Wednesday, August 26, 2015

Worth The Read: Interpreting Unclear Medicare Regulations and FCA Liability - U.S. ex rel Parker v. Space Coast Medical Associates, L.L.P.

Dear Readers:

I commend to you the analysis of the Middle District of Florida opinion, U.S. ex rel Space Coast Medical Associates, LLP, 2015 WL 1456122 (M.D. Fla. Feb. 6, 2015), by Arnold and Porter attorneys Mark D. Colley, Alan E. Reider, and Murad Hussain. Space Coast is another example wherein a court refused to find that a defendant "knowingly" submitted false claims when the Medicare regulations at issue were unclear and the defendant's interpretation of the regulations was not unreasonable.

In this qui tam case, the relators alleged that physicians in an oncology practice failed to provide the proper level of supervision required by "Medicare guidelines." In its order granting the motion to dismiss filed by Messrs. Colley, Reider, and Hussain, the Court conducted a thorough analysis of these so called "guidelines" only to find after analyzing the regulations, the Medicare Benefit Policy Manual, and Local Coverage Determinations that they did not actually require "that radiation oncologists be the physicians who supervised the radiation therapists at issue" and that the regulatory authorities relied on by relators were not preconditions for payment of Medicare claims. Following cases such as U.S. ex rel Hixson v. Health Mgmt. System, Inc., 613 F.3d 1186, 1190 (8th Cir. 2010), the Court then went a step further and found that the Defendants did not knowingly submit a false claim because relators had not shown that "Defendants' interpretations of the regulations were unreasonable."

A. Brian Albritton
August 26, 2015

Tuesday, August 18, 2015

Why the 5th Circuit's Rigsby v. State Farm Fire and Casualty Opinion Is Favorable to False Claims Act Defendants

Dear Readers:

In US ex rel Rigsby v. State Farm Fire and Casualty Co., 2015 WL 4231645 (5th Cir. July 13, 2015), the 5th Circuit recently addressed the limits of Rule 9(b), which requires that fraud be pled with particularity, and whether it applied to limit discovery after trial. The Court held that the district court abused its discretion when it refused on the basis of Rule 9(b) to permit relators to pursue "at least some additional discovery" after they had prevailed at trial. Though at first glance the Rigsby decision may appear to be favorable to relators, the case is, in fact, quite favorable to False Claims Act defendants.

I originally wrote about the district court's decision in Rigsby in "Limiting Discovery and Preventing Claim Smuggling in False Claims Act Cases." Relying in part on Rule 9(b) and scope of the relators' knowledge as an "original source," the district court prevented relators from seeking additional discovery and searching for new claims after they had prevailed at trial. Prior to trial, the district court found that although relators had alleged a broad scheme, the relators only had first hand knowledge of a single claim.  As a result, the district court only permitted the relators to obtain discovery about and proceed to trial on that single claim. The district court reserved ruling on whether to permit the relators to expand their suit and obtain additional discovery until after the trial of that single claim. Having prevailed at trial and shown that the defendant, State Farm, violated the False Claims Act, relators asked the district court after trial to "initiate expanded discovery" for other potential claims. The district court refused to permit the relators additional discovery in order to expand their claims into areas where they did not have knowledge and when it was unclear whether other claims really existed. The district court noted that satisfying Rule 9(b) with "sufficient detail" and defeating a motion to dismiss permits a relator access to the discovery process, but discovery should be "targeted" only to "the claims alleged, avoiding a search for new claims." 

In overturning the district court's decision, the 5th Circuit 
  • Observed that the district court "focused discovery and the subsequent trial on a [single] claim rather than permitting [relators] to seek out and attempt to prove other claims in order to 'protect the interests of the parties.'" The district court structured discovery and trial in this manner in order to "strike a balance between the relators' interest in identifying . . . other allegedly false claims and the defendant's interest in preventing a far ranging and expensive discovery process." The Court approved of the district court's decision to limit discovery and initially confine the case to what it referred to as a "bellwether false claim" and to leave till after the trial the decision as to "whether additional discovery and further proceedings were warranted."
  • Whereas the parties and the district court had framed much of the dispute on whether Rule 9(b) permitted the prevailing relators to conduct post-trial discovery, the Court found that Rule 9(b) was "inapplicable" to the decision "about whether this case should move forward after trial."  
  • As Rule 9(b) did not apply, the Court found that the district court abused its discretion by refusing to permit "at least some additional" post-trial discovery given that the "scope of discovery is broad" and the relators had both alleged and offered proof at trial of a scheme "far beyond the realm" of the single claim that was tried.
  • Yet, though it permitted discovery, the Court stressed that Rigsby "presents something exceptional that most (if not all) plaintiffs in FCA cases are unable to show when seeking discovery: a jury's finding of a false claim and a false record" together with allegations in the "final pretrial order."  These two factors, the Court observed, made it "more than probable, nigh likely . . . that additional false claims might have been submitted" and as a result the relators had "at least edged the door ajar for some additional, if superintended, discovery."
  • Far from declaring that relators have free rein in discovery to search for FCA claims, the Court "emphasize[d] that our decision hinges in large part on the idiosyncratic nature of this case--seldom will a realtor in an FCA case present an already-rendered jury verdict in her favor while seeking further discovery."  
  • "[T]he typical case," the Court observed, "might warrant shutting the door to more discovery."
Overall, the lessons of Rigsby are very favorable to the defense. Courts in False Claim Act cases may "balance" the interests of the relator and the defendant in determining the scope of discovery and may limit discovery and trial to bellwether or representative claims. In turn, far from being confined to a motion to dismiss, the only identified limit of Rule 9(b) and its corresponding application to discovery is after a jury verdict in favor of relators. While the relators may have "edged the door ajar" for some limited post-trial discovery for new claims, the Rigsby case is "exceptional" and "idiosyncratic." In the "typical case," a court appropriately acts within its discretion to limit relators from trying to search out new claims beyond what they have pled with specificity.

A. Brian Albritton
August 18, 2015

Tuesday, July 28, 2015

No False Claims Act Liability Based on Ambiguous Medicare Regulations: Donegan v. Anesthesia Associates of Kansas City

Medicare regulations are often complex, ambiguous (especially when applied), and bereft of any guidance by the Centers for Medicare and Medicaid Services (CMS) or the local Medicare administrative contractor. As the 4th Circuit aptly observed, Medicare statutes and regulations "are among the most completely impenetrable texts within human experience." Rehabilitation Ass'n of Va., Inc. v. Kozlowski, 42 F.3d 1444, 1450 (4th Cir. 1994). As a result of the complexity of these regulations, qui tam relators are increasingly exploiting the ambiguities of Medicare billing regulations in order to bring qui tam actions alleging Medicare providers submitted false claims when they failed to follow the relator's interpretation of billing regulations.

In US ex rel Donegan v. Anesthesia Associates of Kansas City, 2015 WL 3616640 (W.D. Mo., June 9, 2015), the Western District of Missouri recently addressed whether False Claims Act (FCA) liability can be based on an ambiguous Medicare regulation for which there was no authoritative interpretation prohibiting the defendant's billing practice. The Court found as a matter of law that the relator could not establish that the defendant knowingly submitted a false claim because the relator could not "show that there is no reasonable interpretation of the law that would make the [defendant's] allegedly false statement true."

In this qui tam case, the relator sued an anesthesiologist group practice alleging that it had fraudulently billed for anesthesiology services that its anesthesiologists did not "direct" but only "supervised." The case turned on whether the anesthesiologists complied with a Medicare billing regulation, referred to as the "Seven Steps" regulation, and the question of whether the anesthesiologists "personally participated in the most demanding aspects of the anesthesia plan including . . . emergence." 

The issue facing the Court was that there was no authoritative interpretation of "emergence." In its regulation, CMS did not define "emergence," when it began or when it ended. Moreover, no Medicare billing contractor had provided a Local Coverage Determination that defined "emergence" either. The Court noted further that there was "no guidance from any national or state anesthesiology organization defining 'emergence' because emergence is a process, and each patient is different."  

Fortified with the testimony of two experts, the relator argued that emergence excluded time in the recovery room after an operation: to personally participate in the patient's "emergence" from anesthesia that had been administered by a certified registered nurse anesthetist (CRNA) under the physician's "direction" meant the physician had to examine the patient in the operating room. In fact, one expert even referenced "a nationwide medicare carrier for railroad retirees" which defined "emergence" as the period between when anesthesia is no longer administered to the patient and before the patient is turned over to the recovery room. Citing its own evidence, the defendant, however, argued that emergence included a patient's time in the recovery room, which is where its physicians most often checked in on patients who had been administered anesthesia by CRNAs.  

The Court granted summary judgment in favor of the defendant on the relator's only remaining theory left from the amended complaint: that the defendant's anesthesiologists did not personally participate in patient's emergence from anesthesia because emergence did not extend to the recovery room.  

First, the Court rejected the relator's attempt to assert another theory of liability that was not contained in the amended complaint. Acknowledging that this unpled theory "may be meritorious," the Court nevertheless held that the relator may not assert new theories of FCA liability that were not contained in the amended complaint and which were "based on information learned during discovery." "A relator," the Court stated, "cannot plead an FCA violation generally and then fill in the blanks following discovery." Because the relator described a "distinct, independent scheme" and had not pled this theory of liability or provided a representative example in the complaint, the Court "cannot consider this theory of liability." 

Second, observing that the "Seven Steps" regulation is ambiguous because there is no authoritative interpretation in the regulation or otherwise as to when emergence ends, the Court found that the defendant reasonably interpreted the regulation's reference to emergence to include a patient's recovery in the recovery room. The Court acknowledged that the defendant's interpretation is "opportunistic because it has a financial motive to interpret the regulation that way." Yet, in the "absence of an authoritative contrary interpretation of the regulation . . . a defendant does not act with the requisite deliberate ignorance or reckless disregard by taking advantage of a disputed legal question." Moreover, the Court conceded that "the relator has arguably put forth a more reasonable interpretation of the regulation," but "this is not enough" because the relator "must carry its burden of showing that there is no reasonable interpretation of the law that would make the allegedly false claim valid."

Donegan is a real step forward in preventing relators from exploiting ambiguities in Medicare regulations to bring a qui tam action against Medicare providers and hold them hostage if they do not settle. Of course, the Court is not saying a defendant's mistaken or opportunistic interpretation can never give rise to other civil remedies by Medicare -- the government has numerous avenues other than the FCA to enforce its regulatory interpretations. Yet, civil remedies are one thing, but subjecting a defendant to harsh FCA sanctions for violating an ambiguous regulation is a whole different order of magnitude. This is especially true for Medicare providers, like the defendant in this case, who easily can bill and submit thousands of small Medicare claims and for whom the $5,500 - $11,000 penalty per Medicare claim can quickly lead to exposure for catastrophic damages if they lose. Essentially, the Court's ruling has brought common sense back to the analysis of when a false claim arises when dealing with ambiguous regulations. Now, at least in the 8th Circuit, a defendant who reasonably interprets an ambiguous regulation in the absence of a contrary authoritative regulation cannot know that its interpretation is false and thus cannot be found guilty of violating the False Claims Act.

A. Brian Albritton
July 28, 2015

Monday, July 6, 2015

Violation of Government Contract Does Not Give Rise to False Claim Where Government Knows of Violation and Continues to Pay Claims

Dear Readers:

I commend to you the recent False Claims Act case of U.S. ex rel Thomas v. Black and Veatch Special Projects Corp., 2015 WL 3570661 (D. Kan. June 5, 2015). The Court granted summary judgment in favor of the defendant, a government contractor, who contracted with the United States Agency for International Development ("USAID") to provide services and support for power projects in Kandahar, Afghanistan. In a common sense ruling, the Court found that defendant did not falsely certify its compliance with the provisions of the USAID contract because USAID continued to make numerous contract payments to the defendant even after it both learned of the defendant's failure to comply with one of the contract's provisions and was served with a copy of the qui tam complaint together with relators' disclosure of material evidence.

The USAID contract provided for defendant to submit invoices every two weeks to the USAID, which in turn, reviewed and evaluated whether the work was satisfactory, and if it was, authorized periodic payments to the defendant. All work remained subject to USAID's final inspection and acceptance, and the USAID contracting officer was permitted to reduce or suspend payments if he found substantial evidence that the defendant failed to comply with any material requirement of the contract.

Among its many provisions, the USAID contract required the defendant to comply with Afghan law and to obtain work visas and permits for all foreign citizens working for the defendant on the contract in Afghanistan. The relators, employees of the defendant, discovered that forged documents had been submitted to the Afghan government on behalf of seven of the defendant's employees, and they informed the USAID of their discovery. Subsequently, the defendant conducted its own internal investigation and confirmed to USAID that forged educational documents had been provided on behalf of seven employees to the Afghan government in order to obtain work permits for them.  

In their qui tam complaint, Relators alleged that the defendant submitted legally false claims for payment to USAID by impliedly certifying its compliance with Afghan law in its periodic requests for contract payment. Relators cited to a Federal Acquisition Regulation that required defendant and its personnel to comply with all applicable United States and host country laws. Relators asserted that because defendant fraudulently obtained permits and visas in violation of Afghan law, it failed to comply with a contractual prerequisite of payment and as a result falsely certified its compliance with the contract.  

Granting summary judgment in favor of the defendant, the Court found that the realtors had not provided any facts to show that "USAID may have reduced or refused payments" based on alleged false documents and the violation of Afghan law.  The Court found that compliance with Afghan law "was not material to the government's decision to pay defendant's invoices" because "USAID . . . continued to pay defendant, even though it knew about these allegations and even though . . . it could not determine whether defendant had filed the forged documents."

Remarkably, the Court noted further the government continued to pay the contract even after the relators filed their qui tam suit:  
USAID's conduct after relators filed suit also demonstrates that compliance with Afghan law did not matter to the government's payment decision. Relators commenced this action and provided a copy of the Complaint and a statement of all material facts to the government on August 23, 2011. . . .  . Since then, defendant had submitted at least forty-seven invoices for USAID payment. USAID never demanded that defendant refund any amount paid. Nor has it reduced or withheld payment of any invoice submitted after realtors filed suit. Instead, USAID has accepted and paid for all deliverable components completed by defendant under the contact. . . . . USAID's conduct after relators filed this action demonstrates that defendant's compliance with Afghan work permit and visa requirements did not matter to the government's payment decision. 2015 WL  3570661 *13 (citations omitted).
In short, the Court found that the defendant's compliance with Afghan law provision must not be material to the contract's conditions of payment because USAID continued to make payments on its contract even though it was aware of relators' qui tam suit and the defendant's contractual violation. 

The case illustrates two of the maddening aspects of qui tam litigation. First, the government should have dismissed this case when it was filed on the basis that the agency did not believe the defendant's had violated a material provision of the contract.  Instead, as the government so often does, the relator filed a qui tam suit alleging that the defendant violated some government contractual provision or regulation, the government declined to intervene and of course said nothing and the relator prosecuted the matter in the name of the government --all the while as the government agency in question continued to do business with the defendant in the same manner that is alleged to be a FCA violation in the suit.  Almost assuredly, the U.S. Attorney's Office would have inquired of USAID when relators filed their suit and they should have learned then that USAID did not find the contract violation to be material.  Yet, the government permitted the qui tam to proceed even though the government later permitted the defendant to obtain  statements from the USAID contracting representatives who confirmed that they knew "about the defendant's conduct" but continued to direct that USAID pay defendant's invoices.  

Second, the case offers some hope to defendants who are accused by realtors --but not the government-- of violating some obscure or ambiguous regulation or contractual provision. This case permits the defendant to use the government's knowledge of the alleged violation and its continued payment of claims to show that the so called violation must not be material if the government does nothing in the face of these allegations and continues to pay claims.

Defendant's counsel Kathleen Fisher, Nathan F. Garrett, and Todd P. Graves, (the former U.S. Attorney for Kansas City, Missouri) of the Graves Garrett firm should be commended for their excellent work in securing this decision by the Court.

A. Brian Albritton

July 5, 2015

Monday, February 2, 2015

Eleventh Circuit Makes Key Ruling on Public Disclosure Bar: US ex rel. Osheroff v. Humana

In the case of U.S. ex rel. Osheroff v. Humana, Inc., et al., 2015 WL 223705 (Jan. 16, 2015 11th Cir), the Eleventh Circuit clarified a number of key issues concerning the "public disclosure bar" of the False Claims Act, as amended by the Patient Protection and Affordable Care Act (2010), 31 U.S.C. 3730(e)(4). See a helpful redline of the pre/amended versions of the public disclosure bar, 31 U.S.C. 3730(e)(4), found at the HelmerMartins blog entry, "False Claims Act Redline." 
  • The Eleventh Circuit applied the pre-amendment version of the public disclosure bar to conduct occurring before the amendment’s effective date (which the Court stated was March 23, 2010) and the post-amendment version to conduct occurring after the effective date of the amendment.
  • The Eleventh Circuit decided that the amended version of the public disclosure provision is no longer jurisdictional.
  • As the amended version of the public disclosure bar is no longer jurisdictional, the Court held that a motion to dismiss under Rule 12(b)(6) is the appropriate vehicle for asserting the public disclosure bar regarding conduct subject to the amended version of the statute rather than a motion under Rule 12(b)(1).
  • In considering a Rule 12(b)(1) motion regarding conduct that is subject to the pre-amendment version of the provision, the district court is permitted to look at extrinsic documents.
  • While the Court found that a district court generally may not look beyond the pleadings in considering a Rule 12(b)(6) motion for conduct that is subject to the post-amendment version of the statute, district courts may consider extrinsic documents if they are central to a relator’s claim and their authenticity is not challenged. 
  • For example, the Court found that in deciding a 12(b)(6) motion to dismiss, the district court properly took judicial notice of newspaper advertisements, and publicly available websites in determining whether there was a prior public disclosure of the relator's allegations. The Court explained that the term "news media as used in 3730(e)(4)" has a "broad sweep" and as a result "newspaper advertisements and the [defendant] clinics' publicly available websites qualify as news media for the purposes of the public disclosure provision." These advertisements and websites, like the newspaper articles, discussed the clinics' "free services" which the relator claimed gave rise to violations of the Anti-Kickback Statute.
  • The Court found that the "significant overlap between the [relator's] allegations and the public disclosures is sufficient to show that the disclosed information forms the basis of this lawsuit and is substantially similar to the allegations of the complaint."
  • The Court held that the relator was not an original source even though the relator argued that he "conducted his own investigation of the programs offered at the clinics", and his complaint included "some details that are not present in the public disclosure." The Court found that such allegations, "at most" add "background information and details relating to the value of the services offered." Such background information, the Court observed, only "helps one understand or contextualize a public disclosure" but is "insufficient" to grant original source status to a relator under either the pre-amendment or post-amendment versions of the False Claims Act.
Overall, Osheroff joins an increasing number of courts that find the amended 2010 version of the public disclosure bar NOT to be jurisdictional and subject to attack only by a 12(b)(6) motion to dismiss. Though the Court made it look easy in this case to take judicial notice of newspaper articles and websites in applying the public disclosure bar, the Court's ruling will make it much harder in practice to assert this defense if only "undisputed" evidence can be introduced at the motion to dismiss stage. To deal with this, defendants will likely have to seek early summary judgments on the public disclosure defense.

A. Brian Albritton
February 2, 2015

Wednesday, January 14, 2015

Kellogg Brown and Root v. U.S. ex rel Carter: Justices dubious of government's broad reading of False Claims Act

Argument analysis: Justices dubious of government's broad reading of False Claims Act

Dear readers: I commend to you the excellent analysis by Ronald Mann of SCOTUSblog of the oral argument held today at the Supreme Court in the case of Kellogg Brown and Root v. U.S. ex rel Carter. That case raised two questions for the Supreme Court to decide: (1) whether the Wartime Suspension of Limitations Act applies to the False Claims Act; and (2) "whether . . . the False Claims Act’s so-called 'first-to-file' bar, 31 U.S.C. § 3730(b)(5) . . . functions as a 'one case-at-a-time' rule allowing an infinite series of duplicative claims so long as no prior claim is pending at the time of filing." 

A. Brian Albritton
January 14, 2015

Wednesday, November 12, 2014

The Computer Sciences Corporation Qui Tam – A Warning for North Carolina Medicaid Providers

Those of us who have followed the tumultuous roll out of NCTracks, North Carolina’s Medicaid Management Information System (“MMIS”), are familiar with the headaches it has caused Medicaid providers and the resulting class action lawsuit against the North Carolina Department of Health and Human Services (“NCDHHS”).  Today I’m writing to highlight a potentially more serious problem, one that poses a far greater risk to providers than the delayed and/or erroneous payments that followed the inception of NCTracks. Specifically, two recent headlines should serve as warning signs for North Carolina Medicaid providers.  

First, there’s: “New York City Agency and Vendor Bilked Medicaid, U.S. Says.”  On October 27 the United States Attorney’s Office for the Southern District of New York announced that it had filed a Complaint in Intervention in a $100 million qui tam (whistleblower) lawsuit accusing Computer Sciences Corporation, Inc. (“CSC”) and the City of New York (the “City”) of civil health care fraud.  U.S. ex rel. Vincent Forcier v. Computer Sciences Corporation, No. 1:12 Civ.01750 (S.D.N.Y. unsealed Oct. 27, 2014).  The Complaint accuses CSC and the City of violating the False Claims Act by using the City’s MMIS, developed and managed by CSC, to submit fraudulent billing data to Medicaid.  In a statement last Monday, United States Attorney Preet Bharara summarized the Complaint stating, “[a]s alleged, CSC and the City created computer programs that systematically, and fraudulently, altered billing data in order to get paid by Medicaid as quickly as possible and as much as possible.”  

Mr. Bharara then went on to praise the U.S. Department of Health and Human Services Office of the Inspector General (“DHHS OIG”) for its work investigating the case.  This brings me to the second headline: “HHS Watchdog Details 2015 Plans to Scrutinize Medical Billing.”  Lest you assume that the CSC case is an anomaly, on October 31 DHHS OIG released its Fiscal Year 2015 Annual Work Plan.  This year’s plan, which summarizes the priorities DHHS OIG will pursue with regard to DHHS programs this fiscal year, vows to scrutinize the billing, payment, and reimbursement practices of Medicaid providers. These include billing practices for adult day health care services, Medicaid payments for dental services, and state use of provider taxes to generate federal funding.  Thus, providers should expect (and prepare for) additional scrutiny in the coming fiscal year from government regulators and investigators.  

Further, in light of the CSC case, providers in states utilizing MMIS engineered and managed by CSC would be wise to complete a thorough review of their Medicaid billing practices and corporate compliance programs.  Followers of NCTracks know that North Carolina is one such state (Maryland is another).  In December 2008, CSC was awarded a $265 million contract to create the MMIS that is now known as NCTracks.  Since its launch on July 1, 2013, NCTracks has been plagued by glitches and complaints and has yet to be certified by the federal government.  Although NCDHHS may be making progress on these issues, if recent headlines are any indication, North Carolina Medicaid providers will continue to have cause for vigilance.  

Guest Blogger
Nathan A. Huff
November 7, 2014

Nathan A. Huff is an associate in the Raleigh Office of Phelps Dunbar LLP.  A former federal prosecutor, Mr. Huff is a member of Phelps Dunbar’s white collar defense and government investigations practice group.  

Monday, October 13, 2014

DOJ Criminal Division's "New Qui Tam Process" - Attempting to Share in the Civil Division's Success

Dear Readers:

Sorry to have been away so long.  There is much to catch up about. 

The recent remarks by Leslie R. Caldwell, Assistant Attorney General for the U.S. Department of Justice's (DOJ) Criminal Division, at the Taxpayers Against Fraud Education Fund Conference, about the "New Qui Tam Process" merit a closer examination than many other blogs or articles have provided. Upon closer examination, AAG Caldwell's invitation to Relators to bring their qui tam cases to the Criminal Division appears to be more an effort by the Criminal Division to share in the success of DOJ's Civil Division than a real effort to increase the criminal enforcement of health care fraud cases that have a parallel qui tam.

  • First, let's be clear: AAG Caldwell is head of the Criminal Division. It is not at all clear what, if any, impact her remarks will have on the Civil Division at the Justice Department or the U.S. Attorneys' Offices throughout the country. I have not heard of complaints by the Civil Division or the U.S. Attorneys' Offices that they wish DOJ Criminal Division would do more or become more involved in qui tams. Rather, her announcement reflects a department that is seeking to share in the successes of the Civil Division.
  • In appealing to Relator counsel, AAG Caldwell states, we "encourage you to reach out to criminal authorities in appropriate cases, even when you are discussing cases with civil authorities." All I can say is, Relator counsel beware! Involving the Criminal Division may slow a government decision on your qui tam case even more than the usual slow pace. Sharing information between DOJ's Criminal and Civil Divisions is often only a one way street: Civil gives to the Criminal Division and not vice versa. And, the agents and assistant U.S. Attorneys working those criminal investigations often slow the civil investigation by asking Civil to wait on the criminal investigation. In turn, defendants and probable criminal targets lawyer-up even more, assert the Fifth, and the civil investigation and any hoped for speedy qui tam recovery can grind to a halt.  
  • So what does AAG Caldwell mean when by "appropriate cases"? She doesn't say. Since the Criminal Division's Fraud Section consists only of "100" lawyers and its Health Care Fraud Section only has "40" lawyers, there are not a whole lot of personnel to devote to the several hundred qui tam cases that are filed each year. Moreover, AAG Caldwell did not announce that the law enforcement agencies -- the people who actually investigate these cases such as the FBI, HHS-OIG, Postal, etc. -- have agreed to devote additional resources and manpower to investigating all these new qui tams. Without those additional investigative resources, it is hard for the Criminal Division or any U.S. Attorney to pursue complex white collar fraud cases requiring investigative expertise. So what is the "appropriate case"? Most likely, this will be an easy to investigate obvious case of wrong doing of a solvent corporation that can actually pay massive criminal fines -- probably like the Big Pharma cases.
  • AAG Caldwell cites the example of the Medicare Fraud Strike Forces operating in several cities throughout the United States that are "hot spots" for Medicare fraud. These Strike Forces really have done a lot to focus on and successfully prosecute what the AAG refers to as the "worst offenders" and the "most pervasive fraud." Yet, based on the example of the Health Care Fraud Unit in the Miami Division of the U.S. Attorney's Office, these strike forces were never intended to take on the lengthy and sophisticated investigations seen in many civil qui tam cases. Rather, they were started to address the worst abuses in the health care industry, many of which could be found among durable medical equipment suppliers and home health care providers in Miami. In turn, at least initially, many of these abuses were uncovered by tracking huge statistical disparities that reflected fraudulent health care billings. In short, the Strike Forces are not really the model for increased qui tam/criminal cooperation and prosecution.
  • AAG Caldwell announces that "executives at health care providers such as hospitals are also a high priority for us" -- woe to the executive who gets caught up in one of these investigations. When agencies make announcements like this, they often look far and wide to make cases to justify their public statements. In the face of invited public scrutiny and pressure, prosecutors and agents can sometimes make really bad judgements, prosecuting cases that never should have been brought or treating defendants far more harshly than they deserve. Hopefully, DOJ's zeal to prosecute executives won't affect their prosecutorial judgment.
  • Finally, I applaud AAG Caldwell's wish to prosecute more health care fraud cases, and she rightfully looks to the whistleblowers and other insiders who often are best positioned to come forward with evidence. Yet, given the few resources that DOJ's Criminal Division really has in attorneys and agents and the already vigorous enforcement of health care cases, both civil and criminal, by the U.S. Attorneys' Offices throughout the country, I do not see how AAG Caldwell's invitation to Relators' counsel will result in more parallel criminal prosecutions or better results for Relator counsel.
A. Brian Albritton
October 13, 2014

Wednesday, July 30, 2014

Worth the Read: "Meet the Serial Whistleblowers" by the WSJ

I recommend the Wall Street Journal's recent article, "Meet the Serial Whistleblowers," by Peter Loftus, WSJ, July 24, 2014. The article profiles a serial relator, Dr. William LaCorte, who brought 12 qui tam False Claims Act suits against health care companies. Dr. LaCorte's qui tam suits have obtained recoveries in 5 cases (2 are currently pending), including a $250 million payout from Merck. He has earned $38 million from his suits. Essentially, the article uses the example of Dr. LaCorte to illustrate the tension in False Claims Act cases: whistleblowing and protecting the government and taxpayer against fraud versus being motivated by large payouts to bring claims that may not have merit.

Though generally worth the read, I take issue with the article on two major points. First, the article claims that relators do not have a good track record when the government does not intervene. Citing figures from 1988 to 2010, it states that when the government failed to intervene, 94% of all claims brought by relators were dismissed. This high percentage of relator dismissals is not representative of False Claims Act practice today. Though I do not know the exact figures, based on what I have observed and read about the percentage of dismissed non-intervened cases is far less during the last 4 years. There are fewer dismissals in recent years because relator counsel today are generally engaging in better pre-suit investigations and bringing more well-founded qui tam claims. Moreover, whereas relators used to rarely go forward with suits if the government declined to intervene, this is no longer the general practice. Second, the article fails to appreciate just how draconian False Claims Act penalties can be, especially for health care companies, and the role such enormous penalties can have in inducing settlements in health care cases. With penalties ranging between $5,500 to $11,000 for each alleged false claim --each bill-- submitted for payment to Medicare, penalties in health care cases can easily reach into the millions, even billions, thus making heath care defendants far more likely to settle claims of dubious merit.

A. Brian Albritton
July 30, 2014

Tuesday, July 1, 2014

Worth the Read: The Third Circuit Adopts a Lenient Application of Rule 9(b)

I commend to you the recent blog post, "Third Circuit Adopts More Lenient Application of Rule 9(b) in FCA" by Robert Conlan, Jr. of Sidley Austin's Original Source False Claims Act blog. Rule 9(b) of the Federal Rules of Civil Procedure is crucial for defendants in staving off the numerous False Claims Act suits which lack merit by requiring the relator to plead a defendant's alleged fraud "with particularity." The blog post highlights the Third Circuit's recent case, U.S. ex rel. Foglia v. Renal Ventures Mgmt., LLC, 2014 U.S. App. LEXIS 10549 (3d Cir. June 6, 2014), which addressed the application of Rule 9(b) to False Claims Act cases. Mr. Conlan explains how the Court rejected the more restrictive Rule 9(b) pleading standard of the Fourth, Sixth, Eighth, and Eleventh Circuits and instead sided with the "less restrictive approach" found in the First, Fifth and Ninth Circuits. (I think, however, Foglia is even more lenient than the less restrictive approach.) Indeed, Foglia, Mr. Conlan points out, is no surprise, given that the Court drew its interpretation of Rule 9(b) in part from a "Solicitor General's amicus curiae brief" wherein the government argued that "the more rigid pleading standard is unsupported by Rule 9(b)" because it "undermines the FCA's effectiveness as a tool to combat fraud against the United States." As Mr. Conlan observes, Foglia is further evidence that the Supreme Court needs to resolve this circuit split.

A. Brian Albritton
July 1, 2014