Expanded Enforcement of Federal False Claims Act, Rico, and Antitrust Law Changes the Legal
| Publication year | 2015 |
| Pages | 29 |
| Citation | Vol. 44 No. 12 Pg. 29 |
Articles Antitrust Law
Expanded Enforcement of Federal False Claims Act, RICO, and Antitrust Law Changes the Legal Landscape for Healthcare Providers
By Richard H. Cunningham, John D.W. Partridge.
Antitrust and Consumer Protection Law articles are sponsored by the Antitrust and Consumer Protection Subsection of the CBA Business Law Section to provide information about and explain the complexities of antitrust and consumer protection laws.
During the last several years, the FCA, RICO, and the antitrust laws have been enforced with renewed vigor against healthcare providers. As summarized below, healthcare providers now confront new theories of liability, more onerous remedies, and a willingness by both the government and private plaintiffs to pursue actions on more ambiguous facts.
The healthcare services sector is among the strongest and most dynamic components of Colorado's economy. According to the Colorado Health Institute, Colorado's healthcare and wellness industry accounts for more than 15% of Colorado's gross state product and employs more than 360,000 workers statewide. As the healthcare services sector has grown, the laws and regulations governing conduct in the industry have multiplied as well, resulting in an increasingly complex legal and regulatory landscape. The Patient Protection and Affordable Care Act (PPACA), the Health Insurance Portability and Accountability Act (HIPAA), state licensure programs, and numerous other laws and regulations impose a daunting number of obligations on healthcare providers. In recent years, reinvigorated and expanded enforcement of the False Claims Act (FCA); the Racketeering Influenced and Corrupt Organizations Act (RICO); and the Sherman, Clayton, and Federal Trade Commission (FTC) Acts has added to the legal exposure of healthcare providers. Although these federal laws are decades old (and industry-agnostic), they are being asserted with renewed vigor—and notable success—by government enforcers and private plaintiffs against healthcare providers. This article discusses trends in the enforcement of these laws against providers.[1]
Healthcare Providers Are Increasingly Targeted in FCA Suits
The FCA empowers the federal government, via the Department of Justice (DCO), to seek monetary penalties and recompense from those who defraud the government. The FCA also authorizes private whistleblowers, known as "relators," to bring qui tarn suits on behalf of the government (and recover a share of any proceeds that result from the case). During the Civil War era, when the law was enacted, the FCA targeted war profiteers who sold the government lame horses or gunpowder mixed with sawdust. Today, the government wields the FCA as its primary weapon against fraud and abuse involving government-funded healthcare programs.
The FCA packs a significant punch from a liability perspective: providers may submit thousands of claims to government payors and each claim is subject to the FCA's per-claim penalty of $5,500 to $11,000, and the FCA imposes mandatory treble damages. Since January 2009, DOJ has recovered more than $26.2 billion in FCA cases, with more than $16.4 billion resulting from actions alleging fraud related to federal healthcare programs.[2] Of that sum, approximately $1.2 billion came from healthcare providers in 2014 alone—and recoveries are on track to exceed that total in 2015.[3]
In pursuing those recoveries, the government and relators continue to rely on several well-worn FCA theories, which are outlined below. In addition, recent comments by Leslie Caldwell, the assistant attorney general of DOJ's Criminal Division, suggest that the government is considering more expansive theories and areas that, to date, have not been a focus of FCA enforcement, including "laboratory services, hospital-based services, and hospice care."[4]
Ongoing Scrutiny of Medical Necessity and Other Billing Issues
During the past few years, a significant portion of settled FCA cases targeting healthcare providers have involved allegations that the provider knowingly provided care that was medically unnecessary for the patient or a level of care that was unnecessary.
Settlements in medical necessity cases often climb into the tens— if not hundreds—of millions of dollars. For example, in April 2014, Amedisys Home Health Companies, a leading provider of home health services, agreed to pay $150 million to resolve allegations that it billed for medically unnecessary nursing and therapy care.[5] The government also alleged that Amedisys inappropriately boosted its reimbursements from Medicare by misrepresenting its patients' conditions.[
5
]Just a few months later, Community Health Systems, the nation's largest acute hospital operator, paid nearly $100 million to the government to resolve allegations that it billed for medically unnecessary levels of care by submitting claims for inpatient services that should have been provided on an outpatient basis.[7]Like many recent FCA settlements involving providers, the Community Health Systems settlement encompassed alleged conduct at multiple facilities over a long period of time (119 hospitals over five years).[8] Similarly, in May 2015, DOJ announced that it had resolved an extensive investigation into alleged fraudulent billing for intensive outpatient psychotherapy by 16 hospitals located in seven states throughout the South.[9] Those hospitals, a majority of which were formerly owned or operated by Health Management Associates Inc. (HMA), agreed to pay approximately $15.7 million to resolve the FCA claims against them.[10] According to DOJ, the hospitals submitted claims for psychotherapy services that the hospitals knew were not reimbursable under federal health programs because the patients and the care the hospitals provided them did not meet specified requirements.[11]
Continuing Anti-Kickback Statute and Stark Law Enforcement Using the FCA
Laws governing financial relationships among participants in the healthcare sector, including the federal anti-kickback statute and the physician self-referral law (known as the Stark Law), also continue to result in significant FCA settlements. In a typical case, the government alleges that claims submitted by the provider are tainted because the provider paid physicians for patient referrals underlying the claims, by, for example, doling out exorbitant compensation to the physicians to act as consultants or medical directors while receiving little or no work in return.
Just a few months ago, Hebrew Homes Health Network settled an FCA action involving kickback allegations for $17 million—the largest recovery to date against a nursing facility.[12] The government asserted that Hebrew Homes often hired physicians as "medical directors"—and paid them thousands of dollars—even though they were required to do little if any work while serving in these "ghost positions."[13]
Colorado healthcare providers have not been immune from scrutiny relating to allegedly inappropriate relationships with referrals sources. Late last year, Colorado-based DaVita Healthcare Partners, Inc. agreed to pay $350 million (and $39 million in a civil forfeiture) to resolve allegations that it provided inappropriate remuneration to physicians in return for patient referrals.[14]
The government and relators have also pursued providers under the FCA for violating the Stark Law on the theory that federal health programs condition payment on compliance with the Stark Law. To date in 2015, FCA actions premised on providers' alleged Stark Law violations have resulted in tens of millions of dollars of recoveries (including a settlement of approximately $22 million).[15]
Attempts to Expand the Worthless Services Theory
When pursuing providers under the FCA, the government and relators often advance FCA claims stemming from services that were allegedly so deficient as to be worthless.[16]
In a recent opinion, United States ex rel. Absher v. Momence Meadows Nursing Center, Inc., the Seventh Circuit analyzed two relators' attempts to expand the worthless services theory to situations where a healthcare provider's care was allegedly deficient.[17] There, two former nurses of the defendant alleged that it fraudulently sought reimbursement for substandard treatment and secured a judgment against the defendant after a jury trial.[18] The Seventh Circuit reversed, holding that an FCA plaintiff cannot satisfy its burden by merely showing that a defendant's services are "worth less."[19] The court set a much higher bar: the services must be "so deficient that for all practical purposes [they are] the equivalent of no performance at all."[20] Given that the government surveyed Momence Meadows facilities and permitted it to continue providing care, the Seventh Circuit rejected the assertion that the care was entirely worthless.[21]
Despite the Seventh Circuit's narrow construction of the worthless services theory, the government and relators continue to pursue—at times successfully—cases against providers on the basis of allegedly insufficient care. For example, just weeks after the Momence Meadows decision, DO] announced a $38 million settlement with Extendicare Health Services, which operates skilled nursing facilities.[22] According to the government, Extendicare Health Services facility had too few staff, provided inadequate care, and failed to take measures to prevent ulcers and falls.[23] Although this alleged misconduct would seem to fall in the category of substandard care—rather than entirely worthless care—the government warned in its comments on the settlement that providers that "bill Medicare and Medicaid while failing to provide essential services or bill for services so grossly substandard as to...
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