of FCA cases end in a declination or a pre-litigation settlement, so there is “play in the joints” and open and honest dialogue with prosecutors is crucial.  In communicating with prosecutors, clients should be as transparent and forthcoming with the government to the extent that it makes sense, and in most cases that will make sense.  But simultaneously, defense counsel should advocate and persuade by providing necessary context.  Prosecutors have very large caseloads and will appreciate defense counsel doing much of the heavy lifting of culling, reviewing and organizing information.  If they view the targets as being cooperative and helpful, most prosecutors will give a respectful and open-minded hearing to defense counsel as they provide context and a narrative for the information produced, so long as they do not think they are being dealt with dishonestly or their intelligence is being insulted.  Doing so allows defense counsel some potential control and influence over the direction of the investigation and the government’s intervention decision or settlement.  Bottom line, in the FCA context there is a lot of room for persuasion because the government declines most cases (and even dismisses some whistleblower complaints).


The process of producing responsive information in a cooperative fashion while also advocating for your client and attempting to sway the prosecutors is a delicate dance and requires a careful and nuanced approach.  False Claims Act matters are not criminal matters, where an implausible but theoretically possible explanation may be enough to avoid liability under a reasonable doubt standard.  Nor are they run of the mill civil litigation cases such as a contract dispute between private parties.  These are civil enforcement cases where a preponderance of the evidence standard applies and the vast majority of cases are either dismissed or resolved by a financial settlement.  A thoughtful and effective approach to a civil enforcement matter needs to be informed by this context and these realities and should be calibrated to them.  The experienced FCA counsel here at McGuireWoods can help deftly navigate these challenges and ensure a favorable resolution.



FCA Defenses, FCA Litigation

U.S. Supreme Court Declines to Clarify False Claims Act Falsity Standard

The U.S. Supreme Court recently declined to address a circuit split regarding the standard for establishing that a statement material to a claim for payment is false under the False Claims Act (FCA); specifically, whether the FCA requires pleading and proof of an “objectively false statement,” or whether liability can be based on allegedly false opinions. While the Courts of Appeals have taken conflicting positions on these issues, the circuit split is not as deep as would appear and the variation in standards are likely to have a minimal impact on ultimate outcomes. Nevertheless, with these varying standards for establishing falsity, healthcare providers and government contractors should take proactive steps to ensure signed certifications pertinent to a claim reflect appropriate diligence and decision-making and convey reasonably and honestly held opinions.

A plaintiff must allege and prove the following to prevail on an FCA claim: (1) a false statement, (2) made with the requisite scienter (or knowledge that it was false), (3) that was material, causing (4) the government to pay out money. The threshold issue here relates to the proof required to establish the first prong, that information in or material to a claim is actually false. Assessing whether an opinion conveyed in a relevant certification is reasonably held or is false, however, is inextricably tied to the assessment of the second element, whether the statement was made with the requisite knowledge of the fraudulent nature of the statement (and either deliberate ignorance or reckless indifference is sufficient to establish scienter in the FCA context).

On February 22, 2021, the U.S. Supreme Court denied petitions for certiorari in two cases seeking review of opinions of the Third and Ninth Circuits in United States ex rel. Druding v. Care Alternatives, 952 F.3d 89, 97 (3d Cir. 2020), and United States ex rel. Winter v. Gardens Regional Hospital and Medical Center, 953 F.3d 1108, 1114 (9th Cir. 2020), respectively, regarding whether the FCA required proof of an “objective falsity” in a material statement to establish liability. Both cases involve allegations of healthcare fraud arising from false physician certifications, and the circuit opinions in those cases both address the “objective false statement” standard articulated by the Eleventh Circuit in United States v. AseraCare, Inc., 938 F.3d 1278 (11th Cir. 2019).

In the AseraCare case, which involved allegations centering on purportedly false certifications that federal healthcare program beneficiaries were terminally ill and therefore eligible for hospice services, the Eleventh Circuit held that to properly state a claim under the FCA, the plaintiff must demonstrate an objective falsity in the statement at issue, which is “something more than the mere difference of reasonable opinion.”

In contrast, the Third Circuit in ex rel. Druding (another case centering on allegedly false terminal illness certifications) flatly rejected the AseraCare Court’s objective falsity standard for FCA claims. The Third Circuit reasoned that “clinical judgments” like other opinions, can “be ‘false’ for purposes of FCA liability.” The Care Alternatives Court further held that the objective falsity standard “improperly conflates the elements of scienter and falsity,” effectively reading the scienter requirement out of the statute: “objectivity speaks to the element of scienter, not falsity … the text and application of the FCA require that the elements of falsity and scienter be analyzed separately.”

Similarly, the Ninth Circuit in ex rel. Winter (involving allegedly false certifications that hospitalization was medically necessary for federal healthcare program beneficiaries) rejected the argument “that only ‘objectively false’ statements can give rise to FCA liability.” The court noted that, “under the common law, a subjective opinion is fraudulent if it implies the existence of facts that do not exist or if it is not honestly held.” Despite concluding that a physician’s opinion with “no basis in fact can be fraudulent if expressed with scienter,” the Ninth Circuit claimed that their decision did not conflict with AseraCare. The Winter Court reasoned that the AseraCare objective falsity standard was limited to the fact specific and inherently speculative context of the “hospice-benefit provision at issue” (i.e., the forward-looking assessment that a patient was terminally ill and so likely had six months or less to live).

With the Supreme Court declining to provide clarity, government contractors, healthcare entities, and other heavily regulated industries should take note of the ongoing legal uncertainty and potentially disparate levels of risk in different parts of the country. It is unclear to what extent, if any, that entities can rely on AseraCare and the objective falsity standard outside of the Eleventh Circuit (Alabama, Florida, and Georgia) and the hospice context.

That said, the careful reading of the three circuit opinions shows that there is less to the circuit split than meets the eye: While the Eleventh Circuit did adopt an “objective falsity” standard that the Third and Ninth Circuits rejected, the AseraCare Court took pains to broadly define “objective falsity” to include not only patently false certifications containing forged or “rubber stamped” signatures, but also opinions that are not honestly held or reasonable. As such, even the Eleventh Circuit conceded that statements of opinion and clinical judgment can be false if they “disregard[] the patient’s underlying medical condition” and so are not necessarily immune from liability. Moreover, while the AseraCare Court held that a certifying physician’s state of mind must be considered when assessing falsity, and the Ninth and Third Circuits held that such an analysis should be conducted when evaluating scienter, the elements of falsity and knowledge are tightly intertwined: Whether an opinion was dishonestly or unreasonably held (and therefore false), and whether that opinion was conveyed with the knowledge that is was false, are closely related questions. That being the case, whether state of mind is assessed in determining both falsity and scienter, or just scienter, is not likely to affect the outcome of most cases.

Companies should be conscious that a certifying official’s opinion may trigger FCA liability if it is not supported by evidence or if it is not reasonably or honestly held. The fact that a statement at issue may be an opinion or an expression of professional judgment will not automatically immunize the statement from liability, no matter which circuit the case is in. Healthcare providers and government contractors should therefore consider reviewing internal policies related to certifications that are material to a claim for payment. Companies are encouraged to be proactive in mitigating the risk of enforcement actions, including through the maintenance of a robust Governance, Risk, and Compliance (GRC) program and periodic audits of business processes to ensure certifications are supported by documentation in the clinical records or contract files, and made in an environment conducive to considered judgment and free from inappropriate pressure. These proactive mitigating steps are especially important where noncompliance includes the potential for treble damages and per invoice penalties under the FCA.

Please contact the authors if you have any questions about FCA compliance and the potential impact on your business.

About McGuireWoods’ Government Investigations & White Collar Litigation Department
McGuireWoods’ Government Investigations & White Collar Litigation Department is a nationally recognized team of nearly 60 attorneys representing Fortune 100 and other companies and individuals in the full range of civil and criminal investigations and enforcement matters, including litigation and action under the False Claims Act. Our False Claims Act team includes former federal prosecutors, and experienced civil and white collar criminal litigators with experience in this unique area of law. We also tap attorneys from the firm’s other practice groups and our subsidiary McGuireWoods Consulting LLC. Strategically centered in Washington, D.C., our Government Investigations & White Collar Litigation Department has been honored as a Law360 Practice Group of the Year and earned the trust of international companies and individuals through our representation in some of the most notable enforcement matters over the past decade.

About McGuireWoods’ Healthcare Department
With more than 60 experienced, industry-focused lawyers, our national Healthcare Department is consistently ranked as one of the top U.S. healthcare practices. Our healthcare attorneys have the knowledge and experience that healthcare providers and insurers need to achieve compliance with federal and state-specific regulatory requirements. Our group advises clients on a full range of regulatory and policy issues enforced by the U.S. Government. Clients have recognized the value of our depth in regulatory, litigation and transactional matters, noting our “great commercial awareness” and have described us as “very skilled,” “extremely knowledgeable, practical and accessible.” Our healthcare group and individual lawyers from across the country are recognized by Chambers USABest Lawyers in AmericaLegal Elite and Super Lawyers as among the top legal providers in the nation.


FCA Insider Blog Interview with Michael Podberesky

Last month we were pleased to welcome former DOJ prosecutor Michael Podberesky to McGuireWoods.  Michael comes to McGuireWoods after a five and a half year stint as a fraud prosecutor focused mainly on healthcare enforcement under the guise of the False Claims Act.  Below is a short Q&A with Michael discussing his background and recent move as well as current law enforcement priorities.


Tell me a little bit about your practice and experience prior to joining McGuireWoods.


My experience has been predominantly focused on fraud and False Claims Act (“FCA”) matters, primarily in the healthcare and defense procurement sectors.  Prior to joining McGuireWoods, I worked at the Department of Justice’s Civil Fraud Section in Washington, D.C., which is the lead office responsible for prosecuting False Claims Act cases, usually in coordination with local U.S. Attorneys’ Offices.  There, I lead teams of prosecutors and agents in investigating and litigating FCA cases and worked on approximately 50 False Claims Act matters. I was able to attain settlements and judgments in numerous cases, resulting in recoveries for the federal fisc well into the 9-figures.  Healthcare-related cases consisted of about 70% of my caseload while the remaining 30% of cases were related mainly to defense procurement matters.  In the healthcare industry, I worked on a broad range of cases involving several sectors including pharmaceuticals, imagery, home health care, hospice, skilled nursing homes, Medicare Part C, and cardiac devices. I also handled several kickback cases.  On the procurement side, I tended to handle matters involving aerospace products given my background flying aircraft in the Navy. Prior to the Department of Justice, I spent 7 years at a large international law firm where I was a general litigator.  A third of my practice there was white-collar defense and investigation, and the other two thirds was general commercial litigation, with a heavy emphasis on defense and aerospace matters. Prior to law school, I served in the Navy for 8 years flying surveillance aircraft, including over Afghanistan and throughout the Persian Gulf region as part of Operation Enduring Freedom.


What is an interesting or representative case that you worked on at the Department of Justice?


I worked on a series of qui tam (whistleblower) cases filed against a chain of pain management clinics alleged to have violated numerous laws.  The main allegation was that they were over ordering urine drug tests for patients who were prescribed opioids to maximize the number of samples sent to a company-owned testing facility where they would run an extensive battery of costly tests on each specimen.  Whistleblowers alleged that the company, which had dozens of locations and probably more than a hundred clinicians, prioritized collecting urine samples from patients and then running dozens of unnecessary tests on them.  So much so that some employees took to calling the urine samples “liquid gold” because they provided such a large revenue boost.  The government intervened and has reached civil settlements with several of the defendants.  The CEO was also arrested and convicted for a kickback scheme uncovered as part of our investigation.

These cases demonstrate how the opioid crisis has had significant costs beyond the tragic loss of life to include tremendous financial burdens on federal healthcare programs that paid for the allegedly unnecessary tests.  They also demonstrate how Medicare program and payment rules can unintentionally incentivize fraud.  Previously, Medicare used to pay per substance tested because of older technology that required an additional test run of the sample to check for each substance.  With the advancement of mass spectrometry and introduction of more sophisticated analyzers, laboratory techs can now examine a sample for multiple substances with one test run.  The reimbursement rules, however, lagged behind these advancements, creating an over-testing incentive the defendants allegedly tried to take advantage of.


What are you looking forward to in your return to private practice?


I am excited to join one of the premier white collar teams in the world at a firm which also has one of the strongest healthcare practices.  I hope to help bridge those strengths and grow an already strong healthcare enforcement practice that takes advantage of the existing litigation, regulatory and industry experience and tremendous client base here.

I am glad that I can put to work the knowledge and experience gained while prosecuting fraud cases on behalf of clients who are often trying to do the right thing while building a profitable business and serving their customers, but who also transact in a heavily regulated space under complex legal regimes (and are not infallible).  I am also looking forward to providing proactive advice to help solve problems quickly before they become major concerns.


What are some of the hot bed areas of enforcement for healthcare fraud and abuse cases?


There are a few enforcement areas that DOJ leadership across administrations has consistently identified as top priorities.  Opioid abuse and related-fraud continues to be a top DOJ priority.  Opioid-related overdose deaths continue to climb and take a tremendous toll on society.  DOJ continues to pursue entities involved in the sales, marketing and distribution of opioids, but in 2020, their focus widened to include entities outside of the normal supply chain.  For example, in 2020, the Department of Justice settled for $145 million with an electronic medical record company alleged to have violated kickback laws by incorporating prompts in their software meant to encourage physicians to prescribe certain opioids.  Recently, a consulting company settled for around $600 million with 49 states regarding claims related to sales advice the company provided to opioid manufacturers.

Another area of focus will be elder care and nursing homes.  Nursing home operators are currently under a lot of scrutiny because of the large number of people who have died in their facilities from COVID-19 while nursing homes owners are simultaneously collectively receiving hundreds of millions of dollars from the government for forgivable PPP loans and other COVID-19 related relief programs.  This will undoubtedly cause continued scrutiny of the nursing home industry.

A final area I want to address is Medicare Part C cases.  Medicare spends around $250 billion every year on Medicare Part C (managed care) causing a shift away from traditional fee-for-service Medicare and a corresponding shift in enforcement activity.  The Part C managed plans are attractive for seniors and account for about one-third of enrolled Medicare beneficiaries, a percentage that continues to grow.  Medicare Part C is relatively new and the fraud looks very different than it does on the traditional fee-for-service side.  Part C fraud usually involves more exaggerated diagnosing of patients’ condition in order to get the government to pay higher risk adjusted capitated payments per patient.  Enforcement in the Medicare Part C sector will continue to grow as more beneficiaries choose to enroll in managed care plans and insurers and providers become more sophisticated in operating under its risk adjusted capitated-payment regime.

Just a few weeks ago, the Acting Assistant Attorney General provided the first clues about enforcement priorities for the Biden administration in a brief speech to the Federal Bar Association.  In his remarks, Acting Assistant Attorney General Boynton reiterated that opioids and elder-care would remain priority enforcement areas and also discussed focusing on pandemic-related fraud and fraud related to telehealth, electronic medical records and cyber security as additional Civil Division enforcement priorities.

To continue reading, see part 2 of our interview.


DEA Investigation Leads to Record-Setting Settlement for Drug Diversion at a Health Care System

The United States Department of Justice (DOJ) recently announced the nation’s largest settlement involving allegations of drug diversion at a health care system. The settlement, totaling $7,750,000, came after a years-long investigation by the U.S. Drug Enforcement Administration (DEA) into McLaren Health Care Corporation (MHCC).  The DEA concluded that MHCC’s handling of controlled substances violated the Controlled Substances Act (CSA), 21 U.S.C. §§ 801–904, and its implementing regulations.  The government alleged that the health care system’s internal practices were deficient and, therefore, allowed for the diversion of drugs, including opioids.

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