Fraud and Abuse and Why Little Fish Matter

[Ed. Note: We are pleased to welcome Andy Braver, Esq. to Health Reform Watch. Andy is a health care attorney and candidate for the Master of Laws in Health Law degree at Seton Hall University School of Law. Prior to entering the LL.M. program, Andy spent five years as a healthcare provider, running a state of the art medical diagnostic imaging center.  During that time, he dealt with many important health law issues faces by providers today, including Fraud and Abuse, Medicare and Medicaid licensing and reimbursement, state and private accreditation organizations, private payers, electronic health records, and HIPAA and other privacy issues, to name just a few. We look forward to bringing the law based perspective of a provider to the blog.]

Fraud and Abuse is a current health law hot button. Whether looked at from the standpoint of exploding healthcare budgets, or the amount of money being removed from the system by crooked and nefarious actors, there are many opinions on the problem, and what should be done about it.  My views on the subject are colored by my experience as both an attorney and a former healthcare provider.

Recently, I was lucky to hear an enlightening and informative panel discussion with a US Attorney whose post was created specifically to fight health care Fraud and Abuse, and a defense attorney, who spends a good portion of his time defending clients in prosecutions brought by this AUSA’s office.  One of the issues that struck me listening to the discussion is how the lack of resources to fight the problem so greatly affects the reality of how the problem is fought.  Put more succinctly, the government admits it can only go after the big offenders, and those that present immediate danger and potential harm to patients.  As a result, “small time” offenders are often left to flourish without much fear of finding themselves looking down the barrel of a False Claims Act [31 U.S.C. 3729, et seq.] or Anti-Kickback Act [41 U.S.C. 51, et seq.] criminal or civil investigation.

While the overall theory is understandable, does it make sense for the government to make these admissions?  Of course, the government needs to get the most from the resources it has to combat the problem– while also ensuring patient safety is not compromised in any way– but why advertise that limited resources limit investigations and prosecutions?  How then is an attorney to provide counsel in the following scenario: your client, an honest specialty medical provider who has unique offerings to the community (whether specialized training or advanced equipment not found elsewhere), is having trouble breaking into the local market because of a lack of referrals.  It turns out that the competition, in order to protect their business, is paying the gatekeeper (the doctor and/or office manager) at a few referring physician offices for each patient referred (Medicare, Medicaid and even private insurance), in the form of cash or gift cards, paid in small denominations, every week or two.  While the effect this might have on patient care is debatable, there is no question that these payoffs are illegal [41 USC 1320(b)] and [US Attorney Criminal Resource Manual].  There is some question, however, on how the problem should be handled.

The cynic and former healthcare provider in me wants to advise my client to take the easiest route and match the payoff since there is little to fear, but of course, I would NEVER offer such advice, nor condone such behavior.  How, then, do you level the playing field and advise a client who is trying to survive running an honest business, faced with dishonest competition that know that as long as they only cheat a little bit, they will not end up in any kind of trouble?

Is it realistic to ask your client to bring a Qui Tam action against those involved in the payoff schemes?  Was a whistleblower action meant to be used in this kind of small provider situation involving a mixture of federal and private insurance claims?  There will be no treasure trove of documents evidencing the payoffs, no smoking-gun Visa gift cards, and while your client may know the truth about the payoffs, it will ultimately turn into a he-said she-said case without assistance from professional investigators with badges.  Who knows what impact this will have on your client’s business, and whether other referring physicians will want to get involved with your trouble-maker client in the future?  Perhaps you might be able to convince an employee from the dishonest competition to come forward as a relator in order to share in the proceeds of any settlement [31 U.S.C. 3730(d)].  But will the government intervene in a small, low-profile case, then allowing your client to return to life as a full-time medical provider rather than a Qui Tam relator.

I believe that the government would be properly allocating its resources by, from time to time, looking into “smaller” complaints.  These low-hanging-fruit cases are ripe for the picking, and, from my experience as a provider competing in this kind of an environment, a little bit of deterrence will go a long way.  If nothing else, dishonest providers will be more likely to play by the rules if they are fearful that breaking them will result in in bad consequences, and honest practitioners will not have to become experts on the Qui Tam process.

Pharmaceutical Promotion, Prescriptions, Payors: Chain, Chain, Chain?

On February 16, 2011, Magistrate Judge Ramon E. Reyes issued a Report & Recommendation in Sergeants Benevolent Assn. Health & Welfare Fund v. Sanofi-Aventis U.S. LLP, Case No. 1:08-cv-00179-SLT-RER (E.D.N.Y. Feb. 16, 2011), recommending that the district court not certify a class of union health and welfare funds and other third-party payors claiming that they paid for prescriptions for the antibiotic Ketek that doctors would not have written but for the defendant Sanofi-Aventis’ fraudulent marketing.  Jim Edwards at Placebo Net summarizes the plaintiffs’ fraud allegations as follows:  “Basically, Sanofi knew in October 2001 that one of its main researchers on the drug was probably faking her data. That researcher was indicted for research fraud in April 2003. Yet in April 2004, the FDA approved Ketek for sale even though both it and Sanofi knew the data on which the approval was based was entirely bogus. In 2007, after 53 cases of liver failure including four deaths, the FDA all but withdrew Ketek from the market.”

Judge Reyes’ R & R is just the latest in a string of decisions rejecting plaintiffs’ attempts to fit the peg of fraudulent or illegal promotion of drugs and devices into the hole of a civil Racketeering Influenced and Corrupt Organizations Act (RICO) class action.  Writing in Defense Counsel Journal in April of 2010, J. Gordon Cooney, John P. Lavelle, and Bahar Shariati explain the reasons why civil RICO is attractive to class action plaintiffs.  The Food Drug & Cosmetic Act does not have a private right of action, so those harmed when a drug is promoted fraudulently or illegally (for an off-label use, for example) cannot simply allege a violation of the FDCA.  Frequently, they claim instead that the promotion at issue constituted mail or wire fraud, both of which count as racketeering activity under the RICO statute, and that the defendant was guilty of conducting a RICO enterprise.  The civil RICO vehicle has several advantages for plaintiffs, including the possibility of treble damages, broad choice of venues, and “[p]erhaps most importantly in the class action context, civil RICO claims conceivably allow plaintiffs to sidestep the predominating choice-of-law issues that typically prevent nationwide class actions based on fraud or deceptive practice law[.]”

As the authors of the defense-oriented blog Drug and Device Law explain, however, third-party payors like the union health and welfare funds who brought the Ketek case have encountered difficulty at the class certification stage.  This is because they have been unable to convince courts that the members of the class could rely on common evidence to prove their claims.  In particular, courts have held that class certification is not appropriate because each plaintiff would have to put on individualized prescription-by-prescription evidence to establish that the promotion in question caused it to pay for prescriptions that would not otherwise have been written.

As Jim Edwards puts it, Judge Reyes held that “[t]he doctor’s decision to write a Ketek prescription removes the ‘proximate cause’ necessary to establish that the plaintiffs paid for the drug based on fraud — even though the only reason the drug was on the market was because of Sanofi’s fraud, and individual doctors are in no position to know whether drugs are backed by fraudulent data or not.”  Edwards suggest that “[i]f Congress wanted to find a cost-free way of reducing government spending on medical bills, then loosening the legal definitions of fraud, kickbacks and false statements to include common sense interpretations of bad behavior would be one way to do it.”

Lawsuit Against Guidant for Making False Statements (Again)

As we reported a little while back, the Department of Justice obtained what FDA Commissioner Hamburg declared “the largest criminal penalty ever imposed on a device manufacturer for violating the Food, Drug and Cosmetic Act” against Boston Scientific subsidiary, Guidant LLC.

Following this record breaking performance, the Department of Justice filed suit against Guidant LLC on January 27, 2011.  Yes, that is correct — Guidant is once again subject to a federal claim resulting from false statements made regarding three models of its implantable cardioverter defibrillators that were recalled for short-circuiting failures.  This time, however, it is alleged that “Guidant knowingly caused the submission of false or fraudulent claims for implants of faulty… devices to the Medicare program” in violation of the False Claims Act.

John R. Marti, First Assistant U.S. Attorney for the District of Minnesota was quoted in the Department of Justice press release stating:

When companies like Guidant request and receive federal dollars for products they know to be defective, the United States is committed to aggressively seeking the recovery of those payments. That is especially true when the defective products endanger human lives. In today’s environment, it is essential that Medicare and other public health care programs be made whole to ensure their continued vitality for future generations.

Well that makes sense.  But why bring the False Claims Act claim separately from the claims for violations of the Food, Drug and Cosmetic Act (”FDCA”)?  The most obvious reason is as follows: the Department of Justice did not bring the False Claims Act claim against Guidant.  The United States joined a lawsuit filed by qui tam relator James Allen, a patient who allegedly received a defective device.

The complaint alleges that approximately 2,000 false claims were submitted to the Medicare program.  It also includes ten examples of individual false claims ranging from $20,201.14 to $ 46,130.20.  With treble damages and civil penalties of not less than $5,500 and up to $11,000 for each violation, the recovery could range anywhere from $132 million to $298 million.  The record-breaking $296 million in fines and forfeitures for violations of the FDCA standing alone looked formidable; coupled with this latest volley, it is staggering– a potential total minimum of $428 million, maximum  of just shy of $600 million.

According to Fox News, Boston Scientific “is disappointed that the federal government, after reaching a criminal resolution with Guidant LLC, has chosen to seek additional money in a civil lawsuit.  However, the company believes that the ultimate resolution of this matter should not have a significant financial impact.”

Res Ipsa Loquitur

Reform Rodeo

1. 10 Most Wanted: Taking a page out of the FBI’s playbook, HHS’s Office of Inspector General is now publishing a top ten list — with pictures – of the most wanted health care fraud and abuse fugitives.

1. Straight to the Source: Jonathan Cohn discusses what Richard Foster — the chief federal actuary for Medicare — thinks about the chances that health care reform will hold down costs.

2. Individual Mandate Mandatory? NPR has a story investigating whether health reform could be implemented without the individual mandate.

3. Dartmouth Research Questioned: Maggie Mahar discusses a recent Institute of Medicine report which posits that in some circumstances,  an increase in health care spending may lead to better outcomes.

4. Value-Based Purchasing: The Health Care Economist has an interesting post detailing Oregon’s experience with value-based purchasing.

Obama Signs Provision Contrary to Fraud Enforcement Trend

On December 15, 2010, President Obama signed the Medicare and Medicaid Extenders Act of 2010 (the Medicare Physician Pay Fix Bill).  In addition to its one-year delay of a 25% cut in Medicare reimbursements to physicians, the act repeals § 6502 of the Patient Protection and Affordable Care Act which would have become effective on January 1, 2011.  This move stands in stark contrast to a recent trend toward increased individual liability, specifically the increased exclusion of individuals from federal healthcare programs for fraud and abuse violations.

Enforcement Trends

The federal government, through the Department of Health & Human Services Office of the Inspector General (OIG), has increased its focus on individuals, with exclusions for fraud and abuse violations.  As previously reported, OIG released an internal advisory document on October 20, 2010, setting out nonbinding factors for permissive exclusions under § 1128(b)(15) of the Social Security Act.  The new Guidance changed the permissive exclusion standard to a quasi-mandatory standard, by creating a presumption in favor of exclusion when an individual exercises ownership, operational or managerial control over a sanctioned entity and there is evidence that such individual knew or should have known of the prohibited conduct.

OIG swiftly acted on the new Guidance by excluding Marc S. Hermelin, Chairman of the board and majority shareholder of K-V Pharmaceutical.  As a result, K-V announced on November 17, 2010 that Hermelin had resigned and agreed to divest himself of all K-V stock.  On December 7, 2010, Gregory E. Demske, Assistant Inspector General, announced that the exclusion of Hermelin was “preview of things to come.”

Further, on November 9, 2010, former GlaxoSmithKline Vice President and Associate General Counsel Lauren Stevens was charged with obstruction of justice and making a false statement in response to a Food and Drug inquiry.  Michael W. Peregrine, with McDermott Will & Emery LLP, told BNA that, “the Stevens prosecution is a piece of a broader puzzle based in part on the responsible corporate officer doctrine and reflects the government’s heightened interest in fostering individual accountability and that is consistent with other recent attempts by prosecutors to target individuals they believe are responsible for corporate misconduct.”

Section 6502

Section 6502, which was repealed on December 15, would have continued the trend toward increased individual liability.  It would have mandated state Medicaid agencies to exclude an individual or entity that “owns, controls, or manages” a Medicaid-participating entity that:

• Has delinquent, unpaid Medicaid overpayments
• Is suspended or excluded from participation in Medicaid, or
• Is affiliated with an individual or entity that has been suspended or excluded from participation in Medicaid

The Medicaid exclusion authority of § 6502 is different than § 1128(b)(15) of the Social Security Act.  Unlike § 1128(b)(15), which provides for permissive exclusion from all federal health care programs,  § 6502 would have provided for mandatory derivative exclusion from Medicaid only.  Laurence Freedman, an attorney with Patton Boggs told BNA that “this mandatory Medicaid exclusion needed to be repealed to avoid a broad, and I believe, unintended impact.  It would have reached former executives or board members of excluded subsidiaries, for example.”

HHS-OIG Issues “Roadmap” to Help New Physicians Steer Clear of Fraud and Abuse

As others have noted, earlier this month the HHS-OIG issued “A Roadmap for New Physicians: Avoiding Medicare and Medicaid Fraud and Abuse,” a pamphlet which it developed to educate medical students, residents, and fellows about fraud and abuse law.  The HHS-OIG was spurred to act after a 2010 survey it conducted revealed that less than half of the nation’s medical schools provide instruction on the topic.  The Roadmap is sensibly organized around the relationships physicians have with (1) payers, with an emphasis on Medicare, (2) fellow health care providers, and (3) vendors.  It uses well-chosen “case examples” to make the rules governing those relationships concrete.  The Roadmap concludes with a helpful list of additional resources, a list of steps to take “[i]f you are engaged in a relationship you think is problematic or have been following billing practices you now realize were wrong,” and a plug for the HHS-OIG’s Provider Self-Disclosure Protocol.

As David Harlow points out on his HealthBlawg, the release of the Roadmap coincides with an effort by the federal government to re-think current fraud and abuse laws to facilitate the development of accountable care organizations and other efforts to better organize and pay for health care.  Harlow notes that “the fraud and abuse and self-referral rules, intended as a brake on bad behavior in the context of fee-for-service medicine, become less relevant — and even become an impediment — to new systems of care and new systems of financing of that care.”  (Professor Frank Pasquale discusses the move to modify or waive the rules in more depth here.)  Of course, fee-for-service medicine is not going to disappear overnight, so today’s doctors in training need to learn about the current legal regime.

The government’s new willingness to look beyond drug and device companies to hold physicians personally accountable for fraud and abuse violations should make it easier to get the attention of doctors in training.  The Roadmap highlights HHS-OIG’s ongoing investigation into many of the orthopedic surgeons who allegedly received kickbacks from the hip and knee implant manufacturers who entered into a landmark settlement with the U.S. Attorney for the District of New Jersey in 2007.  In May 2010, an orthopedic surgeon in Florida paid $650,000 to resolve claims that he was compensated by two device companies ostensibly for consulting services but allegedly “for ordering, or causing to order, … orthopedic products.”

The Roadmap also reminds physicians that transparency is coming, using large, orange text to emphasize that “[t]he public will soon know what gifts and payments a physician receives from industry.”

Office of the Inspector General Releases 2011 Work Plan

On October 1, the Office of the Inspector General (”OIG”) of the U.S. Dept. of Health & Human Services (”HHS”) released its Work Plan for Fiscal Year 2011 (”Work Plan”).  Each year, the OIG briefly outlines activities that OIG “plans to initiate or continue with respect to the programs and operations” of HHS.  Various offices within OIG conduct audit, evaluation, investigation, enforcement, and compliance activities.

Continuing Work Within OIG

Many of the topics outlined in the Work Plan were included in last year’s plan.  Although the repeated inclusion of these areas of focus makes compliance easier for facilities, audits should still be conducted in the following areas:

• Provider-based status
• Observation services (as part of an outpatient visit)
• Part A hospital capital payment
• Critical access hospitals
• Medicare disproportionate share payments
• Duplicate graduate medical education payments
• Hospital readmissions
• Hospital admissions with conditions coded present-on-admission
• Inpatient rehabilitation facility transmission of patient assessment instruments
• Medicare excessive payments

New Issues to be Targeted

“What we’re really looking at are four or five really brand new issues,” said Stephen Miller, JD, chief compliance and privacy officer for Trenton, NJ-based Capital Health System, Inc. for HealthLeadersMedia.com.

• Brachytherapy reimbursement
• Replacement of devices received at no cost or reduced cost
  • According to Debbie Mackaman, RHIA, CHCO, regulatory specialist for HCPro, Inc., in Marblehead, MA, “Since the medical devices replacement issue can be a difficult billing procedure to comply with, facilities should certainly do an in-depth process audit in this area.”
• Safety and quality of intensity-modulated radiation therapy (IMRT) and image-guided radiation therapy (IGRT)
  • Indicates a responsiveness on the part of OIG to headlines regarding quality concerns.  In March, the Nuclear Regulatory Commission fined Philadelphia Veterans Affairs Medical Center $227,500, its second largest fine ever against a medical institution, after “unprecedented number” of radiation errors in treating prostate cancer patients.
• Hospitals’ application of the “three-day rule” and “one-day rule” under the Preservation of Access to Care for Medicare Beneficiaries and Pension Relief Act of 2010
  • Many hospitals have had difficulty in billing under the new rules, which redefined what services are related to the admission, and therefore not eligible for Medicare payment within the defined window.  According to Mackaman, “IPPS facilities should be vigilant about reviewing the current three-day rule, and the non-IPPS hospitals should review the addition of the one-day rule.”  CMS guidance on this topic can be found here.

OIG Review of FDA Administration

As HealthReformWatch previously reported, nine Food & Drug Administration (”FDA”) scientists from the Center for Devices and Radiological Health (”CDRH”) sent a letter to President Obama stating, in relevant part, that:

the scientific review process for medical devices at the FDA has been corrupted and distorted by current FDA managers, thereby placing the American people at risk. Managers with incompatible, discordant and irrelevant scientific and clinical expertise in devices…have ignored serious safety and effectiveness concerns of FDA experts. Managers have ordered, intimidated and coerced FDA experts to modify scientific evaluations, conclusions and recommendations in violation of the laws, rules and regulations, and to accept clinical and technical data that is not scientifically valid.

These scientists also wrote to Congress in 2008, accusing the top FDA officials of “serious misconduct” in ignoring scientist concerns and “approving for sale unsafe or ineffective medical devices,” according to the N.Y. Times.

According to Washington G-2 Reports, OIG also stated on September 29 that “it would re-examine the concerns of those FDA reviewers, and broaden the scope of its inquiry.”

This coming year, OIG intends to investigate CDRH “policies and procedures for resolving scientific disputes about approval of devices.”  The Work Plan states that OIG will:

review a sample of administrative files for disputed device decisions and assess the extent to which regulations, policies, and procedures were followed during the dispute resolution process. We will also assess whether CDRH managers and staff are aware of and trained on policies and procedures for resolving scientific disputes.

Additionally, OIG will continue to review FDA oversight of investigational new drug applications, the process for device approval, and oversight of postmarketing surveillance studies of medical devices.

An Evening with New Jersey’s Top Cop

On September 23rd, 2010, Paul J. Fishman, United States Attorney for the District of New Jersey, provided insight into his state’s approach to prosecuting health care fraud. He spoke here at Seton Hall Law School, presented by our Center for Health & Pharmaceutical Law & Policy.

First, some background on the U.S. Attorney. Mr. Fishman graduated magna cum laude in 1978 from Princeton University and cum laude in 1982 from Harvard Law, where he served as the Managing Editor of the Harvard Law Review. After a clerkship with the Hon. Edward R. Becker of the U.S. Court of Appeals for the Third Circuit, he became an Assistant U.S. Attorney for the District of New Jersey, where he served as Deputy Chief of the Criminal Division, Chief of Narcotics, Chief of the Criminal  Division, and First U.S. Attorney. From 1994 to 1997, Mr. Fishman served as a senior advisor to the Attorney General and Deputy Attorney General of the United States on a variety of law enforcement, policy, legislative, national security, and international matters, as well as on specific investigations and prosecutions.

Mr. Fishman’s talk, entitled “Why Prosecuting Health Care Fraud is a Top Priority in New Jersey,” drew a diverse crowd comprised of professors and law students from Seton Hall, as well as many in the health care industry and government who were presumably keen to divine the U.S. Attorney’s future prosecutorial plans.  The talk opened with an acknowledgment that the Department of Justice  (DOJ) and the Department of Health & Human Services are working more closely than ever in terms of combating health care fraud. Mr. Fishman noted the importance of this relationship given the myriad opportunities for health care fraud that present themselves throughout the sector’s vast supply chain.

At the outset, Mr. Fishman underscored his desire to leverage emerging technology to better distill trends in the flow of health care dollars in New Jersey. Such analytical technology — already being employed in New Jersey — can help detect anomalous spending patterns that may signal potential fraudulent activity.

Mr. Fishman stated that over the next few years, the number of cases being prosecuted will go up, including both criminal and civil fraud prosecutions. Recognizing the budget shortfall facing New Jersey, Mr. Fishman was quick to note that DOJ is in fact cash flow positive, citing research finding that the DOJ collects $4 for every 1$ spent on investigations.

The U.S. Attorney discussed New Jersey’s unique demographics. With over 100 hospitals,  360-plus nursing homes, 200 private pay home care agencies, and scores of pharmaceutical companies, the New Jersey  health care industry is robust — making it a sizable target for health care fraud.

But as Mr. Fishman notes, it is not just the medical-industrial complex that distinguishes the Garden State’s health care landscape: 38 percent of NJ’s population is overweight, the state ranks ninth in the U.S. in terms of the percentage of elderly residents, and it spends 20 percent more on health care spending on the elderly than the national average. These statistics, according to Mr. Fishman, make the New Jersey health care system an even larger opportunity for fraud.

Mr. Fishman noted a number of specific areas of criminal activity that his office will be focusing on, including:

1. Cases in which people are providing services in a way that is “inconsistent with their stature in the health care industry.” This category would include, for example, individuals pretending to be licensed physicians.
2. Prosecuting fraudulent prescriptions that are written for unneeded services. Mr. Fishman mentioned fraudulent activity in the durable medical equipment field as an example.
3. Staged accidents that seek to defraud the reimbursement system.
4. Traditional Stark and Anti-kickback issues.

On the civil side Mr. Fishman mentioned a desire to reach out to those representing qui tam relators, presumably in an effort to increase the number of qui tam cases brought to his New Jersey office. Mr. Fishman’s qui tam discussion was followed by his general goal of broadening outreach efforts so as to take advantage of the possible early detection of fraud by individuals who may spot a fraudulent activity before such activity is formally recognized. Accompanying  greater outreach efforts will be a tighter integration between the criminal and civil investigatory arms.

Mr. Fishman rounded up his talk with a discussion of deferred prosecution agreements — noting that  while the DOJ often places a huge premium on resolving suits they have not historically focused enough on individual culpability. Accordingly, Mr. Fishman expressed a willingness to go after individuals, and not just corporations, for their actions — predicting an increase in individual prosecutions but maintaining that rates of corporate prosecutions will hold steady.

On the topic of the monitorships that take place in response to non-prosecution and deferred prosecution agreements, Mr. Fishman posited that the monitors should be located in or near the city in which the health care entity is headquartered. Thus, the New Jersey office will be encouraging those in non-prosecution and deferred prosecution to look for monitors in their area. Furthermore, monitors should not have clients with interests that are adverse to the DOJ office, and remained skeptical of the propriety of having white collar defense lawyers acting as the monitors of first resort, notwithstanding their skills. Rather, it is thought that health care entities should look outside the criminal defense bar for monitors, while ensuring that the entity has the requisite integrity and experience to tackle highly complex health care law issues.

In conclusion, Mr. Fishman underscored that deterrence was his guiding principle, with the ultimate goal being the wholesale prevention of health care fraud. Mr. Fishman focused on institutional shortcomings — particularly the lack of a robust relationship between his Office and the health care industry — as a reason his office has failed to sufficiently prevent health care fraud.  However deficient DOJ’s approach to health care fraud has been, the zealousness and creativity of the newly-appointed Mr. Fishman should make even the most seasoned New Jersey health care fraudster nervous.

Seton Hall University School of Law Launches European Healthcare Compliance Certification Programme in Paris

Press Release: Seton Hall University School of Law Launches European Healthcare Compliance Certification Programme in Paris

Co-presented by:
Seton Hall School of Law and Sciences Po

• June 21 - 25, 2010
• Sciences Po, Paris, France
• www.sciences-po.fr/spf/healthcare

PRESS RELEASE
Phone: 973.642-8863
E-mail: simone.handler-hutchinson@shu.edu

Website: law.shu.edu/Paris OR www.sciences-po.fr/spf/healthcare

The Healthcare Compliance Certification Programme, co-organized by Sciences Po Executive Education (Paris, France) and Seton Hall University School of Law (Newark, N.J) to be held from June 21-25, 2010 on the Paris campus of Sciences Po today announced its 2010 topics and faculty.

FEATURED FACULTY:

CURRENT & FORMER REGULATORY & ENFORCEMENT OFFICIALS:
Paul McNulty, Partner, Baker & McKenzie, LLP (DC) Former U.S. Deputy Attorney General
Kirk Ogrosky, Partner, Arnold & Porter LLP (DC), Former Deputy Chief, Health Care Fraud, Criminal Division, U.S. Dept. of Justice

INTERNATIONAL ORGANIZATIONS
Alex Conte, Senior Legal Analyst, Anti-Corruption Division, OECD
Dr. Guitelle Baghdadi-Sabeti, Team Leader, Good Governance for Medicines, World Health Organization
Marie-Claire Pickaert, Deputy Director General, European Federation of Pharmaceutical Industries and Associations (EFPIA)

COMPANY COMPLIANCE PROFESSIONALS:
Dirk Brinckman, Assistant General Counsel, Johnson & Johnson (Brussels)
Roeland Van Aelst, Vice President, EMEA & Canada, Office of Health Care Compliance & Privacy, Johnson & Johnson

KEYNOTE & ACADEMIC SPEAKERS:
Paul Benkimoun, Healthcare Journalist, Le Monde
Claude Le Pen, Professor, Université Paris-Dauphine
Kathleen Boozang, Professor of Law, Seton Hall Law School (Newark, NJ)

LEADING LEGAL AND COMPLIANCE COUNSEL AND ADVISORS:
Peter W.L. Bogaert, Managing Partner, Covington & Burling (Brussels)
John Rupp, Partner, Covington & Burling LLP (London)
Karolos Seeger, Partner, Debevoise & Plimpton LLP (London)
Susie Smith, Bevan Brittan LLP (UK)
Ted Acosta, Leader, Life Sciences & Corporate Compliance Fraud Investigation & Dispute Services, Ernst & Young LLP
Jill Deal, Partner, Venable LLP (DC)
Kristof Van Quathem, Data Protection Advisor, Covington & Burling LLP (Brussels)
Carolyn Lindsey, Director of Member Services, TRACE International
Owen Bevan, Director, Legal & Compliance Practice, Corporate Executive Board

PROGRAMME CURRICULUM:

OECD Convention & Other Anti-corruption StandardS UK Bribery Act: Current Perspective & History To Europe and Beyond: the Impact of the U.S. Foreign Corrupt Practices Act EU Competition Law in Healthcare Approval Processes for New Drugs & Devices Harmonization Efforts by the European Medicines Agency & U.S. Food & Drug AdministratioN A Sampling of Healthcare Reimbursement & Delivery Programs Around the World Current Transnational Landscape for Enforcement by Authorities Lessons Learned from U.S. Healthcare Fraud & Abuse Enforcement and Compliance Programs Scientific & Educational Activities • Managing Risk: Third Party Relationships

Global Anti-Corruption Issues and Efforts: A View from Trace International Organizational & Operational Keys to Effective Compliance Program Organization Beyond Sales & Marketing: Interactions with Government Officials Throughout the Product Life-cycle Advertising and Promotion of Drugs, Devices and OTC products Public Procurement Processes for Healthcare Products & Services Role of Drug & Device Industry Codes Privacy & Data Protection Laws as Related to Anti-corruption Compliance Assessing and Demonstrating Compliance Program Effectiveness

Surety Bond Requirements for Durable Medical Equipment, Prosthetics, Orthotics and Supplies (DMEPOS)

By Rachel Jones

The final rule implementing surety bond requirements for DMEPOS became effective March 3, 2009.  The regulation implemented the surety bond requirements for DMEPOS set forth in section 4312(a) and (c) of the Balanced Budget Act of 1997 (BBA).  The Centers for Medicare & Medicaid Services (CMS) proposed a rule on January 20, 1998 (63 FR 2926) reflecting the BBA’s surety bond requirements and solicited comments.  Comments were solicited for advisability with respect to Section 4312(c) of the BBA, which further allowed CMS to require a surety bond from some or all providers or suppliers who furnish items or services under Medicare Part A or Part B and not solely Durable and Medical Equipment (DME) suppliers.  A substantial amount of comments were received and in the final published rule on October 11, 2000 (65 FR 60366), CMS decided to delay the final rule with respect to surety bond requirements for suppliers of DMEPOS in order to further study the issue.  However, in 2003 Congress enacted section 902 of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (Pub. L. 108-173) (MMA) which prohibits the Secretary of Department of Health and Human Services from finalizing a proposed rule related to Title 18 that was published more than 3 years earlier except under exceptional circumstances.  In response to this CMS proposed a rule on August 1, 2007 (72 FR 42001) to implement the statutory surety bond requirements set forth in the BBA.  CMS received approximately 200 comments that were considered before they published the final rule on January 2, 2009. (FR 30802)

Surety bonds are a financial guarantee whereby a first party (obligee) contracts with a second party (principal) to perform duties in a contract that will benefit a third party (surety).  The first party guarantees that the second party will fulfill its obligation(s) under the contract and in the event that the obligations are not met, the first party will recover its losses via the bond.  CMS has imposed the rule in order to deter fraud and abuse by Medicare suppliers of DMEPOS.  CMS believes a surety bond requirement will (1) limit the Medicare program risk to fraudulent DMEPOS suppliers; (2) enhance the Medicare enrollment process to help ensure that only legitimate DMEPOS suppliers are enrolled or are allowed to remain enrolled in the Medicare program; (3) ensure that the Medicare program recoups erroneous payments that result from fraudulent or abusive billing practices by allowing CMS or its designated contractor to seek payments from a surety up to the penal sum; and (4) help ensure that Medicare beneficiaries receive products and services that are considered reasonable and necessary from legitimate DMEPOS suppliers.  CMS has also instituted other measures– including requiring accreditation for DMEPOS suppliers to deter fraud.

Who is affected by the surety bond requirements?

The regulation affects many healthcare providers; generally any DMEPOS supplier that is registered with the National Supplier Clearinghouse (NSC) may be subjected to the surety bond requirement.  Every DMEPOS supplier to Medicare patients must register with the NSC.  There are several exempt DMEPOS suppliers under the regulation:

I.      Government-owned suppliers,

II.       State-licensed orthotic and prosthetic personnel in private practice making custom made orthotics and prosthetics if the business is solely-owned and operated by said personnel and is billing only for orthotic and prosthetics, and supplies,

III.      Physicians and non-physician practitioners if the DMEPOS items are furnished only to his or her patients as part of his or her professional service, and

IV.      Physical and occupational therapists if: (1) the business is solely-owned and operated by the therapist, and (2) if the DMEPOS items are furnished only to his or her patients as part of his or her professional service.

The economic impact on non-exempt healthcare providers is significant since the regulation requires a minimum of $50,000 surety bond.  This bond amount is required for each National Provider Identifier (NPI).  Since DMPEOS suppliers must obtain an NPI by practice location, this amount can become quite significant for a supplier with multiple locations.  The estimated cost to DMPEOS suppliers is approximately $1200 per $50,000 surety bond, depending on the company’s financial stability.  The regulation also permits an additional $50,000 surety bond for high risk DMPEOS.  For example, if a DMPEOS supplier has an adverse legal action within the last ten years preceding enrollment, revalidation, or re-enrollment then an additional $50,000 surety bond is required per adverse legal action.  An adverse legal action includes: Medicare imposed revocation of any Medicare billing number, suspension of a license to provide health care by any State licensing authority, revocation or suspension of accreditation, a conviction of a Federal or State felony offense or an exclusion or debarment from participation in a Federal or State health care program.

CMS believes that the surety bond will deter fraudulent activity because a fraudulent DMEPOS supplier will not likely post a surety bond.   However, it is more likely the basis for this new requirement is to more easily allow CMS to recoup lost funds due to fraudulent activities.  In addition, the bond requirement allows CMS to track and reprimand those DMEPOS suppliers that have continuously violated the law and stayed in the Medicare

Taking the Fraud Out of Medicare Expansion

One of the ways the Obama administration hopes to pay for health care reform is through policing Medicare fraud.  It is estimated that the Centers for Medicaid and Medicare Services (CMS) spends $60 billion a year on fraudulent claims.  According to Senator Grassley of Iowa, the federal agency received warnings of fraud by watchdog organizations, but did not respond to most of them; these warnings fell upon the CMS’s shoulders under the Bush Administration.

A report by the Department of Health and Human Services finds that much of the fraud in the Medicare Prescription Benefit program could have been avoided through better management of the companies that were hired by the federal government in 2006 to investigate and monitor the fraud.  Grassley notes that the companies, called Medicare drug integrity contractors or Medics, were essentially a waste of money because they were never given the proper information to perform the audits.  The New York Times reports that the Bush Administration did not allow for the audits by Medics to proceed until its final few months in office.

Under the current model, scams to get Medicare reimbursement for non-existent services are easier than one might think.  Just this past July, a couple who owned a medical business was indicted for submitting false reimbursement bills to the CMS for power wheelchairs that they claimed had been lost or destroyed during Hurricane Katrina.  Other scams include medical suppliers billing Medicare for equipment that was never given to patients, creation of fake medical supply companies, and acceptance of illegal kickbacks for referring Medicare patients to unneeded services.

Solutions to fraud, however, are not as clear-cut as one might wish.  For example, there is a worry that over-policing the CMS will lead to valid claims being denied at greater rates. Also, enforcement and punishment are issues.  Some health care companies have been able to escape criminal prosecution by paying restitution amounts for the fraudulent claims.  Finding restitution to be an insufficient deterrent to would-be fraudsters,  Senator Arlen Specter of Pennsylvania wants to see scammers put behind bars. But there is also something to be said for the realization that the “Arthur Anderson solution” is really no solution at all.

Another interesting aspect to consider here is that the CMS finds that provisions of the House bill intended to reduce Medicare fraud will not save all that much money.  In spite of this (or perhaps because of it) many of our leaders have demanded that some action be taken to reduce Medicare fraud– even Sarah Palin says fraud is an issue.  One hopes that the Obama administration will learn from its predecessor’s mistakes (if in fact they be such) when it comes to creating watchdogs such as Medics, but then muzzling and not feeding them.

Turning Up the Heat on Fraud and Abuse–Part of the Solution to Health Reform?

[Ed. note: As noted in the post above, we are very pleased to welcome the Executive Director of the Center for Health & Pharmaceutical Law & Policy, Tracy E. Miller, J.D., to Health Reform Watch today.]

As the search for new sources to fund health care reform intensifies, it seems more certain that increased enforcement of fraud and abuse will be part of the equation.  Both the House and Senate have incorporated increased enforcement as part of health care reform legislation. The health care reform bill released by House Democrats on July 14, 2009, included an additional $100 million to combat fraud and abuse as well as increased mandates for regulatory oversight and provider compliance programs.  The reform bill adopted by the Senate Health, Education, Labor and Pensions Committee on July 15 also embraced new enforcement measures, creating senior level positions at HHS and DOJ to coordinate oversight activities.  The bills follow on the heels of an announcement in May by the Obama Administration that it had created an interagency task force to coordinate fraud and abuse enforcement.

These new enforcement initiatives and proposals add to an already burgeoning increase in enforcement initiatives at the state and national levels, raising the question of whether additional programs can actually have a substantial impact beyond those already underway to combat fraud and abuse in the  health care sector.

The Deficit Reduction Act (DRA) of 2005 provided states with an incentive to enact False Claims Act statutes similar to the Federal False Claims Act, allowing states to retain 10% of any funds collected under such acts. The impact of the laws adopted in the wake of the DRA is unfolding now in many states and will no doubt lead to a significant jump in qui tam actions.  After a hiatus caused by litigation challenging the program, CMS has continued to roll out the Recovery Audit Contractors Program (RAC) which retains contractors paid on a contingency basis to identify fraud and abuse in the Medicare program.  With funding and a mandate from Congress, CMS also established the Medicaid Integrity Program. The program authorizes CMS contractors to use data mining and analysis techniques that combine health care quality indicators, billing practices, and Medicaid reimbursement rules to predict aberrant billing practices in order to identify providers for audit.

At the state level, Attorneys General as well as state Medicaid fraud offices are also turning to data mining and analysis, enhancing their capacity to identify fraud and target their investigations.[1] State Attorneys General have increased their cooperation nationally, heightening the effectiveness of investigations and actions against corporations that conduct business in multiple states.

Whether increased enforcement funds and cooperation among federal agencies will actually produce significant dollars for health reform remains to be seen. But without question, the combined effect of mounting federal and state enforcement efforts has substantially increased the stakes for health care providers in undertaking a proactive approach to compliance.  Indeed, growing use by federal and state enforcement agencies on data mining and analysis challenges providers to determine how they can use their own internal data to identify compliance problems and address them in advance of government action.[2]

---

[1] Using Data to Advance Compliance: Emerging Practices in Industry and Government
June 4, 2008

Seton Hall Law’s Center for Health & Pharmaceutical Law & Policy program focused on best practices by industry to use data for compliance, and government use of data mining and analysis to enhance oversight. Lori Queisser, Senior Vice President, Global Compliance & Business Practices of Schering Plough and Eileen Erdos, Principal of Ernst and Young, provided insight about how industry can use data to inform internal compliance programs. James Sheehan, New York State Medicaid Inspector General and John Krayniak, Assistant Attorney General, New Jersey Medicaid Fraud Control Unit, spoke about government initiatives to use data to target and pursue enforcement. The program, by invitation only, afforded industry counsel the opportunity to have a dialogue with the region’s two leading state prosecutors. The point being, that the success of enforcement initiatives is not only measured in prosecutions, but also in industry tailoring its behavior to be in compliance.

[2] Using Data to Advance Compliance
On March 16, 2009, the Center for Health and Pharmaceutical Law & Policy co-sponsored a program with KPMG on Using Data to Advance Compliance.  The program, held in New York City for an audience comprised primarily of hospital leaders in compliance, finance, and in-house legal services, featured a presentation by James Sheehan, Medicaid Inspector General for New York State, who discussed how the Office of Medicaid Inspector General is using data to target and pursue investigations.  Experts from KPMG presented practical, concrete strategies for how facilities can use data to advance internal compliance efforts. Ed Kornreich, a partner at Proskauer Rose, examined the implications of data mining for Board fiduciary duties.

---

Synthes Legal Troubles –Again

[Today's Post is by Maansi K. Raswant, a Seton Hall Law student pursuing the Health Law concentration. She is a research assistant to the Center for Health & Pharmaceutical Law & Policy and an intern at the NYC Health and Hospitals Corporation.]

Recently, the Synthes corporation has been garnering a lot of attention, but for all the wrong reasons. A June 17^th indictment comes a little over a month after the New Jersey Attorney General announced that the medical device maker had entered into a settlement agreement for failing to disclose financial conflicts of interests held by physicians conducting clinical trials for its products (see prior post, “Clinical Research: When the Compensation Begs the Answer“). Filed by the United States Attorney for the Eastern District of Pennsylvania, the recent 52-count indictment alleges that from May 2002 to Fall 2004, the Swiss company Norian, and its parent company Synthes, (both based in West Chester, Pennsylvania) conspired to conduct unauthorized clinical trials of Norian XR and Norian SRS, bone cement products used in surgery to treat vertebral compression fractures of the spine. Not only did the trials lack FDA authorization, but the FDA had specifically warned Synthes against using Norian XR for spinal surgery due to safety concerns.

The indictment explains that preliminary studies using human blood in test tubes found that the bone cement products chemically reacted with the blood to create blood clots. In further studies of the prod in a pig, the clots became wedged in the lungs. Despite this knowledge, Synthes continued to market the Norian products for use in spinal surgery, and did not stop doing so until after three patients had died on the operating table.  According to the indictment, rather than recall the products following the patient deaths, the company engaged in a cover up by lying to FDA officers during an official inspection in May and June 2004.

The two recent legal actions against Synthes break new ground, and represent significant inroads by prosecutors in the arena of clinical research. Among other remedies, the settlement with the State of New Jersey required Synthes to disclose all relevant financial interests of its investigators on a public website, and barred the company from compensating investigators with stock, a practice the Attorney General called widespread in the industry. The latest indictment contains not just the usual charges against the corporations, but also criminal charges against four corporate executives charged with shipment of unauthorized devices. If found guilty, each executive faces up to a year in prison.

Crackdown on Fraud and Abuse in Detroit, Miami Signals Health Care Reform as a Priority of the Obama Administration

Federal agents arrested dozens of people in Miami and Detroit yesterday morning for allegedly submitting Medicare claims totaling $50 million for treatments that were unneeded and sometimes never provided, according to The Washington Post.

Later in the day, the Justice Department unsealed criminal indictments against 53 people in connection with the arrests. In Detroit, the indictments focus on costly HIV/AIDS infusion drugs as well as physical and occupational therapy treatments.

According to The Post,

Authorities filed criminal charges against patients, doctors, medical assistants and company owners who allegedly played complicit roles in the fraud schemes. Prosecutors are seeking forfeiture of the criminal proceeds and restitution to the Medicare program.

The action was announced at a news conference held by Attorney General Eric H. Holder Jr., Health and Human Services Director Kathleen Sebelius, and FBI Director Robert S. Mueller III.

We will strike back against those whose fraudulent schemes not only undermine a program upon which 45 million aged and disabled Americans depend, but which also contribute directly to rising health-care costs,

said Attorney General Holder.

Las Vegas Infectious Disease Specialists Accused of Fabricating Medicare Services

The Las Vegas Sun reports that the Nevada Medical Examiners Board is investigating into the falsification of medical records at HealthSouth Tenaya.  Raye Kraft, wife of a patient at this hospital, began to notice “infectious disease specialists Dr. Dhiresh Joshi and his then-employee, Dr. Fadi El Salibi,” writing in Kraft’s husband’s medical charts that they were examining him when they were not.  As her suspicion rose, Ms. Kraft took detailed notes of when the specialists charted activity on her husband, compared these notes with her insurance bill and her own notes of the times they actually examined him, and then sent these notes and comparisons along with a complaint to the Nevada Medical Examiners Board.

The Sun reports:

Her claim: that on an ongoing basis, Joshi and El Salibi were writing in the chart that they had examined her husband when they hadn’t, and then billing for it. One supposed exam was nothing more than the doctor’s friendly wave from the door, she said.

Ms. Kraft’s was not the only person suspicious.  The article notes that another patient “had complained a year earlier to the medical board of similar experiences.”  Additionally, nurses at MountainView Hospital Medical Center also filed complaints  “about El Salibi’s fly-by visits.”

In addition, the number of patients Dr. Joshi has claimed to have examined in the course of  a day has been deemed further cause for suspicion. According to the Sun, Elizabeth Neubauer, Dr. El Salibi’s former billing manager, “said that Joshi himself routinely billed for 70 patients a day. Other infectious diseases doctors say that’s double the number they could reasonably see in a long day of hospital rounds.”

The Sun also reports:

Indeed, a 2004 Medicare audit showed that in a single day, Joshi billed for an impossibly high number of patients - 104, according to Neubauer’s recollection. Joshi said it was 81 Medicare patients, and 20 of them were seen by medical residents under his supervision.

One might have thought that the audit would have served as a red flag for further examination for fraud and abuse at that time.  An  “impossibly high number of patients” is, after all, impossible– and therefore seemingly either the result of either inadvertence or knowing falsehood. If a pattern of such “impossible” billing emerges, “inadvertence” begins to seem less likely– especially when coupled with independent allegations of “overbilling.”

The articles reports that “[a]llegations about doctors fraudulently billing Medicare and insurance companies are whispered throughout the Las Vegas medical community . . . .” One might hope that the numerical evidence derived from audits in cases such as this would do more than whisper– and would occasion heightened scrutiny.

Read more

Next Page »