Health Care Law Matters

2011 marked the second year in a row that DOJ surpassed $3 billion in recoveries under the False Claims Act.

In December, DOJ reported:

"Enforcement actions involving the pharmaceutical industry were the source of the largest recoveries this year.  In all, the department recovered nearly $2.2 billion in civil claims against the pharmaceutical industry in fiscal year 2011, including $1.76 billion in federal recoveries and $421 million in state Medicaid recoveries."

Pharmaceutical companies, take note.

And it's not just the False Claims Act to think about.

In 2011 DOJ obtained 21 criminal convictions and $1.3 billion in criminal fines, forfeitures, restitution, and disgorgement under the Food, Drug and Cosmetic Act .

Contributed by Frank E. Sheeder, Carolyn F. McNiven, and Rebecca Jones McKnight as part of our ongoing Fraud & Abuse Matter series.

According to a recent clearinghouse report, federal criminal prosecutions of health care fraud are up—way up—this year.  According to an analysis that Transactional Records Access Clearinghouse (TRAC) conducted on statistics released by the U.S. Department of Justice (DoJ), in 2011 federal prosecutors initiated prosecution of 904 new health care fraud cases as of August.  This means that before the end of the summer of 2011, DoJ had initiated more health fraud cases than it did in all of 2010.  

That is quite a stunning statistic.  Moreover, if DoJ continues at this rate, it is on pace to reach 1,350 health care fraud cases by the end of 2011: approximately 85% more than in 2010.   (For more information regarding these statistics, see the TRAC analysis.)

Temperatures may be starting to dip as we head into fall, but DoJ shows no signs of turning down the heat on the health care industry. 

On September 7th, DoJ announced a massive nationwide health care takedown in which DoJ charged 91 defendants—including physicians, nurses, and other health care professionals—for alleged participation in Medicare fraud schemes involving approximately $295 million in false billing.  (Read more here.)  The charges stem from a greatly expanded Medicare Fraud Strike Force, which now operates in most major metropolitan areas.

Who are the targets of DoJ’s stepped up efforts in the health care sector?  The bottom line is that the targets are as diverse as the sector itself.  In addition to massive False Claims Act settlements with pharmaceutical and medical device manufacturers, DoJ has also focused on hospital emergency rooms and revenue recognition, home health care, occupational and physical therapy, mental health services, durable medical equipment (DME), and HIV infusion therapy cases.  This sample of August 2011 DoJ case activities provides a window into the wide angle of DoJ’s lens:

• On August 25th, the owner of three Detroit-area clinics was sentenced to 48 months in prison for his role in schemes attempting to defraud the Medicare program of more than $15 million.
• On August 24th, two sisters who owned a Detroit-area medical clinic and who are former “Most Wanted” health care fugitives pleaded guilty for their roles in a $9.1 million Medicare fraud scheme.  At sentencing, they face a maximum of 10 years in prison for each count of conspiracy to commit health care fraud, and 20 years in prison for each count of conspiracy to commit money laundering.
• On August 23rd, the president of a Florida DME company was sentenced to 12 1/2 years in federal prison for conspiracy to commit health care fraud, health care fraud, and submitting false claims.  He was ordered to pay $7 million in restitution, a $3 million fine, and a $1,000 special assessment. The court also entered a money judgment in the amount of $5,800,000, representing the proceeds of the health care fraud.
• On August 23rd, a the owner of a Miami-area mental health care company was convicted of 24 felony counts, including conspiracy to commit health care fraud, health care fraud, conspiracy to pay and receive illegal health care kickbacks, conspiracy to commit money laundering, money laundering, and structuring to avoid reporting requirements.   Her assets were frozen at the time of her arrest and will remain frozen through civil forfeiture proceedings.  At sentencing, she faces a maximum of:
  
  
  • 10 years in prison for each count of conspiracy to commit health care fraud and each count of health care fraud,
  • five years in prison for each count of conspiracy to pay and receive health care kickbacks,
  • 20 years in prison for each count of conspiracy to commit money laundering,
  • 10 to 20 years in prison for each count of money laundering, and
  • 10 years in prison for each count of structuring to avoid reporting requirements.    
• On August 10th, a Maryland medical center agreed to pay $1.8 million to settle False Claims Act allegations that it was aware of, but failed to take action to prevent, medically unnecessary cardiac stent procedures by a cardiologist who formerly had privileges at the medical center.

The joint DoJ and HHS Health Care Fraud Prevention and Enforcement Action Team (HEAT), which makes the fight against health care fraud “a Cabinet-level priority” has also been active.  On September 1st, a California medical billing company agreed to pay $4.6 million to resolve False Claims Act allegations tied to coding and billing practices.  HEAT reports this resolution as being “part of the government’s emphasis on combating health care fraud and another step for the Health Care Fraud Prevention and Enforcement Action Team (HEAT) initiative.”

These trends are likely to make anyone in the health care industry break into a sweat.  The government has made health care fraud enforcement a top priority.  Prudent organizations anticipate government contacts and have comprehensive and well-communicated policies and procedures for dealing with them.  You may contact  Frank E. Sheeder or Carolyn F. McNiven, partners in DLA Piper's Health Care Compliance and Enforcement practice, for additional information on how to mitigate legal and regulatory risks in the current enforcement environment and to discuss the best approaches to dealing with government inquiries.

Contributed by Carolyn F. McNiven as part of our ongoing Fraud & Abuse Matter series.

On April 8, 2011, the government reached agreements with Johnson & Johnson that obligated the company to pay $70 million in connection with bribes that it paid to foreign officials in several European countries and Iraq to induce them to purchase medical products.  Based on the conduct that it admitted, Johnson & Johnson could have faced criminal charges for violating the Foreign Corrupt Practices Act (FCPA).  Its agreement with  U.S. Department of Justice (DoJ) resolved that potential liability short of actual criminal charges. 

Pursuant to its agreement with DoJ, Johnson & Johnson (J&J) agreed to pay a $21.4 million criminal penalty and set up strict compliance mechanisms as part of a so-called deferred prosecution agreement.  J&J admitted that it made improper payments to government officials in Greece, Poland and Romania in violation of the Foreign Corrupt Practices Act (FCPA).  It also agreed to make certain changes to its policies and practices to ensure no future FCPA violations  occur.

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Contibuted by Carolyn F. McNiven as part of our ongoing Fraud & Abuse Matter series.

Today, what is most troubling to [HHS] OIG is the possibility that some unethical health care corporations build the cost of paying civil fines and penalties and implementing CIAs into their cost of doing business. . . . As long as the profits from fraud outweigh those costs, abusive corporate behavior is likely to continue. . . .[W]e do not propose to exclude all officers and managing employees of a company that is convicted of a health-care-related offense.  However, when there is evidence that an executive knew or should have known of the underlying criminal misconduct of the organization, OIG will operate with a presumption in favor of exclusion of that executive.

                                    -- Gerald T. Roy, HHS Deputy Inspector General, April 5, 2011

This chilling pronouncement was delivered earlier this week by Deputy HHS-IG Gerald Roy in testimony before Congress.  The good news is that HHS it is not going to “exclude all officers or managing employees of a company that is convicted of a health care related offense.”  The bad news is that Roy could easily mean that HHS-OIG plans to exclude at least one executive (read “sacrificial lamb”) in every case where a company is convicted of a health care offense.  The cases are certainly trending this way.

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Contributed by Carolyn Fitzhugh McNiven and Zachary Neil Coseglia as part of our ongoing Fraud & Abuse Matter series.

The Department of Health and Human Services Office of Inspector General (OIG) has issued an internal guidance document that reinforces its stated commitment to increase substantially the exclusion of individual company officers and managers through its authority under §1128(b)(15) of the Social Security Act. These guidelines potentially impact thousands of individuals across all sectors of the health care industry.

Though OIG has not historically exercised its permissive authority to exclude individuals from participating in federal health care programs, the guidance, issued last week, is further evidence that OIG is serious about its recent focus on individual accountability and that it intends to exclude officers and managing employees, even without evidence that those individuals knew or should have known about the conduct giving rise to the entity’s criminal liability or exclusion.

OIG’s exercise of this discretion is not subject to administrative or judicial review. Most experts agree that exclusion effectively ends an individual’s health care industry career.

OIG’s authority under § 1128(b)(15) of the Social Security Act

Pursuant to §1128(b)(15), the Secretary of Health and Human Services has broad authority to exclude individual officers and managing employees of a sanctioned entity from participation in federal health care programs. A “sanctioned entity” is an entity that has been convicted under federal or state law of certain offenses (including program-related crimes, patient neglect or abuse and/or felony health care fraud) or that has been excluded from participation in federal or state health care programs.

OIG may exclude officers and managing employees based solely on their position within the sanctioned entity, and thus irrespective of their knowledge of the conduct at issue.

These guidelines have the potential to affect a large number of individuals in various health care industry sectors, including many in mid- to upper-management, and in particular to foreclose their ability to pursue careers in the health care industry after their employer has been sanctioned. A managing employee is defined as an individual who exercises operational or managerial control over the entity or who directly or indirectly conducts the day-to-day operations of the entity. The OIG lists general managers, business managers, administrators and directors as persons whom it considers “managing employees.”

Exclusion under § 1128(b)(15) effectively precludes an individual from employment in any capacity by any entity that receives reimbursements directly or indirectly from a federal health care program.

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