Looking Back at Health Care False Claims Enforcement in 2015; Looking Ahead at Trends Driving Health Care False Claims Enforcement in 2016
On December 3, 2015, the U.S. Department of Justice (DOJ)—the principal public enforcer of the U.S. False Claims Act (FCA)—released its report of recoveries obtained under the FCA during its 2015 fiscal year. In FY 2015, the DOJ recovered more than $3.5 billion in settlements and judgments from civil cases involving fraud and false claims against the government. This is the fourth year in a row that the DOJ has recovered more than $3.5 billion in cases under the FCA, and brings total recoveries from January 2009 to the end of the fiscal year to $26.4 billion.
Of the $3.5 billion recovered last year, $1.9 billion—more than half of the total recovery—came from companies and individuals in the health care industry who were accused of providing unnecessary or inadequate care, paying kickbacks to health care providers to induce the use of certain goods and services, or overcharging for goods and services paid for by Medicare, Medicaid, and other federal health care programs. This $1.9 billion reflects federal losses only. In many of these cases, the DOJ played a salient role in recovering additional millions of dollars for consumers and state Medicaid programs.
Big recoveries for FCA violations in the health care industry are nothing new. Health care fraud recoveries in 2015 were actually slightly less than they were in 2014, when DOJ’s FCA recoveries for fraud against federal health care programs were about $2.3 billion in all. Health care fraud has been assuming an increasingly prominent role in FCA enforcement for decades. In 1987, the number of FCA cases that the DOJ filed involving fraud on federal health care reimbursement programs was a whopping zero. By 2011, it was over 400 cases. By the late 1990s, HHS cases began to represent a majority of all FCA cases.
The growth in health care FCA claims is mostly attributable to qui tam actions—that is, lawsuits alleging FCA violations that have been filed by private individuals acting on the government’s behalf, pursuant to 31 U.S.C. § 3729 et seq. In 1992, the number of qui tam filings exceeded for the first time the number of FCA claims filed by the DOJ. For the last decade, about 80 percent of all FCA recoveries in health care have resulted from qui tam lawsuits.
What can we expect by way of FCA enforcement trends in health care this year? Extrapolating from last year’s developments, there seem to be at least two safe bets:
1. Individuals will be in the cross-hairs like never before. In a memo issued in September 2015, the DOJ announced that it will aggressively pursue individuals in the health care industry who are responsible for corporate FCA violations. The memo, addressed to all federal prosecutors and issued by Deputy Attorney General Sally Quillian Yates (and therefore popularly referred to as the “Yates Memo”), states among other things that: (1) in order to qualify for any cooperation credit, corporations must provide to the DOJ all relevant facts relating to the individuals responsible for the misconduct; (2) criminal and civil corporate investigations should focus on individuals from the inception of the investigation; (3) absent extraordinary circumstances or approved departmental policy, the DOJ will not release culpable individuals from civil or criminal liability when resolving a matter with a corporation; (4) DOJ attorneys should not resolve matters with a corporation without a clear plan to resolve related individual cases, and should memorialize any declinations as to individuals in such cases; and (5) civil attorneys should consistently focus on individuals as well as the company and evaluate whether to bring suit against an individual based on considerations beyond that individual's ability to pay.
All of this is likely to increase the incentives for employers in the health care sector to place the blame for FCA violations on the actions of "bad apple" employees, in an effort to escape corporate culpability. Those incentives were already powerful before the Yates Memo was issued.
2. Enforcement focus on physician compensation arrangements will likely continue. Physician compensation arrangements that violated the Stark Law, and that therefore violated the FCA as well (at least where federal money was directly or indirectly involved), were the focus of several big-dollar FCA recoveries in 2015.
In September of last year, the DOJ announced that Florida-based Broward Health had agreed to pay the federal government $69.5 million to settle allegations it violated the FCA by engaging in improper financial relationships with nine physicians. This case originated as a qui tam complaint brought by a physician-whistleblower, Dr. Michael Reilly, MD, an orthopedic surgeon in private practice, who alleged the health system carefully tracked the value of physician referrals and pressured physicians to increase referral volume when they lagged. Dr. Reilly's claim came about after he was offered an employment deal with Broward Health, but rejected it after his lawyer told him it was illegal.
Just one week after the Broward Health settlement was announced, Florida-based Adventist Health System reached a $118.7 million settlement with the DOJ and four states to settle similar allegations. The settlement resolved claims that the nonprofit health system had paid bonuses to employed physicians based on a formula that improperly took into account the value of the physicians' referrals to Adventist hospitals.
Then in October of 2015, the DOJ announced that it had settled its years-long battle with Tuomey Healthcare System in South Carolina. Trial in that case in 2013 yielded an astonishing $237 million jury verdict, which was subsequently upheld by the US. Court of Appeals for the Fourth Circuit in July of 2015. The DOJ settled the case for $72.4 million, and Tuomey was sold to Palmetto Health, a multi-hospital healthcare system based in Columbia, South Carolina. The basis of the DOJ’s complaint against Tuomey was that it illegally billed the Medicare program for services referred by physicians with whom the hospital had improper financial relationships.
Given all of the attention directed at these big settlements in 2015, physician compensation cases should continue to fuel FCA claims in 2016. It's not enough to have a written employment contract with compensation provisions that appear to comply with the Stark Law on their face. The government has signaled that it will not only scrutinize a written agreement memorializing a compensation arrangement, but will also scrutinize the parties' performance under the contract and the basis on which compensation is determined. Compliance is an on-going obligation throughout the term of a physician's employment.
The Tuomey and Adventist cases, which are only two among the many enforcement actions brought recently by the DOJ against non-profit providers, also make clear that the DOJ won't cut any slack to a hospital or health system just because it is non-profit. There is no "halo effect" that will shield a non-profit health care provider from a potentially devastating FCA claim.
Let’s say that you’re a registered nurse, employed at a hospice in Montgomery County, Maryland. Pain management being an important part of hospice care, your employer often dispenses high-power, potentially dangerous narcotics to its patients. The problem is, it has recently started providing narcotics to patients without a physician’s order.
Eventually, you come to find out that narcotics are sometimes even being dispensed to individuals who aren’t patients of the hospice at all. You learn that "starter packs" of medications, containing adult doses of narcotics, have been ordered for every patient—including your employer’s pediatric patients, some of whom live in homes with many children and with little supervision in the house.
Naturally, you’re alarmed. You recognize the danger to public safety posed by your employer’s reckless dispensation practices. You believe that, as a registered nurse, you have a legal duty to say something. You send an email to your supervisor describing these lapses. Shortly thereafter, you’re fired.
Do you have a claim for wrongful termination?
The story above isn’t hypothetical. It’s a very short summary of the allegations made by the plaintiff in Lark v. Montgomery Hospice, Inc., 414 Md. 215 (2010). In Lark, the Court of Appeals reversed the trial court, which had dismissed Susan Lark’s claim of wrongful termination under the Maryland Health Care Worker Whistleblower Protection Act, and reinstated her claim against her former employer.
The Health Care Worker Whistleblower Protection Act (the “Act”) is codified under Sections 1-501 through 1-505 of the Health Occupations Article of the Maryland Code. Any employed professional who is licensed by a professional board under the Health Occupations Article is entitled to protection under the Act. This includes, but is not limited to:
· Physician Assistants
· Physical therapists
· Psychologists and
Under the Act, an employer may not take or refuse to take any personnel action as reprisal against an employee because the employee:
(1) Discloses or threatens to disclose to a supervisor or board an activity, policy, or practice of the employer which is in violation of a law, rule, or regulation;
(2) Provides information to or testifies before any public body conducting an investigation, hearing, or inquiry into any violation of a law, rule, or regulation by the employer; or
(3) Objects to or refuses to participate in any activity, policy, or practice which is in violation of a law, rule, or regulation.
Unfortunately, the scope of the Act’s protection is more limited than one might wish. In order for an employee’s disclosure to an employer’s activity, policy or practice to be protectable, that activity, policy, or practice must pose a “substantial and specific danger to the public health or safety.” So if, for example, the violation disclosed by the employee relates to fraudulent Medicaid billing, the employee’s reporting activity with respect to that violation would not be protected under the Act.
Moreover, although Maryland enacted a Health Care False Claims Act in 2010, which outlaws false and fraudulent claims under any State health plan or program—and which contains an anti-retaliation provision for employees and others who disclose or oppose activities which they reasonably violate that law—professional employees who are covered under the Health Care Worker Whistleblower Protection Act cannot bring claims of retaliation under the Health Care False Claims Act. Thus, doctors, nurses and most other employed healthcare professionals (who are often in the best position to prevent and detect healthcare fraud) are not protected from retaliation for reporting suspected violations of the Health Care False Claims Act unless those suspected violations pose a danger to public health and safety, and are therefore covered under the Whistleblower Protection Act.
To claim protection under the Act, a healthcare employee must at least report his or her suspicions internally. He or she must either:
(1) report the activity, policy, or practice to a supervisor or administrator of the employer in writing and afford the employer a reasonable opportunity to correct the activity, policy, or practice; or
(2) If the employer has a corporate compliance plan specifying who to notify of an alleged violation of a rule, law, or regulation, follow the plan.
Thus, the protection provided by the Act does not extend to a former employee who made no internal report before his or her employment was terminated. In Lark, the Court of Appeals ruled that the Act does protect a former employee who was fired before he or she made an external report to a board, provided that the employee made a written report internally to a supervisor or administrator of the employer. A “supervisor” under the Act means any individual within an employer's organization who has the authority to direct and control the work performance of an employee, or who has managerial authority to take corrective action regarding the violation of a law, rule, or regulation of which the employee complains.
An employee bringing an action under the Act may recover lost wages, benefits, and other compensatory damages. An employer who has been terminated in violation of the Act is also entitled to reinstatement to the same or an equivalent position held before the violation, as well as the removal of any adverse personnel record entries based on or related to the violation and the reinstatement of full fringe benefits and seniority rights. If the employee prevails, a court may also assess reasonable attorney's fees and other litigation expenses against the employer.
Under the Act, an employer has an affirmative defense if the personnel action complained of was based on grounds other than the employee's exercise of any rights protected by the Act. What this means in a “mixed motive” case, where an employer terminates an employee not only for her reporting activity under the Act but also for legitimate, performance-related concerns, is not clear. The Court of Appeals hasn’t yet been presented with an opportunity to interpret the Act’s “other grounds” defense. However, in other cases involving termination in violation of public policy, the Court of Appeals has ruled that an employee need only persuade a jury that his or her protected activity played a “motivating part” in the employer’s decision to terminate her; the employee is not required to prove that, but for engaging in the protected activity, she would not have been discharged. Ruffin Hotel Corporation of Maryland, Inc. v. Gasper, 418 Md. 594, 686 (2011). One would hope that the Court of Appeals would adopt this less stringent standard for claims arising under the Act, as well.
This gap in protection may have been fixed this year. In February of 2015, Maryland enacted a more comprehensive False Claims Act that protects employees, contractors and grantees from retaliation for disclosing or opposing an activity, policy or practice which that person reasonably believes violates that law—which would include the making of false and fraudulent claims for payment to the State or any county. MD GEN PROVIS § 8-101 et seq. Importantly, healthcare professionals are not excluded from protection under this statute.
David M. Briglia is an attorney who represents physicians, physician assistants, nurses and other healthcare professionals who have been fired, harassed or demoted for reporting fraud, illegal activity, discrimination and other misconduct. The Law Office of David M. Briglia serves doctors and other healthcare professionals in Washington, D.C. and Maryland, including Silver Spring, Takoma Park, Bethesda, Chevy Chase, Rockville, Gaithersburg, Germantown, Columbia, Baltimore, Annapolis and Frederick, and throughout Montgomery County, Prince George's County, Howard County, Anne Arundel County, Calvert County and Baltimore County. You can reach the firm at 240-482-0581.This blog is intended for informational purposes only and cannot be relied upon as legal advice.