Anti-Kickback Statute December 28, 2023

Life Sciences Companies Face Continuing Compliance Challenges in Developing Value-Based and Value-Added Models

By Samuel C. Bernstein, Kristen H. Chang and McGuireWoods LLP

The U.S. Department of Health and Human Services Office of Inspector General recently issued Advisory Opinion 23-08, continuing its long-held position that the provision of value-added items and services implicates fraud and abuse laws, including the Federal Anti-Kickback Statute and the Beneficiary Inducement Civil Monetary Penalty law.

Read on to learn how manufacturers, distributors, and other life sciences companies that seek to improve outcomes by providing value-added items and services to their customers continue to face challenges in developing compliant models.

Anti-Kickback Statute, FCA Litigation December 27, 2023

A Failed Constitutional Challenge to the AKS Safe Harbor Provision – More to come?

By Brett Barnett and Timothy Fry

This past summer, in United States v. Booker, a North Carolina district court ruled against a challenge to the constitutionality of Congress’s delegation of authority to promulgate safe harbors to the Anti-Kickback Statute (AKS). In filing a motion for acquittal, Defendant Donald Booker argued the AKS “Safe Harbor Provision,” which grants the Secretary of Health and Human Services (HHS) the authority to exempt certain conduct from the “illegal remuneration” prohibitions of the AKS, violates the nondelegation doctrine. While Booker’s argument may appear paradoxical as, if successful, he would be prosecuted under the AKS without the protection of this safe harbor, the case raises an interesting example of a constitutional challenge to the AKS, which we may see more to come directly or with the FCA in the new year.

Anti-Kickback Statute, FCA Litigation December 1, 2023

The Growing Causal Divide: But-For Causation in AKS/FCA Actions

By Timothy Fry and Brett Barnett

In United States v. Regeneron, the District of Massachusetts Court recently joined the Sixth and Eighth Circuits in requiring the government to show a direct tie between kickbacks and referrals that proximately caused claims to federal healthcare programs to prevail in Anti-Kickback Statute (AKS) and False Claims Act (FCA) actions. The District Court’s ruling contributes to the growing split between the Third Circuit, which requires a mere causal connection between kickbacks and referrals, and the Sixth and Eighth Circuits, which require but-for causation between the kickback and the federal claim. This split relates to the per se fraud clause added to the AKS in 2010, which provides “a claim that includes items or services resulting from a violation of this section constitutes a false or fraudulent claim” for purposes of the FCA. The specific causal connotation of the language “resulting from” is the core of the debate between circuits.

Anti-Kickback Statute, FCA Litigation, Settlements November 29, 2023

$12M Default Judgment Results from Purchasing Prescriptions

By Brett Barnett, Timothy Fry and Micaela Enger

A large damage award serves as a significant reminder to file an appearance in a False Claims Act (FCA) case.

In late August of 2022, the Government filed suit against AZ Diabetic and the owner, Hisham Zaghal (Zaghal), in the Eastern District of Virginia, alleging violations under the False Claims Act (FCA), stemming from over $600,000 in reimbursement claims related to prescriptions that AZ Diabetic illegally purchased. After AZ Diabetic failed to file an appearance, the Government moved for default judgment, which was entered by the Court. As a result, AZ Diabetic was liable for just over $12 million in civil penalties and treble damages under the FCA for violations of the Anti-Kickback Statute (AKS).

Anti-Kickback Statute, FCA Litigation, OIG, Regulatory November 6, 2023

Lessons for Providers and Practice Entities: Ophthalmology Groups Pay Millions to Settle Co-Management, Optometrist Relationship Allegations

By Timothy Fry, Holly Buckley, Gretchen Heinze Townshend, Jim Schanaberger, Brett Barnett and McGuireWoods LLP

Two ophthalmology practice groups recently reached settlements with the U.S. government totaling nearly $20 million to resolve allegations that their third-party cataract arrangements violated several healthcare laws.

Read on to discover how the settlements offer guidance to vision providers with respect to the government’s focus on ophthalmology-optometry relationships, and whether the settlements’ lessons have broader applicability to providers and practice entities.

Anti-Kickback Statute, OIG, Regulatory October 30, 2023

HHS Advisory Opinion Approves Profit-Based Bonus Plan for Bona Fide Physician Employees

By Gretchen Heinze Townshend, Helen Suh, Amber Walsh, Timothy Fry, Kimberly J. Kannensohn, Kristen McDermott Woodrum, Natalie Galdos and Kristen H. Chang

On Oct. 13, the U.S. Department of Health and Human Services Office of Inspector General issued an advisory opinion approving a physician practice’s proposal to pay bonuses to each of its employed physicians based on net profits derived from the facility fee generated by procedures the physician performed at the practice’s ambulatory surgery center.

Read on for analysis of this opinion and how the proposed arrangement avoids implicating the federal Anti-Kickback Statute.

DOJ, FCA Litigation, Settlements October 2, 2023

DOJ Settles Self-Reported Referral Incentives With Dermatology Practice Manager

By Timothy Fry, Brett Barnett and Jonathan D. Wrobel

On Sept. 13, the U.S. Attorney’s Office for the Northern District of Texas announced a settlement with Oliver Street Dermatology Management LLC to resolve self-reported allegations that its acquisition of several dermatology practices violated the Stark Law, the Anti-Kickback Statute and the False Claims Act.

Read on for details about this matter, plus helpful guidance for considering fraud and abuse rules in acquisition strategies.

CMS Guidance, Stark Law September 18, 2023

CMS Settles Record Number of Stark Self-Disclosures

By Gretchen Heinze Townshend, Timothy Fry, Kristen H. Chang, Varsha Gadani and Micaela Enger

The Centers for Medicare & Medicaid Services (CMS) recently released data on its 2021 and 2022 settlements of voluntary self-disclosures related to past violations or potential violations of the physician self-referral law (the “Stark Law”). In 2022, CMS settled a record 104 self-disclosures, with settlement amounts totaling over $9,000,000 in the aggregate. These amounts are nearly quadruple the number and amounts of settlements in 2021 and one more than the previous record number from 2016. The record number and value of settlements in 2022 shows a marked increase from 2020 and 2021, when we speculated that CMS focused greater attention on the 2019 novel coronavirus (“COVID-19”) pandemic. Coming on the heels of the COVID-19 pandemic, it appears that CMS is working to review a greater number of self-disclosure submissions annually, which may reduce the backlog or the time it takes to have a self-disclosure reviewed.

DOJ, Individual Liability July 25, 2023

Eleventh Circuit Affirms Order for $1.195 Million in Restitution and 48 Month Sentence in Commercial Insurance Healthcare Fraud Case

By Michael J. Podberesky and Timothy Fry

Last month, the Eleventh Circuit upheld a $1.195 million restitution order and 48-month sentence against Carlos Verdeza for three counts of healthcare fraud. See United States v. Verdeza, No. 21-10461, 2023 WL 3728960 (11^th Cir. 2023). Verdeza was a case brought by the United States against a physician assistant who produced fraudulent patient files and sought reimbursement from Blue Cross Blue Shield (BCBS) commercial healthcare insurance for physical therapy treatments that were never performed. A jury in the United States District Court for the Southern District of Florida convicted Verdeza on three healthcare fraud counts. Verdeza illustrates that prosecutors can and do prosecute healthcare fraud cases that do not involve government payors.

DOJ, FCA Litigation July 24, 2023

U.S. Supreme Court Clarifies DOJ’s Authority to Dismiss Whistleblowers’ False Claims Act Suits, Questions Constitutionality of Qui Tam Provisions

By Edwin O. Childs, Michael J. Podberesky, Jonathan Ellis, Gretchen Heinze Townshend, Todd R. Steggerda, Charles Wm. McIntyre and Jason M. Vespoli

In United States ex rel. Polansky v. Executive Health Resources, Inc., the U.S. Supreme Court recently resolved a circuit split[1] by holding that in a False Claims Act (“FCA”) action (1) the Government may seek dismissal of a qui tam case in which it initially declined to intervene over the relator’s objection as long as the Government later intervened in the litigation, and (2) that in considering such a dismissal motion, district courts should apply the rule generally governing voluntary dismissal of suits: Federal Rule of Civil Procedure 41(a). Under Rule 41(a), the Court explained that the Government has broad latitude to seek dismissal stating that “motions will satisfy Rule 41 in all but the most exceptional cases.” The decision is an important one for the Government and FCA defendants. But perhaps as important as the Court’s central holding in the Polansky case (and certainly more surprising), was the view expressed by Justice Thomas in dissent (and echoed by Justice Kavanaugh in a concurring opinion joined by Justice Barrett) that the FCA’s qui tam provision permitting a private citizen to litigate a case on behalf of the United States may be unconstitutional.

The FCA Insider

Insights and updates on False Claims Act Litigation