This Summer’s Healthcare Enforcement Trends

Summer is traditionally a slow time for everyone, including those in law enforcement. But this summer was a little “hotter” enforcement-wise. Here are a few observations from the recent enforcement cases that have emerged this summer.

  1. The Opioid Epidemic. Since the beginning of the summer, the trend in both the Department of Justice and HHS-OIG enforcement continues to be weighted heavily in the prosecution and civil enforcement in matters related to the opioid epidemic. Some of these cases involve ongoing opioid prescription abuse (pill mills and pill mill doctors), while others involve drug diversion, which is a common problem in larger clinics and hospitals. The common drug diversion schemes—some more sophisticated than others—involve: (1) the diversion in the prescription itself—i.e., when someone other than the doctor has access to prescribing documents; (2) the substitution of a controlled substance with a non-controlled substance, either at the distributor, pharmacy, or clinic level; and (3) the prescription of opioids to “straw men” who are paid to divert the drugs to others.

Larger institutions are likely to have more robust compliance systems in place to catch diversions early. However, as with any problem tied to addiction, the effort to control diversion is a bit like Whack A Mole—once one scheme is discovered and new compliance measures are enacted to prevent it from happening again, the schemers find a new and, at times, more sophisticated ways to achieve their end goal. While it’s hard to prevent the actions of a smart bad actor (smart drug diverters are harder to catch), regular training and continued diligence by all employees to follow up on what seems out of the ordinary is one good way to uncover theft and diversion sooner rather than later. Unfortunately, abuse and fraud involving opioids is not likely to decrease in the near future.

  1. Laboratories, Treatment Facilities, and Hospitals. Although clinical diagnostic laboratories have been on the government’s radar screen for several years, we are beginning to see more enforcement actions becoming public, especially for the time period between 2011-2016, before the reimbursement model changed. Because clinical diagnostic laboratories generally face a competitive market, many of the enforcement actions that we are seeing now involve violations of the Anti-Kickback Statute. Thanks to the ongoing opioid epidemic, we should continue to expect the increased scrutiny of laboratories and substance abuse treatment facilities as we see more and more schemes to game the system.

Once such scheme that came to light this summer implicated several rural hospitals in Florida and Georgia. On July 9, 2019, the Department of Justice issued a press release regarding a guilty plea entered by the owner of a substance abuse treatment facility for his alleged involvement in a $57 million money laundering conspiracy. It involved not only the treatment facility and a laboratory, but also several rural hospitals. (United States v. Marcotte, Middle District of Florida). The owner of the treatment facility entered into an agreement with the owner of a laboratory for reference of urine drug testing to the laboratory in exchange for receiving 40% of the insurance reimbursements. The lab owner, in turn, arranged with the managers of two rural hospitals to have the testing billed to private insurers through the hospitals and reimbursed at favorable rates under the hospitals’ in-network contracts insurers. The lab owner subsequently acquired a hospital in Georgia and other rural hospitals and continued to broker deals with other substance abuse treatment facilities to have the samples sent to his lab and billed through his hospitals. Over $50 million in payments were made to companies and individuals as part of the scheme that the defendant concocted. Stay tuned to see more convictions as well as civil settlements arising from this scheme, and potentially similar pass-through schemes that have undoubtedly arisen throughout the nation.

  1. Claims Involving Medical Necessity. Traditionally, claims that a certain treatment was not medically necessary to have been hard for the government to prove, both criminally and civilly, because of the element of medical judgment involved in treating patients. Further, because every patient is different, it’s hard to extrapolate data to accurately predict an error rate, and the alternative—the review of thousands of medical records—is a laborious and expensive endeavor. Traditionally, such claims have been easier to prove where the service was provided in total disregard for the patients’ actual medical conditions.

A recent ruling in a suit brought under the False Claims Act suit involved a question of whether a claim for hospice treatment under Medicare may be deemed “false” where the defendant hospice providers certified patients as eligible for the hospice benefit based on erroneous clinical judgments regarding the patients’ conditions. (United States v. Asercare, Inc., Eleventh Circuit, No. 16-13004, 9/9/19). The government contended that the patients were not in fact terminally ill at the time of certification, and thus the provider’s claims to Medicare were false. The district court, and subsequently the court of appeals, were tasked with deciding whether a medical provider’s clinical judgment that a patient is terminally ill could be deemed false based merely on the existence of a reasonable difference of opinion between experts as to the accuracy of that prognosis. The appellate court agreed with the trial court and found that, for purposes of the False Claims Act, the clinical judgment of terminal illness warranting hospice benefits under Medicare cannot be deemed false when the only evidence supporting the alleged falsity of the statement involves a reasonable disagreement between medical experts as to the accuracy of the medical opinion.

The ruling in the Asercare affirms that it is hard for the government to win a claim of unnecessary medical services based on expert testimony alone. However, the ruling may be limited in some part to its facts, most specifically, the difficulty in predicting a patient’s life expectancy. Under Medicare regulations, “terminally ill” means that the patient “has a medical prognosis that the individual’s life expectancy is 6 months or less.” This is something that could vary significantly based on an individual’s specific characteristics.

In contrast, in another case involving medical necessity that was settled this summer before the ruling in Asercare, the government pursued claims against the nation’s largest operator of inpatient rehabilitation facilities based in part on its claim that the inpatient rehabilitation facilities admitted (and treated) patients who were not eligible for admission because they were too sick and/or disabled to participate in or benefit from IRF.  (United States ex rel. Simon, v. HealthSouth Corp., No. 08-CV-236, Middle District of Florida.)  The defendant settled the claims against it for $48 million, although no specific finding or admission on the issue of medical necessity was made in the record.

Time will tell the effect of the Asercare ruling on the government’s decisions on pursuing medical necessity claims where there is conflicting expert testimony on the issue.

  1. Behavioral Health. Behavioral health is a perennial source of enforcement actions, partly because there is a certain population that seems destined to cycle in and out of inpatient, partial hospitalization, and outpatient care. Manipulation and control of this population can produce a near-constant revenue source. Thus, behavioral health—like clinical laboratory testing, substance abuse treatment, DME, and home health—is rife with accusations of fraud and abuse, particularly in the form of prohibited inducements.

Unfortunately, hospital administrators have been known to fall to the temptation of paying for client referrals. One CFO/COO from the Houston, Texas area, Starsky Bomer, was recently sentenced to ten years in prison for orchestrating a scheme in which he and others paid illegal bribes and kickbacks to group homeowners and “patient recruiters” in exchange for the referral of Medicare patients to the facilities he was responsible for. The prosecutors presented evidence at trial that Bomer knew that many of the patients admitted to the facilities did not qualify for, and were in fact never provided legitimate partial hospitalization services.

As the author notes from her own experience prosecuting and defending healthcare providers, it can be very difficult to attract patients in an environment where kickbacks and bribes are the status quo. Nevertheless, the cost of non-compliance is not worth the potential revenue gained by resorting to the level of non-legitimate providers.

Written By: Catherine M. Maraist

Maraist, Catherine

Catherine M. Maraist is a partner in Breazeale, Sachse & Wilson LLP’s Healthcare Section.  She practices in the firm’s Baton Rouge office.

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