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Archive for the ‘False Claims Act’ Category

DOJ Skilled Nursing Facility Settlement Involving Rehab – Highest Ever

Thursday, December 28th, 2017

Skilled Nursing Facility Single Highest False Claims Act Settlements to Date

Personal Care Agency Fraud2017 saw the largest recovery from a skilled nursing facility under the False Claim Act.  Life Care Centers of America Inc. and its owner agreed to pay $145 million to settle allegations that it caused skilled nursing facilities to submit false claims for rehabilitation therapy services that were not reasonable, necessary, or skilled.  The government’s case alleged that Life Care instituted corporate-wide policies and practices designed to place beneficiaries in the highest level of Medicare reimbursement.  High reimbursement categories were encouraged irrespective of the clinical needs of the patients.  The case alleged that this resulted unreasonable and unnecessary therapy to to be provided to many beneficiaries.

Health Care Leads in Fraud Recoveries in 2017

Thursday, December 28th, 2017

fraud recovery doj report 2017Health Care Leads With $2.4 Billion Fraud Recoveries in 2017

The United States Department of Justice recently released a summary of recoveries from False Claims Act cases for Fiscal Year 2017.  The report, which was released in late December 2017, indicates that the DOJ recovered over $3.7 billion in settlements and judgments from civil cases involving fraud and false claims during 2017.

One thing is evident when examining the report.  The lion’s share of recoveries come from the health care industry.  Almost $2.5 billion of the $3.7 billion in total recoveries involved health care providers and others in the health care industry.  This is not a new trend.  Health care has led in recoveries with over $2 billion per year for the past 8 years in a row.

The department’s health care fraud program is intended to restore assets to federally funded programs, such as Medicare, Medicaid, and TRICARE.  By all reports, health care fraud and abuse recovery is big business for the Federal government.  The details vary, but reports indicate that the government receives between seven and ten times return on every dollar it spends on pursuing health care fraud and abuse cases.  Recent revisions to Federal False Claims Act penalties increased the maximum penalty per claim from $11,000 to $22,000.  This increase is likely to result in even more aggressive enforcement and an even higher percentage return on the government’s investment in this area.

The high potential financial exposure is intended to deter others from committing health care fraud.  Additionally, the high potential exposure provides an incentive for providers to put in place proactive compliance programs to help identify errors and instances of noncompliance that could eventually result in unmanageable penalties if allowed to emerge through discovery by government audits or a whistleblower complaint.  It is generally much preferable for a provider to discover and correct a problem on its own initiative rather than exposing itself to draconian penalties.

Federal Government Will Seek Dismissal of False Claims Act Cases That Lack Merit

Monday, December 11th, 2017

The FCA is a federal law aimed at combatting fraud against the U.S. government.  The FCA has been around since 1863, in response to contractors who defrauded the Union Army by selling it defective weapons, ammunition, and equipment and unhealthy and unfit food and animals.

A prime feature of the FCA is what is called the “qui tam” provision, under which a private citizen, known as a “relator” (otherwise known as a whistleblower), can sue on behalf of the government and be paid a percentage of the amount recovered (generally 15% to 30%) plus legal fees.  Health care and military-related industries have been particularly popular targets of FCA whistleblower actions.  Under the FCA, the DOJ has 60 days within which to decide to prosecute the claim or decline involvement.  If the DOJ decides not to be involved, the relator has to decide whether to proceed alone.

Up to now, it has been the position of the government that the relator is free to continue a case that the government declines to prosecute.  Now, however, the DOJ will file a motion with the court urging it to dismiss the case if it believes it is frivolous.  The DOJ’s rationale for its new policy is that frivolous litigation imposes a burden on the government, the courts, and the health care industry.

It is important to note that this change in policy affects only those cases that the DOJ believes have no merit.  By no means should this cause any reduced emphasis on compliance activities.  It is also not known how DOJ will determine that a case is frivolous.  What is known is that this is a major shift from the policy of the previous administration and could have significant implications for the health care sector.

Exercising Reasonable Care to Identify and Address Potential Overpayments

Monday, July 17th, 2017

When the Center for Medicare and Medicaid Services (CMS) finally issued final regulations under the 60-day repayment rule, it implemented a new standards that requires a provider to affirmatively exercise reasonable diligence to identify potential overpayments.  This was a change from the proposed regulations that held providers to a much lower affirmative duty to exercise diligence to find potential overpayments.  Now, when a provider receives “credible information” that indicates a potential overpayment, affirmative steps must be taken in a timely and good faith manner to investigate.  Failure to meet the standard of reasonable diligence can result in significant penalties under the False Claims Act.  In some cases criminal liability can attach as well; particularly when evidence strongly indicates a problem might exist and a deliberate decision is made not to investigate or repay amount due.

By now most health care providers are at least generally aware of the 60-day repayment rule.  That rule originated as part of the Affordable Care Act in 2010.  The rule provides that the failure to repay a known overpayment within 60 days after discovery results in potential penalties under the False Claims Act.  This means that a simple overpayment is multiplied by a factor of three.  Additionally, penalties can be assessed in amounts ranging from a minimum of $11,000 and a maximum of approximately $22,000 per claim.  Financial exposure under the FCA can be very substantial; particularly when there is a systematic billing error that impacts a large number of claims over a significant period of time.  The lookback period for imputed False Claims is 6 years, which amplifies the potential exposure when the “tip of the iceberg” is discovered in a current year audit.

The initial statutory provision left some ambiguity regarding application of the 60 day repayment rule.  One significant ambiguity related to when the 60 day time period begins to run.  The statute states that the 60 day period commences upon “identification” of the overpayment but included no clarification of when a provider is deemed to have identified an overpayment.  It was not clear whether identification occurred when there was an allegation that an overpayment exists, when an amount of overpayment was calculated, when the existence of the overpayment was verified, or at some other time.  It was also unclear whether actual knowledge of an overpayment was required or whether knowledge could be imputed in certain circumstances.

CMS provided clarification on the issue of identification in the final regulations, but the clarification places significant burdens on providers.  Under the final rules, the provider is deemed to have identified an overpayment, not when actual knowledge is obtained, but rather when the provider “should have” identified the overpayment through the exercise of “reasonable diligence.”  The new standard requires providers to conduct a timely and good faith investigation when it receives credible information that an overpayment might exist.  Failing to take reasonable steps to investigate will result in imputed knowledge and deemed “identification” of the overpayment.  In other-words, the 60 day clock starts to run when the investigation should have commenced.

It is useful at this point to mention what constitutes and overpayment that invokes the statutory requirement.  An overpayment exists when the provider receives any funds to which they are not entitled.  There is no amount threshold, substantiality or materiality requirement.  Any overpayment invokes the statute and becomes a potential false claim if not repaid within the 60 day period.  There are situations where the amount of overpayment is so small that the provider might determine it not to be worth the resources to identify, quantify and repay.  When making this determination, it should be kept in mind that the False Claims Act will apply if a whistleblower case is brought or a government investigation is commenced and finds the overpayment.  False Claims Act liability can result in large penalties; particularly where there are multiple claims involved.  It should also be kept in mind that criminal statutes impose felony penalties for the willful failure to return known overpayments.

Overpayments that are self-discovered and repaid before they become false claims are relatively easy to manage.  Once the False Claims Act potentially attaches, these situations become increasingly complicated to manage.  The OIG Self Disclosure process should be considered where the potential for significant penalties is present.  The SDP permits resolution at a minimum of 1.5 times the amount of the overpayment.  Full disclosure of the facts and investigation is required as part of the self-disclosure process.  Only civil penalties are subject to settlement under the protocol.  The wrong facts disclosed as part of the SDP process can lead to criminal charges against the entity or individuals.  Criminal charges cannot be settled using the SDP.

Where amounts are smaller, a provider may decide to repay without going through the protocol process.  A determination of which option is right in the specific situation should be made with the involvement of legal counsel that has experience with these issues.

Proper operation of a compliance program is the best defense to mitigating exposure under the 60 day rule.  Prompt investigation should be conducted whenever there is a credible allegation of an overpayment.  Compliance risk identification and proactive auditing can also help mitigate risk be identifying problems early and by demonstrating that compliance process is being effectively operated.  This will help avoid allegations that overpayments should have been discovered sooner through the exercise of a reasonable compliance program.  Most importantly, ignoring alleged overpayments is never an answer that mitigates risk.  All credible allegations must be investigated and appropriate repayment should be made using one of the available methods.  The requirements of the final rule should be baked into compliance program policies and procedures and staff should be educated on the need to investigate and return overpayments within required timeframes.

Using the Self Disclosure Protocols to Minimize Risk

Tuesday, June 27th, 2017

When to Use the OIG’s Self Disclosure Protocols

Self Disclosure Mitigate RiskThe HHS Office of Inspector General offers providers an opportunity to self-disclose certain violations in exchange for avoiding some of the more draconian penalties that may otherwise apply under applicable regulations.  Even though the OIG’s Provider Self-Disclosure Protocols (“SDP”) can be very compelling, the decision whether to utilize the OIG’s self-disclosure protocols is often very difficult.

To begin, the SDP is not available in all situations.  The SDP is limited to situations that potentially violate Federal criminal, civil, and administrative laws for which Civil Monetary Penalties are authorized.  The SDP requires the disclosing party to Continue

Dermatology Fraud Risk Areas – Impossibly Long Days

Tuesday, June 27th, 2017

Failure to Supervise and Impossibly Long Days

Payment of $302,000 and Forced Corporate Integrity Agreement – July 2016

fraud and abuse dermatologistsThe government alleged the dermatologist in this case repeatedly billed for services under the “incident to” billing rules during periods when the dermatologist was not present in the office.  Some of the services were allegedly performed when the doctor was traveling out of the country.  The government also alleged the doctor billed for impossibly long days including one day where 26 hours were billed.

This case illustrates the need to comply with the “incident to” billing rules.  Those rules permit a physician extender’s services be billed under the physician in certain circumstances.  In order to qualify to bill incident to, the physician must be physically present within the office suite at the time the extender performs the service.  The physician cannot order the procedure and then leave the office while the procedure is being performed.  There are new Medicare rules clarifying some aspects of the “incident to” billing rules.  There was a previous ambiguity that some providers interpreted as permitting the physician that ordered the service to bill for the services, even though another physician actually supervised the performance of the service.  The rules revision clarified only the supervising physician can bill the services as “incident to” his or her service.  The ordering physician can only bill the service if he or she also supervises the extender.

Dermatology Practice Fraud and Abuse Risks Identified in Florida Case

Tuesday, June 27th, 2017

Dermatologist Fraud and Abuse Risks – Identified from Florida Case Targeting Demotologist

Dermatology Risk Areas Fraud and AbuseAn allegation from a competing dermatologist resulted in a Federal government investigation of a Florida dermatologist.  The dermatologist was accused of charging the Medicare program for unnecessary biopsies and radiation treatments that were not rendered, not properly supervised, or given by unqualified physician assistants.  It was alleged the doctor was not even in the country when some of the procedures at issue were performed.  The unnecessary charges were alleged to have totaled around $49 million over a 6-year period.

The dermatologist did not admit wrongdoing in the settlement.  Rather, he alleged the overbilling resulted from his unique practice that relied on radiation, instead of disfiguring surgery, to help patients.  The doctor claimed he had cured “over 45,000 non-melanoma skin cancers with radiation therapy” over a 30-year period.  The problem with that argument appears to be the fact that the dermatologist was not trained or qualified in providing radiation oncology treatments.

There are a number of interesting things about this case.  The case was brought by a competing physician as a whistleblower.  The physician who brought the case expressed concern about having to treat patients that the accused doctor had misdiagnosed with squamous cell carcinoma.

The case also alleged significant billing for services allegedly provided when the doctor was not even in the office.  The accused doctor alleged he was available by phone while the procedures at issue were being performed.  This raises interesting issues under the rules regarding “incident to” billing.  Those rules permit a physician to bill for physician extender services.  In order to qualify to bill a service as “incident to” a physician’s service, the billing physician must meet supervisions requirements.  The physician must be physically present within the office suite during the performance of the procedure in order to qualify to bill a service as “incident to” the physician’s services.

It appears there were a number of things going on in this case.

  • There appears to have been a pattern of diagnosing a higher level of severity than was supported by the patient’s condition.
  • There was a routine use of radiation therapy, even in cases that were not medically appropriate.  This placed patients at potential risk.
  • There appears to have been questions whether the accused doctor was authorized to perform radiation therapy.
  • There were issues regarding improper use of the “incident to” billing rules when the doctor was not present to actively supervise the service.
  • There was also some evidence the doctor had offered incentives for staff to misdiagnose and over utilize the radiation treatment.
  • There was an alleged kickback arrangement with another physician who operated a clinical laboratory.

Credible Information Indicating Overpayment – Duty to Investigate

Tuesday, June 27th, 2017

Addressing Potential Over-payment Situations – Exercising Reasonable Care

known overpayment credible informationThe new final regulations under the 60-day repayment rule, require providers to affirmatively exercise reasonable diligence to identify potential overpayment situations. The obligations to further investigate is triggered when a provider receives “credible information” that indicates a potential overpayment.  Affirmative steps must be taken in a timely and good faith manner to investigate the situation further. Failing to use reasonable diligence can result in significant penalties under the False Claims Act (FCA). In some cases criminal liability can attach as well; particularly when evidence strongly indicates a problem might exist and a deliberate decision is made not to investigate or repay an amount due.

By now most health care providers are at least generally aware of the 60-day repayment rule. That rule originated as part of the Affordable Care Act in 2010. The rule provides that the failure to repay a known overpayment within 60 days after discovery results in potential penalties under the FCA. This means a simple overpayment is multiplied by a factor of three. Additionally, penalties can be assessed in amounts ranging from a minimum of $11,000 and a maximum of approximately $22,000 per claim. Financial exposure under the FCA can be very substantial; particularly when there is a systematic billing error that impacts a large number of claims over a significant period of time. The lookback period for imputed False Claims is 6 years, which amplifies the potential exposure when the “tip of the iceberg” is discovered in a current year audit.

The initial statutory provision left some ambiguity regarding application of the 60-day repayment rule. One significant ambiguity relates to when the 60-day time period begins to run. The statute states the 60-day period commences upon “identification” of the overpayment but included no clarification of when a provider is deemed to have identified the existence of an overpayment. It was not clear whether identification occurred when there was an allegation that an overpayment exists, when an amount of overpayment was calculated, when the existence of the overpayment was verified, or at some other time. It was also unclear whether actual knowledge of an overpayment was required or whether knowledge could be imputed in certain circumstances.

CMS provided clarification on the issue of identification in the final regulations, but the clarification places significant burdens on providers. Under the final rules, the provider is deemed to have identified an overpayment not when actual knowledge is obtained, but rather when the provider “should have” identified the overpayment through the exercise of “reasonable diligence.” The new standard requires providers to conduct a timely and good faith investigation when it receives credible information an overpayment might exist. Failing to take reasonable steps to investigate will result in imputed knowledge and deemed “identification” of the overpayment. In other words, the 60-day clock starts to run when the investigation should have commenced.

It is useful at this point to mention what constitutes an overpayment that invokes the statutory requirement. An overpayment exists when the provider receives any funds to which they are not entitled. There is no requirement of an amount threshold, substantiality, or materiality. Any overpayment invokes the statute and becomes a potential false claim if not repaid within the 60-day period. There are situations where the amount of overpayment is so small that the provider might determine it not worth the resources to identify, quantify and repay. When making this determination, it should be kept in mind the FCA will apply if a whistleblower case is brought or a government investigation is commenced and finds the overpayment. FCA liability can result in large penalties; particularly where there are multiple claims involved. It should also be kept in mind that criminal statutes impose felony penalties for the willful failure to return known overpayments.

Overpayments that are self-discovered and repaid before they become false claims are relatively easy to manage. Once the FCA potentially attaches, these situations become increasingly complicated to manage. The OIG Self Disclosure process should be considered where potential for significant penalties is present. The Self Disclosure Protocols permit resolution at a minimum of 1.5 times the amount of the overpayment. Full disclosure of the facts and investigation is required as part of the self-disclosure process. Only civil penalties are subject to settlement under the protocol. The wrong facts disclosed as part of the SDP process can lead to criminal charges against the entity or individuals. Criminal charges cannot be settled using the SDP.

Where amounts are smaller, a provider may decide to repay without going through the protocol process. A determination of which option is right in the specific situation should be made with the involvement of legal counsel that has experience with these issues.

Proper operation of a compliance program is the best defense to mitigating exposure under the 60-day rule. Prompt investigation should be conducted whenever there is a credible allegation of an overpayment. Compliance risk identification and proactive auditing can also help mitigate risk by identifying problems early and by demonstrating the compliance process is being effectively operated. This will help avoid allegations that overpayments should have been discovered sooner through the exercise of a reasonable compliance program. Most importantly, ignoring alleged overpayments is never an answer that mitigates risk. All credible allegations must be investigated and appropriate repayment should be made using one of the available methods. The requirements of the final rule should be baked into compliance program policies and procedures and staff should be educated on the need to investigate and return overpayments within required timeframes.

Personal Care Agency Fraud – Business Structure Can Impact Compliance Risk

Tuesday, June 27th, 2017

Personal Care Agency Structure Can Increase Risk and Government Scrutiny

Personal Care Agency FraudThe OIG recently released a review of Medicaid Fraud Control Unit activities which identified personal care agencies as accounting for nearly one-third of fraud prosecutions.  Previous blogs identified a number of compliance risks that often ensnare agencies.  Risk can also be impacted by the structure and nature of the business that is conducted by the agency.  The business might be perfectly legal, but can still create additional risk.

An good example involves personal care agencies that focus on recruiting patients with extended families who already reside with the patient.  A personal care business plan that focuses on training extended family might be technically legal, but can certainly present risk that a reviewer will more closely scrutinize record-keeping, PCW training, and other requirements.  Closer scrutiny may result in overpayment requests and/or investigation.

The normal business plan for a personal care agency involves the hiring and training of personal care worker who are assigned to clients who retain the agency’s services.  Normally, a PCW and a client do not know each other and certainly are not sharing a residence with the client.  Some agencies might focus their business on recruitment of patients who live with extended family.  Simply by providing training to the existing family member, the agency is able to generate reimbursement.  The extended family member is able to earn a wage for the service that it performed.

Immediate family will normally not qualify to generate reimbursement as a personal care work.  More distant family might be able to generate reimbursement.  There may be nothing specific in the laws of the applicable state that prohibits this type of arrangement.  At the same time, there is nothing prohibiting a regulator from more closely scrutinizing regulatory requirements when presented with agencies that may be technically legal but could be viewed as being abusive at their core.

The main point here is that business structure and other factors might present additional levels of risk to an agency.  Business structure should be considered as a factor when conducting risk analysis.  Businesses that are operated in technical compliance could present higher degrees of risk than more traditional business structures.

Using Self-Disclosure Protocols – CMS and OIG Self Disclosure Process

Tuesday, April 11th, 2017

Self-Disclosure Has Become a Normal Part of the Compliance Process

As the OIG and CMS make self-disclosure easier for providers, we have noticed an increase in the rate of cases that are being filed.  Assisting providers in making decisions whether to self-disclose, conducting internal investigations, and guiding the self-disclosure process when appropriate has become a large part of our compliance practice.  Here are just a few of the articles and other resources that we have released regarding self-disclosure issues:

Exercising Reasonable Care to Identify and Address Potential Overpayments

Criminal Exposure for Failing to Repay Known Overpayment

When to Use the OIG’s Self Disclosure Protocols

Excluded Party Cases Dominate OIG Published Self Disclosure Settlements

Self-Disclosure Process – Voluntary Self Disclosure Decisions are not Always Easy

When Does An Overpayment Become Fraud? How Simple Inattention Can Expose You to Penalties for Fraudulent Activities

Provider Self-Disclosure Decisions – Voluntary Disclosure Process

Provider Self Disclosure Process

For more information on the self-disclosure process and legal updates impacting the process, watch this space.

John H. Fisher

Health Care Counsel
Ruder Ware, L.L.S.C.
500 First Street, Suite 8000
P.O. Box 8050
Wausau, WI 54402-8050

Tel 715.845.4336
Fax 715.845.2718

Ruder Ware is a member of Meritas Law Firms Worldwide

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