The FCA Insider

The FCA Insider

Insights and updates on False Claims Act Litigation

FCA Defenses

No FCA Liability Where Fraudulently Obtained Contract Did Not Concern the United States

In U.S. ex rel. Freedman v. Bayada Home Health Care, Inc., No. 3:19-cv-18753-FLW-ZNQ, 2021 WL 1904735 (D.N.J. May 12, 2021), a New Jersey District Court found that the relator failed to plead a cognizable theory of liability under the FCA based on defendant Bayada Home Health Care, Inc. (“Bayada”) allegedly fraudulent acquisition of a home health agency that subsequently billed Medicare for seemingly legitimate claims.

In 2011, the Ocean County Board of Health (“Ocean County”) began considering whether to sell its home healthcare agency. That fall, Bayada asked George Gilmore, an attorney and local Republican Party chair, to “lobby” on its behalf in its attempt to purchase Ocean County’s home healthcare agency. Gilmore engaged in various efforts to that end, and signed a retention agreement for legal services in March 2012. Additionally, days before Bayada submitted its proposal to Ocean County, Bayada’s then-COO offered Gilmore a “success fee” on top of his retention agreement. Bayada did not inform Ocean County of its contingency fee arrangement with Gilmore, despite the fact that the RFP and New Jersey state regulations prohibit paying lobbyists in that way. Bayada was awarded the contract, despite bidding $500,000 less than the other bidder. Bayada obtained Ocean County’s license in December 2014, enrolled as a Medicare provider in January 2015, and billed approximately $36 million in Medicare claims to the federal government through 2019.

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OIG, Regulatory

Providers May Offer Incentives to Federal Beneficiaries for Receiving COVID-19 Vaccine

As previously discussed, on April 3, 2020, the U.S. Department of Health and Human Services (HHS) 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 recent inquiry discussed in our May 17 post, providing guidance on the following question:

“Would the offer or provision of cash, cash-equivalent, or in-kind incentives or rewards to Federal health care program beneficiaries who receive COVID-19 vaccinations during the public health emergency violate OIG’s administrative enforcement authorities?”

A broad range of entities are offering a wide variety of incentives and rewards from food and beverages, tickets to concerts and baseball games, cash, to even State sponsored exclusive lottery tickets, to individuals who receive the COVID-19 vaccine. Because effective, expeditious, and widespread vaccine administration is crucial to the COVID-19 pandemic response, OIG has concluded that because certain incentives and rewards may promote broader access to and uptake of COVID-19 vaccinations, these incentives do not violate OIG’s administrative enforcement authorities.

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OIG, Regulatory

OIG Advisory Opinion Allows ASC Joint Venture by Management Company and Hospital-Employed Physicians

On April 29, 2021, the U.S. Department of Health and Human Services Office of Inspector General issued a favorable advisory opinion offering first-time guidance on the development and investment of an ambulatory surgery center owned jointly by a hospital, management company and physician investors employed by the hospital.

Read on for analysis of this opinion.

OIG, Regulatory

OIG Removes Mandatory Cost-Sharing Obligations for COVID-19 Ambulance Transport Waiver

As previously discussed, on April 3, 2020, the U.S. Department of Health and Human Services (HHS) 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 most recent inquiry discussed in our April 13 post and also providing guidance on the following question:

What are the implications, under OIG’s administrative sanction authorities, of an ambulance provider or supplier waiving or discounting beneficiary cost-sharing obligations (required by the Medicare program) resulting from ground ambulance services paid for by the Medicare program under a waiver established pursuant to section 1135(b)(9) of the Social Security Act?

OIG responded to the unique context where Medicare will make retroactive ground ambulance payments for certain patients not transported to a local hospital due to COVID-19 by responding in the affirmative that such ambulance providers and suppliers would not need to collect beneficiary cost-sharing payments to receive such Medicare reimbursement. Such retroactive billing was authorized in the American Rescue Plan for the services described below, and the Secretary of HHS utilized this authority to waive certain statutory reimbursement requirements the same day as OIG issued this FAQ.

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Damages, FCA Litigation

Sixth Circuit Creates Circuit Split, Allows Former Employee’s FCA Retaliation Claim

U.S. 6th Circuit Court Room with LogoThe U.S. Court of Appeals for the Sixth Circuit held, in connection with an interlocutory appeal, that the False Claims Act (FCA) anti-retaliation provisions protect relators from post-employment retaliatory conduct.  In United States ex rel. Felten v. William Beaumont Hosp., 993 F.3d 428 (6th Cir. 2021), the Sixth Circuit reversed the district court’s dismissal of relator, David Felten’s complaint involving allegations that he was “blacklisted” by Beaumont Hospital post-employment when seeking other employment, reasoning that the FCA’s anti-retaliation provisions cover actions taken after the course of employment concludes. The opinion diverges from both a 2018 Tenth Circuit opinion and a strong dissent from Judge Griffin.

For context, the relevant language of the FCA’s anti-retaliation language at 31 U.S.C. § 3730(h)(1) reads:

Any employee, contractor, or agent shall be entitled to all relief necessary to make that employee, contractor, or agent whole, if that employee, contractor, or agent is discharged, demoted, suspended, threatened, harassed, or in any other manner discriminated against in the terms and conditions of employment because of lawful acts done by the employee, contractor, agent or associated others in furtherance of an action under this section or other efforts to stop 1 or more violations of this subchapter.

(Emphasis added.)

The ultimate question before the circuit court was whether the statute means that the employee, contractor, or agent has to be currently employed when subjected to the italicized language in order to bring a retaliation claim. In a matter of first impression for the Sixth Circuit, the court answered this in the negative holding that former employees can bring retaliation claims when facing post-employment harm.

The opinion follows Beaumont Hospital settling with both the U.S. and the State of Michigan, both of whom had intervened in the case, which concerned an illegal kickback scheme.  With the settlement, the district court dismissed all claims other than Felten’s allegations involving employment discrimination.

Subsequently to the settlements, Felten amended his complaint to raise both employment discrimination and post-termination retaliation by his former employer. Felten alleged his termination occurred after he filed the qui tam complaint based on a false pretense that his position was subject to mandatory retirement. Further, post-termination, Felten alleged that he was unable to find a comparable position in academic medicine because Beaumont Hospital “intentionally maligned him in retaliation for his reports of its unlawful conduct.” (Internal punctuation removed.)  Specifically, Felten alleged that his employment applications to nearly 40 institutions were undermined by the hospital. The district court dismissed claims related to post-employment discrimination, reasoning the FCA’s anti-retaliation provisions do not extend beyond employment.

[T]he court held that the anti-retaliation provisions of the FCA may be invoked for post-termination retaliatory conduct by a former employer.

On appeal, the court reasoned that the term “employee” in the FCA has ambiguous meaning and could be interpreted to apply to former employees under rules of statutory interpretation. The court looked at the broader context of the FCA and utilized previous opinions under Title VII to determine that restricting the definition of “employee” to current employees would create a perverse incentive for employers to fire employees who might bring claims of fraud and abuse against their employer. Further, the court worried that within the broader FCA-landscape that post-employment retaliation could chill or “dissuade” “potential whistleblowers … from reporting fraud against the government.” Accordingly, the court held that the anti-retaliation provisions of the FCA may be invoked for post-termination retaliatory conduct by a former employer.

Judge Griffin’s dissenting opinion stated that the Sixth Circuit majority “rush[ed] to find ambiguity” where none exists.  He cited ten lower court opinions holding that the FCA anti-retaliation provision did not extend to post-employment conduct (compared with two opinions ruling similar to the majority), as well as an opinion from the Tenth Circuit, noting that “[n]early every federal court that has considered whether the FCA’s anti-retaliation provision [applies, has found it] is temporally limited to current employees.” The dissent suggested the opinion could have unintended impact on claims against former employees of the federal government under the FCA. Finally, responding to the majority, the dissent made clear that former employees can obviously bring post-termination claims but the allegations should relate to the temporal period of employment.

This opinion will obviously have impacts on cases arising out of the Sixth Circuit (cases filed in Kentucky, Michigan, Ohio, and Tennessee) but could also have a domino effect in other jurisdictions, as well. Going forward, healthcare employers should consider how conduct may be interpreted as retaliatory against former employees. Companies may want to revisit policies with former employees to avoid making statements in response to reference questions that could lead to a post-employment retaliation claim, particularly those that raised compliance complaints, whether warranted or not. Further, further development of the emerging circuit split will be interesting to monitor to predict whether such a case could reach the Supreme Court in the future.

If you have any questions about the contents of this alert or your organization’s compliance with the FCA, please contact the author or any member of the McGuireWoods healthcare team.

 

FCA Defenses, FCA Litigation

Texas Court Allows FCA Case to Proceed Based on Purchasing “Future Referrals”

In United States ex rel. Roshan v. E. Tex. Med. Ctr., 2020 U.S. Dist. LEXIS 252092, 2020 WL 8918651 (E.D. Tex. (Nov. 24, 2020)), a Texas federal court partially dismissed a relator’s claim alleging the defendants engaged in various billing and referral practices that violated the False Claims Act (FCA), the Stark Law, and Anti-Kickback Statute (AKS). While dismissing certain of the relator’s claims for failure to plead with the requisite particularity, the court allowed the case to proceed on the allegations concerning a single practice purchase compensating the seller for “future referrals” and pressure on the employee relator himself to refer more hospital-based procedures. This case serves as reminder that healthcare providers should always be cautious when discussing patient referrals, particularly when negotiating financial arrangements with physicians.

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Defense Arguments, FCA Litigation

Alleged Emergency Room Advanced Professional Practitioner Billing Scheme FCA Case Proceeds

In U.S. ex rel. Sonyika v. ApolloMD, Inc. et al., 2021 WL 1222379 (N.D. Ga. Mar. 31, 2021), a Georgia federal court allowed a relator’s Amended Complaint alleging a fraudulent scheme involving improper billing for services rendered by Advanced Professional Practitioners (APP) in violation of the False Claims Act (FCA) and the Georgia-equivalent to proceed. The court found that the relator’s personal experience as a participant in the alleged billing scheme provided adequate indicia of reliability with respect to his “presentment claim” and his “use claim” under the FCA and claim under the Georgia State False Medicaid Claims Act that the defendants caused increase reimbursement for APP services in emergency rooms than should have been billed. On the other hand, the court dismissed claims related to violation of the AKS and non-Georgia false claims statutes.

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CMS Guidance, Stark Law

Stark Law 2020 Settlements Return to Pre-2019 Trend

The Centers for Medicare & Medicaid Services (CMS) recently announced 2020 settlements concerning past violation or potential violations of the physician self-referral law (the Stark Law) and the number and value of such settlements have returned to the pre‑2019 trends. The 2020 settlements based on voluntary submissions submitted several years ago mark an increase from 2019’s report when CMS announced the lowest aggregate settlement dollars collected since the Stark Law disclosure’s first year in 2011. We speculated last year that such decrease could continue in 2020 as the agency’s attention focused on the 2019 novel coronavirus (COVID-19). That said, as shown on the first chart below, CMS doubled its 2019 settlement numbers, and, as shown on the second chart, announced the greatest aggregate settlement dollars collected since reaching aggregate value that peaked in 2016.

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FCA Defenses

The Perils of Pleading the Fifth in the Corporate Fraud Context

“Pleading the Fifth” is one of the most commonly known phrases in the U.S. legal system, and the right against self-incrimination is one of the Constitution’s most meaningful protections. That said, the costs and risks of exercising that right in the corporate fraud context may outweigh the benefits.

To learn about some of the limits and potential high costs that invoking this protection could mean for companies — particularly federal government contractors, see our post on the Subject to Inquiry blog.

FCA Defenses

Sixth Circuit Affirms Jury Criminal Conviction in Federal Healthcare Kickback Scheme

In a recent opinion from the United States Court of Appeals for the Sixth Circuit, the court analyzed several alleged points of error from a criminal jury trial about a healthcare kickback scheme.  See United States v. Trumbo, No. 20-1393, __ F. App’x __, 2021 WL 957337 (6th Cir. March 15, 2021).  The opinion is significant because it gives insight into how an appellate court will approach contested issues on appeal after a rare criminal jury trial.

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