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.

Anti-Kickback Statute, DOJ, FCA Litigation, Settlements, Stark Law July 18, 2023

Regional Hospital System and Two Physicians Pay More Than $69 Million to Settle False Claims Act, Involving Allegations of Improper Financial Relationships With Referring Physicians

By Brett Barnett, Timothy Fry and Alec J. Smith

On March 29, 2023, the U.S. District Court for the Eastern District of Michigan granted the parties’ joint stipulation for dismissal in U.S. ex. rel. Godsholl v. Covenant Healthcare, following three settlements of the relator’s claims pursuant to the False Claims Act, 31 U.S.C. § 3729 (“FCA”), the Michigan Medicaid False Claim Act, MCL 400.601, et seq., the Federal Anti-Kickback Statute, 42 U.S.C. 1320a-7b(b) (“AKS”), and the Stark Act, 42 U.S.C. § 1395nn (“Stark”), alleging that a regional hospital system engaged in improper financial relationships with referring physicians. The settlement payments total more than $69 million.

Anti-Kickback Statute, CMS Guidance, Plaintiff Strategies, Stark Law July 14, 2023

Complex AKS/Stark Complaint Survives Rule 9(b) Particularity Challenge – A Guide for FCA Complaints

By Francis C. Oroszlan, Brett Barnett and Timothy Fry

In U.S. v. Genesis Global Healthcare, 2023 WL 3656925 (S.D. Ga. May 25, 2023), a Georgia district court denied three (3) Motions to Dismiss the Second Amended Complaint filed in a qui tam action brought by relators under the False Claims Act (the “FCA”) and the Georgia False Medicaid Claims Act. The court, having previously held that the relators’ First Amended Complaint amounted to an improper shotgun pleading, found that the Second Amended Complaint adequately remedied the court’s concerns. The court’s ruling reaffirms the pleading standards of claims brought under the FCA and serves as a guide for both courts and parties alike to the pleading requirements a complaint must satisfy to survive a motion to dismiss.

FCA Litigation July 5, 2023

Home Cooking: Washington Transfers Venue to Court in State

By Timothy Fry and Brett Barnett

Earlier this year, the U.S. District Court for the Western District of Oklahoma granted Washington state’s motion to intervene to transfer venue to the Western District of Washington in James Siegel, M.D. v. Novo Nordisk, Inc. Relator Dr. Siegel originally filed suit in Oklahoma on February 2, 2015, alleging violations of the Federal False Claims Act (FCA), the Washington Medical Fraud False Claims Act, and the Oklahoma False Claims Act, among other state law infractions. On January 23, 2020, Washington intervened, adding additional claims under Washington’s Fraudulent Practices Act. Oklahoma and the federal government did not. The district court dismissed Oklahoma state law claims, and Washington subsequently moved to transfer the case, limited now to FCA and Washington claims, to the federal court in their own state. The court granted their motion.

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