AHLA's Speaking of Health Law

Fraud and Abuse: Latest False Claims Act Developments

June 07, 2022 AHLA Podcasts
AHLA's Speaking of Health Law
Fraud and Abuse: Latest False Claims Act Developments
Show Notes Transcript

In this episode of AHLA's monthly series on fraud and abuse issues, Matthew Wetzel, Partner, Goodwin Procter, speaks with Robert S. Salcido, Partner, Akin Gump, about recent developments related to the False Claims Act (FCA). They discuss the ongoing split in circuit cases regarding when reasonable clinical judgements can be subject to the FCA, the government’s attack on joint ventures involving referral sources, and potentially amending the FCA’s damages provision to make it fairer to health care entities. Robert is the author of the brand-new Fourth Edition of AHLA’s False Claims Act & The Health Care Industry: Counseling & Litigation. From AHLA's Fraud and Abuse Practice Group. Sponsored by BRG.

To learn more about AHLA and the educational resources available to the health law community, visit americanhealthlaw.org.

Speaker 1:

The following message and support for ALA is provided by Berkeley research group, a global consulting firm that helps organizations advance in the areas of disputes and investigations, corporate finance, and strategy and operations BRG helps clients stay ahead of what's next for more information, visit think brg.com .

Speaker 2:

Good morning. Good evening. Welcome to the American health law association, fraud and abuse podcast. I'm your host, Matt Wetzel, the false claims act looms large over so many aspects of healthcare and touches on all of our work as healthcare lawyers. Whether you represent clients who have been charged with violating the false claims act, or whether you counsel clients on proactive compliance measures, designed to avoid false claims, act violations, all good health lawyers must understand the scope and impact that this Keystone law has on our work. Today, we are joined by Robert Salcito , a partner with Aiken Gump to discuss his latest edition of his book. The false claims act in the healthcare industry, which is a one stop source for legislative and case law development covering the gamut of false claims act litigation. Robert represents clients and false claims act and Keam litigation having successfully defended a number of false claims act actions on behalf of a litany of healthcare clients and organizations prior to joining Aiken gum. Robert served as a trial attorney with the us department of justice, civil fraud unit from 1988 to 1993. Robert, welcome to the podcast and , um, you know, given your background, Robert , uh , and your authorship of the fourth edition now up from the third edition , um, of the , uh , HLA false claims act and healthcare industry book. Um, tell , tell me a little bit Robert, and I know we've talked previously about this, but would love to hear some of your background and, and how you found yourself prosecuting healthcare fraud cases so many years ago.

Speaker 3:

Yes, it , it was really a fluke. What happened was , uh , I graduated from law school in 1988 and , uh , received the job at the honors program at the United States department of justice department of justice for its honor grads allows 'em to select any part of the department of justice that , uh , those individuals wanted to work at. So I thumbed through the catalog , um, of different things. The department of justice does. And for some reason, civil , um , fraud enforcement appealed to me. I , I didn't want to do necessarily criminal law specialize in criminal law and put people in jail. But , uh , the , the pros, the prospect of bringing civil fraud suits under false claims act seemed to appeal to me. So I ended up working with the civil fraud section of the United States department of justice for five years a as you know, that office has nationwide jurisdiction over the false claims act. So all we, the young lawyers did was , uh, bring false claims act actions across the country on behalf of the United States. Um, a a , a couple other aspects , uh , to that is immediately before I joined the department of justice. Congress had made major revisions in the false claims act in 1986. So that ushered in a , a whole new vehicle for the government to actively enforce its fraud and abuse loss . Uh, second , um , healthcare fraud enforcement was taken off at , at that time during the early 1980s , uh , primarily what the government was interested in was prosecuting defense department procurement fraud. So that was the high priority. So they gave to the young attorneys like me, all the Medicare, Medicaid, false claims act cases since they were deemed to be lesser important. So I was lucky enough to be able to specialize in that area.

Speaker 2:

Well , and, and , you know, Robert, one of the things that I appreciate about your practice is that you've , uh, been, you know, sort of a , a key thought leader in the false claims act. You've, you know, not only lived and breathed it and, and forced it and defended against it. Uh , but you've also written extensively about it. Uh , when did you decide to first write the , uh , false claims act book? And , um, and , and how did you get started with that first edition?

Speaker 3:

It was really , um, purely by happenstance. I , uh, came to Aiken Gump in 1993. Um, when , when I left the department of justice and at that time I had done a lot of work for the department of, of justice on one particular topic area, which had to do with whether the relators QAM action was based on a public disclosure and relator was an original source. And I was, DOJs go to guy at understanding that particular provision. So I had a ton of knowledge in terms of how all the different circuits were interpreting that provision and had done appellate courts , uh , cases for the department of justice. So turning that into a law review article, which I did was, was pretty easy. Another area I was interested in was the false claims acter standard , uh , which , uh , applies with reckless disregard or deliberate ignorance. So that turned into another article. And as I turned my attention to different areas during the time period, I was an associated a can go . I kept writing articles. And then once you put all those articles together , um , by , uh , I think it was 1998 going into 1999, I wrote the first edition for the American health lawyers of the false claims act book, but it was just a matter of taking different topic areas within the false claims act, writing on 'em . Um, and then before I knew it, I had a whole book.

Speaker 2:

It , it it's, it's great. And I love hearing how the evolution takes place. I think all of us in our practice have those sort of niche areas , um , where we've developed a personal interest, a professional interest. And , um, just to see how that sort of, you know, grows and evolves over time into now, what we're talking about is the fourth edition of this text. And tell us a little bit Robert about what's new in the book and what's been updated

Speaker 3:

Well, what's, what's been new and updated. There's a particular doctrinal area. That's very important in , in the healthcare world. And actually it stems from a 2007 Supreme court case , uh , safe co-insurance versus Burr , which is a non falses claims act case. But what it said is it, it articulated a principle that those who adopt a reasonable interpretation of an ambiguous rule , uh, does not act with reckless disregard , uh, unless there's official governmental guidance to warn that party away from its interpretation. Now, the reason that doctrine is important in the healthcare world is there are more than 50 cases that have quoted a particular , um, statement that that court seem to latch onto , which is that , uh , with, with respect to Medicare, Medicaid techs , they're about the most impenetrable techs known within human experience. So what anyone operating in the world of Medicare, Medicaid regulations, they're voluminous and frequently they're in incomprehensible taking the doctrine in . So in Safeco and applying it to the, to the healthcare world is important because what happened previously is either the government or whistleblowers would take advantage of ambiguous statutes and regulations to bring a false claims act. What this particular doctrine, the safe code doctrine says is that all the defendant has to do is have a reasonable interpretation of that ambiguous text with no official governmental guidance to warn them away. And that's a dispositive defense. What was , what has been really important since the time safe code was issued is now more than half a dozen appellate court cases have taken that doctrine and applied it to the false claims act. And also in a number of significant cases recently , um, have applied that to , uh , Medicare, Medicaid regulations in particular. So areas that are laid in with ambiguity within the healthcare regulatory world, you could think of , um , uh , Medicaid drug rebate statute. You could think of usual and customary pricing where there's guidance all over the place on those issues. What that doctrine says is long as your interpretation is reasonable and the government and notice and comment rule making or other official government , uh , statements , uh , binding on the agency has not said anything otherwise, then at least you're not gonna get sued under false claims act. So in the latest edition, naturally all that case law is traced out and particular steps then that defendants can take to , to make sure that they can readily invoke that defense is also set out. So

Speaker 2:

Let's talk a little bit about that because I , you know, that certainly comes into bear on many of our practices as health lawyers, digging into the impenetrable texts of, of Medicare and Medicaid, you know, can sometimes be , um, you know, almost a little puzzle like in nature. Um, what are some of those steps that , uh , a healthcare organization can take to ensure that it is sort of, you know, maximizing its use of , uh , Safeco as a, is a defensive posture?

Speaker 3:

Yes. Now the interesting part about Safeco is courts have been saying so far that you do not need to have necessarily a contemporaneous reasonable interpretation of the statute . Uh , the logic behind that is that if E even if after the fact post talk , you have a reasonable interpretation of an ambiguous role, and there's no official governmental guidance out there. Otherwise it's difficult to say that that particular company , uh, was acting recklessly. If in fact the interpretation is reasonable. The , the reason for that is no one's clairvoyant. You can't predict how ultimately the government would resolve that ambiguity. Your duty is only to be reasonable, not withstanding that what all companies should always do is as new official governmental guidance comes out to study it, understand it, come to reasonable conclusions in terms of what the regulations mean, adopt a policy in terms of what is a usual custom charge within the wide array of governmental guidance that exists out there on that same thing with the , um , uh , Medicaid drug rebate statute. If you're operating in that realm, come up with the interpretation of what it means, confirm that it's reasonable. It fits within the, the language of the reg the language of the statute. It's not undermined by other appellate courts. If you document that, and then you get a subpoena down the road asking what was the basis for your interpretation? And then you , you produce that information ultimately to the government. For example, you have a policy that's discoverable, and you could produce under a subpoena. You're gonna curtail almost at the very start the government's investigation.

Speaker 2:

I might also add to that just based on my own experience in addition to sort of having the , the policy and the documentation, but operating consistently with that policy and , uh, and ensuring sort of continued , uh, uh , operations that are consistent with that policy over time through monitoring, auditing, et cetera . Um, you know, we've, we traded a couple of emails , uh , in preparation for our call today. And , um, you know, one area that you mentioned , uh , in connection with our, our , our prep messages here was , um , a split and circuit cases that's currently ongoing , uh , regarding when, if ever , um, reasonable clinical judgements can be subject to a false claims act to action. Do you wanna talk about that a little bit?

Speaker 3:

Yes. This , this doctrine is, is I think very important in , in the healthcare world. And the reason for that is any of us who have dealt extensively with health systems , uh , it , it , it could go across the board , uh , clinical laboratories, dialysis facilities, hospital systems, skilled nursing , uh , facilit systems. Uh , usually they'll do some degree of coding review or analysis of whether services are medically necessary frequently. There'll be disagreement internally , um , among reasonable knowledgeable individuals. Uh, there, there is under the false claims act as, you know, a duty to remit over payments . So theoretically in that situation where there's disagreement internally , um , some people would say, well, at that point, you have a duty to inform the government and remit overpayment, because you have qualified individuals within the workplace who say that in fact, there is, there is an overpayment where the, the doctrine that is, is primarily founded or , or the best lead case for it is the United States versus Erra care . The , the reason the doctrine is important , um , and , and in Theracare , what , what the 11th circuit held is that in order to have a violation of the false claims act, you needed objective falsity . Um, so if you had two experts who reasonably disagree with each other, it it's impossible at that time to say that fraud or, or deception has occurred. The reason for that goes back to where we all learned in law school, which is it , it is impossible to say that an opinion is false. You could prove a false opinion if you show that the speaker knew it to be false, or the speaker didn't do any analysis to find out whether the opinion was true or false, but if it's a genuine opinion, then people are entitled to different opinions. It's , it's not fraud that that's in essence, the 11th circuit decision. So now applying that back to facilities where you have coders, let's say disagree with each other, as long as it's reasonable , um , and reasonable people can disagree. It doesn't necessarily trigger a overpay obligation for those working within the company. That's, that's why I think that doctor and is particularly important for compliance folks out there to, to be aware of it and be able to apply it internally.

Speaker 2:

I , I , and particularly pertinent right now, as health systems and providers grapple with sort of the downstream impacts of COVID 19 guidance that may have been, you know, instructive about coding particular, you know, instances of care, a certain way or another way , um, to account for , um , the COVID 19 virus. Um, you also mentioned in some of your messages , um , the government's attack on joint ventures with referral sources. And I know this has B has been a particular interest for, you know, a , a long time, at least in the near two decades, I've been practicing law. It's been , um , a top of mind for folks. Um , tell us a little bit about some of the government's concerns here and some of the recent developments.

Speaker 3:

Yes. I , I , I think what is, what is important in this area? It , it was amazing. You , you may have experienced it as well when , uh , the OIGs advisory opinion 2118 came out. I was immediately inundated with emails from clients saying , um, we , we just did destroying venture. And , uh , the , the OIG is saying that the type, this type of arrangement could possibly violate the anti kickback statute . Do we have to unwind the, the transaction now where I think the OIG advisory opinion is, is flawed , uh, is that part of the , uh , factual setup for it, or, or the assumed facts , uh, was that you had a therapy services provider that was gonna do a joint venture with skilled nursing facility , uh , U under the assumed facts , the payments made would be at fair market value. Now, the OIG for purposes of issuing its opinion, what will frequently state , um, that it does not take an account, other statutes such as the false claims act? Now, my, my observation on that is that if they had taken in the false claims act, they would realize that their interpretation was dis positively flawed. In , in my opinion, the reason for that is there's an 11th circuit case us X Bingham versus HCA , uh , which says that as long as you pay fair market value, that's not unlawful remuneration for purposes of the anti kickback statute. So that right there undermines the, ultimately the, the OIGs conclusion, but even leaving that aside , um, you , you tie back the , the safe code doctrine that I started with, which is even outside of the 11th circuit, you have the 11th circuit saying that remuneration does not include fair market value payments, just construing the word, re remuneration in the anti type X statute. You might have other , um , courts that disagree with that and say, remuneration is any payment of, of any kind, a much broader interpretation, but if you are a healthcare provider out there and you have this ambiguity and the ambiguity hasn't been resolved , uh , through other appellate court decisions, or through final notice and , and comment rule making by the agency , uh, then you can reasonably rely on your interpretation until there is official governmental guidance or an appellate court decision to warn you away from that. So it it's under this framework again, looking at the OIGs opinion , um, I don't think you could hit the anti kickback statute willful standard, which is higher than the false claims act, reckless disregard deliberate ignorance standard mm-hmm <affirmative> , mm-hmm , <affirmative> applying the safe code rubric . So I , I think that the OIG advisory opinion is , is just fundamentally flawed. Uh , the , the principles in a book would , would also set that out. I , I , I think, and , and demonstrate to the healthcare community, how the OIG got that wrong.

Speaker 2:

And what do you think the downstream impact of that might be from a false claims act , uh , you know, enforcement perspective, this idea that, you know, maybe, and maybe it's a broader idea, Robert, of sort of the OIGs interpretation , um, you know, forward looking interpretation of a statute versus DOJs retroactive enforcement of that statute, you know, do we, will we see any downstream impact from this opinion from 2118 ?

Speaker 3:

The , the answer is possibly, and , and the reason I, I hedge a little bit on that is there , there are some decisions I , I did a case. It was about a decade ago , um, us X real Jameson versus McKesson , where the , um, department of justice, which had intervened in that case cited , um, the OIGs , um, guidance on suspect contractual, joint ventures as a basis for saying that the joint venture that DOJ was , uh , litigating against in that case , uh , violated the false claims act. The judge, in that case, judge ACO threw that out, saying that that's, that's not binding law. So I I'm , whatever that special advisory bulletin says, I'm, I'm not gonna put any weight to that. So that is frequently the, the viewpoint of courts. On the other side, you'll have some judges who will look at prior , um, OIG , um , opinions, advisory opinions, and say that, well, the OIG has informed the world. Now that's not precedent, but it's informed the world. The dis arrangement is potentially problematic. Not withstanding that the, the defendant here engaged in that arrangement. Then you have to ask your question. If , if you're oriented toward , toward that side, are you acting with reckless disregard or deliberate ignorance when you adopt the same framework that the OIG has said is , is possibly a violation of the anti kickback statute. So that that's what creates the dilemma for the healthcare community.

Speaker 2:

There's a lot to pay attention to in this regard. And I know we are , uh , you know, every week it seems like there's a new OIG advisory opinion that comes out and , uh, sort of, you know, requires us to , uh , to take heed and, and , and think about the government's directional points , um , when it comes to compliance and controls and you know, what I views is appropriate in that regard. Um, talk to us a little bit about , uh , amending the false claims act , uh , damages provisions that might make it a little fairer for healthcare entities. You mentioned that in one of your notes to me as well.

Speaker 3:

Yes. And what what's really important there, there , there was a case that, that that's also described in a book that came out late in 2021 , uh , us X Yates versus pans hematology. Uh , what he had, there was a , um, damages that were found of $744 . Um, so usually under the false claim act , you would trouble that amount. So a little north of 2,100 , um , dollars. But in that case, the , the court found that there were 214 civil penalties. And during that time period, the minimum amount for civil penalties was 5,500 . So it resulted in more than 1.1 million judgment based on 744 overpayment. Um, the 11th circuit rejected the defendant's argument that, that violated the eighth amendment. So you see the, the obstacle that the healthcare community confronts , uh , because you have particular segments of the industry, whether it's at small dollar claims in the , the laboratory field, or even even take physician services, you could have $120 office visit that in and of itself. If it's knowingly false could result. Now, the , the minimum , uh , civil penalty amount is close to 12,000. You get have a hundred and , and $20 office visit generate more than $12,000 in , in potential exposure to liability. What that has caused I , in my view is for a disproportionate number of actions to be filed against the healthcare industry. For example, last year out to 5.6 billion, the government recovered 5 billion of that was targeted against the , the healthcare industry right now, proportionately federal funding with respect to healthcare , isn't that dis disproportionate to lead you to believe that roughly 90%, 85 to 90% of the government recoveries would be in the , in the healthcare realm. The reason I believe that happens is because of the civil penalty , um , provision, and the fact that you have so many low dollar claims in the healthcare world that could generate this type of massive exposure to liability. It's not like defense procurement, where you're , you're spending millions of dollars on a claim for a jet engine , uh , or a missile. So , um, the , the legislative potential legislative proposals that have been kicked around is to state that , um, if the dollar amount involved in the claim is less than the minimum amount of civil penalties, then the amount of civil penalties, the government or relator could recover is gonna be the dollar amount of the claim. So , um, in , in Yates , for example, let's say that there was a $50 lab test that was found to be false. Um , instead of awarding in , in that case, what was then a minimum amount, 5,500 as a civil penalty, you would take the $50 of the , the lab claim, and that would be your civil penalty amount. So people are thinking of different ways of making this fairer and make it so that the healthcare industry wasn't , um, disproportionately targeted as opposed to all other industries.

Speaker 2:

Absolutely. I mean, even if you were to withdraw some of the sort of higher profile fraud cases, and, you know, for example, the , uh , Purdue pharma settlement , uh , from last year, even then, it's still a disproportionate amount of recoveries in the healthcare space. And this conceptually could, you know, or conceivably rather could make this, make it a little bit fairer and, you know, maybe put , put less of a target on our, our , our client's backs, so to speak , uh, and , uh, and , uh , you know, perhaps be beneficial in that way. Um, Roberts Aceto , it's been so great. Um , catching up with you and hearing about this latest edition of the false claims act in healthcare industry book. Um , we're looking forward to it coming out and , uh, thanks so much for the time today. This has been really enlightening and, and , uh , hope you enjoyed it.

Speaker 3:

Thank you, Matt, always nice talking to you,

Speaker 2:

You as well, so much, and thank you to our sponsor, the Berkeley research group for your continued support and to the listeners of the ALA fraud and abuse podcast. Thanks so much for continuing to download and listen in once again. I'm your host, Matt Wetzel, and we look forward to bringing you another edition of the podcast next month.

Speaker 4:

Thank you for listening. If you enjoyed this episode, be sure to subscribe to ALA speaking of health law, wherever you get your podcasts to learn more about ALA and the educational resources available to the health law community, visit American health law.org .