On June 11, 2018, the United States Court of Appeals for the Sixth Circuit sustained a complaint against a home health care agency alleging that the agency had violated the False Claims Act (FCA) by submitting numerous claims to the Medicare program, even though the agency had not timely received the requisite physician certifications of the need for the services billed‑for. United States ex rel. Prather v. Brookdale Senior Communities, Inc., 892 F.3d 822 (6th Cir. 2018).

The Sixth Circuit concluded that the agency’s former employee, who filed the FCA action, had sufficiently alleged that (i) the timely submission of physician certifications was “material to the Government’s decision to make the payment,” and (ii) the defendants had knowledge—or at least acted with “reckless disregard”—that the Medicare claims may not comply with the applicable Medicare regulations governing payment. The FCA action was allowed to go forward on that basis alone, even though there was no allegation that the home care services were not medically necessary or were not provided, or that the home health agency had backdated certifications, submitted claims with unsigned certifications, or withheld any information from Medicare.

This case highlights the need for providers to implement robust compliance policies and procedures to ensure that mere technical violations of the regulations do not mature into full-blown FCA violations.

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On October 19, 2017, the United States District Court for the Northern District of Illinois, in the case of MedPro Health Providers, LLC v. Hargan, dismissed a home care agency’s suit — without deciding the merits of the agency’s challenge to a Medicare contractor’s determination to suspend the agency’s Medicare payments.  Noting that the delay in adjudication was “unfortunate,” the District Court nevertheless held that the home care agency had to exhaust its administrative remedies prior to filing suit.  The provider thus had to first let the administrative process play out to conclusion even while its Medicare payments were cut off and the alleged overpayments continued to be recouped.

Regulatory Background.  The Centers for Medicare & Medicaid Services (“CMS”) and its contractors may temporarily suspend Medicare reimbursement payments to providers for up to 180 days if they possess “reliable information that an overpayment exists” — even in the absence of any suspected fraud.  42 C.F.R. § 405.371(a)(1).  A provider has the right to submit to the Medicare contractor, a rebuttal statement explaining why the suspension should be lifted, and the contractor is required to review and consider the statement when determining if the suspension should continue.  Id. at 405.372(b)(2); 405.375(a).  If CMS or its contractor determines to continue the suspension, it must provide written notice to the provider.  Id. at 405.375(b)(2).  The suspension will not be rescinded until CMS or its contractor finally determines whether the provider was overpaid.  The suspended payments would then be released to the provider, less the amount of any overpayment.  Id. at 405.372(c)(1)(ii) and (e).  A provider may then appeal the subsequent overpayment determination through a four-part administrative process, and ultimately to the Medicare Appeals Council.  It is only after the four-step process has been exhausted and the Council had rendered its decision that CMS’ action can be challenged in court.  Id. at 405.904(a)(2); 405.1130.

Factual Background.  MedPro Health Provider (“MedPro”) is a home health agency authorized to provide services to Medicare beneficiaries.  AdvanceMed Corporation is a Zone Program Integrity Contractor (“ZPIC”) that has contracted with CMS to identify suspected cases of Medicare fraud and prevent the mistaken overpayment of Medicare funds to health care providers.  The ZPIC reviewed 32 MedPro patient charts in 2016 and notified MedPro that it was suspending future Medicare payments to the company on the grounds that its review revealed that MedPro had billed Medicare for services that were not medically reasonable or necessary.  MedPro provided the ZPIC with a rebuttal statement and supporting documentation but, as alleged in MedPro’s complaint, ZPIC determined to continue the suspension even though it admitted that it had not reviewed or considered the supporting documentation.

Shortly after the ZPIC’s suspension determination, MedPro filed a lawsuit in U.S. District Court against the Secretary of the U.S. Department of Health and Human Services and the ZPIC, alleging that the ZPIC’s refusal to review the supporting documentation violated regulations and effectively deprived MedPro of its right of administrative review.  For relief, MedPro asked the Court to compel CMS to immediately review its rebuttal statement and supporting documentation, and to declare that the ZPIC had committed fraud by representing that it would, and failing to, review such documentation as required.  The ZPIC moved to dismiss the complaint on the ground that MedPro had failed to exhaust administrative remedies.

After the suit was filed, the ZPIC terminated the payment suspensions and notified MedPro that it determined that MedPro had been overpaid by $6.9 million.

The Court’s Decision.  By decision dated October 19, 2017, the court granted the defendants’ motion to dismiss for lack of subject-matter jurisdiction.  The Court explained that MedPro could have raised the ZPIC’s failure to review the rebuttal submission as a ground for administrative appeal of the ZPIC’s overpayment determination.  The court acknowledged that the delayed review “and the resulting hardship” to MedPro resulting from having to wait until the ZPIC made its overpayment determination was “unfortunate.”  Nevertheless, the court concluded that MedPro was required to exhaust the administrative process before resorting to the courts, and that it lacked authority at that stage to compel the ZPIC to review MedPro’s rebuttal submission.

The court also determined that MedPro’s related fraud claim, premised on the ZPIC’s failure to review MedPro’s rebuttal submission, was “bound up with a claim for benefits under the [Medicare] Act . . . and a challenge to the ultimate overpayment determination.”  Accordingly, the court held that this claim too must be addressed through the administrative process and could not be adjudicated separately from the underlying reimbursement claim.

Implications.  This decision highlights the formidable hurdle that exhaustion of administrative remedies can present for a provider seeking relief from the court when operating under a suspension of Medicare payments.  The exhaustion requirement was enforced in this case even when the provider challenged the Medicare contractor’s compliance with the very procedures prescribed to ensure a meaningful administrative review.  Although a Medicare suspension of payments can cripple a health care provider, the immediacy of such harm does not excuse a provider from first following the prescribed administrative procedures to challenge the underlying overpayment determination.  It may be high time to consider the efficacy and fairness of the backlogged Medicare administrative appeal process that can often leave providers with no meaningful relief.

DOJOn May 31, 2017, the Department of Justice announced a $155 million settlement with eClincialWorks (ECW), an electronic health records (EHR) software vendor, to resolve a whistleblower complaint that alleged violations of the False Claims Act and the Anti-Kickback Statute.  This settlement, the “largest financial recovery in the history of the State of Vermont,” should put EHR vendors on notice, as well as vendors that offer services or products to health care providers: providing misinformation to a government contractor or health care provider about their products or services, or furnishing nonconforming goods or services, may expose them to significant financial exposure under the False Claims Act, even if they do not themselves submit claims to the government.

Background:  Pursuant to the Health Information Technology for Economic and Clinical Health Act (HITECH Act) of 2009, the United States Department of Health and Human Services (HHS) established a program to provide incentive payments to health care providers who demonstrated “meaningful use” of “certified” EHR technology.  The incentive payments are to encourage health care providers to transition to using EHR.  To obtain the proper certification, EHR vendors are required to affirm that their products meet certain requirements adopted by HHS and then pass certain tests by a certifying agency approved by HHS.

Allegations:  The lawsuit, in which the federal government intervened, alleged that ECW falsely attested that its products met the applicable certification criteria and prepared its software to pass the certification testing without actually meeting the certification criteria.  Significantly, ECW was alleged to have violated the False Claims Act because it had “caused” the end user health care providers to submit inaccurate attestations concerning their use of “certified” EHR in support of their claims to the government for “meaningful use” incentive payments.

Settlement:  ECW agreed to pay $155 million to settle the complaint and entered into an onerous, five-year Corporate Integrity Agreement (CIA).  In what the DOJ described as “innovative,” the CIA requires, among other things, that ECW (a) retain an Independent Software Quality Oversight Organization to assess ECW’s software quality control systems, (b) provide prompt notice to its customers of any safety related issues, (c) maintain on its customer portal a comprehensive list of issues and steps users should take to mitigate potential patient safety risks, (d) provide its customers with updated versions of their software free of charge, (e) offer customers the option to have ECW transfer their data to another EHR vendor without penalties or charges, and (f) retain an Independent Review Organization to review ECW’s arrangements with health care providers to ensure compliance with the Anti-Kickback Statute.

Implications:  EHR and other health care vendors cannot assume that their liability is limited to breach of contract or indemnification of its customers.  Rather, the ECW case points to the risk of direct exposure under the False Claims Act, without ever submitting a single claim to the government.  In a similar vein, in the context of the Health Insurance Portability and Accountability Act (HIPAA), software and other vendors may also be directly subject to penalties under HIPAA for breaches of protected health information – as a business associate to their health care provider customers.

USDHHS-sealNew regulations have been released in the form of a Final Rule (announced at 82 Fed. Reg. 4100) (the “Final Rule”), revising and expanding the authority of the U.S. Department of Health and Human Services (HHS) Office of Inspector General (OIG) to exclude entities and individuals from participation in federal health care programs. The Final Rule adds to the OIG’s longstanding statutory authority to issue exclusions, which was most recently expanded by Congress in the 2010 Affordable Care Act.

The Final Rule was announced on January 12, 2017, and was intended to go into effect on February 13, 2017. The new administration’s temporary freeze on pending regulations delays that effective date until March 21, 2017. Continue Reading New Regulations Expand Authority of HHS OIG to Issue Exclusion Orders