Update: False Claims Act Litigation:
Cure for Caffeine?
Georgia Hospital Association
Compliance Officers Retreat
September 3-5, 2014
Tracy M. Field, M.S., J.D.
Womble Carlyle Sandridge & Rice, LLP
271 17th Street, NW – Suite 2400
Atlanta, GA 30363
(404) 962-7539
Sandra L.W. Miller, R.N., M.N., J.D.
Womble Carlyle Sandridge & Rice, LLP
550 S. Main Street, Suite 400
Greenville, SC 29601
(864) 255-5425
Agenda
Department of Justice Statistics – FYE 2013
Selected Recent Cases, Settlements, CIAs
The Future?
The Remedy…
False Claims Act
The DOJ 2013 Numbers
$3.8 billion in settlements/judgments from civil cases
$2.6B in Health care matters:
- $1.8B collected from drug/device settlements
- “Off label” promotion
- $1.5B from Abbott
- $762M from Amgen
- $505M for counterfeit drugs
- $237M for Tuomey Hospital
- $26M from Florida dermatologist, AKS with laboratory
False Claims Act
The DOJ 2013 Numbers
$2.6B in Health care matters:
• $1.8B collected from drug/device settlements
• $237M -- Tuomey Hospital
• $134M -- national kyphoplasty settlements with 53
hospitals
• $26M – Dr. Wasserman, dermatologist paid
kickbacks by pathology lab
False Claims Act
Drug - Devices
FDA-Approved Drug Marketed
• But if misrepresented or failed to disclose clinical
trial data
• Off label or free speech?
Abbott: $1.5 billion Depakote
GlaxoSmithKlein: $3 billion Paxil
False Claims Act Litigation
Medical Devices
Medtronic: June 2014, $9.9 M Settlement
Kickbacks to physicians
• Speaking engagement: compensation
• Tickets to sporting events
• Providing marketing plans for doctors
False Claims Act
The DOJ 2013 Numbers
Qui Tam Relator Filings
753 Cases in Fiscal Year 2013
- 101 more than previous year’s “record”
- majority (66%) in healthcare
DOJ: $3.8 billion in settlements/judgments from civil
cases
- $345 million to Relators
False Claims Act
Number of FCA New Matters,
Including Qui Tam Actions
False Claims Act
Legal Changes
• Civil War Statute
• Healthcare: 1986 Amendments
−
−
Fraud Enforcement and Recovery Act of
2009 (“FERA”) Amendments
Affordable Care Act (“ACA”)
False Claims Act
FERA
Increased Ability of Department of Justice to Issue Civil
Investigative Demands (“CID”)
Increased number of CIDs being issued
Expands “reach” of DOJ of what is “false claim”
Liability extends to subcontractors
False Claims Act
ACA
Liability for retention of Medicare and Medicaid
Overpayments
• within 60 days of being “identified”
• Proposed rule: 10 year look-back
₋ Where are we??
Health Fraud
WakeMed
January 17, 2013 Hearing
Judge Boyle rejected Deferred Prosecution
Agreement:
• Under the Federal Rules of Criminal Procedure
₋
Judges accept or reject plea deals, not “dictate
terms” or “participate”
o Neither Hospital CEO nor Board members
attended hearing
12
Health Fraud
WakeMed
January 13, 2013
DOJ Files Memorandum in Support of DPA
February 5th Hearing; February 8, 2013
Order Accepts DPA
Statement of facts clear that WakeMed responsible for
acts of officers, directors and employees and can be
used against them if breach
Government can continue investigation(s)
No interruption to essential health care
13
WakeMed
The Legal Debate
First criminal prosecution of hospital asserting
material/false statements to government
$8M settlement:
$6M civil penalty
$2M criminal
Judge: “slap on the hand”; conviction “erased” in 2
years; use for “teenagers smoking pot”
14
WakeMed
The Legal Process
Deferred Prosecution Agreement (DPA):
DOJ tool since 1999
File Criminal Information: Admission of
Facts
Deferral Avoids “Arthur Andersen Effect”
Judge: Convict and Defer Sentencing…
Debarment!
15
WakeMed
The Investigation
2007 Program Safety Contractor Audit
• Data mining of claims
• For NC, WakeMed with highest Zero-Day stay
billings for Oct. 1, 2003 – Sep. 30, 2006
• On-site interviews at WakeMed – conflicting
information
o Be on-site with auditors!
16
False Claims Act
Medical Necessity
Community Health Systems: $98M August 2014
• Settlement for Medical necessity of Inpatient Admissions
– “corporate driven”
• Requires Board of Director Resolution:
₋
Affirmatively state BOD has made “reasonable inquiry”
into effectiveness of Corporate Compliance/Privacy
program,
o else explain why

Notify OIG if Change in Board Composition
False Claims Act
Medical Necessity
CHS Settlement:
Medical Necessity
• 0-1 day stays for inpatient admissions:
• What if observation day 1?
• Ensure “proper and accurate documentation of medical records”
• Ensure the “proper and accurate assignment and designation of
patients into inpatient, outpatient or observation status”
• Medical record documentation accurate including preadmission,
admission, case management, billing, coding and reimbursement
False Claims Act
Medical Necessity
CHS Settlement:
Medical Necessity
• “Personal obligation of each individual involved in
medical documentation process” to ensure accurate
documentation
• Ensure proper order authorization process
₋ Ensure employees do not “disregard” physician orders
• IRO review:
₋ 50 paid claims in discovery sample; 5% error rate threshold
o compare to OIG hospital audits??
FALSE CLAIMS ACT
Medical Necessity
CHS Settlement:
• Must refund overpayment:
₋ in 60 days, or
₋ within 90 days notify government as to when
they can reasonably expect calculation of
overpayment and refund
FALSE CLAIMS ACT
Medical Necessity
Health Management Associates (HMA)
• Medical Center of Southeastern OK,
$1.4M settlement (April 2014)
₋ Medically unnecessary surgeries on children
(sinus surgeries) billed by Dr. Castro and hospital
21
FALSE CLAIMS ACT
Medical Necessity
Health Management Associates (HMA)
• Employed physician as whistleblower – first to
Joint Commission, not validated
• Allegations of free office space, medically
unnecessary admissions from ED
• CEO named individually as well as HMA
22
FALSE CLAIMS ACT
Medical Necessity
Maryland St. Joseph’s Medical Center:
$4.9M settlement for unnecessary hospital
admissions
• Related prosecution of cardiologist (Dr.
Midei) for medically unnecessary
admissions under fraud theory
• Malpractice case: Class action: $37M for
200+ patients (April 2014); others pending
23
False Claims Act
Medical Necessity
Baptist Health System: April 2014 : $2.5 M
Qui Tam Action: “Misdiagnosis and subsequent
mistreatment” of patients with neurological
disorders” Multiple sclerosis
•
•
Treatment by providers and drug regimens false
Failure by Hospital to disclose physicians’
misdiagnosis after disclosing improper use of
Botox for treatment
False Claims Act
Medical Necessity
US ex rel Ryan v. Lederman
•
•
•
•
Radiologist for Staten Island University Hospital
allegedly improperly billed Medicare for cancer
treatments (stereotactic/gamma knife)
Hospital settled - $25M
DOJ: LCD does not cover below-neck procedures
Court: Specific LCD controls, therefore IF
KNOWLEDGE of noncoverage proven, violation of
FCA
False Claims Act
Medical Necessity
Ohio Cardiac Providers: April 2014 : $1 M
• Improper compensation arrangements between
hospital and physicians led to referrals
• Note: Ohio Valley Hospitals settled previously for
$3.8 M
False Claims Act
Medical Necessity
Carondelet Health Network:
August 2014; $35M settlement
• Unnecessary Inpatient Rehabilitation Services
• Relator assertions 2004-11 admissions not
necessary
• Hospital investigated, disclosed $24M already
• Government: disclosures not timely or adequate
FALSE CLAIMS ACT
Medical Necessity
Kentucky St. Joseph’s Medical Ctr: $16.5 M
settlement settlement for unnecessary cardiac
hospital admissions (January 2014)
• Exclusive arrangement between hospital and
Cumberland Clinic to provide cardiac services
• 3 other cardiologists were whistleblowers
28
False Claims Act
Medical Necessity
King’s Daughters Medical Center:
June 2014; $41M
•
•
•
Unnecessary Cardiac Procedures and Kickbacks
(prohibited financial arrangements with physicians)
Alleged falsification of medical records to support
MN
Stark violations: Cardiologists compensation
“unreasonably high and in excess of fair market
value”
FALSE CLAIMS ACT
Aggressive Litigants
Contractors as whistleblowers:
• Reported concerns to compliance, but issues not
addressed
• Data Mining
• More sophisticated whistleblowers
• Whistleblowers “going all the way”
30
False Claims Act
Physician Arrangements
All Children’s Health System: April 2014 - $7M
Qui Tam: “Aggressive acquisition program” to
secure exclusive physician referral relationships
•
•
“Lucrative compensation plans”
Not all terms in contract
False Claims Act
Physician Arrangements
All Children’s Health System
• Compensation plan
-
-
Guaranteed base salary
Salary at “median of the medians” for FMV
Hospitalists paid at 100% FMV
Incentive bonuses and merit bonuses for teaching,
research, professionalism
If practice produces net profit, incentive payment to
physician
False Claims Act
Physician Arrangements
All Children’s Health System:
• includes payment in salary and bonuses
• call pay
• practice purchase price
• Government declined to intervene, but
issued Statement that Stark law applies to
Medicaid and Medicare referrals
False Claims Act
Physician Arrangements
Amedisys, Inc.: April 2014 settlement; $150M
• improper financial relationship with referring
physicians and home health agencies
False Claims Act
Special Relator
Holzer Health System (ongoing)
Qui Tam by VP of Compliance
Allegation: Overuse of one air ambulance provider
Retaliatory Discharge Claim
survives dismissal since employer knew of the
seriousness – “protected conduct” – there were 6
pending investigations
-
hired attorney
directed not to write findings
OIG Special Fraud Alert
June 2014: Lab Payments
to Referring Physicians
• Compensation to collect specimens
• Registry Payments
* Antikickback Statute Implication
HHS OFFICE OF INSPECTOR GENERAL
October 2013 Report
Responds to Congressional Request
Focused on Spinal Fusion Devices (1000 claims)
• For FY 2011, POD devices used in 1 in 5
spinal fusion surgeries
• Concerns
₋
₋
Costlier per case
Increase in volume and rate of growth of surgeries
once POD in place
37
Other FCA, Stark Issues
Privilege Issues
Halifax Hospital:
Whistleblower suit: unlawful compensation
of physicians violating Stark, AKS –
$200M
Government intervened: Discovery of
regulatory compliance, communication
with legal
Court: Business advice, not protected with
in-house counsel
38
Other FCA, Stark Issues
Privilege Issues
In re Kellogg Brown & Root
US Court of Appeals for DC Circuit – June 27,
2014 opinion
• Privilege for in-house investigations!
39
QUESTIONS?
Tracy M. Field
tfield@wscr.com
Womble Carlyle Sandridge & Rice, LLP
271 17th Street, N.W., Suite 2400
Atlanta, Georgia 30363
(404) 962-7539
Sandra Miller
samiller@wcsr.com
Womble Carlyle Sandridge & Rice, LLP
550 S. Main Street, Suite 400
Greenville, SC 29601
(864) 255-5425