2020 A LOOK BACK … A LOOK AHEAD 1 CARES ACT/COVID-19 RELIEF 3 NOTEWORTHY SETTLEMENTS 5 ISSUES TO WATCH 9 FALSE CLAIMS ACT UPDATE 15 STARK LAW/ANTI-KICKBACK STATUTE 34 MANAGED CARE/MEDICARE ADVANTAGE 38 PHARMACEUTICAL AND MEDICAL DEVICE DEVELOPMENTS 40 APPENDIX — 2020 NOTABLE SETTLEMENTS 43 Hospitals and Health Systems Behavioral Health and Substance Abuse Treatment Hospice and Home Health Specialty Care and Other Provider Entities Skilled Nursing Facilities and Nursing Homes Individual Providers Pharmaceutical and Device Other Laboratory, Pathology, Radiology, and Diagnostics ABOUT BASS, BERRY & SIMS 68 turned-offices, and we argued and won key FCA cases on behalf of clients, appearing Civil fraud recoveries by remotely before appellate courts via video DOJ dipped to $2.2 billion conference. in the fiscal year ending For its part and not surprisingly, the September 30, 2020 federal government continued forward with its pursuit of healthcare fraud (FY 2020) as compared to and abuse issues. The Department of $3.1 billion in FY 2019, Justice’s (DOJ) announced results reflect that the government’s healthcare fraud and recoveries attributable enforcement efforts have continued to the healthcare industry unabated. Civil fraud recoveries by DOJ dipped to $2.2 billion in the fiscal year were $1.8 billion in ending September 30, 2020 (FY 2020) as FY 2020, compared with compared to $3.1 billion in FY 2019, and recoveries attributable to the healthcare $2.6 billion in FY 2019. industry were $1.8 billion in FY 2020, compared with $2.6 billion in FY 2019.1 Whistleblowers filed 672 new qui tam A LOOK BACK … lawsuits under the FCA in FY 2020, which represented an increase compared with the prior year, and brought the total number of FCA qui tam lawsuits filed since 2010 to more than A LOOK AHEAD 7,000. For their efforts, whistleblowers recovered more than $309 million in relator share awards in FY 2020, bringing the total awards to relators to more than $2 billion in the last five years. It is also noteworthy that 250 new non-qui tam civil fraud lawsuits were filed last year, which represented an increase of more than 100 such lawsuits from the prior year. When we released last year’s Healthcare Fraud and Abuse Review With respect to criminal healthcare fraud enforcement, cases emerged stemming from in early 2020, none of us could have predicted what the year ahead fraud associated with COVID-19 relief. DOJ has announced a number of indictments, plea would bring. By March 2020, we saw healthcare professionals agreements, and sentences associated with respect to COVID-19 fraud schemes.2 There is standing at the forefront of one of the greatest health crises in a no question that enforcement efforts with respect to such fraud schemes will remain robust. generation, and we saw our healthcare system quickly stressed In November 2020, DOJ announced the largest healthcare fraud and opioid criminal 3 to the breaking point by the COVID-19 pandemic. Over the next enforcement action in DOJ history. The takedown involved 345 charged defendants across 51 federal judicial districts, including more than 100 doctors, nurses, and other licensed several months, we saw trillions of stimulus dollars distributed by medical professionals. The government charged defendants with submitting more than the federal government to provide economic relief to individuals $6 billion in false and fraudulent claims to federal healthcare programs and private and businesses. By 2020’s end, we saw the beginning of a massive 1 See https://www.justice.gov/opa/pr/justice-department-recovers-over-22-billion-false-claims-act-cases- and historic vaccine roll-out designed to stem the continued rising fiscal-year-2020; https://www.justice.gov/opa/press-release/file/1354316/download. 2 See, e.g., https://www.justice.gov/opa/pr/two-owners-new-york-pharmacies-charged-30-million-covid-19- tide of COVID-19 infections against the backdrop of leadership health-care-fraud-and-money (announcing indictment related to $30 million COVID-19 healthcare fraud and money laundering scheme by the owners of two pharmacies); https://www.justice.gov/opa/pr/medical- changes at the highest levels of government. technology-company-president-charged-scheme-defraud-investors-and-health-care-benefit (announcing charging of medical technology company executive charged with defrauding investors and healthcare benefit programs in connection with the submission of $69 million in false and fraudulent claims for allergy Along the way, we continued to pay close attention to healthcare fraud and abuse issues and COVID-19 testing); https://www.justice.gov/opa/pr/ceo-medical-device-company-charged-covid-19- on behalf of our clients, and we began to anticipate the likely issues that would arise related-securities-fraud-scheme (announcing charging of CEO of medical device company with COVID-19- related securities fraud scheme); https://www.justice.gov/opa/pr/florida-man-charged-covid-relief-fraud- from COVID-19-related relief programs. We negotiated significant False Claims Act (FCA) and-health-care-fraud (announcing charging of individual who participated in scheme to defraud Medicare settlements and corporate integrity agreements from our kitchen tables and bedrooms- of at least $5.6 million and fraudulently seeking Paycheck Protection Program loans). 3 https://www.justice.gov/criminal-fraud/hcf-2020-takedown/press-release. HEALTHCARE FRAUD & ABUSE REVIEW 2020 BASS, BERRY & SIMS | 1 insurers, which included more than “$4.5 billion connected to telemedicine, more DOJ reported that 250 than $845 million connected to substance CIVIL FRAUD RECOVERIES new non-qui tam civil fraud abuse treatment facilities” and “more than FY 2016-2020 ($BILLIONS) $806 million connected to other health lawsuits were filed last care fraud and illegal opioid distribution year, which represented an schemes across the country.” increase of more than 100 During its semiannual reporting period for such lawsuits from FY 2019. the period ending September 30, 2020, $4.9 the U.S. Department of Health and Human 5 Services, Office of Inspector General (HHS- OIG) announced 166 criminal and 414 civil actions against individuals and entities engaged in healthcare fraud-related offenses and 4 $3.4 reported $1.24 billion in investigative receivables due to HHS and $363.2 million in non-HHS $3.1 investigative receivables, including civil and administrative settlements or civil judgments $2.9 related to Medicare, Medicaid, and other government healthcare programs.4 HHS-OIG 3 cited its use of risk assessment and data analytics to identify, monitor, and target potential $2.2 fraud, waste, and abuse affecting HHS programs and beneficiaries and to promote the effectiveness of HHS’s COVID-19 response and recovery programs. HHS-OIG also noted 2 that hospitals overbilled Medicare $1 billion by incorrectly assigning severe malnutrition diagnosis codes to inpatient hospital claims.5 1 There were key regulatory developments, as well. HHS-OIG and the Centers for Medicare & 2016 2017 2018 2019 2020 Medicaid Services (CMS) published final rules in a coordinated effort to modernize regulations implementing the Stark Law, the Anti-Kickback Statute (AKS), and the beneficiary inducement provisions of the Civil Monetary Penalties Law. To increase transparency in drug pricing and lower those prices, HHS-OIG released a final rule to alter the way prescription drug discounts are handled and to protect certain drug-manufacturer payments to pharmacy benefit managers (PBMs), which we discuss throughout the Review. Finally, with the change in administration at HHS-OIG’s Semiannual the federal level, DOJ, HHS-OIG, and CMS, Report noted that along with all other federal agencies will Whistleblowers filed 672 new qui tam have new leadership, new priorities, and hospitals overbilled undoubtedly new approaches to the pursuit lawsuits under the FCA in FY 2020, which Medicare $1 billion by of healthcare fraud and abuse issues. represented an increase compared with the incorrectly assigning During these turbulent times, our firm’s prior year, and brought the total number severe malnutrition annual Healthcare Fraud & Abuse Review will assist healthcare providers in of FCA qui tam lawsuits filed since 2010 to diagnosis codes to developing a greater understanding of the more than 7,000. inpatient hospital claims. civil and criminal enforcement risks they face during a time of great uncertainty for the healthcare industry. 4 https://oig.hhs.gov/reports-and-publications/archives/semiannual/2020/2020-fall-sar.pdf. 5 https://oig.hhs.gov/oas/reports/region3/31700010.pdf. A LOOK BACK … A LOOK AHEAD BASS, BERRY & SIMS | 2 no strings attached, so the healthcare providers that are receiving these dollars can essentially spend that in any way they see fit.”6 The government has announced its However, there are numerous pre- and post-funding requirements in the funding tied to receipt of the commitment to devote relief funds, including areas related to eligibility to extensive resources request and receive the funds, the determination of actual COVID-19-related expenses, attributable and effort to the lost revenue related to COVID-19, demonstrable use aggressive pursuit of of COVID-19 funds, and certifications submitted to the government related to any funding provision. perceived COVID-19 The government has announced its commitment funding fraud. to devote extensive resources and effort to the aggressive pursuit of perceived COVID-19 funding fraud. COVID-19 funding presents an enforcement perfect storm;