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October 03, 2020 01:00 AM

Healthcare fraud probes grow in number, intensity

Alex Kacik
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    The possibility of scoring a lucrative healthcare fraud settlement may be spurring broad information requests by the government that look more like “fishing expeditions” than targeted investigations, and as a result are driving up providers’ costs, legal experts said.

    Healthcare fraud investigations have consistently netted the government more than $2 billion in settlements a year since 2010, with whistleblowers recouping hundreds of millions of that share annually, according to U.S. Justice Department data. A “historic” $6 billion healthcare fraud investigation unveiled last week will likely fuel more federal and state probes.

    The number of cases brought by a whistleblower jumped from around 200 a year in the early 2000s to more than 400 annually since 2011.

    Now that financial incentive is likely drawing more frequent and comprehensive state and federal investigations, legal experts said.

    “Burdensome investigative demands for documents seem to be on the rise, possibly due to reallocation of FBI and other investigative support and the deadlines Justice Department attorneys face in pending False Claims Act qui tam cases,” said Craig Smith, partner at Hogan Lovells.

    Investigators often start broad and can ask for five to 10 years of data. That can cost providers tens or hundreds of thousands of dollars in data analysis, resource allocation and legal counsel, said Mark Silberman, chair of Benesch’s white collar, government investigations and regulatory compliance practice group who has served as a state and federal prosecutor. “They sometimes root out terrible fraud, but the problem is the government doesn’t seem to be doing much diligence to see if the claims are valid,” Silberman said, adding  investigators often deputize public health agencies in the discovery process. “They are putting the burden on facilities to evaluate the information and prove that everything is OK.”

    Silberman wondered to what extent prosecutors might be launching investigations to try to justify and maintain their budgets.

    The Justice Department did not respond to requests for comment.

    Long-term care providers a vulnerable target

    The pandemic will likely give prosecutors more ammunition to pursue legal actions in the long-term care sector, legal experts said.

    In early March, the U.S. Justice Department launched a national initiative to coordinate and enhance civil and criminal enforcement action against long-term care facilities. Although the initiative didn’t directly stem from COVID-19, regulators noted that they started investigating 30 nursing homes’ adherence to basic infection-control protocols, among other issues related to patient safety and care quality.

    “The government is very unsympathetic about everything nursing homes and long-term care facilities are going through today with the COVID pandemic—you would think they would be a little more lax in enforcement,” said Neville Bilimoria, partner at Duane Morris. “In fact, they seem to be going full speed ahead, almost taking advantage of the clinical problems healthcare providers are dealing with and hitting them over the head with civil monetary penalties.”

    A wave of audits is coming related to how providers spent federal relief funding, he said.

    “We’ve been telling our clients that they better have a folder ready for the government about every penny you spent that money on. If they can’t account for it, they could ask for it back, issue civil monetary penalties or even suspend Medicare payments or exclude you from the program,” Bilimoria said.

    It could start with a tip

    Designed to keep false claims and similar actions at bay, whistleblower civil and criminal fraud cases often start with a tip from inside the offending organization. Whistleblowers can reap up to 25% of the settlement if one is reached.

    “There is always going to be that financial incentive that drives the system when there is the possibility of hitting a jackpot,” said Christopher Hotaling, a partner at Nixon Peabody who worked as a federal prosecutor in the U.S. Attorney’s Office in Chicago.

    But Hotaling said in more-recent discovery processes, subpoenas and civil investigative demands may be broader than they have been, but not by a significant margin. Still, potential nine-figure settlements are likely driving larger information requests, he said.

    Federal overseers typically suss out the whistleblower’s claims, starting with the allegations and if they constitute fraud, interviewing the whistleblower and reviewing their documentation. After some initial fact-finding, the government decides whether it wants to intervene in the case—which it does less than 25% of the time. It could also allow the whistleblower to pursue the case or move to dismiss it.

    It’s best to work with investigators, try to narrow their requests and persuade the government not to intervene in the suit, Smith said. “The last thing you want is to be defending against an ill-informed fraud suit brought by your biggest customer,” he said.

    Michael Shaheen, a partner at Crowell & Moring and former trial attorney with the Justice Department’s fraud section, said he hasn’t seen the government’s due diligence dip. Before the government approached the provider, it would almost always assess the legal merits of the whistleblower’s claims; interview the individual and review their documents; talk to former employees of the accused provider; and analyze government data to identify any problematic billing practices, he said.

    “Only after exhausting those investigative strategies would I reach out to the defendant provider, and I believe most of my colleagues followed the same procedures,” Shaheen said.

    Five largest healthcare fraud settlements of 2020

    1) Amount: $6 billion
    Allegations concern: Telehealth/opioid fraud 
    More than 340 individuals were charged with submitting false claims to federal healthcare programs and private insurers for telehealth services and substance abuse treatment, among other services. The U.S. Justice Department described the investigation, which involved 51 judicial districts, as the largest healthcare fraud case in history.

    2) Amount: $2 billion
    Allegations concern: Misleading opioid marketing
    Indivior Solutions agreed to pay $600 million to resolve its misleading marketing of opioid-addiction-treatment drug Suboxone, which followed a $1.4 billion settlement with former parent company Reckitt Benckiser Group.

    3) Amount: $681 million
    Allegations concern: Unnecessary tests 
    Florida doctors allegedly billed Medicare and private insurers for unnecessary urine drug tests and blood tests, psychiatric testing, prescription drugs and other services.

    4) Amount: $642 million
    Allegations concern: Pharmaceutical kickbacks
    Novartis allegedly funneled cash to pay Medicare beneficiaries’ drug copayments through independent foundations. The pharmaceutical company also allegedly paid kickbacks to doctors.

    5) Amount: $475 million
    Allegations concern: Telehealth kickback scheme
    A Georgia-based durable medical equipment company allegedly paid kickbacks for prospective patients. The physicians receiving the kickbacks allegedly knowingly signed false medical records describing “consultations” with Medicare patients. It was the 25th defendant charged in a $475 million Georgia telefraud scheme.

    Source: HHS’ Office of Inspector General

    A document called the Granston memo is meant as a guide to weeding out frivolous False Claims Act cases, as it advises the government to be more selective about what cases are being brought in its name. Since it was promulgated in early 2018, there have been approximately 45 government motions to dismiss FCA cases, Smith said. That’s a fairly significant increase, considering that it has been historically rare for the government to move to dismiss an FCA suit brought by a whistleblower, he said.

    But in a probe’s early stages, strategy varies by jurisdiction. Some investigators issue broad requests as they “fish” for anomalies, others use a more focused approach. “Some have a scorched-earth approach where they request everything related to a matter,” said Robert Salcido, an Akin Gump partner.

    Since the COVID-19 pandemic hit, Salcido said he has seen both extremes. In one case, the jurisdiction involved had a strong political mandate to get to the bottom of whether nursing homes took adequate precautions to protect residents and staff. That placed onerous demands on prosecutors, who had to deal with a large quantity of documents and an expedited time period, he said.

    In a case alleging price gouging for personal protective equipment, the government investigator recognized the time and expense of getting the documentation for every PPE vendor, so they asked the provider for a subset of data as soon as realistically possible, Salcido said.

    “There’s a perception that at times the political appointees feel a great deal of pressure to say they held the industry accountable, particularly during these tough times when a lot of people have had adverse health impacts,” he said.

    While there aren’t specific guidelines about how much documentation investigators can ask for, there is an implicit limitation, Salcido said. If subpoenas or civil investigative demands are overly burdensome and defendants successfully push back, it could build a negative body of case law, which could give other providers incentives to follow suit, he said.

    The False Claims Act gives investigators a lot of leeway, and it doesn’t seem that the government has any motivation to change it, given the significant return on investment, said Neville Bilimoria, partner at Duane Morris.

    “Certainly healthcare providers can fall victim to overly burdensome document requests, subpoenas or civil investigative demands and get taken on a fishing expedition,” he said, adding that there has been an uptick in the scope of the documentation requests. “The only thing to do is work with the government to try to limit those.”

    Employee burnout is more prevalent than ever. Are you investing in the mental health of your employees? Join the conversation on Thursday, October 8 at the Workplace of the Future Conference. Register with code MHEdit for 15% the registration fee (new registrations only).

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