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There is a growing interest of qui tam plaintiffs, or whistleblowers, to bring claims alleging violations of statutory or regulatory requirements under the False Claims Act (FCA). [FOOTNOTE 1]This trend is reflected in the government’s decision to intervene in three qui tam cases that allege kickbacks to physicians. While the law is unsettled in this area, counsel for health care providers should recognize the potential threat posed by these new FCA options and act to reduce the risk that their clients will be named in one of these types of lawsuits. In what is the largest fraud settlement ever negotiated by the Department of Justice (DOJ), last December the former Columbia/HCA, a national hospital and ancillary health care chain, agreed to pay $840 million dollars — $745 million in civil damages and penalties and $95 million in criminal fines — to settle allegations of health care fraud. [FOOTNOTE 2]The settlement arose from 28 different qui tam suits filed against Columbia under the FCA. The case is noteworthy not only for its high dollar figure, but also because it failed to resolve all of the government’s claims. Of the eight ongoing cases in which the government filed amended complaints in March, three contain an expansive theory of FCA liability that will offer qui tam plaintiffs, called “relators,” more opportunities than ever before. [FOOTNOTE 3] This expanded theory transforms into a “false” claim actionable under the FCA, any allegedly improper kickback or referral that violates certain fraud and abuse statutes governing federal health care programs. [FOOTNOTE 4]The first principal fraud-and-abuse statute, commonly known as the “Stark” self-referral ban, [FOOTNOTE 5]prohibits physicians from referring to entities with which they, or their families, have financial relationships. The second principal fraud-and-abuse statute, known as the Anti-kickback statute, [FOOTNOTE 6]prohibits soliciting or receiving remuneration in return for referrals of Medicare patients, and also prohibits paying remuneration to induce such referrals. In light of the expansive theory of false claims liability being pursued in Columbiaand other cases, attorneys representing health care clients should counsel their clients to anticipate many more qui tam cases arising from alleged violations of the Anti-kickback and Stark statutes and act now to reduce this risk. A NEW TWIST TO “FALSE” Typically, qui tam FCA cases in health care involve allegations of billing for unperformed or unnecessary services. But to deem as a “false” claim, any failure to satisfy all of the statutory and regulatory provisions applicable to a government program, potentially opens a flood of new litigation. As counsel for health care clients well know, qui tam litigation is big business. If successful, relators receive up to 30 percent of the government’s recovery, plus attorney fees. [FOOTNOTE 7]The DOJ recovered $1.5 billion in civil fraud cases last year, and 80 percent, or $1.2 billion, arose in connection with qui tam cases. [FOOTNOTE 8]Mandatory penalties of between $5,500 and $11,000 per false or fraudulent claim plus treble damages, attorney fees and the possibility of exclusion from participation in federal health care programs make FCA cases very expensive for health care providers. [FOOTNOTE 9] The theory underlying false claims cases based on Anti-kickback and Stark violations is that any claim submitted in violation of a law or regulation governing a federal health care program is tainted and, thereby, “false.” The alleged falsity arises from a provider’s certification on claim forms that its services are delivered in compliance with those laws and regulations. In Columbia, [FOOTNOTE 10]for example, the alleged false certifications appeared on HCFA-2552 forms (hospital cost reports) that were submitted to the Health Care Financing Administration, the agency that administers Medicare. Hospital cost reports include the following notation, signed by a hospital representative: “I hereby certify … that I am familiar with the laws and regulations regarding the provision of health care services and that the services identified in this cost report were provided in compliance with such laws and regulations.” [FOOTNOTE 11]Immediately above that statement, the cost report references those laws and regulations: “[I]f services identified in this report were provided or procured through the payment directly or indirectly of a kickback or where otherwise illegal, criminal, civil and administrative action, fines, and/or imprisonment may result.” The leading circuit court opinion to address whether an Anti-kickback or Stark law claim can be the basis for a qui tam FCA case declined to resolve it. [FOOTNOTE 12]Instead, the 5th U.S. Circuit Court of Appeals found that “claims for services rendered in violation of a statute do not necessarily constitute false or fraudulent claims under the FCA” but a statutory violation of the Anti-kickback or Stark laws may lead to an FCA suit “where the government has conditioned payment of a claim upon a claimant’s certification of compliance” with the statute. [FOOTNOTE 13]On remand, the district court found that the certification statement was a condition for Medicare payment, but limited its holding to claims involving an express certification of compliance. [FOOTNOTE 14] Other courts have extended this FCA theory to include “implied certifications” on different HCFA claims forms like HCFA-1500, used by non-institutional providers. Last summer, in United States ex. rel. Kneepkins, the U.S. District Court for the District of Massachusetts denied a motion to dismiss a qui tam case based on allegations that the defendants violated the Anti-kickback law and Medicare’s regulatory requirement that services be provided “economically.” [FOOTNOTE 15]The court recognized that the defendant’s claims contained no express certification that services had been provided in accord with those provisions. But in a ruling that even the court called “not uncontroversial,” it found that the defendants made an “implied certification” of compliance that can give rise to an FCA action because “[s]ubmitting a claim under the false pretense of entitlement is fraudulent.” [FOOTNOTE 16] In contrast to the HCFA-2252, noticeably absent from the HCFA-1500 form is any statement suggesting that compliance with federal laws or regulations applicable to the Medicare program is a prerequisite for payment. The only certification the claimant makes on the form is that the services for which payment is sought “were medically indicated and necessary for the health of the patient and were personally furnished by me or were furnished incident to my professional services.” [FOOTNOTE 17] The majority of circuit courts have rejected the theory that an implied certification of compliance with a statute or regulation can serve as the basis for a qui tam FCA suit. [FOOTNOTE 18]These courts allow an FCA claim based on violation of another statute or regulation only where it can be shown that certification of compliance with that statute or regulation is a condition for payment. The Kneepkinscourt dodged this requirement by finding instead that an FCA claim can proceed if the defendants “omitted” material facts “in order to deceive the government into making payments [that] it otherwise would have withheld.” [FOOTNOTE 19]In other words, if a provider submits a claim for payment when it is not in compliance with the statutory and regulatory requirements applicable to the program from which payment is sought, then those claims become “false” claims for FCA purposes. [FOOTNOTE 20] TAKING PRECAUTIONS This reasoning challenges the “well-established principle that the FCA is not a vehicle for regulatory compliance.” [FOOTNOTE 21]The willingness of some courts to allow false claims actions based on Anti-kickback, Stark and some regulatory violations means, however, that health care providers and their counsel will face a growing number and variety of qui tam actions. There are several things counsel and their clients can do to minimize the likelihood of facing an FCA suit for Anti-kickback or Stark violations. They need first to understand the statutes’ terms and how the government applies them. The laws can apply to a wide range of business activities that, but for occurring in the health care setting, would be perfectly acceptable. Several sources of information provide guidance to identify whether an arrangement may implicate these laws. The Anti-kickback law’s safe harbor regulations describe specific business practices between referrers and recipients that will not give rise to enforcement actions. [FOOTNOTE 22]Currently, there are 22 safe harbors. Reading them along with the preambles to the rules announcing them will provide substantial insight into the government’s views about what is, and is not, covered by the law. The Department of Health and Human Services’ Office of Inspector General (OIG) offers several other sources of guidance to assist in understanding what types of transactions are likely to implicate the Anti-kickback law. The OIG’s “Special Fraud Alerts” identify practices in the health care industry that the OIG sees as particularly vulnerable to abuse. Additionally, the OIG publishes “Advisory Opinions” that address the permissibility of specific conduct or arrangements in response to public inquiries. To date, the OIG has issued approximately 11 Special Fraud Alerts and 54 Advisory Opinions. [FOOTNOTE 23] The regulations implementing the Stark self-referral ban, which prohibits physicians from referring to entities with which they, or their families, have financial relationships, detail certain exceptions to the law. [FOOTNOTE 24]To fit within an exception, an arrangement must satisfy certain criteria. Counsel should review these requirements carefully. Because Stark contains no intent requirement, any arrangement that may be covered by the law should be structured to fit within an exception. HCFA issues advisory opinions regarding application of the Stark law to physicians’ referrals involving designated health services, other than clinical laboratory services. [FOOTNOTE 25] REDUCING RISK OF LAWSUITS In seeking to understand what sorts of activities implicate these laws, counsel should also review the OIG’s compliance program guidances. These documents set forth model compliance plans targeted to specific provider types, such as laboratories or hospitals. [FOOTNOTE 26]Counsel should review these documents both to understand what practices are deemed appropriate and to assist them in helping their clients develop their own compliance plans. Having an effective compliance plan may go a long way toward mitigating liability in the event that a client faces an FCA claim. Second, counsel for health care providers wanting to reduce the risk that their clients will face a qui tam action should recognize who brings such cases. By far, the vast majority of relators are disgruntled employees or former employees who are unhappy about some aspect of their employment relationship. In the words of the 9th Circuit, “the archetypal qui tam FCA action is filed by an insider at a private company who discovers his employer has overcharged under a government contract.” [FOOTNOTE 27]Relators can be any employee, sub-contractor, representative, agent, vendor, shareholder, competitor or client. Compliance officers, even if they participate in the wrongdoing themselves, can be qui tam relators and still recover a whistleblower fee, so long as they are not the original instigators of the wrongdoing. Employees who believe that they are treated fairly, who are or were happy in their jobs, who respect and feel loyal to their current or former employer, and who feel that their employer is committed to compliant and ethical conduct, are unlikely to bring suit, even if they find that a mistake has been made. Counsel for health care providers should advise their clients to ensure that human resources needs are handled by individuals who are knowledgeable about health care compliance and the FCA’s qui tam provisions. Third, counsel for health care providers also should advise their clients to implement an effective and regular compliance training program that satisfies the standards established in the OIG’s compliance guidelines. [FOOTNOTE 28]Adopting a compliance program, one that includes a plan and training, tells employees that a provider takes seriously its obligations to comply with the law. Employees should be encouraged to ask questions and communicate concerns about conduct that may be inappropriate. Employers should obtain and provide meaningful answers to compliance questions and should respond quickly and appropriately to allegations of possible wrongdoing. Assuring that complaints are investigated and resolved not only can help the employer stem or prevent liability, but also can deter employees from instituting qui tam suits. Hope S. Foster is a partner and co-chair of the health care section, and Valerie E. Hurt is an associate, in the Washington, D.C., office of Boston’s Mintz, Levin, Cohn, Ferris, Glovsky and Popeo. They can be reached at [email protected]and [email protected], respectively. ::::FOOTNOTES:::: FN131 U.S.C. 3729(a). FN2DOJ Press Release, “HCA: The Health Care Company & Subsidiaries to Pay $840 Million in Criminal Fines and Civil Damages and Penalties,” (Dec. 14, 2000). This press release is available at www.doj.gov. FN3 U.S. ex rel. Thompson v. HCA, No. 99-3302 (D.D.C. filed March 15, 2001); U.S. ex rel. King v. HCA, No. 99-3306 (D.D.C. filed March 15, 2001); U.S. ex rel. Mroz v. HCA, No. 99-3292 (D.D.C. filed March 15, 2001). FN442 U.S.C. 1320a-7b(b)(1)(A); 42 U.S.C. 1395nn. FN542 U.S.C. 1395nn. FN642 U.S.C. 1320a-7b. FN731 U.S.C. 3729(a). FN8DOJ Press Release, “Justice Recovers Record $1.5 Billion in Fraud Payments, Highest Ever for One Year Period” (Nov. 2, 2000). This press release is available at www.doj.gov. FN931 U.S.C. 3729(a); 64 Fed. Reg. 47099 (Aug. 30, 1999) (setting penalties). FN10 U.S. ex rel. Thompson v. HCA, No. 99-3302 (D.D.C. filed March 15, 2001); U.S. ex rel. King v. HCA, No. 99-3306 (D.D.C. filed March 15, 2001); U.S. ex rel. Mroz v. HCA, No. 99-3292 (D.D.C. filed March 15, 2001). FN11HCFA-2552. FN12 U.S. ex. rel. Thompson v. Columbia/HCA Healthcare Corp., 125 F.3d 899, 902 (5th Cir. 1997). FN13I d., citing U.S. ex. rel. Hopper v. Anton, 91 F.3d 1261, 1266 (9th Cir. 1996) (finding that “violations of laws, rules, or regulations alone do not create a cause of action under the FCA”). FN14 U.S. ex. rel. Thompson v. Columbia/HCA Healthcare Corp., 20 F. Supp.2d 1017, 1048 n.33 (S.D. Texas). FN15 U.S. ex. rel. Kneepkins v. Gambro Healthcare, Inc., 115 F. Supp.2d 35 (D. Mass. July 18, 2000) (referencing 42 U.S.C. 1320s-5(a)(1)). FN16 Id. at 43. FN17HCFA-1500. FN18 See, e.g., U.S. ex rel. Siewick v. Jamieson Science and Engineering, Inc., 2000 U.S. App. Lexis 15370 (D.D.C. June 30, 2000); Harrison v. Westinghouse Savannah River. Co., 176 F.3d 776, 793 (4th Cir. 1999); U.S. ex. rel. Thompson v. Columbia/HCA Healthcare Corp., 125 F.3d 899, 902 (5th Cir. 1997); U.S. ex rel. Hopper v. Anton, 91 F.3d 1261, 1266 (9th Cir. 1996). But see U.S. ex rel. Pogue v. American Healthcare Corp., 914 F. Supp. 1507, 1509 (N.D. Tenn. 1996); Ab-Tech Constr., Inc. v. United States, 31 Fed. Cl. 429 (1994), aff’d, 57 F.3d 1084 (Fed. Cir. 1995) (without opinion). FN19 Kneepkins, 115 F. Supp. at 43. The court cited only two cases in support of its holding: U.S. ex rel. Pogue v. American Healthcare Corp., 914 F. Supp. 1507 (N.D. Tenn. 1996); U.S. ex rel. Luckey v. Baxter Healthcare Corp., 183 F.3d 730, 732 (7th Cir. 1999). FN20The Thompsondistrict court alluded to a similar theory of false misrepresentation of entitlement, but its reasoning was rooted firmly in the express certification of compliance that it found in the HCFA-2552. Thompson, 20 F. Supp.2d at 1047-1048. FN21 See, e.g., Luckey v. Baxter Healthcare Corp., 2 F. Supp.2d 1034, 1045 (N.D. Ill. 1998) (citations omitted). FN2242 C.F.R. 1001.952. FN23Alerts and opinions are available at www.hhs.gov/progorg/oig/index.ht. FN24 SeeHCFA, Medicare Programs; Physician Financial Relationships With, and Referrals to, Health Care Entities that Furnish Clinical Laboratory Services; Financial Relationship Reporting Requirements, Final Rule, 60 Fed. Reg. 41,914 (Aug. 14, 1995) (implementing clinical laboratory provisions); HCFA, Medicare and Medicaid Programs; Physicians’ Referrals to Health Care Entities with which they have Financial Relationships; Final Rule 66 Fed. Reg. 856 (Jan. 4, 2001) (implementing designated health services provisions). FN25Those opinions are available at www.hcfa.gov/regs/aop/. FN26 See, e.g.,OIG, Compliance Program Guidance for Hospitals, 63 Fed. Reg. 8987 (Feb. 23, 1998); OIG, Compliance Program Guidance for Clinical Laboratories, 62 Fed. Reg. 9435 (Mar. 3, 1997), as amended in 63 Fed. Reg. 45,076 (Aug. 24, 1998). FN27 U.S. ex rel. Hopper v. Anton, 91 F.3d 1261, 1266 (9th Cir. 1996). FN28The OIG in its compliance guidance emphasizes seven specific criteria. For details of the criteria, see generally 62 Fed. Reg. 9436-9440 (Feb. 23, 1998).

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