Supreme Court Rejects Mandatory Dismissal for Violations of the FCA’s Seal Provision

Supreme Court Rejects Mandatory Dismissal for Violations of the FCA’s Seal Provision

By Emma R. Cecil

A unanimous Supreme Court ruled on Tuesday that violations of the False Claims Act’s seal provision do not require automatic dismissal of suits brought under the Act.

As we reported in back in June, the Supreme Court had agreed to resolve a split among the circuits regarding what standard governs the decision to dismiss a relator’s claim for violation of the FCA’s seal provision, 31 U.S.C. § 3730(b)(2). The relators, insurance adjustors employed by State Farm, had sued State Farm a decade ago alleging that the insurance giant fraudulently misclassified claims related to flood policies in order to get them paid by the federal government in the aftermath of Hurricane Katrina. Although the complaint had been filed under seal, the relators’ attorney had on multiple occasions leaked evidence about the case to various news outlets. 

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Judge Considers Summary Judgment in Government’s FCA Suit Against Lance Armstrong

Judge Considers Summary Judgment in Government’s FCA Suit Against Lance Armstrong

By Emma R. Cecil

The legal battle between the Justice Department and Lance Armstrong may be nearing an end as the district court considers additional arguments on Armstrong’s motion for summary judgment, filed at the end of April. As we reported last January, the district court had granted summary judgment for Armstrong on the government’s reverse false claims counts but kept alive the possibility of direct false claims liability arising out of sponsorship money paid by the United States Postal Service to Armstrong’s management company, Tailwind Sports. 

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Senate Finance Committee Publishes Report on Stark Law Reform - Are Changes to the Stark Law on the Way?

Senate Finance Committee Publishes Report on Stark Law Reform - Are Changes to the Stark Law on the Way?

By William D. Ezzell

Last December, the Majority Staff of the Senate Finance Committee invited a select group of experts to participate in discussions regarding the need for reforms to the Stark law, which prohibits physicians and their immediate family members from referring patients to any entity in which the physician has a financial relationship, subject to certain exceptions. Financial relationships include both ownership and investment interests, as well as compensation arrangements. Billing Medicare for services provided pursuant to a financial arrangement that violates Stark is also prohibited and can subject providers to mammoth penalties under the False Claims Act. Over recent years, the breadth and complexity of the Stark law’s strict liability regime, along with its draconian penalties and myriad ambiguities, has had a decidedly chilling effect on the implementation of innovative payment models.

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District Court Rejects Claims Based on Difference of Medical Opinion and Disallows Statistical Sampling and Extrapolation Methodologies in Hospice Eligibility Case

District Court Rejects Claims Based on Difference of Medical Opinion and Disallows Statistical Sampling and Extrapolation Methodologies in Hospice Eligibility Case

By Emma R. Cecil and Brian F. McEvoy

A federal district court in the Northern District of Texas has granted summary judgment in favor of hospice care providers on relator’s FCA claims based on differences of clinical judgment regarding patients’ eligibility for hospice services. The court also rejected the relator’s attempts to prove liability through the use of statistical sampling and extrapolation.

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DOJ to Double FCA Civil Penalties

DOJ to Double FCA Civil Penalties

By Emma R. CecilRoss Burris, and Noam B. Fischman

One June 30 2016, the Department of Justice released its interim final rule, which makes inflationary adjustments to civil monetary penalties under its jurisdiction, including those authorized by the federal False Claims Act, 31 U.S.C. § 3729(a), as mandated by last November’s Bipartisan Budget Act of 2015

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DOJ Argues Supreme Court Holding Regarding FCA Implied Certification Theory Applies Beyond Health Care Arena and Privity

DOJ Argues Supreme Court Holding Regarding FCA Implied Certification Theory Applies Beyond Health Care Arena and Privity

By Brian F. McEvoy and William D. Ezzell

As we recently reported, in Universal Health Systems, Inc. v. United States ex rel. Escobar, the Supreme Court validated the theory of implied certification in FCA cases but rejected the Government’s arguments regarding how a misstatement or omission is material. And as we expected, the impact of Escobar is already playing out in district courts.

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Acquittal of Former Pharm Executive Sends Message to DOJ

Acquittal of Former Pharm Executive Sends Message to DOJ

By Jonathan N. Rosen

Last Friday, a federal jury acquitted Carl Reichel, Warner Chilcott’s former president. The indictment alleged that Reichel violated the Anti-Kickback statute by instructing sales representatives to use "sham" promotional education dinners in exchange for prescription of Warner Chilcott products.

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BREAKING: Supreme Court Rejects Government’s FCA Implied Certification Theory

BREAKING: Supreme Court Rejects Government’s FCA Implied Certification Theory

By Mary Clare BonaccorsiJonathan N. RosenJeffrey FitzgeraldBrian F. McEvoyWilliam B. MatejaRoss BurrisEmma R. CecilBarry R. GrissomBarry D. Alexander and William D. Ezzell

Today, the Supreme Court of the United States in Universal Health Services, Inc. v. Escobar et al., weighed in on and embraced the implied certification theory of liability under the False Claims Act (FCA).   

Under the implied certification theory, a party can be held liable for the mere submission of a claim where the claim results from or is tied to the violation of a law, regulation or even a government contract. The rationale underlying this theory is that, upon submission of a claim seeking reimbursement from federal funds, the submitter is impliedly certifying that the claim does not result from the violation of any applicable law or regulation. Critics of this theory argue that it unduly expands the scope of the FCA by rendering it an enforcement tool for the violation of separately enacted laws and regulations.

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Together or Separate? When Paying for a Client Dinner Can Mean Federal Prison

 Together or Separate? When Paying for a Client Dinner Can Mean Federal Prison

By Jonathan N. Rosen and William D. Ezzell

Reservations at the local steakhouse. Dirty martini. Oysters on the half shell. Wedge salad. Porterhouse steak. A bottle of red. And cheesecake. Sound improper? How about a federal offense? The U.S. Attorney’s Office for the District of Massachusetts sure thinks so. Fortunately, today in Boston, a federal jury disagreed.

The case, United States v. W. Carl Reichel, which centered on an alleged conspiracy to pay doctors kickbacks in the form of dinners and speaking fees, was yet another showdown regarding the required intent in anti-kickback cases. It centered on Mr. Reichel’s role as CEO of Warner Chilcott, a pharmaceutical company, for allegedly conspiring to pay doctors kickbacks in the form of dinners and speaking fees. The dinners were supposedly intended – at least in part – to induce doctors to prescribe medications manufactured by Warner Chilcott.

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Supreme Court to Resolve Circuit Split on FCA Seal Violations

Supreme Court to Resolve Circuit Split on FCA Seal Violations

By Brian F. McEvoy and Emma R. Cecil

Earlier this week, the Supreme Court agreed to resolve an emerging circuit split regarding what standard governs the decision to dismiss a relator’s claim for violation of the FCA’s seal provision, 31 U.S.C. § 3730(b)(2), which requires FCA complaints to be filed in camera, remain under seal for at least 60 days, and not be served on the defendant until the court so orders.

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Bill to Expand HHS-OIG’s Exclusion Authority in Health Care Fraud Cases

Bill to Expand HHS-OIG’s Exclusion Authority in Health Care Fraud Cases

By Emma R. Cecil and Brian F. McEvoy

On May 17, Reps. Lois Frankel (D-Fla.) and William Keating (D-Mass.) introduced The Fighting Medicare Fraud Act of 2016 (H.R. 5267), which would, among other things, allow HHS OIG to exclude from Federal health programs individuals who have a prior interest in organizations that have been convicted of health care fraud or excluded from Federal or state health care programs, or in entities that are affiliated with such sanctioned organizations. Under the proposed law, an individual has a prior interest in a sanctioned entity if he or she had an ownership or control interest in, or was an officer or managing employee of, the sanctioned entity at the time of the fraudulent conduct and knew or should have known of such conduct. The expanded permissive exclusion authority thus would permit HHS-OIG to exclude an officer or managing employee who left the organization before the organization was sanctioned.

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Second Circuit’s Narrow Application of Implied Certification Liability Not Limited to Health Care Cases

Second Circuit’s Narrow Application of Implied Certification Liability  Not Limited to Health Care Cases

By Emma R. Cecil and Brian F. McEvoy

As the Supreme Court mulls the validity and scope of the implied false certification doctrine in Universal Health Services v. United States ex rel. Escobar, the Second Circuit not only has reaffirmed its insistence that implied certification liability attaches only where compliance with the particular regulation is expressly identified as a condition of payment, but has explicitly extended that check on FCA liability beyond the healthcare context to the financial industry. 

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Fourth Circuit’s Decision on Fate of Statistical Sampling in FCA Cases Could Have Major Impact on Health Care Providers

Fourth Circuit’s Decision on Fate of Statistical Sampling in FCA Cases Could Have Major Impact on Health Care Providers

By Emma R. Cecil and Brian F. McEvoy

Whether and to what extent statistical sampling and extrapolation may be used to establish liability in FCA cases will soon be decided by the Fourth Circuit and the decision is sure to have far-reaching repercussions for how FCA cases are brought and defended. 

While the use of statistical sampling and extrapolation to determine damages once liability has already been established is common practice in FCA cases, the increasing reliance on these questionable methods as the exclusive means of proving liability – especially in medical judgment cases that depend on a careful case-by-case analysis of each patient’s particular situation – marks a troubling new trend in FCA litigation. Indeed, the consequences to health care providers of allowing relators to establish liability based on statistical extrapolation would be difficult to overstate. 

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Congressional Subcommittee Hearing on FCA Reform Signals Potential Relief for Health Care Providers

Congressional Subcommittee Hearing on FCA Reform Signals Potential Relief for Health Care Providers

By Brian F. McEvoySidney WelchJeremy Burnette and Emma R. Cecil

Good news may be in sight for businesses and health care providers. 

On April 28, 2016, the House Judiciary Committee’s Subcommittee on the Constitution and Civil Justice once again considered potential updates to the federal False Claims Act. Those in favor of reform touted the hearing as a first step toward commonsense changes and improvements targeted at promoting compliance and rooting out and preventing fraud in the first instance.

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Federal Agency Doubles FCA Civil Monetary Penalties With Passage of Interim Final Rule

Federal Agency Doubles FCA Civil Monetary Penalties  With Passage of Interim Final Rule

By Brian F. McEvoy and Emma R. Cecil

Pursuant to a provision of last November’s Bipartisan Budget Act of 2015, federal agencies are required to make, by August 1, 2016, inflationary adjustments to civil monetary penalties. With the passage of an interim final rule on April 29, the Railroad Retirement Board, which administers benefit programs for railroad workers and their families, became the first federal agency to amend its regulations to provide for adjustments in the minimum and maximum amounts of civil monetary penalties under the Board’s jurisdiction, including penalties authorized by the False Claims Act, 31 U.S.C. § 3729(a). The RRB’s new rule would adjust the minimum and maximum per claim penalties for false claims under § 3729 to $10,781.40 and $21,562.80, respectively. The RRB’s new penalties were determined by multiplying the pre-adjustment penalty amount or range ($5,500 minimum and $10,000 maximum) by the percent change in the CPI-U over the relevant time period (2.15628), and rounding to the nearest dollar.

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Yellow Card or Red Card? OIG Updates Criteria for Exclusion from Federal Health Care Programs

Yellow Card or Red Card? OIG Updates Criteria for Exclusion from Federal Health Care Programs

By Brian F. McEvoy and William D. Ezzell

Picture yourself as a physician, health care administrator, or nurse. The government initiates a False Claims Act (FCA) investigation and you (or your company), as a provider, commence an immediate internal investigation. The findings are brought to the government, you promptly correct any errors, and a settlement is in sight. This begs the question: What’s next?

Depending on the settlement, the government may not deprive a person’s liberty through prison, but it might take away a health care professional’s freedom to work. Medicare and Medicaid account for nearly 40 percent of the nation’s health expenditure ‑ and this number is only going to rise. For the medical professional who has devoted his or her entire career to health care, what is the professional to do if he or she can’t treat Medicare or Medicaid patients?

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Olympus to Pay $632.2 Million to Resolve Allegations of Kickbacks

Olympus to Pay $632.2 Million to Resolve Allegations of Kickbacks

By Jennifer L. EvansDayna C. LaPlanteRyan M. McAteer, and Stephen M. Angelette

Olympus Corporation of the Americas, the United States’ largest distributor of endoscopes and related medical equipment, recently agreed to pay $623.2 million to resolve criminal charges and civil claims, according to a United States Department of Justice (DOJ) press release on March 1, 2016. The settlement is a result of a qui tam action alleging violations of the Federal False Claims Act (FCA), Federal Anti-Kickback Statute (AKS), and analogous state statutes for paying kickbacks to physicians and hospitals to induce the purchase of Olympus medical and surgical equipment. Olympus was required to enter into a Corporate Integrity Agreement and a Deferred Prosecution Agreement that, among other things, includes an executive financial recoupment program that will cause company executives to forfeit certain compensation if they are associated with future misconduct.

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California Hospital Pays $3.2 Million to Settle Self-Reported Stark Violations

California Hospital Pays $3.2 Million to Settle Self-Reported Stark Violations

By Brian F. McEvoy and Emma R. Cecil

Tri-City Medical Center in Oceanside, California has agreed to pay $3.28 million to settle allegations that its payment arrangements with doctors and physician groups violated the Stark Law. Tri-City self-reported the potential violations, which date back to its 2009-2010 fiscal year, in 2011 and had been negotiating a settlement ever since.

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University is “Arm-of-The-State,” Can’t be Sued Under FCA

University is “Arm-of-The-State,” Can’t be Sued Under FCA

By Emma R. Cecil

Deciding a question of first impression, the First Circuit recently held that the arm-of-the-state test is the appropriate test for determining whether an entity is a state agency for FCA purposes. The case, United States ex rel. Willette v. University of Massachusetts, involved a qui tam suit by a former employee of the University of Massachusetts Medical School’s Center for Health Care Financing, which was tasked with recovering funds from third parties in order to reimburse Medicaid expenditures previously made by the Commonwealth of Massachusetts and the federal government. After discovering that another CHCF employee had, before his death, embezzled nearly $4 million of funds collected by CHCF, the relator sued both his deceased co-worker’s estate and UMMS alleging violations of the federal and state FCAs. UMMS moved to dismiss for lack of subject matter jurisdiction and failure to state a claim and, relying on the “bedrock proposition” that states cannot be sued in a private action under the FCA, the district court granted the motion. 

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Federal Judge in Florida Grants Defendant Ambulance Company’s Rule 9(b) Motion to Dismiss Government’s FCA Claims

Federal Judge in Florida Grants Defendant Ambulance Company’s Rule 9(b) Motion to Dismiss Government’s FCA Claims

By Emma R. Cecil

A January 7, 2016 decision from the Middle District of Florida tossing out the government’s complaint in intervention for failure to plead fraud with particularity underscores the important gate-keeping function of Rule 9(b) and the necessity of filing such motions, even where the government has attached sworn statements suggesting a scheme to secure payment based on false claims.

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