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Third Circuit Recognizes Escobar “Heightened Materiality Standard” in Dismissal of False Claims Act Case Tied to Avastin

In May 2017, the U.S. Court of Appeals for the Third Circuit relied on the “heightened materiality standard” endorsed by the U.S. Supreme Court in its 2016 Escobar decision in dismissing a False Claims Act (FCA) whistleblower suit filed against pharmaceutical giant Genentech related to its billion dollar cancer drug Avastin. In Escobar, the Supreme Court upheld the validity—“at least in some circumstances”—of the “implied false certification” theory of FCA liability, and provided that this theory can attach where at least two conditions are met: a defendant must (1) …

FTC Intervenes in Physician Practice Acquisition in North Dakota

On June 22, 2017 the Federal Trade Commission (FTC) filed an administrative complaint and a request for a preliminary injunction in federal court to block a proposed physician practice acquisition in North Dakota (the Transaction), the agency’s latest intervention in opposition to consolidation at the physician practice level. In this case, the FTC (accompanied by the Attorney General of North Dakota) opposes a proposed acquisition of Mid Dakota Clinic, P.C. (MDC) by Sanford Bismarck (a subsidiary of multi-state health system Sanford Health, collectively Sanford) on the grounds that the Transaction, …

EHR Vendor Settles False Claims Act Suit for $155 Million

Electronic health record (EHR) vendor eClinicalWorks (eCW) recently entered into a settlement with the US Department of Justice (DOJ) and the Department of Health and Human Services’ Office of Inspector General (OIG) to resolve allegations under the federal False Claims Act (FCA) that eCW misrepresented its software and paid customers kickbacks to promote its products. The settlement imposes joint and several liability for payment on the EHR Vendor and three of its founders for $154.92 million, and liability for settlement payments individually by a developer ($50,000) and two project managers …

Connecticut Legislature Expands Universe of Available Disciplinary Actions Against Licensed Practitioners

The Connecticut Legislature recently approved Public Act 17-10, a bill that establishes a new disciplinary action that may be taken against certain licensed practitioners in Connecticut, including physicians, physician assistants, nurses, dentists, podiatrists, physical therapists, psychologists, and EMS personnel.…

DOJ Settles Allegations of Fraudulent Loan Program Between Hospital System and FQHC

The U.S. Department of Justice (DOJ) recently announced a settlement with a hospital operated by Indiana University Health, Inc. and a federally qualified health center operated by HealthNet, Inc. to resolve claims that the parties violated the Anti-Kickback Statute, the Federal Claims Act and Indiana law. Each of the parties will pay over $5 million to the United States and approximately $3.9 million to the State of Indiana. The lawsuit was originally brought by a qui tam relator, a physician and former employee of the hospital and HealthNet, and later …

Anthem Terminates Cigna Merger Following D.C. Circuit Setback

On May 12, 2017, Anthem Inc. announced that it had terminated its merger agreement with Cigna Corporation, a deal that would have united the second and third largest sellers of health insurance to large companies in the country. Anthem’s termination of the merger came two weeks to the day after the U.S. Court of Appeals for the D.C. Circuit rejected Anthem’s appeal of an injunction blocking the merger issued by a U.S. District Court earlier this year. Anthem terminated the merger one week after filing a petition for a writ …

Court Rejects Health Care System’s Efforts to Dismiss Government’s Anti-Steering Managed Care Antitrust Case

On March 30, 2017, the U.S. District Court for the Western District of North Carolina rejected a motion for judgment on the pleadings (akin to a motion to dismiss) by Carolinas HealthCare System (CHS) in a novel health care antitrust suit brought by the Department of Justice (DOJ) and State of North Carolina (collectively, the Government).

The Government filed suit against CHS, a health system consisting of 10 hospitals in and around Charlotte, North Carolina, in June 2016, alleging that contractual provisions mandated by CHS in its contracts with health …

Third Circuit Holds that Medical Resident Can Bring Title IX Claim Against Private Teaching Hospital

In Doe v. Mercy Catholic Med. Ctr., No. 16-1247 (March 7, 2015), the U.S. Court of Appeals for the Third Circuit held that a private teaching hospital operating a residency program can be held liable under Title IX for sex discrimination.

The plaintiff was a resident in Mercy’s accredited diagnostic radiology residency program, which is affiliated with Drexel University’s College of Medicine.  She claimed that the director of Mercy’s residency program sexually harassed her, and that the harassment interfered with her medical training.  The plaintiff also claimed that after …

CMS Revises Process for Reporting Stark Law Violations and Posts New SRDP Forms

On March 28, the Centers for Medicare & Medicaid Services (CMS) revised the procedures and posted new forms for its Voluntary Self-Referral Disclosure Protocol (SRDP).  The SRDP is a mechanism established pursuant to the Affordable Care Act for health care providers and suppliers to facilitate settlement of violations of the physician self-referral law (Stark Law).

Under the Stark Law, physicians (or their immediate family members) who have a financial relationship with an entity are prohibited from making referrals to that entity for certain designated health services (DHS) that are payable …

DOJ Increases Range of Per-Claim Penalties under False Claims Act for 2017

In a little-noticed development, on February 3, 2017, the Department of Justice (DOJ) increased the per-claim range of penalties under the federal False Claims Act (FCA) (31 U.S.C. § 3729 et seq.) for the second successive year, in accordance with a statutory requirement issued under the Bipartisan Budget Act of 2015. As a result, FCA defendants are now subject to monetary penalties ranging from $10,957 to $21,916 per claim submitted in violation of the FCA.

Section 701 of the Bipartisan Budget Act of 2015 revised federal requirements for determination …

Fourth Circuit Upholds DOJ’s Absolute Veto Power but Declines to Address Validity of Statistical Sampling in FCA Case

The U.S. Court of Appeals for the Fourth Circuit recently declined to rule on the validity of statistical sampling as a method to establish liability and damages in a False Claims Act (FCA) whistleblower case that was closely watched within the FCA bar, U.S. ex rel. Michaels v. Agape Senior Community, Inc. et al. (Nos. 15-2145, 15-2147). In a victory for the government, however, the Court did hold that the FCA grants the Department of Justice (DOJ) an “unreviewable veto” over proposed settlements of FCA cases – even cases in …

11th Circuit Invalidates Key Provisions in Florida Law Prohibiting Physician Inquiries About Patient Firearm Ownership

In Wollschlaeger v. Florida, No. 12-14009 (Feb. 16, 2017), the U.S. Court of Appeals for the Eleventh Circuit invalidated provisions of the Florida Firearms Owners’ Privacy Act that prohibited physicians from (i) asking patients if they (or their family members) own firearms or ammunition, (ii) documenting firearm ownership in patient medical records, and (iii) harassing patients about firearm ownership during examinations. The appellate court did not invalidate the Act’s antidiscrimination provision that prohibits physicians from discriminating against patients based solely on firearm ownership. Physicians who violated the Act were …

DOJ Announces $23 Million in Settlements Related to Implantation of ICD Cardiac Devices

On February 17, 2017, the U.S. Department of Justice (DOJ) announced settlements with 51 hospitals related to implantable cardioverter defibrillators (ICD), totaling over $23 million.  Combined with previously announced settlements, the DOJ has now reached agreements with more than 500 hospitals totaling more than $280 million relating to ICDs.   According to the DOJ, most of the 51 settling defendants were named in a False Claims Act qui tam lawsuit filed by a health care reimbursement consultant and a cardiac nurse.  U.S. ex rel. Ford et al. v. Abbott Northwestern

HHS Delays Effective Date of New Part 2 Regulations

On February 15, 2017, the U.S. Department of Health & Human Services announced that it had delayed the effective date of the Substance Abuse and Mental Health Services final rule announced in January regarding the Confidentiality of Substance Abuse Disorder Patient Records (commonly known as the 42 C.F.R. Part 2 regulations).  The final rule – which had been scheduled to take effect February 17, 2017 – will now take effect March 21, 2017.

HHS made this delay in accordance with the new administration’s “Regulatory Freeze Pending Review” memorandum issued January …

FY2105 Saw an Increase in Medicaid-Related Convictions and Decrease in Civil Settlements

On September 13, 2016, the Department of Health and Human Services (HHS) published its Medicaid Fraud Control Units Fiscal Year 2015 Annual Report (Report).  Medicaid Fraud Control Units (MFCUs) operate in 49 states and the District of Columbia. Typically part of the state-level Attorney General’s offices, the MFCUs investigate and prosecute Medicaid provider fraud as well as patient abuse and neglect. The Report found that in FY 2015, there were 1,553 reported convictions, seventy-one percent of which involved fraud. In addition, 731 civil settlements were entered into.…

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