Sunday, December 6, 2015

U.S. Department of Justice 2015 False Claims Act Statistics: A Great Year for Relators in Declined Qui Tam Cases

The Civil Division of the U.S. Department of Justice (DOJ) announced its False Claims Act (FCA) recoveries for fiscal year 2015 last week. Here is the DOJ's press release and its cumulative statistics for 1987 through 2015. The DOJ's statistics reflect that the overall recoveries were down from last year's high point and that the government and relators filed fewer FCA cases. 

The biggest take away from the 2015 figures is that relators are continuing to vigorously pursue qui tam cases in which the government has declined to intervene: 2015 was the best year ever for relator recoveries in declined qui tam cases. Moreover, 2015 was the first year in which the relators' share of awards from FCA cases in which the government declined to intervene exceeded that of qui tam cases in which the government intervened. The days are officially over when relators' counsel and relators dropped most of their qui tam cases when the government declined. Rather, these statistics show that relators' counsel are increasingly pursuing and obtaining recoveries in declined cases.

DOJ recovered $3.583 billion in FCA settlements and judgments in 2015, not including recoveries from cases "delegated" to the U.S. Attorneys' Offices.  

Regarding the $3.583 billion in total FCA recoveries for 2015, I observed the following:
  • Total FCA recoveries were down 38% from the $5.781 billion recovered by DOJ last year; FY 2014  was the best year ever for FCA recoveries.
  • $2.913 billion or 80% of DOJ's 2015 recoveries resulted from qui tam cases, both intervened and non-intervened/declined (herein "declined") cases.
  • $1.149 billion or 32% came from 2015 recoveries in declined qui tam cases.
2015 was the best year ever for relator recoveries in qui tam cases in which the government declined to intervene. By comparison, the best year for recoveries in declined qui tam cases was 2011 in which relators recovered $173 million. In 2015, DOJ obtained more recoveries from declined qui tam cases than all the previous years added together: $1.149 billion in 2015 v. $1.006 billion in 1987-2014.

As has been the trend for almost every year since 1987, recoveries from qui tam cases exceeded non qui tam cases: $2.913 billion to $670,783,021.

Lowest Number of FCA Cases Filed Since 2010.

737 FCA cases and investigations were filed in FY 2015: 105 "direct filed" by DOJ/US Attorneys and relators filed 632 qui tams
  • Qui tam cases filed in 2015 were also the lowest since 2010 when relators filed only 576 qui tams.
  • 2015 FCA cases decreased 9% from the 810 FCA cases filed in FY 2014.
  • 2015 qui tam cases decreased 11.48% over FY 2014's 714 filed qui tams.

Relator Share Awards Increased Especially in Declined Cases.

The big news for 2015 concerns relators' share awards. Relators had their best year ever in the amount of relators' share awards recovered: $597,610,533. The only previous year in which more than $500 million was awarded to relators was 2011.
  • In FY 2014, relators' share awards in declined cases totaled $14,622,854 but that total grew in 2015 to $334,642,108 – a 2188% increase. Prior to 2015, the largest year for relators' share awards was 2011: $49,041,606.
  • For the first time, the relators' share awards in declined cases, $334,642,108, exceeded relators' share awards in qui tam cases where the government intervened: $262,968,424. 
  • In fact, the relators' share awards in declined cases for 2015 exceeded all previous years of relators' share awards put together since 1987: $202,530,697.

FCA Recoveries in Health Care Fraud Cases Continued to Lead. 

As in many years past, the largest portion of FCA recoveries arose from FCA cases alleging health care fraud against the federal government (e.g., Medicare, Tricare) and state Medicaid programs: in 2015, the DOJ received $1.965 billion in health care fraud recoveries form FCA cases. That total was down from $2.401 billion in 2014. 2015 had the smallest recovery in health care fraud FCA cases since 2009, when $1.632 billion was recovered.
  • 60.79% of the 737 FCA cases/investigations initiated in 2015 related to health care fraud.
  • 66.93 of all qui tams filed in 2015 related to health care fraud: 448/632.
  • The $330,393,564 total of relators' share awards for 2015 represented 55.29% of the total amount of all relators' share awards in 2015, but that total was a decrease from last year in which relators received almost $356 million in awards in FCA health care cases.
  • Relators' share awards in declined health care cases increased substantially: from $10,841,222 in 2014 to $131,047,572 in 2015, a 1108% increase!

FCA Recoveries Excluding Cases Arising from Health Care and Department of Defense Continue to Be High.

Excluding health care fraud and Department of Defense cases, the remaining category of FCA cases had another respectable year in 2015: 247 FCA cases and investigations, both non qui tam and qui tam, were filed. This represented only a slight decrease from FY 2014 when 256 cases/investigations were filed.

DOJ obtained $1.359 billion in settlements and judgments for this category in 2015. Here again, settlements in declined qui tam cases led with $647,516,850 recovered. Not surprisingly, the relators' share award in declined qui tam cases also was large: $201,678,887, which was an increase of 15562.7% over the relators' share awards in 2014: $1,287,632. The relators' share awards in 2015 for declined cases was more than 4 times more than the relators' share for intervened qui tams: $201,678,887 to $39,746,064. 

A. Brian Albritton
December 6, 2015

Tuesday, December 1, 2015

Courts Increasingly Find That Defendants Did Not Knowingly Submit False Claims When They Followed Plausible Interpretations of Ambiguous Regulations

Dear Readers:

There have been several dramatic examples in the last few months where courts have either granted summary judgment in favor of False Claim Act ("FCA") defendants or even overturned jury verdicts in favor of relators. See e.g., U.S. ex rel Purcell v. MWI Corporation, Civ. No.14-5210, slip. op.(D.C. Cir. Nov. 24, 2015) (overturning jury verdict); U.S. v. Aseracare Inc., Civ. No. 2:12-CV-245-KOB, slip. op. (N.D. Ala. November 3, 2015)(overturning jury verdict); U.S. ex rel Phalp v. Lincare Holdings Inc. and Lincare Inc. d/b/a Diabetic Experts of America, __ F.Supp.3d__, 2015 WL 4528955 (S.D. Fla. July 13, 2015)(granting summary judgment for defendants); US ex rel Donegan v. Anesthesia Associates of Kansas City, 2015 WL 3616640 (W.D. Mo. June 9, 2015)(granting summary judgment for defendant). In each of these FCA cases, the court found that the defendant did not submit false claims to Medicare or other government agencies because the regulations which the defendants allegedly violated were ambiguous (or silent) and the defendants had adopted a plausible interpretation of that regulation, even if that interpretation was later found to be erroneous. The decisions have fallen two ways: because the regulations at issue which the defendants allegedly violated were ambiguous and the defendants adopted a plausible interpretation of them, these courts have found that either the defendant did not violate the regulation at issue and submit a false claim or if it did submit a false claim, the defendant did not do so knowingly. See Fried Frank's recent alert addressing the Purcell case; Sidley and Austin's recent blog post on Aseracare, and my blog post on Donegan.

Another case recently decided by U.S. District Judge Amy Totenberg of the Northern District of Georgia should be added to this list: U.S. ex rel Saldivar v. Fresenius Medical Care Holdings, Inc., 2015 WL 7293156 (N.D. Ga October 30,  2015). In Fresenius, the Court issued an interesting summary judgment order in a FCA qui tam case addressing whether and when a Medicare provider can be said to "know" that its Medicare billing practices were false. In an incredibly thorough (40 pages) and well-researched opinion, the Court found that the defendant did not have knowledge that its billing practices violated Medicare, even though the Court previously found that defendant had, in fact, submitted false billings. Well worth the read, the Court's ruling contains a number of "nuggets" that may be helpful to defendants in FCA cases relating to Medicare regulations.

The relator in Fresenius alleged that the owner of the largest chain of renal dialysis facilities, Fresenius Medical Care North America, billed Medicare for using and administering the "overfill" of two injectable drugs used in the treatment of patients suffering from end stage renal disease. In the vials containing these two drugs, the drug manufacturer always included a small amount more of the medicine beyond the stated amount on the vial, i.e., "overfill." Whereas Medicare normally only reimbursed Fresenius for the stated drug amount contained in a vial, Fresenius captured that extra bit of overfill from the vials and later administered it to patients. Fresenius billed Medicare for using and administering the overfill to its patients. 

Prior to January 1, 2011, the Centers for Medicare and Medicaid Services ("CMS") had not expressly prohibited Medicare providers such as Fresenius from billing for overfill. Not long before that date, CMS issued a regulation specifically prohibiting providers from billing for overfill and stating further that "the prohibition against billing for overfill was not a new policy" but instead "a clarification of existing policy." The relator alleged that Fresenius violated the FCA by administering overfill to patients and billing Medicare during 2005 to 2010, a period in which the relator contended that Fresenius should have known that Medicare prohibited it from billing for overfill.  

Granting summary judgment in favor of Fresenius, the Court found that the company did not violate the FCA because "no reasonable jury could find that Fresenius acted knowingly or recklessly" in billing Medicare for administering overfill to patients during the period at issue. In handing down its decision, the Court 
  • Bifurcated the summary judgment motions, addressing initially whether Fresenius billing Medicare for overfill constituted a "false claim." After granting summary judgment in favor of the government and finding that such billings were false, the Court permitted additional discovery and a second summary judgment motion addressing whether Fresenius "knew" or was reckless in submitting false claims. Though it initially granted partial summary judgment on the "falsity" question, the Court observed later: "If the Court had been, at that time, presented with the record as it is now developed, the Court would likely not have reached the falsity element at all. Whether overfill administration was reimbursable from 2006 through 2010 is not clear on the face of any one statute or regulation. And although, as explained in this Order, there were those in the industry who believed overfill administration was not reimbursable during that time, given the ambiguity in the Medicare rules and the record now presented, no reasonable jury could decide that Fresenius was reckless, let alone acted with actual knowledge that overfill was not reimbursable."
  • Found that Fresenius did not know that billing for overfill was false nor was it reckless in failing to recognize such billings were false. In the initial part of its analysis and at the end, the Court emphasized that Medicare rules or regulations were "silent" as to the issue of whether a provider, such as Fresenius, could bill for overfill. Notwithstanding CMS's statement that its 2011 regulation forbidding providers from billing overfill was simply a "clarification" of existing policy, the Court observed that nothing unequivocally prohibited providers from using and billing for overfill.
  • Acknowledged that Medicare did have a policy prohibiting billing for "discarded overfill" -- a close question that simply gave rise to an ambiguity as to whether overfill could be used and billed. The Court explained: "One could have deduced from the Medicare policy on discarded drugs that overfill was free, and thus should not be billed even if administered. But one could alternatively, reasonably assume that by prohibiting overfill billing only when overfill is discarded, Medicare implicitly recognized that overfill can be billed when administered."
  • Examined numerous sources as to Fresenius' knowledge about overfill and billing in order to determine if Fresenius acted recklessly: 
    • Statements by Fresenius' executives over the years reflecting that they believed billing for overfill was permissible;
    • Open knowledge among staff about the policy to use and bill overfill, including knowledge by the Monitor of a Medicare Consent Decree of a company acquired by Fresenius;
    • Advice by the company's lawyers that billing for overfill did not violate Medicare rules;
    • Previous FCA qui tam cases brought against the company that made similar allegations and which had either been dismissed by the relator or which the company had addressed and was then dismissed or abandoned by the relator;
    • Periodic reviews by HHS-OIG of the company's billing practices, its knowledge from those reviews that Fresenius was billing overfill, and the OIG's failure to object; and
    • Statements made by the company to Medicare showing it was openly using/billing overfill.
  • Refused to accord any real weight to a fiscal intermediary's 2005 negative comments on overfill. The Court noted that the "closest" that Fresenius "got to a warning" that billing for overfill might be improper was a 2005 document from its Medicare fiscal intermediary (n/k/a as a "Medicare Administrative Contractors") primarily addressing "wastage" but also stating that providers could not bill for "wasted overfill." Even this, the Court observed, did not "tip the scales in favor of a finding of recklessness." The fiscal intermediary's document, the Court explained, was "several steps removed from an authoritative interpretation of CMS rules or regulations" and the Court cited several cases emphasizing the "limited authority" of a fiscal intermediary. Moreover, the document itself did not qualify as "official" policy of the fiscal intermediary.
  • Most importantly, the Court rejected the relator's argument that Fresenius had sufficient information at its disposal that it should have connected the dots and concluded from these different sources that it could not bill Medicare for administering overfill. Observing that a failure to put such information together may have been "arguably negligent," the Court found that it did not support a finding of recklessness. Fresenius had adopted a plausible interpretation of Medicare rules and regulations that was consistent with its communications with the OIG and CMS and some in the industry.
Fresenius together with the other cases cited above stand for strict enforcement of the FCA's knowledge requirement. As the D.C. Circuit explained in Purcell,"innocent mistakes made in the absence of binding interpretive guidance [should not be] converted into FCA liability, thereby avoiding the potential due process problems posed by penalizing a private party for violating a rule without first providing adequate notice of the substance of the rule." 

A. Brian Albritton
December 1, 2015