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Healthcare Fraud & Abuse Review 2019

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Healthcare Fraud & Abuse Review 2019 A LOOK BACK … A LOOK AHEAD 1 NOTEWORTHY SETTLEMENTS 3 ISSUES TO WATCH 6 FALSE CLAIMS ACT UPDATE 11 STARK LAW/ANTI-KICKBACK STATUTE 31 PHARMACEUTICAL AND MEDICAL DEVICE DEVELOPMENTS 34 APPENDIX — 2019 NOTABLE SETTLEMENTS 36 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 Medical Transportation Pharmaceutical and Device Individual Providers Pharmacy Services Other Laboratory, Pathology, Radiology, and Diagnostics ABOUT BASS, BERRY & SIMS 71 DOJ’s announced results reflect that the government’s healthcare fraud enforcement efforts have continued unabated. Civil fraud recoveries by DOJ rose to more than $3 billion in the fiscal year ending September 30, 2019 (FY 2019) as compared to $2.8 billion in FY 2018, and recoveries attributable to the healthcare industry were $2.6 billion in FY 2019 – up slightly from $2.5 billion in FY 2018.1 Whistleblowers filed 633 new qui tam lawsuits under the False Claims Act (FCA) in FY 2019, which represented a slight drop-off compared with prior years, but brought the total number of FCA qui tam lawsuits filed since 2010 to more than 6,600. For their efforts, whistleblowers recovered more than $265 million in relator share awards in FY 2019, bringing the total awards to relators to more than $2.1 billion in the last five years. Throughout the year, DOJ and HHS announced a number of healthcare fraud takedowns – many of which focused on enforcement actions involving opioid distribution. In September, DOJ announced a coordinated healthcare fraud enforcement action across seven federal districts in the Northeastern United States, involving more than $800 million in losses and A LOOK BACK ... CIVIL FRAUD RECOVERIES A LOOK AHEAD FY 2015-2019 ($BILLIONS) $4.8 Turmoil at the highest levels of government served as the 5 backdrop for civil and criminal healthcare fraud enforcement efforts again last year. At the beginning of the year, this took 4 $3.7 the form of leadership changes at the U.S. Department of Justice (DOJ) and within the U.S. Department of Health and Human $3.1 $3 3 $2.8 Services (HHS). U.S. Attorney General Robert Barr was confirmed on February 14, 2019, and long-serving HHS Inspector General Daniel Levinson stepped down from his position after serving for 2 more than a decade to be replaced by Acting Inspector General Joanne Chiedi. Notwithstanding these leadership changes, 1 government enforcement efforts remained consistently focused 2015 2016 2017 2018 2019 on previously-announced priorities with significant success. 1 https://www.justice.gov/opa/pr/justice-department-recovers-over-3-billion-false-claims-act-cases-fiscal- year-2019. HEALTHCARE FRAUD & ABUSE REVIEW 2019 BASS, BERRY & SIMS | 1 the distribution of more than 3.25 million Finally, the year ended in December with a panel of the U.S. Court of Appeals for the Fifth pills in connection with “pill mill” clinics.2 Circuit striking down the individual mandate of the Patient Protection and Affordable Recoveries attributable to The announced takedown also involved the Care Act (PPACA), which imposes minimal essential coverage requirements under which the healthcare industry disclosure of guilty pleas by executives of certain individuals are obligated to purchase and maintain health insurance coverage, as were $2.6 billion in FY numerous telemedicine and durable medical unconstitutional in a 2-1 decision in Texas v. United States.4 The Fifth Circuit remanded equipment (DME) companies for their roles the case back to the district court for consideration of whether the individual mandate is 2019 – up slightly from in the submission of more than $600 million severable from the balance of PPACA. While the implications of the Fifth Circuit’s ruling $2.5 billion in FY 2018. in fraudulent Medicare claims. Earlier in the could have a far-reaching impact on healthcare broadly speaking, PPACA also included year, DOJ announced that the Appalachian key amendments to the FCA that could hang in the balance with respect to any result that Regional Prescription Opioid Strike Force imperiled PPACA. filed charges in 11 federal districts against Our firm’s annual Healthcare Fraud & Abuse Review is intended to assist healthcare 60 individuals, including 31 physicians, seven pharmacists, eight nurse practitioners, and providers in developing a greater understanding of the civil and criminal enforcement seven other licensed medical professionals stemming from 350,000 prescriptions for risks they face during a time of great uncertainty for the healthcare industry. Without opioids and other narcotics.3 question, understanding the key developments during the prior year is an important DOJ also made two key announcements in 2019. The first concerned how prosecutors step in implementing necessary safeguards designed to minimize enforcement risks for will evaluate corporate compliance programs, which followed the 2017 guidance by healthcare providers. DOJ on this same topic. The second announcement concerned how DOJ will evaluate a party’s cooperation in connection with resolution of civil FCA claims. Both of these DOJ pronouncements provide practical guidance for healthcare providers to consider in evaluating civil and criminal enforcement risks. For its part, the Centers for Medicare & Medicaid Services (CMS) provided further explanation of its approach to considering sub- regulatory guidance in connection with enforcement actions following the Supreme Court’s opinion in Azar v. Allina Health Services, which determined that substantive changes to For their efforts, whistleblowers recovered regulations need to follow notice-and-comment rulemaking procedures. more than $265 million in relator share awards in FY 2019, bringing the total awards to relators to more than $2.1 billion HEALTHCARE FRAUD TAKEDOWN IN in the last five years. NORTHEASTERN UNITED STATES BY THE NUMBERS 48 3.25M $800M 7 INDIVIDUALS OPIOID PILLS IN LOSSES FEDERAL DISTRIBUTED DISTRICTS 2 https://www.justice.gov/opa/pr/federal-health-care-fraud-takedown-northeastern-us-results-charges- against-48-individuals. 3 https://www.justice.gov/opa/pr/appalachian-regional-prescription-opioid-arpo-strike-force-takedown- results-charges-against. 4 945 F.3d 355 (5th Cir. 2019). A LOOK BACK ... A LOOK AHEAD BASS, BERRY & SIMS | 2 HOSPITALS AND HEALTH SYSTEMS There were several notable settlements involving hospitals and health systems resolving FCA allegations, many of which related to alleged violations of the Stark Law or the Anti- Kickback Statute (AKS). Improper compensation arrangements with physician referral sources remained a key area of scrutiny with inappropriate remuneration taking on various forms, such as compensation either exceeding fair market value (FMV) or accounting for the volume or value of physician referrals,6 kickbacks disguised as professional services agreements,7 and loans without repayment expectations.8 In the year’s largest series of settlements involving hospitals and health systems, Sutter Health, several of its affiliated hospitals, and a group of cardiovascular surgeons agreed to pay more than $46.1 million to resolve a number of alleged Stark Law violations, including allegations that physicians were paid in excess of FMV, space was leased at below-market rates, and physicians were reimbursed for recruiting expenses in excess of the expenses incurred. Approximately one-third of the settlement amount ($15.1 million) was attributable to the resolution of self-disclosed Stark Law violations, as well as allegations that several of Sutter’s ambulatory surgical centers double-billed Medicare.9 Hospitals and health systems also resolved several cases related to medical necessity issues, including allegations of inappropriately billing or coding claims or treating patients in an NOTEWORTHY inpatient setting when an outpatient or observation setting was sufficient.10 And, a number of SETTLEMENTS settlements involved general failures to adhere to reimbursement or coverage requirements.11 LONG-TERM CARE PROVIDERS The medical necessity of services provided continued to be the dominant focus of As in recent years, resolutions in healthcare fraud cases accounted settlements involving home health, hospice, skilled nursing, and nursing home providers.12 for the vast majority of all FCA recoveries in FY 2019. Of the $3 Several settlements resolving FCA allegations related to Stark Law and AKS violations involved improper remuneration in the form of sham medical director agreements allegedly billion in settlements and judgments, recoveries from matters used to induce referrals.13 Long-term care providers settled alleged violations of both federal involving the healthcare industry amounted to $2.6 billion (87%). This is the tenth consecutive year that recoveries in federal civil 6 See, e.g., https://www.justice.gov/usao-ndga/pr/union-general-hospital-pay-5-million-resolve-alleged- false-claims-act-violations; https://www.justice.gov/usao-md/pr/medstar-health-pay-us-35-million-resolve- healthcare fraud matters have exceeded $2 billion.5 allegations-it-paid-kickbacks-cardiology-group. 7 https://www.justice.gov/usao-md/pr/medstar-health-pay-us-35-million-resolve-allegations-it-paid- kickbacks-cardiology-group. 8 https://www.justice.gov/opa/pr/rialto-capital-management-and-current-owner-indiana-hospital-pay-36- As has been typical in recent years, newly-filed qui tam complaints accounted for the vast million-resolve-false. majority of the new civil fraud
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