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Fourth and Fifth Circuits Rely on Escobar to Render Important Fraud Decisions

Recent decisions in the Fourth and Fifth Circuit Courts of Appeals demonstrate the central role that the Supreme Court’s Escobar decision continues to play in fraud litigation despite, or as a result of, continued uncertainty as to the application of the “rigorous” and “demanding” materiality standard endorsed in that decision. The decisions discussed below provide additional circuit-level guidance for litigants, but also raise additional questions as to the scope of the Escobar ruling and the efficacy of the implied false certification theory of FCA liability.

First, on September 29, 2017 …

Draft Interpretive Guidelines for COPs for Home Health

The Centers for Medicare & Medicaid Services (CMS) has released a draft of interpretive guidelines (Guidelines) to the Home Health agency Conditions of Participation (the COPs).  After having previously been delayed, the COPs are set to be implemented January 13, 2018.  While feedback is being solicited on the draft and final guidelines have yet to be released, agencies should begin preparing in the event that no further delay is provided.

While information is provided on all of the COPs, examples of the topics guidelines are provided for include OASIS, patient …

New York 13 Hour Rule

The New York State Department of Labor (DOL) adopted an emergency temporary regulation on October 6, 2017 to address home care aides who work shifts of 24 hours or more.  This action comes amidst much anxiety in the industry caused by recent case law which called into question a prior DOL opinion letter as not being a proper interpretation of existing laws and regulations.  In the DOL’s own words, the reason for this emergency temporary regulation is as follows:

This emergency regulation is needed to preserve the status quo, prevent …

CMS Releases 2018 OPPS/ASC Payment Systems Final Rule

The Centers for Medicare and Medicaid Services (CMS) issued the 2018 Medicare: Hospital Outpatient Prospective Payment and Ambulatory Surgical Center Payment Systems and Quality Reporting Programs Final Rule with comment period, scheduled to be published in the Federal Register on November 13, 2017. The Final Rule, effective January 1, 2018, includes the following changes to Medicare payment rates and policies, among others:

  • Increased Outpatient Prospective Payment System (OPPS) and Ambulatory Surgical Center (ASC) Payment Rates. CMS is increasing the payment rates under the OPPS by 1.35 percent for CY 2018.

CMS Unexpectedly Withdraws Three Proposed Rules

The Centers for Medicare and Medicaid Services (CMS) recently announced the withdrawal of three proposed rules that, in one case, had been pending since 2014. The first proposed rule that CMS decided to scrap was proposed in December of 2014 that would have ensured same-sex spouses were recognized and afforded equal rights as opposite-sex couples in Medicare and Medicaid participating facilities. The proposed rule was initiated to ensure that the Medicare conditions of participation and conditions of coverage were consistent with the U.S. Supreme Court decision in United States v.

CMS Proposes to Cancel EPM and CR Bundled Payment Programs and to Reduce Mandatory Participation in CJR Model

The Centers for Medicare and Medicaid Services (CMS) recently published a proposed rule (Proposed Rule) to scale back its mandatory bundled payment programs. Under the Proposed Rule, CMS would cancel the episode payment models (EPMs) and cardiac rehabilitation incentive payment model (CR), and it would also reduce the mandatory participation in the comprehensive care for joint replacement model (CJR). CMS stated that it believed the proposed changes are necessary because the continued mandatory participation in bundled payment models may impede CMS’s ability to engage providers in future, voluntary initiatives. CMS …

House Bipartisan Act Would Amend Stark Law and Medicare Part B

On July 25, 2017, the U.S. House of Representatives passed by voice vote a bipartisan bill which is now in the Senate’s hands for consideration, the Medicare Part B Improvement Act of 2017. The bill would amend the Stark Law (Section 1877(h)(1) of the Social Security Act) and impact other provisions governing Medicare Part B.

The bill would amend the Stark Law:

  • to provide that the writing requirement for certain compensation arrangements may be satisfied by means determined by the HHS Secretary, including “a collection of documents, including contemporaneous

Ninth Circuit Relies on Escobar to Revive False Claims Act Suit Against Pharmaceutical Manufacturer

On July 7, 2017, the U.S. Court of Appeals for the Ninth Circuit reversed a federal district court’s dismissal of a False Claims Act (FCA) whistleblower suit in United States ex rel. Campie v. Gilead Sciences, explaining that the district court did not have “the benefit of” the Supreme Court’s 2016 decision in Escobar at the time the suit was dismissed for failure to state a claim under Federal Rule of Civil Procedure 12(b)(6).…

New OIG Advisory Opinion Allows Waiver of Cost Sharing in Research Studies

The Office of Inspector General (OIG) recently issued Advisory Opinion 17-02, allowing waivers or reductions of cost-sharing amounts owed by financially needy Medicare beneficiaries in connection with certain clinical research studies conducted at a non-profit medical center.  In the advisory opinion, the OIG reiterated its longstanding concern about routine waivers of Medicare beneficiary cost-sharing amounts in the absence of financial hardship, and noted this can lead to liability under the anti-kickback statute (AKS).  The research studies were conducted utilizing protocols under the Medicare Coverage with Evidence Development (CED) framework …

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) …

Senate Proposes Expanded Use of Telehealth

On May 18, 2017, the Senate Finance Committee voted to move forward a bill entitled the Creating High-Quality Results and Outcomes Necessary to Improve Chronic (CHRONIC) Care Act of 2017 (S870), which would increase access to telehealth services in the home.

Telehealth is the use of electronic information and telecommunications technology to support remote clinical healthcare, patient and professional health related education and other healthcare delivery functions. …

CMS Reverses Direction in Proposed Rule on Long Term Care Facility Arbitration Agreements

The Centers for Medicare & Medicaid Services (CMS) announced a Proposed Rule scheduled to be published in the Federal Register on June 8, 2017, revising its prior restrictions on binding arbitration provisions between long term care facilities and their residents set forth in a Final Rule published in October 2017.  Comments are due sixty days after publication of the Proposed Rule. In the Final Rule published last year, CMS had prohibited pre-dispute binding arbitration agreements and imposed requirements on facilities that asked residents to sign arbitration agreements.  The U.S. District …

OIG Publishes Prioritized Recommendations for HHS

The OIG has released the 2017 Compendium of Unimplemented Recommendations, summarizing prioritized recommendations relating to HHS programs and operations.   Topping the list are recommendations relating to hospitals, including:

  • Reimbursement rates for critical access hospital swing beds should be adjusted to the lower rates for similar services provided in skilled nursing facilities.
  • Reimbursement rates for hospital outpatient department procedures should be adjusted to the lower rates for similar procedures conducted in ambulatory surgical centers.
  • Medicare should adopt a hospital transfer payment policy to lower hospital reimbursement for beneficiaries who are

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 …

Federal Court Holds Online Medical Products Auction Contract Violates the AKS

The U.S. District Court for the District of Connecticut granted a motion for summary judgment in favor of Becton, Dickinson & Co. (BDC), a medical products provider, on the grounds that its contracts with MedPricer.com, Inc. (MedPricer), a company operating an online auction platform, violated the federal Anti-Kickback Statute (AKS), and were therefore unenforceable under Connecticut state law. MedPricer.com, Inc. v. Becton, Dickinson & Co., 2017 U.S. Dist. LEXIS 30854 (Memorandum opinion).

As described in the opinion, MedPricer enters into service agreements with hospitals and other health care providers to …

CMS Issues Proposed IPPS Rule

On April 14, 2017, the Centers for Medicare & Medicaid Services (CMS) released the FY 2018 Medicare Hospital Inpatient Prospective Payment System (IPPS) and Long Term Care Hospital (LTCH) Prospective Payment System (PPS) Proposed Rule, and Request for Information (Proposed Rule). The Proposed Rule outlines proposed updates to Medicare payment rates under the Inpatient Prospective Payment System (IPPS) and policies for hospital admissions. The goals of the Proposed Rule include relieving regulatory burdens on providers, supporting the doctor-patient relationship, and promoting transparency, flexibility, and innovation in the delivery of care.…

Massachusetts’ Health Policy Commission Further Limits Health Care Cost Growth

On March 29, 2017, the Massachusetts Health Policy Commission voted to decrease its annual health care cost growth benchmark from 3.6 percent to a 3.1 percent, effective in 2018. The benchmark applies to hospitals, certain physician groups and individual health insurers. The Commission also voted to finalize regulations to require those entities that fail to comply with the benchmark to file and follow performance improvement plans. Non-compliant entities will be subject to oversight by the Commission, during which they will be required to file monthly progress reports and demonstrate that …

CMS Proposes Delay of Home Health Agency Conditions of Participation

The Centers for Medicare & Medicaid Services (CMS) is proposing to delay the effective date for the revised Conditions of Participation (CoPs) for Home Health Agencies (HHAs).  The original effective date was July 13, 2017.  The proposed delay would extend the effective date for an additional six months, until January 13, 2018.  In a previously published post, we discussed the HHA CoPs.…

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 …

OIG Applies The Access To Care Exception In Favorable Advisory Opinion For Hospital Meal And Lodging Assistance Program

The Office of the Inspector General (OIG) recently issued Advisory Opinion 17-01 to a health system (Requestor) for an arrangement to provide free and reduced-cost lodging and meals to financially disadvantaged patients (Proposed Arrangement). In issuing this positive opinion, the OIG applied the Access to Care exception to the prohibition on beneficiary inducements under the Civil Monetary Penalties (Beneficiary Inducement CMP).

One of the hospitals operated by the Requestor provides services to a rural and medically underserved patient population. Under the Proposed Arrangement, the Requestor would offer financially needy patients …

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 …

HHS Delays Effective Date of Key Provisions in CMS Final Rule “Advancing Care Coordination through Episode Payment Models”

On February 17, 2017, the U.S. Department of Health & Human Services (HHS) announced that it had delayed the effective date of provisions of a Centers for Medicare & Medicaid Services (CMS) Final Rule that were scheduled to take effect February 18, 2017.  The Final Rule – titled “Advancing Care Coordination through Episode Payment Models” – was issued January 3, 2017 (see our previous analysis here) and in pertinent part implements:

  • Three new Medicare episode payment models (EPMs) surrounding 90-day episodes of care arising from (a) an acute myocardial

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

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