The FCA Insider

The FCA Insider

Insights and updates on False Claims Act Litigation

FCA Defenses

Request to File Amended Complaint for Fraud Rejected for Failure to Allege Facts with Particularity

After granting defendants’ motion to dismiss and dismissing plaintiff’s action with prejudice, the U.S. District Court for the Middle District of North Carolina recently denied relator’s motion to alter or amend the judgment and file an amended complaint alleging Anti-Kickback Statute (“AKS”) and False Claims Act (“FCA”) violations. Central to the court’s decision to deny the motion in United States v. Medcom Carolinas, Inc., No. 1:17-CV-34, 2021 WL 981240 (M.D.N.C. Mar. 16, 2021) was plaintiff’s continued inability to: (1) provide a representative example of a false claim that had been submitted to the government for payment; and (2) connect remuneration being paid with any claims that were submitted

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FCA Defenses, FCA Litigation, Uncategorized

Michael Podberesky Discusses Circuit Split on FCA’s False Statement Standard

In an April 7, 2021, interview with Federal News Network, Washington, D.C., partner Michael Podberesky discussed how federal contractors are impacted by the U.S. Supreme Court’s recent decisions denying two petitions for writs of certiorari, thereby declining to resolve a circuit court split regarding the False Claims Act’s standard for pleading and proving the falsity element.

Because of the conflicting appellate court decisions, healthcare providers and government contractors “need to be vigilant because depending on what jurisdiction you’re in, you could have a varying standard for assessing certification decisions,” Podberesky noted. “Companies should ensure they have a robust compliance function,” he continued, “and part of that compliance function is auditing the certification process to make sure the certifications [pertinent to a claim] are supported by data in the records and are completed in an appropriate manner.”

Podberesky and McGuireWoods’ Todd SteggerdaDavid PivnickJohn MoranLawrence CameronBrandi Howard and Jason Vespoli addressed this topic in a March 8, 2021, post on the firm’s Subject to Inquiry blog titled “U.S. Supreme Court Declines to Clarify False Claims Act Falsity Standard.”

OIG, Regulatory

Rural FQHC Can Provide Free Space for COVID-19 Vaccinations

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 most recent inquiry discussed in our March 22 post, and also providing guidance on the following question:

Can a federally qualified health center (FQHC) with a location in a rural area provide free space to a retail pharmacy that administers COVID-19 vaccinations to FQHC patients and the general public (including Federal health care program beneficiaries)?

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FCA Defenses

Court Dismisses FCA Retaliation Complaint Involving Speaker Fees

In U.S. ex rel. Manieri v. Avanir Pharmaceuticals, Inc., 2021 WL 857102 (N.D. Oh. Mar. 8, 2021), the Northern District of Ohio dismissed a relator’s claim that he had been improperly retaliated because he had raised concerns about alleged fraudulent conduct involving speaker fees under the False Claims Act (FCA) and the Federal Anti-Kickback Statute (AKS).  Manieri serves as a helpful reminder of the high standard for pleading a retaliation claim under the FCA.

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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.

For related commentary, please see the following posts:
Providers May Offer Incentives to Federal Beneficiaries for Receiving COVID-19 Vaccine (June 9, 2021)
OIG Removes Mandatory Cost-Sharing Obligations for COVID-19 Ambulance Transport Waiver (May 17, 2021)
Rural FQHC Can Provide Free Space for COVID-19 Vaccinations (April 13, 2021)
Per-Click Compensation for Philanthropic Entity’s COVID-19 Vaccine Site Low Risk of Fraud According to OIG (March 2, 2021)
OIG Responds to Free/Discounted Lodging and Free Antibody COVID-19 Test Inquiries (August 27, 2020)
OIG Responds to Physician Group COVID-19 Personal Protective Equipment Arrangement Inquiry (May 17, 2020)
OIG Updates Enforcement Responses to COVID-19 Arrangement Inquiries (May 13, 2020)
OIG Requests Inquiries on Enforcement Related to COVID-19 Arrangements (April 13, 2020)

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.



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