Tag Archives: Fraud

An Ever Widening Gap: Circuit Split on the Applicable Pleading Standard for the False Claims Act

Many areas of the False Claim Act are subject to legal interpretation and have been subject to Circuit splits, sometimes resulting in rulings from the Supreme Court.  In the United States, there are thirteen federal circuit courts that provide intermediate appellate review of the federal district courts in several states.  The decision by a circuit court has binding authority on the district courts within its jurisdiction.  When there is a conflict between circuit courts on an important issue it creates the basis for review by the Supreme Court.

One such area that is currently subject to a Circuit split is the standard to which a relator or the government must plead their case for the False Claims Act.  The Federal Rules of Civil Procedure, Rule 9(b), requires that when alleging fraud or mistake, “a party must state with particularity the circumstances constituting fraud or mistake.” F.R.C.P. Rule 9(b).

The Third, Fifth, Seventh, Ninth and Tenth Circuits have adopted a broader reading of the pleading requirements in a False Claims Act, finding that a relator must only “offer[] particular and reliable indicia that false bills were actually submitted” to the government as result of a particular scheme.  U.S. ex rel. Grubbs v. Kanneganti, 565 F.3d 180, 188-89 (5th Cir. 2009).  However, the First, Sixth and Eleventh Circuits have adopted a much stricter interpretation set forth by the First Circuit in U.S. ex rel. Karvelas v. Melrose-Wakefield Hospital.  In Karvelas, the Court found

a relator must provide details that identify particular false claims for payment that were submitted to the government…[D]etails concerning the dates of the claims, the content of the forms or bills submitted, their identification numbers, the amount of money charged to the government, the particular goods or services for which the government was billed, the individuals involved in the billing, and the length of time between the alleged fraudulent practices and the submission of claims based on those practices.  U.S. ex rel. Karvelas v. Melrose-Wakefield Hospital, 360 F.3d 220, 232-33 (1st Cir. 2044), abrogated on other grounds by Allison Engine Co., 553 U.S. 662.

As of now, the 2nd Circuit has not yet opined on the particularity standard.  However, the District Courts in New York have analyzed the Circuit split in several cases and have adopted the stricter standard as set forth in the First, Sixth and Eleventh Circuits.  See, U.S. ex. rel. Mooney v. Americare, Inc., 2013 WL 1346022 (E.D.N.Y. 2013); United States ex rel. Siegel v. Roche Diagnostics, Corp., 988 F. Supp. 2d 341, 346 (E.D.N.Y. 2013); United States ex rel. Moore v. GlaxoSmithKline, LLC, 2013 WL 6085125, at *5 (E.D.N.Y. October 18, 2013); U.S. ex rel. Osmose, Inc. v. Chemical Specialties, Inc., 2014 WL 234819 (W.D.N.Y. 2014); U.S. v. Wells Fargo Bank, N.A., 2013 WL 5312564 (S.D.N.Y. Sept. 24, 2013); U.S. v. Dialysis Clinic Inc., 2011 WL 167246 (N.D.N.Y. 2011).  Two recent cases in the District Courts of New York have also adopted this stricter standard.  In U.S. ex rel. Kester v. Novartis Pharmaceuticals Corp., 2104 WL 2324465 (S.D.N.Y. May 29, 2014) the Court stated,

Though no Second Circuit opinion addresses the degree of particularity with which a plaintiff asserting an FCA claim must plead the submission of a false claim, the court has issued a summary order on the subject. In Wood ex rel. United States v. Applied Research Associates, Inc., 328 Fed. App’x 744 (2d Cir.2009), the court affirmed the district court’s dismissal of an FCA action on the basis that the plaintiff failed to satisfy Rule 9(b)….Wood lacks precedential value, but it strongly suggests that the Second Circuit would approve a pleading rule comparable to the “identification” standard articulated in Karvelas. Kester, supra *13. 

Recently, the Court in U.S. ex rel. Corporate Compliance Associates, also adopted the heightened pleading standard as set forth in the First, Sixth and Eleventh Circuits, finding that “[t]his Court agrees that Grubbs would likely not be accepted as the law of this Circuit. Clausen and Karvelas are more consistent with decades of Second Circuit precedent.” U.S. ex rel. Corporate Compliance Associates v. NY Soc. for the Relief of the Ruptured and Crippled, Maintaining the Hospital for Special Surgery, 2014 WL 3905742, *15 (S.D.N.Y. Aug. 7, 2014). 

While not settled in the 2nd Circuit, it appears that most of the District Courts have sided with the First, Sixth and Eleventh Circuits in adopting a heightened pleading standard for qui tam actions, further deepening the Circuit split on the issue and making it a ripe issue for the Supreme Court to address.  The impact of the decision by the Supreme Court on this issue would have a tremendous effect on parties in False Claims Act litigation.

For more information, please contact the author, Danielle Holley.  She can be reached by calling (518) 462-5601 or by email at dholley@oalaw.com  

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Filed under False Claims Act, Federal Case Updates, Fraud and Abuse

Attention Medicaid and Medicare Providers: US DOJ Sues Providers for Failing to Return Overpayments Within 60 Days

On June 27, 2014, in the case of United States ex rel. Kane v. Healthfirst, Inc., et al., No. 11-2325 (S.D.N.Y.), the United States Department of Justice (USDOJ), via the United States Attorney’s Office for the Southern District of New York, sued several Medicaid providers under the federal False Claims Act for failing to return Medicaid overpayments within 60 days of identifying them. Continue reading

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Filed under False Claims Act, Federal Case Updates, Fraud and Abuse, Medicaid, Medicaid Fraud, Medicare, Medicare Fraud

Applicability of Fraud and Abuse Rules to the Marketplace Clarified … Somewhat

One of the lingering questions about the Health Insurance Marketplace created under the Affordable Care Act is whether plans on the Marketplace are considered part of a Federal health care program, thus opening up potential liability under the Anti-Kickback Statute. There was concern that the broad language defining a “Federal health care program” would apply to the Exchanges because of the federal tax subsidizes provided to individuals on the private market.  Under 42 U.S.C. 1320a-7b(f)(1), a “Federal health care program” is defined as “any plan or program that provides health benefits, whether directly, through insurance, or otherwise, which is funded directly, in whole or in part, by the United States Government.”  This presented the possibility that, by virtue of the inclusion of federal subsidy payments, even private insurance plans on the Marketplace and the state Exchanges would constitute Federal health care programs and necessitate compliance with the entire array of federal legal requirements.    Continue reading

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Filed under False Claims Act, Fraud and Abuse, PPACA

Proposed Rule to Extend and Amend the Exception to Donate Electronic Health Records Items and Services

The Office of Inspector General for the Department of Health and Human Services (OIG) and the Centers for Medicare and Medicaid Services (CMS) published on April 10, 2013 proposed rules to extend and amend the Electronic Health Records (EHR) donation exceptions under the Anti-Kickback Statute and Stark Law, respectively.

The proposed rules would extend the exceptions until the end of 2016, but both the OIG and CMS are seeking comments on extending the sunset date to December 31, 2021, which corresponds to the end of the EHR Medicaid incentives program.  Under the current law, both exceptions are set to sunset on December 31, 2013 .

In addition, the OIG and CMS propose to amend the conditions of the EHR donation exceptions by removing the electronic prescribing requirement and redefining (i.e. limiting) the type of entities that can donate.   The current EHR donation exceptions permit donations by any individual or entity that provides patients with health care items or services covered by a Federal health care program, based on a public policy initiative to expedite adoption and use of EHR systems.  The proposed rules would remove, among other entities, clinical laboratories and pharmacies from the definition of a protected donor.

Finally, the OIG and CMS propose to address a critical issue identified as “data and referral lock-in,” in which EHR technology that appears to support the interoperable exchange of information on its face, in practice restricts the recipient provider to transmit data and communicate only with the donor entity to control referrals.  In response, the OIG and CMS propose to require that the donated EHR software is certified in accordance with the definition of Certified EHR Technology applicable on the date of the donation. Under the current law, both exceptions require only that the EHR software is interoperable.

Comments on the proposed rules will be accepted for 61 days from the date of publication, which is June 10, 2013.

This post is contributed by Charles Dunham.

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Filed under Anti-Kickback Statute, Electronic Health Records, False Claims Act, Fraud and Abuse, Laboratories, Medicaid, Medicaid Fraud, Medicare Fraud, Stark Law

Auditing the Auditors, Part II: New York State Senate Republicans Request Independent Audit of the OMIG

As a result of a recent Congressional report on New York State’s Medicaid program, the Legislative Gazette has reported that Senate Republican leader Dean Skelos and New York State Senate’s Republican Conference have called for an independent audit of the New York State Medicaid program. A Congressional panel had requested that federal auditors review New York State’s $54 billion Medicaid spending and fraud, waste and abuse oversight programs.

A previous post on this blog, available here, reported that the U.S. House of Representatives Committee on Oversight and Government Reform issued a report entitled “Billions of Federal Tax Dollars Misspent on New York’s Medicaid Program.”  Among its conclusions are that fraud, waste, abuse and mismanagement has permeated the New York State Medicaid program for decades; that New York must crack down on wealthy individuals posing as indigent patients, as well as on allegedly excessive salaries paid to health care executives; and that New York overcharged the federal government $15 billion on its developmentally disabled patient facilities and that the state must repay an appropriate amount of the funds.

The report also questioned the operations of the New York State Office of the Medicaid Inspector General (OMIG), which is tasked with investigating and auditing the misspending of taxpayer funds. Congressional officials said either the federal Centers for Medicare and Medicaid Services (CMS) or the Government Accounting Office (GAO) must send auditors to New York to review the OMIG and various Medicaid programs.

Senator Dean Skelos said that “An immediate, independent audit of the entire state Medicaid system is imperative” and also that “These are serious allegations against OMIG.”

Recently, current and past employees of the OMIG have publicly criticized the OMIG and alleged that the office is performing poorly and that its staff suffers from low morale.

The Legislative Gazette article is available here.

For more information, please contact the author, David R. Ross, who served as Acting Medicaid Inspector General under governors Pataki and Spitzer, as well as General Counsel, Deputy Medicaid Inspector General, and Director of Audits and Investigations for the OMIG.

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Filed under Fraud and Abuse, Medicaid, Medicaid Fraud, NY Office of Medicaid Inspector General

Medicaid Provider Gets His Second Day In Court, Wins $7.7 Million Verdict Against His Accusers

A Brooklyn dentist who alleged that his career was ruined by a New York State Attorney General’s Office Medicaid Fraud Control Unit (MFCU) investigation has won a $7.7 million verdict against two of then-Attorney General Eliot Spitzer’s staff members.

According to court papers filed by Dr. Leonard Morse’s attorney, available here, the dentist was pursued by Elliot Spitzer’s MFCU because he was one of the top Medicaid billers in the state with 30,000 patients, almost all of whom were Medicaid eligible. He was criminally charged with stealing more that $1 million in false billings for dentures but was acquitted at trial. The dentist alleged that he lost his practice and his credibility in the field as a result of the publicity. He also alleged that the MFCU individuals had fabricated evidence.

After winning his case against his accusers, a legal battle that took almost 7 years, Dr. Morse was quoted in a New York Daily News article (available here) as feeling “totally vindicated.”

The jury deliberated for merely three hours. After requesting a calculator from the Judge, they rendered its $7.7 million verdict.

The AG’s office had no official comment but apparently they will appeal.

The New York Daily News also reported that Dr. Morse may have a new patient. As he was leaving the courtroom, one of the jurors in the case asked him to look at his tooth.

For more information, please contact the author, David R. Ross, who served as Acting Medicaid Inspector General under governors Pataki and Spitzer, as well as General Counsel, Deputy Medicaid Inspector General, and Director of Audits and Investigations for the Office of the Medicaid Inspector General (OMIG).

The complaint in this case may be found here: Morse v Spitzer (Complaint)

The New York Daily News article may be found here: http://www.nydailynews.com/dentist-wins-7-7m-ex-spitzer-staff-article-1.1262539

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Filed under Fraud and Abuse, Medicaid, Medicaid Fraud, NY Office of Medicaid Inspector General

Quest’s Competitors File Lawsuit for Prohibited Arrangements with National Health Plans

Over the past several years, some commercial insurers have made a concerted effort to reduce costs associated with laboratory services, which physicians have increasingly relied upon in diagnosing and treating patients. In particular, insurers are concerned with the rise in laboratory services being performed out-of-network and the increased costs associated with such claims. Despite the imposition of higher premiums for out-of-network benefits, insurers are attempting to do indirectly – what they cannot do directly – to restrict the ability of health plan members to receive laboratory services from out-of-network providers.

A federal complaint was filed on November 14, 2012, in the Northern District of California that highlights the extent of such activities alleged to have been taken by Aetna, Inc., Blue Shield of California, and Blue Cross and Blue Shield Association in violation of federal and state law, and charges that such efforts are being initiated in concert with Quest Diagnostics Incorporated, the largest clinical laboratory provider in the nation. Rheumatology Diagnostics Lab., Inc. et al v. Blue Shield of Cal. Life & Health Ins. Co. et al, Case No. 12-5847 (November 14, 2012).

In short the complaint alleges that Aetna and Blue Shield, in order to receive capitated rate discounts on laboratory services, have conspired with Quest to direct all laboratory testing business to Quest by controlling referrals and reducing competition by the following: Continue reading

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OMIG Releases Annual Report for Calendar Year 2011

Today, the New York State Office of the Medicaid Inspector General (“OMIG”) posted its 2011 Annual Report.  We will post a detailed analysis in the coming days. In the meantime, the report may be accessed here.

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Filed under Fraud and Abuse, Medicaid, Medicaid Fraud, NY Office of Medicaid Inspector General

New York State Allegedly Overbilled $15 Billion for State-Operated Facilities for Developmentally Disabled

On May 17, 2012, the U.S. Department of Health and Human Services, Office of Inspector General (OIG) released a report that found Medicaid overpayments to New York State-operated developmental centers. The OIG concluded that, in 2009, State-operated  facilities for the developmentally disabled received $1.7 billion in Medicaid payments in excess of the reported costs of these facilities. The Medicaid rates paid to these New York State-operated facilities were ten times higher than the rates paid to private Intermediate Care Facilities in New York, which the OIG found comparable. The OIG determined that these overpayments had occurred for two decades and that they are still occurring in 2012. In fact, in fiscal year 2011, the daily payment rate to New York’s developmental centers was $5,118, which represented a 24 percent increase since 2009 and means that State-run developmental facilities are being paid approximately $1.9 million per year for each individual patient. This surprising increase was triggered by the formula for Medicaid payment rates for patients in developmental centers, which allows State-operated facilities to collect roughly two-thirds of the total Medicaid payment after an individual who has left the facility. Continue reading

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Filed under Fraud and Abuse, Medicaid, Medicaid Fraud, Uncategorized

OMIG Adopts Regulations Concerning Withholding of Medicaid Payments When Fraud Is Alleged

In accordance with federal law, the OMIG has finalized proposed regulatory changes to conform New York State law to federal law regarding the withholding of payments to Medicaid providers when there is a “credible allegation of fraud.” This requirement is imposed on States that participate in the Medicaid program as part of the the Affordable Care Act (see 42 CFR § 455.23). The regulations that have been modified are 18 NYCRR 518.7 and 18 NYCRR 518.9.  18 NYCRR Part 518.9 has incorporated the above federal regulation by reference in its entirety.

There was public comment on the proposed regulatory changes. However, the OMIG did not make any changes as a result of the public comment. A minor technical correction was made in 18 NYCRR § 518.7(a)(1) in that the term “law enforcement agency” was deleted and replaced with the term “law enforcement organization.” Continue reading

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Filed under Health Care Reform, Medicaid, Medicaid Fraud, Medicare Fraud, NY Office of Medicaid Inspector General, PPACA