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A Civil Investigative Demand Issued to You or Your Medical Practice is Serious Business. Understand Your Level of Risk Before Responding to the Government’s Investigation

(September 17, 2019): The False Claims Act (31 U.S.C. §§ 3729-3733) is the primary civil enforcement tool relied on by the Federal government. It has a long and storied history, going back all the way to the Civil War.[1]  Prior to 1986, the statute was only infrequently utilized by law enforcement. That changed with the enactment of the “False Claims Amendments Act of 1986.”[2]  Among its many changes, the 1986 Amendments Act authorized the Attorney General to issue Civil Investigative Demands in connection with the investigation of False Claims Act cases.  Over the years, Civil Investigative Demands have greatly bolstered the effectiveness of the government’s ability to examine alleged violations of the False Claims Act.[3]

In 2009, Congress further expanded the use of Civil Investigative Demands when it passed the “Fraud Enforcement and Recovery Act of 2009”[4] (FERA).  Among its various provisions, FERA authorized the Attorney General to delegate his authority to issue Civil Investigative Demands to other Department of Justice (DOJ) officials. The Attorney General subsequently issued a directive in 2010 which delegated his authority to issue Civil Investigative Demands to the Assistant Attorney General for the Civil Division.  This directive also permitted the Assistant Attorney General for the Civil Division to redelegate the authority to issue Civil Investigative Demands to other DOJ Officials, including United States Attorneys.[5]

From a practical standpoint, the redelegation of authority to issue Civil Investigative Demands from the Office of the Attorney General to the 94 United States Attorneys Offices has greatly expanded the issuance of Civil Investigative Demands around the country.  This article examines the government’s use of Civil Investigative Demands as an investigative tool and discusses the steps you should take if the government issues one to you or your health care organization.

[For additional guidance on the risks presented when dealing with parallel civil and criminal investigations, you may wish to review our article titled “Have You Received a Civil Investigative Demand (CID)? How Should a Health Care Provider or Supplier Respond When Receiving a Civil Investigative Demand?]

I.  What is a Civil Investigative Demand?

A Civil Investigative Demand is essentially a judicially enforceable administrative subpoena[6] that can be issued by a Federal prosecutor to obtain documentary materials and other information that may be in your possession, custody or control that the government believes may be relevant to an investigation of possible violations of the False Claims Act.  A Civil Investigative Demand is only issued in connection with an ongoing False Claims Act investigation.

When issued to you or your medical practice, this investigative tool can be used to require that the subject (recipient individual or entity) of a Civil Investigative Demand:

  • Produce such documentary material for inspection and copying,
  • Answer in writing written interrogatories with respect to such documentary material or information,
  • Give oral testimony concerning such documentary material or information,[7] or
  • Furnish any combination of such material, answers, or testimony.

II.  Are You or Your Medical Practice the Target of False Claims Act Investigation?

If you are sent a Civil Investigative Demand, it doesn’t necessarily mean that you are believed to have violated the False Claims Act. It’s possible that a Federal prosecutor believes that you are a mere witness or a custodian of the records or other information that is relevant to the government’s False Claims Act investigation.  If you are the subject or target of a False Claims Act investigation, it is quite common for the Assistant U.S. Attorney handing the matter to clearly identify you or your medical practice as such when issuing a Civil Investigative Demand. While the language utilized by the government may vary from case to case, letters sent to physicians and other health care providers / suppliers will typically state something along the lines of:

“This False Claims Act investigation concerns allegations that you, your medical practice, your employees, contractors, and agents, as well as other individuals or entities violated or conspired to violate the False Claims Act by submitting claims to Federal health benefit program for which you were not entitled to receive payment.”

After investigating suspected violations of the False Claims Act, the Attorney General (through his or her designee) may either bring a civil suit for violations of the False Claims Act OR elect to intervene in a qui tam case that has been brought by a private party.   Importantly, once the government either files a False Claims Act complaint or intervenes in a qui tam that has been filed, it loses its authority to issue a Civil Investigative Demand.[8]

III.  Do I have to Comply with the Requirements Set Out in a Civil Investigative Demand?

The evidence sought by a Civil Investigative Demand may be quite extensive and will likely include demands for documentary materials, electronic records and written responses to interrogatories.  Unfortunately, it may be quite costly and time-consuming for you to assemble the information requested and fully comply with the specifications set out in a Civil Investigative Demand.  Should you fail to comply with a Civil Investigative Demand, the government will likely file a petition in Federal District Court seeking judicial enforcement of the request.[9] As the government’s utilization of Civil Investigative Demands has increased, we have seen a number of challenges raised by recipients.

In one recent case, Federal prosecutors issued a Civil Investigative Demand in connection with their investigation of whether a physician had violated the Anti-Kickback Statute and Stark (which, depending on the facts, may also constitute a violation of the civil False Claims Act).[10]  The respondent recipient of the Civil Investigative Demand, a California-based orthopaedic surgeon, refused to comply with the government’s request, arguing that the DOJ lacked the authority to enforce the Civil Investigative Demand due to the fact that the government’s had allegedly entered into settlement communications with a related party.  Essentially, the respondent argued that the government’s settlement discussions with a related party constituted a determination that a basis for the physician respondent’s liability was present.  Therefore, the respondent physician took the position that the government had an obligation to move forward with litigation rather than continue to investigate.  In this case, since the government had not yet initiated a civil action and had not made an election related to actual qui tam litigation, the District Court that the Civil Investigative Demand should be enforced.

IV.  Risks Presented in Parallel Civil and Criminal Investigations of Your Conduct:

Although the issuance of a Civil Investigative Demand is reflective of the fact that a civil False Claims Act investigation is underway, it is important to keep in mind that the government may also have an open, ongoing criminal investigation related to the conduct that is under review. In recent years, this has become quite common, due in large part to more effective coordination efforts between civil litigators and criminal prosecutors in U.S. Attorneys Offices around the country.

It is the policy of the DOJ that its components (including U.S. Attorney’s Offices) employ a coordinated approach to litigating affirmative matters from the initial intake, throughout the investigation and to resolution.[11] DOJ requires “early, effective and regular communication” between all of its litigating components in order that it considers all potential remedies. Consultation between the Department’s civil and criminal attorneys, together with agency attorneys, are promoted to permit consideration of the fullest range of the government’s potential remedies and promotes the most thorough and appropriate resolution in each case. (criminal, civil, regulatory or administrative).

In some instances, concurrent criminal and civil investigations of individual misconduct are pursued. When this occurs, it is DOJ policy for the litigating components to coordinate the investigation and potential resolutions among themselves and with other stakeholders to the extent that the law permits. For example, criminal Assistant U.S. Attorneys are encouraged to use Administrative Investigative Demand (AID) subpoenas instead of Grand Jury subpoenas so that information obtained can be freely shared with their civil counterparts.  Similarly, civil Assistant U.S. Attorneys are required to share the information they obtain in response to Civil Investigative Demands and / or qui tam investigation with their criminal colleagues. Coordination is extended to all aspects of the investigation including consideration as to the apportionment of fines, penalties and/or forfeitures and the avoidance of the duplicative fines, penalties and/or forfeiture in its resolution. Parallel actions are also intended to facilitate the Department’s efforts to hold individuals as well as corporations accountable for malfeasance.

As earlier discussed, the fact that you are the recipient of a Civil Investigative Demand does not necessarily mean that you are the target of a government False Claims Act investigation. Instead, you may be considered a subject of the government’s False Claims Act investigation. Finally, you may be a mere witness.  Ultimately, a Federal prosecutor may choose to issue a Civil Investigative Demand if he or she believes that you have documentation or other materials that are relevant to the government’s investigation of possible violations of the False Claims Act.

A Civil Investigative Demand cannot be issued to investigation allegations that are solely criminal in nature (for example, the fraudulent billing of health care services to a private payor).  However, if a bona fide investigation of possible civil false claims is present, this tool can be used to investigation potential False Claims Act violations and other conduct that may constitute a violation of criminal law. In light of the nature of parallel proceedings, there are a number of risks that you should take into account when responding to a Civil Investigative Demand.  Several of these risks include:

  • Federal Anti-Kickback Statute (42 U.S.C. 1320a-7b(b)).  The Federal Anti-Kickback Statute[12] makes it a crime to knowingly and willfully offer, pay, solicit, or receive remuneration, directly or indirectly, overtly or covertly, in cash or in kind, to purposefully induce or reward referrals of items or services payable by a federal health care program. Simply put, it is against the law to pay or provide anything of value in an effort to induce referrals or business related to a federal health care program.  While for many years the Federal Anti-Kickback Statute and the civil False Claims Act were long viewed as separate and distinct enforcement tools, over the past 20 years, the enforcement landscape has slowly changed. Starting in the early 1990’s, whistleblowers began asserting violations of the False Claims Act in cases that would typically be pursued as a criminal anti-kickback violation.  These cases often involved fact patterns where a party was alleged to have violated the Anti-Kickback Statute and, in the process, billed for services that were allegedly medically unnecessary (or, in some instances, worthless) and made a false express and / or implied certification to the Medicare or Medicaid program.  The 2010 passage of the Affordable Care Act (ACA) obviated the need to bootstrap a violation of the Anti-Kickback Statute into a violation of the civil False Claims Act.  Under the ACA, a claim submitted in violation of the Federal Anti-Kickback Statute now automatically constitutes a false claim for purposes of the civil False Claims Act.   Providers need to keep in mind that even though a kickback violation may also be pursued under the False Claims Act, that does not preclude the government from prosecuting individuals and entities for violations of the Anti-Kickback Statute.
  • False Statements Involving Health Care Programs (18 U.S.C. § 1035). Several examples we have seen have involved the (a) the misrepresentation of the provider of a medical service, (b) the misrepresentation of a non-covered service, and / or (c) the billing of services performed by unlicensed staff. Each of these examples may give rise to criminal and / or may also be pursued under the civil False Claims Act:
  • Misrepresentation of the Provider of a Service. This improper billing practice is still commonly found in both medical and dental practices around the country. In the cases we have seen, “fraud” wasn’t the reason for the underlying misrepresentation on the CMS 1500 Claims form. In most instances, it was merely a matter of a credentialing delay.  Although we have not seen a misrepresentation case of this type referred for criminal prosecution, it is important to remember that both CMS 1500s and ADA Dental Claim Forms Claims forms are typically electronically submitted to the health plan for payment.  Depending on the facts, an aggressive prosecutor could argue that such conduct constitutes a criminal false statement under 18 U.S.C. § 1035 or even wire fraud under 18 U.S.C. §1343.
  • Misrepresentation of a Non-Coverage Service. This type of improper billing practices occurs when a medical or dental practice has mischaracterizes a non-covered service as a covered service. Keep in mind, the definition of a non-covered service varies from payor to payor. Additionally, the list of non-covered services under a specific payor’s policy may change from year-to-year.  In any event, it is important that health care providers regularly check to ensure that the services being provided qualify for coverage and payment.
  • Billing for Medical or Dental Services Performed by Unlicensed Staff. Perhaps the quickest way to get into trouble with both law enforcement and your State Medical Board or State Dental Board is to allow non-licensed individuals to provide care that may only be administered by qualified, licensed personnel. Earlier this year, the New York Attorney General’s Office announced the indictment, arrest and arraignment of a health care provider and four unlicensed individuals that the provider was permitting to perform medical related procedures on more than 100 Medicaid patients. From a false claims perspective, the billing of Medicare and / or Medicaid services by unlicensed staff would constitute the misrepresentation of the credentials of the staff member at issue and would not qualify for reimbursement.

These are only a few of the risks that you face when a government investigation of your business arrangements, and billing / coding practices is initiated. When responding to a Civil Investigative Demand, it isn’t merely sufficient to produce the information requested. A careful analysis of your practices needs to be conducted on the front end so that any problematic conduct can be identified and assessed. Experienced health care legal counsel can then more effectively represent you and your practice.

V.  How Should You Respond to a Civil Investigative Demand?

For the reasons set out above, we strongly recommend that you engage counsel as soon as you receive a Civil Investigative Demand.  Your attorney can then take the lead and contact the Assistant U.S. Attorney[13] handling the False Claims Act investigation. Additional steps you should take include, but are not limited to:

  • Determine the nature of your involvement in the government’s investigation. Does the government consider you or your practice to be a target, a subject or a witness?  Are both civil and criminal allegations present?  If the possibility of criminal culpability has been identified, it is essential that your legal counsel advise you on any steps needed to properly safeguard your interests.
  • Don’t turn what may be a civil problem into a criminal case. Steps should immediately be taken to ensure that no documentation (either paper or electronic) is destroyed, deleted or over-written. Your attorney can guide you in this document preservation process. The last thing you want to do is take an action in a civil False Claims Act investigation that might constitute a separate criminal violation (such as obstruction of justice).  Once the proverbial fog lifts, your attorney will likely be able advise you whether it is permissible to resume getting rid of documents that have no bearing on the government’s case.
  • Have experienced health law counsel handle scope and timing negotiations with the government. Civil Investigative Demands are often excessively broad in scope and typically request large numbers of medical or dental records and claims information.  Moreover, under the statute you have very little time to produce the materials being sought by a Civil Investigative Demand. Your attorney will likely try and work with the government attorney handling the investigation to obtain an extension of time in which to submit the requested documents.[14]  Your attorney will also try and work with the government attorney to see if the scope can be narrowed (at least at first).  Finally, your attorney will want to try negotiate for the documents and information to be produced to be submitted on a “rolling” basis.
  • Diligently work to identify and address the government’s concerns. It has been our experience that most Assistant U.S. Attorneys are willing to engage (at least in a limited fashion) in a discussion regarding the nature of the government’s concerns. This information can be crucial in assessing the conduct, responding to the government’s concerns, and, if necessary, preparing your defense(s) in the case. Keep in mind, at this point, the government hasn’t filed a False Claims Act complaint and hasn’t intervened in the whistleblower’s case (to the extent that one exists).  Now is the time to do your very best to analyze the facts and respond to the allegations presented.
  • Take care before “Certifying” your responses under the Civil Investigative Demand. As required under 31 U.S.C. § 3733(f)(1), when you produce documentary materials in response to a Civil Investigative Demand, it must be made under a “Sworn Certificate.”  31 U.S.C. § 3733(f)(1), The Sworn Certificate is required to state that:

“. . . all of the documentary material required by the demand and in the possession, custody, or control of the person to whom the demand is directed has been produced and made available to the false claims law investigator identified in the demand.”[15]

As with any certification made to the government, you must exercise caution when making the representations required under 31 U.S.C. § 3733(f)(1).  Should your responses to the Civil Investigative Demand be false or misleading, the government may assert that you have made a false statement (assuming that the requisite level of intent can be shown).

As reflected by the risks discussed above, if you or your practice are the recipient of a Civil Investigative Demand, you should immediately contact a qualified health lawyer.  The issuance of a Civil Investigative Demand raises a number of complex regulatory questions that must be fully vetted.  Have you received a Civil Investigative Demand?  Give us a call for a free consultation.  1 (800) 475-1906.

 

Robert W. Liles Healthcare LawyerRobert W. Liles serves as Managing Partner at the health law firm, Liles Parker, Attorneys and Counselors at Law.  Liles Parker attorneys represent health care providers and suppliers in connection with False Claims Act issues and investigations.  Have you received a Civil Investigative Demand?  If so, we can help.  For a free initial consultation regarding your situation, call Robert at: 1 (800) 475-1906.

[1] For additional background information on the False Claims Act, see False Claims Act Matters and Cases — An Overview.”  

[2] Public Law 99-562.  October 27, 1986.  Senator Charles Grassley (R-Iowa) and Representative Howard Berman (C-California) led the drive to have these amendments passed. Several of the significant changes to the statute included, but were not limited to the following:

  • Permitted the government to seek treble damages.
  • Revised the statute’s qui tam provisions by increasing the incentives to whistleblowers disclosing allegations of fraud under the False Claims Act.
  • Conferred authority upon the Attorney General to issue Civil Investigative Demands (CIDs) in connection with the investigation of False Claims Act investigations.

[3] Last Fiscal Year (FY 2018), the Federal government won or negotiated more than $2.8 billion in judgments and settlements under the False Claims Act. Of the $2.8 billion in settlements and judgments recovered by the Department of Justice this past fiscal year, $2.5 billion involved the health care industry.  Although the gross recoveries were almost $600 less than what was collected in FY 2017, it is worth noting that an additional $329 million was collected in health care related cases than last year.  During FY 2018, 645 qui tam (whistleblower) cases were filed. About 87% of all new FCA matters pursued against entities involved in the healthcare industry were brought by relators.

[4] P.L.111-21 (FERA).  FERA also permitted Federal prosecutors to share information obtained under a Civil Investigative Demand with “any person” (most typically a qui tam relator)(See 31 U.S.C. § 3733(a)(1) and with Federal prosecutors conducting criminal investigations if the Attorney General or designee has reason to believe that such person may be in possession, custody, or control of any documentary material or information relevant to a False Claims law investigation.

[5] In 2010, the Attorney General signed Order No. 3134-2010 (January 15, 2010).

[6] See United States v. Markwood, 48 F.3d 969, 975-76 (6th Cir. 1995) (finding FCA CIDs are administrative subpoenas); FTC v. Invention Submission Corp., 965 F.2d 1086, 1087 (D.C. Cir. 1992) (treating FTC CID as administrative subpoena), cert. denied, 507 U.S. 910 (1993); United States v. ASG Solutions Corp., No. 17-cv-1224, 2018 WL 1418023, 2018 U.S. District LEXIS 47716 (S.D. Cal., March 22, 2018) (Report and Recommendation of Magistrate Judge) (enforcement of FCA CID governed by standards for administrative subpoenas), adopted in full, 2018 WL 3471405, 2018 U.S. Dist. LEXIS 121013 (S.D. Cal., July 18, 2018).

[7] Under a Civil Investigative Demand, the government may seek oral testimony concerning the documents and / or information that you are producing. The oral testimony is handled like a deposition, the deponent is placed under oath and a stenographic record of the proceeding is kept.

[8] For example, in the case United States v. Kernan Hospital, No. RDB-11-2961, 2012 WL 5879133, 2012 U.S. Dist. LEXIS 165688 (D. Md., Nov. 20, 2012), the district court denied the government’s Petition for Summary Enforcement based on the fact that the United States had already filed an FCA complaint in the caseThe District Court took this position even though the case had been dismissed (for failure to plead the alleged fraud with particularity) at the time the Civil Investigative Demand was issued.

[9] The scope of judicial review that is conducted by a District Court Judge when the government seeks to enforce a Civil Investigative Demand is very narrow.  As the Ninth Circuit has stated:

 “[t]he scope of the judicial inquiry in . . . any . . . agency subpoena enforcement proceeding is quite narrow. The critical questions are: (1) whether Congress has granted the authority to investigate; (2) whether procedural requirements have been followed; and (3) whether the evidence is relevant and material to the investigation.” EEOC v. Fed. Express Corp., 558 F.3d 842, 848 (9th Cir. 2009) (quoting EEOC v. Karuk Tribe Hous. Auth., 260 F.3d 1071, 1076 (9th Cir. 2001)).

[10] United States v. Picetti, No. 2:19-cv-00049 KJM AC (E.D. California)(April 29, 2019).

[11] Justice Manual Chapter 1-12.000; updated in November 2018, See also, Memorandum entitled “Coordination of Parallel Criminal, Civil, Regulatory and Administrative Proceedings, from the Attorney General to all Litigating Divisions and All Trial Attorneys, dated January 30, 2012, found as Civil Resource Manual 228 and Criminal Resource Manual 2464.

[12] Under the Bipartisan Budget Act of 2018 (effective February 9, 2018), Criminal penalties for acts involving Federal health care programs under 42 U.S.C. § 1320a–7b, including but not limited to the Anti-Kickback Statute, were increased from $25,000 to $100,000. Additionally, the maximum sentences for felonies involving Federal health care program fraud and abuse under 42 U.S.C. § 1320a–7b, including but not limited to the Anti-Kickback Statute, were increased from five to ten years.

[13] Infrequently, we have seen prosecutors from the State Attorney General’s Office issue a CID.

[14] Pursuant to 31 U.S.C. §3733, you will only have twenty days in which to respond to a Civil Instigative Demand, unless an extension is granted by the government.  Additionally, if a request for oral testimony is being sought, you may have as little as seven days within which to respond.

[15]31 U.S.C. § 3733(f)(1)(B).

False Claim Act Whistleblower Cases Are Rising

The number of False Claims Act whistleblower cases is increasing

(March 3, 2015): The federal False Claims Act (FCA), 31 U.S.C. §§ 3729 – 3733 is the primary civil enforcement tool utilized by the U.S. Department of Justice (DOJ). Enacted in 1863, this Civil War era statute was passed by Congress in an effort to address the fraudulent acts of government contractors providing goods and services to the Union Army. While originally passed to serve deter government military contracting fraud, the scope and use of the statute has greatly expanded over the last 150 years. False Claims Act whistleblower cases are rising, along the variety of allegations of health care fraud by individuals and entities . The purpose of this article is to examine the impact, if any, of the passage of the Patient Protection and Affordable Care Act (Affordable Care Act) on the number of health care “qui tam” (also commonly referred to as “whistleblower”) cases that have been filed under the federal False Claims Act

I.  Impact on the False Claims Act – Passage of the Affordable Care Act:

On March 23, 2010, President Obama signed the Affordable Care Act into law. While the primary purpose of the 906 page legislation was to make health care insurance accessible and affordable for millions of uninsured Americans, the law also introduced a number of fundamental changes to the False Claims Act. Several of these important changes are outlined below:

  • The Affordable Care Act Amended the Definition of Two Key Terms Under the False Claims Act.

Under the Affordable Care Act, the definition of the term “public disclosure” (as utilized under the False Claims Act) was amended to abolish the public disclosure bar. The definition of “public disclosure” was further revised to permit a qui tam relator to bring a whistleblower action that is based on allegations that have been previously disclosed in government or private litigation (as long as the relator meets the statutes “original source” requirements.

Prior to the passage of the Affordable Care Act, if a qui tam relator sought to bring an action based on public disclosures, the relator was required to qualify as an “original source” and have “direct and independent knowledge” of the facts alleged to constitute violations of the False Claims Act and have provided that information to the government prior to filing suit.   Under the Affordable Care Act, a qui tam relator is now only required to have “knowledge that is independent of and materially adds to the publicly disclosed allegations . . .”  As you can imagine, this change makes it significantly easier for an individual to meet the False Claims Act’s original source requirements.

Ultimately, the changes implemented under the Affordable Care Act to the False Claims Act’s public disclosure bar and the original source doctrine have made it easier for a relator to file a case involving public disclosure issues

  • The Affordable Care Act Defines Improperly Held Overpayments as an “Obligation,” Within the Meaning of the False Claims Act.

Under the Affordable Care Act, a health care provider’s liability under the False Claims Act was significantly broadened to cover identified “overpayments” that were improperly retained for more than 60 days. More specifically, 42 U.S.C. 1320a-7k(d) was revised to define “overpayments” as “Medicare funds received or retained to which a person is not entitled, after applicable reconciliation.” Overpayments must be reported and returned to the government (typically a Medicare Administrative Contractor) within 60 days of identification. Should a health care provider fail to return an overpayment within the statutorily required period, the overpayment then qualifies as an “obligation,” thereby subjecting the provider to liability under the False Claims Act.

  • The Affordable Care Act Makes it Clear that a Violation of the Federal Anti-Kickback Statute May Also Constitute a Violation of the False Claims Act.

As set out in §6402(f)(1) of the Affordable Care Act, any claims constituting a violation of the federal Anti-Kickback Statute (42 U.S.C. §1320a-7b(b)) qualify as “claims” for purposes of the False Claims Act (31 U.S.C. §§ 3729 et seq.). In addition to this fundamental change, the Affordable Care Act also arguably lowers the scienter and intent standards required for a violation of the Anti-Kickback Statute. As §6402(f)(2) of the Affordable Care Act provides, in order for an individual or entity to commit a violation of the federal health care Anti-Kickback Statute “a person need not have actual knowledge of this section or specific intent to commit a violation of this section.”

II.  False Claims Act Whistleblower Cases are Growing:

Collectively, the changes set out above make it much easier for both a relator and the government to bring a False Claims Act case against a health care provider or supplier. Notably, the number of new health care qui tam cases filed in 2010 (the Affordable Care Act was signed into law on March 23, 2010) rose to 385, a new high at that point in time. In FY 2013, the number of health care qui tam cases reached an all-time of 501 cases. While there was a slight drop (to 469 cases) in the number of health care qui tam cases filed in FY 2014, all indications are that FY 2015 may again challenge the record of cases filed in FY 2013.

III. Overview of the False Claims Act’s Qui Tam Provisions:

One of the most unique elements of the False Claims Act is that it authorizes private parties having direct knowledge of fraudulent conduct to bring a civil suit (on behalf of the government) against an individual or entity that has violated the statute. These civil suits are known as “qui tam” actions, and the private parties who initiate such actions are called “relators”. Qualified relators may share in any monies recovered as a result of their qui tam action.[1]

A qui tam action is initiated when a relator files a Complaint – along with supporting documentation – “under seal” in federal court. When a case is filed under seal, it means that all records associated with the whistleblower are maintained on a non-public docket by the Clerk of the Court. A copy of the complaint is given to the judge assigned to the case. The relator’s attorney also serves a copy of the complaint on the Attorney General in Washington, D.C. and on the U.S. Attorney in the federal judicial district in which the case has been filed.[2] By statute, the government is initially given 60 days to evaluate whether to “intervene” in the qui tam case that has been brought against the defendant. In almost all cases, the government will seek an extension to allow it an opportunity to further investigate the allegations. After showing “good cause” for an extension, most federal courts readily grant the government’s request for an extension. It is not at all uncommon for a qui tam to remain under seal for over a year (and often much longer) while the government reviews the allegations. The seal is important for several reasons:

  • The government can quietly investigate the allegations without the defendant knowing that their company is under investigation.
  • The mere existence of a government investigation can be devastating on the public’s view of a company. Moreover, if a company is publicly-traded, the publicity surrounding a government investigation can severely affect the price of a company’s stock—despite the fact that the allegations at issue have not been investigated or proven at this point in the process.

After concluding its evaluation, the government may elect to proceed with the complaint and intervene in the case or it may decline to intervene. If the government decides to intervene in the action, then the relator has the right to remain a party to the action. If the government decides not to intervene in the case, the qui tam relator may elect to proceed on his or her own against the defendant. Notably, the government always retains the ability to intervene in the case at a later time. From a practical standpoint, if the government decides not to intervene in a case, in all likelihood the relator will seek to dismiss the suit. Unlike the government, a relator’s ability to investigate a False Claims Act case is quite limited, both in terms of resources and in terms of investigative tools. As a result, the government’s decision to decline to intervene severely impacts a relator’s ability to move forward with the case.

IV.  What Can You Do to Reduce the Likelihood of a False Claims Act Whistleblower Case:

In light of the changes to the Affordable Care Act outlined above, it is imperative that health care providers and suppliers comply with all applicable medical necessity, documentation, coding and billing regulations. An effective Compliance Program can serve as an invaluable tool and can greatly assist providers and suppliers in their efforts to stay within the four corners of the law. As Supreme Court Justice Oliver Wendell Holmes wrote:

“Men must turn square corners when they deal with the Government.”[3]

Effectively, Justice Holmes’ comment serves as a continuing caution for individuals and entities who participate in government programs. Unfortunately, it isn’t always that easy for a health care provider or supplier to determine whether an overpayment exists, especially in complex cases where a patient has secondary insurance and/or the number of claims processed (as charges, credits, and corrections) may be quite large. Additionally, due to the complexity of Medicare coverage and payment rules, two reasonable individuals may disagree as to whether an overpayment is present. Despite the fact that two reasonable minds may disagree on whether an overpayment exists, the fact remains that a health care provider or supplier is ultimately responsible for repaying any overpayments due to the government. In order to avoid potential False Claims Act liability, it is imperative that you fully research any outstanding issues and determine the scope of any overpayment to be reported and repaid to the government.

V.  Final Remarks:

An effective compliance plan can assist in the identification and proper handling of overpayments, thereby reducing the provider’s risk of committing a violation of the False Claims Act. Health care providers and suppliers should review their current Compliance Plan to better ensure that internal audit and review mechanisms are in place so that any overpayments can be readily identified and repaid to the government within the 60-day deadline. The decision of whether to disclose and return an overpayment, whether to a MAC, the Department of Health and Human Services – Office of inspector General (HHS-OIG), or to the Department of Justice (DOJ), may differ depending on the facts. Depending on the size or complexity of an overpayment, a health care provider may need to contact legal counsel for advice on how to best handle a specific overpayment. Due to the 60-day deadline, if legal counsel is to be involved, they should be contacted as soon as possible.

Healthcare AttorneyRobert W. Liles serves as Managing Partner at Liles Parker. Robert has worked in health care administration since 1984 and previously served as “National Health Care Fraud Coordinator” for Executive Office of U.S. Attorneys, Department of Justice. Robert has extensive experience working on False Claims Act matters and cases. For a free consultation on your case, you may call Robert at: 1 (800) 475-1906.

[1] Relators can receive between 15% and 25% of any recovery in a qui tam action where the government has intervened in the case. In a non-intervened case, a relator may recover up to 30%. Consequently, there is a tremendous financial incentive to file and pursue these types of actions.

[2] The relator must also serve a “disclosure statement” on DOJ (normally, it is provided to the U.S. Attorney’s Office) which sets out the evidence that the relator has in support of the allegations set out in his/her Complaint. This statement is not filed with the Complaint.

[3] Rock I., Ark. & La. R.R. v. United States. 254 U.S. 141. 143 (1920). As Supreme Court Justice Felix Frankfurter commented, this statement “does not reflect a callous outlook. It merely expresses the duty of all courts to observe the conditions defined by Congress for charging the public treasury ” Federal Crop Ins. Corp. v. Merrill, 332 U.S. 380, 385 (1947).

Record FCA Recoveries Were Collected by the Government in 2012

FCA Recoveries in 2012 Were a New Record.(February 12, 2013): The civil False Claims Act is the primary civil enforcement tool used by the U.S. Department of Justice.  As discussed below, the False Claims Act is an extraordinarily useful statute for government prosecutors, both in terms of ease of use and in terms of the damages which may be recovered by the government

 

 

I.   Overview of the False Claims Act:

As set out below, the civil False Claims Act imposes civil monetary penalties and will expose a person to civil liability under the circumstances below:

Sec. 3729.  False claims 

(a) Liability for Certain Acts—any person who: 

(1) Knowingly presents, or causes to be presented, to an officer or employee of the United States Government or a member of the Armed Forces of the United States a false or fraudulent claim for payment or approval; 

(2) Knowingly makes, uses, or causes to be made or used, a false record or statement to get a false or fraudulent claim paid or approved by the Government; 

(3) Conspires to defraud the Government by getting a false or fraudulent claim allowed or paid; 

(4) Has possession, custody, or control of property or money used, or to be used, by the Government and, intending to defraud the Government or willfully to conceal the property, delivers, or causes to be delivered, less property than the amount for which the person receives a certificate or receipt; 

(5)  Authorized to make or deliver a document certifying receipt of property used, or to be used, by the Government and, intending to defraud the Government, makes or delivers the receipt without completely knowing that the information on the receipt is true; 

(6) Knowingly buys, or receives as a pledge of an obligation or debt, public property from an officer or employee of the Government, or a member of the Armed Forces, who lawfully may not sell or pledge the property; or 

(7) Knowingly makes, uses, or causes to be made or used, a false record or statement to conceal, avoid, or decrease an obligation to pay or transmit money or property to the Government, 

. . . is liable to the United States Government…  

II.  What is Not Covered Under the False Claims Act:

It is essential to keep in mind that the civil False Claims Act does not cover mistakes, accidents, or mere negligence.  Unfortunately, the line separating a billing “mistake” from a non-intentional wrongful billing, which could give rise to an action under the False Claims Act, is not always easy to discern.  In an effort to provide additional guidance to DOJ attorneys on the judicial use of the False Claims Act, guidance setting out a number of factors to be considered when pursuing a False Claims Act case.

III.  Damages Under the Civil False Claims Act:

A “person” (which would covers individuals, physician practices, home health agencies, hospice agencies, third-party billing companies, ambulance companies, hospitals, skilled nursing facilities and other health care providers)   found to have violated this statute is liable for civil penalties in an amount between $5,500 and not more than $11,000 per false claim, as well as up to three times the amount of damages sustained by the government.

IV.   What is the Involvement of the U.S. Department of Justice?

While attorneys in DOJ’s Civil Division in Washington, D.C. are likely to be involved in most of the larger, more complex cases under the False Claims Act, it is important to remember that a “Civil Health Care Fraud Coordinator” has been appointed in each of the 94 U.S. Attorney’s Offices around the country. Assistant U.S. Attorneys are highly trained and experienced in handling False Claims Act cases and will readily file a case against a health care provider in the event that improper conduct can be shown.

V.  Whistleblower or “Qui Tam” Provisions of the False Claims Act:

One of the most unique elements of the False Claims Act is that it authorizes private parties having direct knowledge of fraudulent conduct to bring a civil suit against the violator on behalf of the government.  These civil suits are known as qui tam actions, and the private parties who initiate such actions are called “relators.”  Relators may share in any monies recovered as a result of their qui tam action.[1] A qui tam action is initiated when a relator files a complaint – along with supporting documentation – “under seal” in federal court.  When a case is filed under seal, it means that all records associated with the whistleblower are maintained on a non-public docket by the Clerk of the Court.  A copy of the complaint is given to the judge assigned to the case.  The relator’s attorney also serves a copy of the complaint on the Attorney General in Washington, D.C. and on the U.S. Attorney in the federal judicial district in which the case was filed.[2]  Initially, the government will have 60 days to evaluate whether to proceed against the defendant.  In almost all cases, the government will seek an extension to allow it an opportunity to investigate the allegations.  After showing “good cause” for an extension, most federal courts will readily grant the request for an extension.  It is not at all uncommon for a qui tam to remain under seal for over a year (and often much longer) while the government reviews the allegations.  The seal is important for several reasons:

  • The government can quietly investigate the allegations without the defendant knowing that their company is under investigation.
  • The mere existence of a government investigation can be devastating on the public’s view of a company.  Moreover, if a company is publicly-traded, the publicity surrounding a government investigation can severely affect the price of a company’s stock—despite the fact that the allegations at issue have not been investigated or proven at this point in the process. 

After concluding its evaluation, the government may elect to proceed with the complaint and intervene in the case or it may decline to intervene.  If the government decides to intervene in the action, then the relator has the right to remain a party to the action.  If the government decides not to intervene in the case, the qui tam relator may elect to proceed on his or her own against the defendant.  Notably, the government always retains the ability to intervene in the case at a later time.  From a practical standpoint, if the government decides not to intervene in a case, in all likelihood the relator will seek to dismiss the suit.  Unlike the government, the relator’s ability to investigate a False Claims Act case is quite limited, both in terms of resources and in terms of investigative tools.  As a result, the government’s decision to decline to intervene severely impacts a relator’s ability to move forward with the case.  The government often asks the court to partially lift the seal solely for the purpose of advising the defendant of the existence of the case and to seek their cooperation in resolving the allegations.

Should the government choose not, to intervene, it will often ask that the Court remove the seal to the case.  Once the seal is removed, the case (and its allegations) will be part of the public record.  In cases where the government chooses to intervene, the case is often kept under seal until a settlement is worked out with the defendant.  There are a number of limitations placed on the filing of qui tam cases.  Two of the more commonly seen limitations include:

  • When the government has already initiated an action against a party for the same allegations that would form the basis of a qui tam suit; or
  • When the action is based on publicly-disclosed information[3] that was contained in an official hearing, report, investigation, audit, or information disseminated by the news media. 

VI.  Record Recoveries in 2012 Under the False Claims Act:

In recent years, False Claims Act recoveries resulting from whistleblower suits have exceeded most observers’ expectations.  Issues related to the False Claims Act should be at the top of the list of ongoing concerns for most health care Compliance Officers.  The potential damages a provider may face for violations of the False Claims Act cannot be understated.

In Fiscal Year 2012, the U.S. Department of Justice secured settlements and judgments in civil False Claims Act of $4.9 billion.  Notably, this includes a “record recovery for a single year” by more than $1.7 billion.  Over the last four years, $13.3 billion has been recoveries.  Notably, this represents more than a third of the total recoveries achieved since the False Claims Act was amended over 26 years ago.[4]

VII.  Are Physicians Being Targeted Under the False Claims Act:

While large pharmaceutical, durable medical equipment and hospital chain cases continue to dominate the press, physicians, dentists and other solo health care providers are increasingly finding themselves and their practices subject to whistleblower suits under the False Claims Act by former employees, competitors and others who believe that false claims are being submitted to the government for payment.

Notably, a recent whistleblower case pursued by the U.S. Department of Justice against an individual physician (a dermatologist) resulted in a $26.1 million settlement.  In this case, the physician was alleged to have accepted kickbacks from a pathology laboratory.  The physician was also accused of billing Medicare for medically unnecessary services. The whistleblower reportedly collected $4 million as part of the settlement.

VIII.  How Can You Prevent a False Claim Act from Being Filed Against You?

Ultimately, your ability to avoid the filing of a False Claims Act case against you or your practice rests on your ability to comply with state and federal laws, regulations and rules governing the provision, coding and billing of health care services. Without a doubt, the single most important step you can take in this regard is to develop, implement and adhere to the provisions and guidelines set out in an effective Compliance Plan.  While most hospitals and other institutional providers have had Compliance Plans in place for many years, very few physicians have taken this necessary preventative step.

Will a Compliance Plan prevent you from having a False Claims Act case brought against you or your practice?  No, not necessarily.  Instead, you should look at a Compliance Plan as being akin to a flu shot.  Just because you have received a flu shot does not mean that you will never catch the flu.  However, if you do come down with the flu, chances are that it won’t be as serious and it might otherwise have.  All of us make mistakes, and physicians are not immune to this risk.  Nevertheless, having an effective Compliance Plan in place is likely to greatly assist you in your efforts to stay within the four corners of the law.

Healthcare LawyerRobert W. Liles serves as Managing Partner at Liles Parker.  Robert and other attorneys at Liles Parker have extensive experience working on False Claims Act matters and case.  For a free consultation, please call Robert at:  1 (800) 475-1906.   

 


[1] Whistleblowers (also known as “Relators”) can receive between 15% and 25% of any recovery in a qui tam action where the government has intervened in the case.  In a non-intervened case, a relator may recover up to 30%.  Consequently, there is a tremendous financial incentive to file and pursue these types of actions.

[2] The relator must also serve a “disclosure statement” on DOJ (normally, it is provided to the U.S. Attorney’s Office) which sets out the evidence that the relator has in support of the allegations set out in his/her Complaint.  This statement is not filed with the Complaint and is not given to the defendant.

[3] This rule is known as the “public disclosure bar.” The Affordable Care Act modifies this rule in several respects.  First, a qui tam action will not be dismissed under the public disclosure rule if the government opposes dismissal.  Second, fraud disclosed in private legal actions will not activate the public disclosure bar; the government must have been a party to the action in order for the public disclosure rule to apply.  Third, information obtained from state proceedings or hearings likewise will not qualify under the public disclosure bar.  Finally, the public disclosure bar will not operate where the relator was the “original source” (e.g., has independent knowledge) of the fraud or false claim allegation.

[4] http://www.justice.gov/opa/pr/2012/December/12-ag-1439.html

 

Top Ten Health Care Compliance Risks for 2011

Compliance Risk(December 31, 2010):  In case you missed it, Congress, President Obama and the healthcare regulators had a banner year with respect to regulatory activism in 2010.  Over the next several weeks we will be releasing a series of articles on our website addressing the compliance risk areas facing your organise dramatic changes and the compliance risks they present for your practice, clinic or health care business in 2011:

 

Compliance Risk Number 1:  Increased “HEAT” Activity and Enforcement:

Perhaps the greatest risk to consider in 2011 is the increase in targeted health care fraud enforcement efforts by the government’s Health Care Fraud Prevention and Enforcement Action Team (HEAT).  These teams are comprised of top level law enforcement and professional staff from the U.S. Department of Justice (DOJ), the Department of Health and Human Services (HHS), and their various operating divisions.  HEAT team initiatives have been extraordinarily successful in coordinating multi-agency efforts to both prevent health care fraud and enforce current anti-fraud initiatives.

As DOJ noted in September 2010, over the previous Fiscal Year, DOJ (including its 94 U.S. Attorneys’ Offices), HHS’ Office of Inspector General (HHS-OIG), and the Centers for Medicare and Medicaid Services (CMS), jointly accomplished the following:

  • Filed charges against more than 800 defendants.
  • Obtained 583 criminal convictions.
  • Opened 886 new civil health care fraud matters.
  • Obtained 337 civil administrative actions against parties committing health care fraud.
  • Through these efforts, more than $2.5 billion was recovered as a result of the criminal, civil and administrative actions handled by these joint agencies. 

President Obama’s FY 2011 budget request includes an additional $60.2 million in funding for the HEAT program.These funds will be used to establish additional teams and further fund existing investigations. Now, more than ever, it is imperative that you ensure that your Compliance Plan is both up-to-date and fully implemented.  Medicare providers are obligated to adhere to statutory and regulatory requirements and the government’s HEAT teams are aggressively investigating providers who fail to comply with the law.

Compliance Risk Number 2:  Zone Program Integrity Contractor (ZPIC) / Program SafeGuard Contractor (PSC) / Recovery Audit Contractor (RAC) Audits of Medicare Claims:

As you already know, private contractor reviews of Medicare claims are big business – one ZPIC was awarded a five-year contract worth over $100 million.  In 2011, we  should expect to see:

  • The number of ZPIC / PSC / RAC audits of Physician Practices, Home Health Agencies, Hospice Companies, DME Suppliers and Chiropractic Clinics will greatly increase in 2011.

  • The reliance of both contractors and the government on data mining will continue to grow.  Providers targeted will likely be based on utilization rates, prescribing practices and billing / coding profiles.

  • An increase in the number of Administrative Law Judge (ALJ) hearings in where ZPIC representatives choose to attend the hearing as a “participant.”  In these hearings, the ZPIC representative will likely aggressively oppose any arguments in support of payment that you present.

Are you ready for an unannounced / unanticipated site visit or audit?  When is the last time that you have conducted an internal review of your billing / coding practices?  Are you aware of the hidden dangers when conducting these reviews?  In 2011, your Compliance Officer may very well be your most important non-clinical staff member.  Physicians and other providers should work with their Compliance Officer to better prepare for the unexpected audit or investigation.

Compliance Risk Number 3: Electronic Medical Records:

Unfortunately, some early adopters of Electronic Medical Records (EMR) software are now having to respond to “cloning” and / or “carry over” concerns raised by ZPICs and Program SafeGuard Contractors (PSCs).  In a number of cases, these audits appear to be the result (at least in part) of inadequately designed software programs which generate progress notes and other types of medical records that do not adequately require the provider to document individualized observations.  Instead, the information gathered is often sparse and similar for each of the patients treated.  Take care before converting your practice or clinic to an EMR system.  Include your Compliance Officer in the selection and review process.

Compliance Risk Number 4:  Physician Quality Reporting Initiative (PQRI) Issues:

Under the Health Care Reform legislation passed last March. PQRI was changed from a voluntary “bonus” program to one in which penalties will be assessed if a provider does not properly participate.  As of 2015, the penalty will be 1.5% and will increase to 2.0% in 2016 and subsequent years. Additionally, questions about the use of PQRI date in “Program Integrity” targeting remain unanswered.  Once again, it is essential that your Compliance Officer provide guidance to your staff regarding this program and its potential impact.

Compliance Risk Number 5:  Medicaid Integrity Contractors (MICs)  and Medicaid Recovery Audit Contractors (MDRACs):

In recent months, we have seen a marked increase in the number of MIC inquiries and audits initiated in southern States.  Notably, the information and documentation requested has often been substantial.  Medicaid providers must now also contend with MDRACs.  As a result of health care reform, MDRACs are now mandatory in every State and are may initiate reviews and audits as soon as March 2011.   Compliance Officers should review their current risk areas and ensure that Medicaid coding and billing activities are actively monitored to better ensure statutory / regulatory adherance.

Compliance Risk Number 6:  HIPAA / HITECH Privacy Violations:

Failure to comply with HIPAA can result in civil and / or criminal penalties. (42 USC § 1320d-5).

  • Civil Penalties – A large retail drug store company was recently fined $2.25 million for failure to properly dispose of protected information.

  • Criminal Penalties – Earlier this year, a physician in Los Angeles, CA, was sentenced to four months in prison after admitting he improperly accessed individual health information.

As of mid-2010, there had been 93 breaches affecting 500 or more individuals.  The total number of individuals whose information was disclosed as a result of these breaches was estimated at over 2.5 million.  Out of the 93 breaches, 87 involved breach of hard copy or electronic protected health information (about 1/4 involved paper records and 3/4 involved electronic records. The vast majority of the 93 breaches involved theft or loss of the records.  Many of these thefts could have been avoided with appropriate security.  The government is serious about privacy and your practice, and in 2011 you will likely see increased HIPAA / HITECH enforcement.  Your clinic or health care business must take appropriate steps to prevent improper disclosures of health information.

Compliance Risk Number 7:  Increased Number of Qui Tams Based on Overpayments:

Section 6402 of the recent Health Care Reform legislation requires that all Medicare providers, (a) return and report any Medicare overpayment, and (b) explain, in writing, the reason for the overpayment.

This law creates a minefield for physicians and other Medicare providers.  First, providers have only 60 days to comply with the reporting and refund requirement from the date on which the overpayment was identified or, if applicable, the date any corresponding cost report is due, whichever is later.  Of course, the legislation does not actually explain what it means to “identify” an overpayment.

From a “risk” standpoint, this change is enormous.  Disgruntled employees try to file a Qui Tam  (“whistleblower”) lawsuit based on a provider’s failure to return one or more Medicare overpayments to the program in a timely fashion.  While the government may ultimately choose not to intervene in a False Claims Act case based on such allegations, a provider could spend a significant amount defending the case.  Providers should ensure that billing personnel understand the importance of returning any overpayments identified as quickly as possible.

Compliance Risk Number 8:  Third-Party Payor Actions:

Third-party (non-Federal)  payors are participating in Health Care Fraud Working Group meetings with DOJ and other Federal agents.  Over the last year, we have seen an increase in the number of “copycat” audits initiated by third-party payor “Special Investigative Units” (SIUs).  Once the government has announced the results of a significant audit, the third-party payor considers the services at issue and reviews whether it may have also been wrongly billed for such services.  If so, their SIU opens a new investigation against the provider.

Compliance Risk Number 9:  Employee Screening:

With the expansion of the permissive exclusion authorities, more and more individuals will ultimately be excluded from Medicare.  As we have seen, HHS-OIG is actively reviewing whether Medicare providers have employed individuals who have been excluded.  In one recent case, HHS-OIG announced that it had assessed significant civil monetary penalties against a health care provider that employed seven individuals who the provider “knew or should have known” had been excluded from participation in Federal health care programs. These individuals were alleged to have furnished items and services for which the provider was paid by Federal health care programs.  All providers should periodically screen their staff against the HHS-OIG and GSA databases to ensure that their employees have not been excluded from participation in Federal Health Benefits Programs.

Compliance Risk Number 10:  Payment Suspension Actions:

Last, but not least, we expect the number of payment suspension actions to increase in 2011.  In late 2010, Medicare contractors recommended to CMS that this extraordinary step be taken against providers in connection with a wide variety of alleged infractions.  Reasons given for suspending a provider’s Medicare number included, but were not limited to: (1) the provider failed to properly notify Medicare of a change in location, (2) the provider allegedly engaged in improper billing practices, and (3) the provider failed to fully cooperate during a site visit.

As each of these compliance risks reflect, health care providers are expected to fully comply with a wide myriad of Medicare and Medicaid statutory and regulatory requirements.  Moreover, the failure to meet these obligations can subject a provider to penalties ranging from suspension from the program to criminal prosecution.  Providers must take compliance seriously if they hope to thrive in 2011.

Robert W. Liles Healthcare AttorneyRobert W. Liles, J.D., represents healthcare providers and suppliers around the country in connection with Medicare and Private payor audits.  Liles Parker attorneys have extensive experience working on compliance related matters and defending providers in connection with allegations of one or more alleged violations of regulatory requirements. Should you have questions regarding these and other issues, give us a call for a free consultation.  We can be reached at 1 (800) 475-1906.