omm National Association of Criminal DeFense lawyers September/October 201.0 The Rise of EnvironmentaL Crime Prosecution ALSO IN THIS ISSUE • l-IeaLthcare Reform • FCPA • FDA LAS VEGAS, NV > > > SEE PAGE 4 Oct. 14-16/ NACDl 2i NCDD's 14th AnnuaL DUI Seminar SAVANNAI-i, GA >>> SEE PAGE 27 Nov. 3-5/ NACDl's 2010 FaUSeminar Sexual Assault Cases LAS VEGAS, NV >>> SEE PAGE 45 Nov. 18-19/ NACDl's 3rd Annual Defending Cases Seminar ASPEN, CO > >> See PAGE 47 Jan. 16-21/ NACDl's 31St Annual Advanced Criminal law Seminar SAN ANTONIO, TX >>> SEE PAGE 55 Feb. 16-19/ NACDl's 2011 Midwinter 2i Seminar LAS VEGAS, NV >>> SEE PAGE 61- March 25-26/ NACDl 2i CAO's 4th AnnuaL forensic Sdence Seminar SlV:>IOOn:l3d WWW.NACDl.ORG
5
Embed
National Association of Criminal DeFense lawyersRecovery and the Patient Protection and Affordable Care Act (P.L. 111-148) as amended by the Health ... stand the changes to the relevant
This document is posted to help you gain knowledge. Please leave a comment to let me know what you think about it! Share it to your friends and learn new things together.
Transcript
omm National Association of Criminal DeFense lawyers
September/October 201.0
The Rise of EnvironmentaL Crime Prosecution
ALSO IN THIS ISSUE
• l-IeaLthcare Reform
• FCPA
• FDA
LAS VEGAS, NV > > > SEE PAGE 4 Oct. 14-16/ NACDl 2i NCDD's
14th AnnuaL DUI Seminar
SAVANNAI-i, GA > > > SEE PAGE 27 Nov. 3-5/ NACDl's 2010 FaUSeminar
Defendin~ Sexual Assault Cases
LAS VEGAS, NV > > > SEE PAGE 45 Nov. 18-19/ NACDl's 3rd Annual
Defending Dru~ Cases Seminar
ASPEN, CO > > > See PAGE 47 Jan. 16-21/ NACDl's 31St Annual
Advanced Criminal law Seminar
SAN ANTONIO, TX > > > SEE PAGE 55 Feb. 16-19/ NACDl's 2011
Midwinter Meetin~ 2i Seminar
LAS VEGAS, NV > > > SEE PAGE 61March 25-26/ NACDl 2i CAO's 4th
AnnuaL forensic Sdence Seminar
SlV:>IOOn:l3d
WWW.NACDl.ORG
l-tere Come the Feds:
The Significant Impact of
l-ieaLthcare Reform on
Government Investigations
And Enforcement
For the heavily regulated and already embattled
• healthcare industry, the recent changes in the healthcare arena by the Fraud Enforcement and
Recovery and the Patient Protection and Affordable Care Act (P.L. 111-148) as amended by the Health Care and Education Reconciliation Act of 2010 (together, the Healthcare Reform Law) are largely unwelcome news. The expansion of potential liability
. and the Department of Justice's authority and ability to investigate fraud makes investigations into and challenges of providers' practices by both the government and individual whistleblowers considerably more likely. While health care is a highly specialized practice area, all white collar practitioners could benefit from a general understanding of the recent changes in this area and the likely practical effect of these changes.
BY \-lOllY
I. Increased Emphasis Upon, and Funding for, Fraud Investigations
In May 2009, the Fraud Enforcement and Recovery Act (FERA) allocated significant additional resources to various federal agencies to assist in combating fraud, including specifically healthcare fraud. FERA allocated $165 million to the DOJ in fiscal years 2010 and 2011 to hire fraud prosecutors and 'investigators. The law also dedicated $140 million to the FBI, $50 million to the U.S. Attorney's Offices, and over $80 million to other federal agencies for the specific purpose of investigating fraud. In his 2011 budget, President Obama proposes approximately $1.7 billion, and the Healthcare Reform Law sets aside an additional $250 million over the next 10 years, to fund the DOl, the Department of Health and Human Services (DHHS), and a number of enforcement agencies tasked with fighting healthcare fraud. In short, there is no shortage of funds for, or emphasis upon, investigating and prosecuting healthcare fraud .
II. FERA and Healthcare Reform Law Make Material Changes to Statutes Impacting Healthcare Industry The Healthcare Reform Law amends the False
Claims Act (FCA), the Stark Law (Stark), the AntiKickback Statute, and the criminal Healthcare Statute in ways that are likely to negatively impact investigations and whistleblower lawsuits against providers.
A. Significant Changes to the False Claims Act While the False Claims Act (FCA) applies only in
the civil investigation context, white collar practitioners nonetheless need to be aware of its provisions. First,
PIERSON
w w W . N A C D l. 0 R G T\-IE CI AMPION 28
federal health care investigations are often parallel, with both a civil and criminal investigation proceeding simultaneously. As such, the tools available to whistleblowers and the government for purposes of the civil investigation can have a tremendous impact on the criminal investigation.
The recent amendments by FERA and the Healthcare Reform Law to the FCA combine to dramatically expand potential FCA liability - to a vast and unprecedented degree. Under the FCA as amended, the class of persons who can serve as whistleblowers and the types of transactions that can be subjected to FCA liability are ,;irtually unlimited. When this expansion of the FCA is viewed in combination with rampant federal government spending and the current emphasis on recovering funds from fraud and abuse to pay for new federal entitlement programs, the healthcare industry faces uncertain and perilous times ahead. While practitioners in the healthcare arena have been preaching compliance for years, the need for vigilant, rigorous, up-to-date, and effective compliance programs has never been more at the forefront or more critical.
Before a robust compliance plan can be implemented, however, providers and suppliers must understand the changes to the relevant healthcare laws, including the FCA, and modifications and adjustments that these new provisions will require. The purpose of this article is to highlight the key changes made to the FCA in 2009 and 2010 and their practical impact on the healthcare industry.
1. Changes Made to the FCAby FERA
The FCA was already a powerful weapon in the hands of government prosecutors and counsel for whistleblowers, with its treble damages and punitive per-occurrence penalties. The 2009 amendments to the FCA, made as part of the Fraud Enforcement and Recovery Act', vastly expanded FCA liability to include "downstream" claims made not just to the government itself but also to all recipients of federal funds. The amendments also materially expanded "reverse false claims" liability under the FCA and eliminated the specific intent requirement that some courts had read into the statutory scheme, while increasing whistleblower protections and giving the government additional procedural advantages. At the end of the day, the 2009 amendments added significant
WWW.NACDL.ORG
weapons to the whistleblowers' and government's arsenal.
a. New Definition of 'Claim' and Elimination Of Presentment Clause
As amended by FERA, the new definition of claim for purposes of the FCA is no longer limited to requests or demands for money or property made directly to the government. Instead, claims now include demands made to "a contractor, grantee, or other recipient [of federal funds]" if the money or property provided to the recipient will be (1) spent or used on the government's behalf or (2) used on behalf of the government to advance a government program or interest, as long as the government has provided or will reimburse the recipient for any portion of the money or property requested.' The elimination of the presentment requirement in the amendments demonstrated that Congress rejected judicial decisions, such as United States ex reI. Totten v. Bombardier Corp.,' which had determined that FCA liability could only attach if the claim was presented to an officer or employee of the government. In effect, FCA liability after the 2009 amendments can attach to demands for money or property made not just to the government itself, but to any recipient of government funds (i.e., contractor, grantee, etc.).
b. Elimination of Specific Intent Requirement
Prior to the 2009 amendments, FCA liability could only attach if a person "knowingly makes, uses, or causes to be made or used, a false record or statement to get a false or fraudulent claim paid or approved by the government."4 Based upon this statutory language, the Supreme Court, in Allison Engine,s determined that a plaintiff in an FCA case must establish that the defendant specifically intended to get the government itself to pay the claim.
Legislatively reversing Allison Engine, the 2009 amendments removed the "to get" and "by the government" language from the FCA. The amended statute required only that a false statement be "material to" a government payment of the claim, i.e., that the false claim or statement had "a natural tendency to influence" or was "capable of influencing" the payment of the c1aim.6
In essence, this amendment eliminated any specific intent requirement and relieved FCA plaintiffs from their prior burden of having to establish a direct connection between the allegedly false
claim and the payment of the claim by the government.
c. Liability for Reverse False Claims
Before the 2009 amendments in FERA, the "reverse false claims" provision in the FCA prohibited an individual from "knowingly mak[ing], us[ing], or caus[ing] to be made or used, a false record or statement to conceal, avoid, or decrease an obligation to payor transmit money or property to the government."] As amended by FERA, the reverse false claims provision prohibits "knowingly mak[ing], us ling], or caus[ing] to be made or used, a false record or statement material to an obligation to payor transmit money or property to the government, or knowingly concea1[ing] or knowingly and improperly avoid[ing] or decreas[ing] an obligation to payor transmit money or property to the government.'" By adding this section to the definition of reverse false claims, Congress removed the previous requirement that FCA plaintiffs establish an affirmative act (making/using/causing a false record or statement) for a defendant to be subject to FCA liability for avoiding or decreasing an obligation to pay. Nor does the alleged misconduct have to involve a false or fraudulent statement or record; conscious disregard or recklessly improper conduct is now sufficient for FCA liability to attach under the reverse false claims provision.'
Liability for reverse false claims was also expanded by the FERA amendments' new definition for the term obligation: "an established duty, whether or not fixed, arising from an express or implied contractual, grantor-grantee, or licensor-licensee relationship, from a fee-based or similar relationship, from statute or regulation, or from the retention of any overpayment."10 Prior to the codification of this broad definition of obligation, several courts had declined to interpret obligation to include potential or contingent obligations, requiring instead that the obligation be fixed at the time of the allegedly false claim."
FERA's definition of the term obligation seemed to raise more questions than it answered. Providers and suppliers were left to ponder several questions. What is an obligation? What is an overpayment? When are they triggered? What duty are providers and suppliers under to identify overpayments? When is an overpayment officially identified for purposes of this statute? In the absence of guidance on these issues, how are providers and suppliers to conduct themselves?
SEPT-MBER/OCTOBER 20~O
-i :::;: m
o
:::;:
> m
r-i :::;: n > ~
m
-
Ll
LU
LU
~
« u J: I .....
LU
J:
o
LU
J: I
3°
d. Expanded Whistleblower Protections From Retaliation
Consistent with other changes to the FCA in the FERA amendments, whistleblower protections in the statute were expanded to cover not only employees, but also contractors and agents." Additionally, actions taken by whistleblowers to stop violations of the FCA are now covered by the retaliation protections. 1l Prior to the 2009 amendments, whistleblowers were protected only when (J) the whistleblower engaged in conduct that was directly in furtherance of an actual action under the FCA; (2) the employer knew about the investigation or action; and (3) the employer retaliated against the whistleblower as a result.!' The amended retaliation provision expanded both the potential pool of whistleblowers who could invoke protection under the FCA and the array of protected conduct to which the retaliation provision applies.
e. Relation Back of Government's Complaint
Prior to the 2009 FCA amendments, the state of the law with regard to when the statute of limitations on FCA cases began to run was unsettled. Defendants argued, and many courts agreed, that the statute of limitations began to run at the filing of the whistleblower's complaint and that the government's complaint-inintervention did not relate back to the date of the relator's complaint. FERA amended the FCA to explicitly state that the government's complaint did relate back to the whistleblower's complaint." This explicit change means that the whistleblower's complaint now serves as a placeholder or backstop that essentially allows the governmen t more leeway to investigate and engage in discovery without the time pressure of having to file its own complaint-in-intervention. As a result, investigations are likely to be lengthier and more expensive.
f. Civil Investigative Demands Another important change brought
about by the 2009 amendments was the expansion of the DOl's authority to use Civil Investigative Demands (CIDs). \Vhile civil and criminal prosecutors previously ran parallel investigations and shared documentary information obtained from Administrative Investigative Demands (AIDs), the CIDs permit the civil prosecutors to compel both documents and sworn testimony, and then to share this information with criminal prosecutors and counsel for whistleblowers.!6 Before FERA, CIDs were
WWW.NACDl.ORG
not widely used in FCA investigations because they were required by statute to be issued by the u.s. Attorney General. FERA, however, amended the statute to permit the Attorney General to delegate the authority to issue CIDs, and the Attorney General has delegated this authority to, inter alia, the individual United States Attorneys.!? As with any new weapon in the prosecutor's arsenal, the delegation of this authority to the local enforcement level is certain to result in a significant increase in its utilization.
The increased authority through CIDs to gather and share evidence at this early stage in an investigation will adversely impact providers and suppliers both in fending off a whistleblower suit and in attem pting to negotiate the already treacherous waters of a parallel civil and criminal investigation.
2. Changes Made to the FCA by The Healthcare Reform Law
While the healthcare industry was still trying to get its arms around the import and meaning of the 2009 amendments to the FCA, Congress went back to the well and made even more significant changes to the law. Like their 2009 predecessors, the 2010 amendments, enacted as part of the Healthcare Reform Law, further broadened potential exposure for providers and suppliers, increased yet again the potential pool of whistleblowers and eliminated previously available defenses to FCA claims.
a. Permitting More Whistleblowers to Qualify As the Original Source
Under the FCA, a whistleblower must be the "original source" of the information that forms the basis of the alleged fraud.!S Prior to the 2010 amendments, the FCA defined original source as "an individual who has direct and independent knowledge of the information on which the allegations are based and has voluntarily provided the information to the government before filing an action under this section which is based on the information."!' The Healthcare Reform Law expanded that definition of original source to include individuals who either (l) voluntarily disclosed to the government the information on which allegations or transactions in a claim are based prior to a public disclosure, or (2) have knowledge that is independent of and materially adds to the publicly disclosed allegations or transactions, and who voluntarily provided the informa
tion to the government before filing an action under this section.20
This new definition of "original source" eliminates the requirement for direct knowledge by the whistleblower, and allows individuals to still be considered whistleblowers after the public disclosure of allegations or transactions if the whistleblower's information is independent of and materiaJly adds to the already-disclosed information. In short, the 2010 amendments to the original source definition permit individuals who previously could not have been whistleblowers because they were not the original source to now qualify as whistleblowers in some instances.
b. Narrowing of Defense Based Upon 'Public Disclosure'
Before the 2010 amendments to the FCA through the Healthcare Reform Law, one defense that providers could raise was a jurisdictional bar that prevented an FCA suit by a whistleblower when the allegations had been publicly disclosed to the news media or in a criminal, civil, administrative or congressional investigation, proceeding, hearing, audi t, or report.'! The Healthcare Reform Law eliminates the jurisdictional nature of the public disclosure provision, and instead gives the government the right to oppose dismissal even if there has been a public disclOsure. The Healthcare Reform Law also specifically limits the public disclosure definition as applying only to disclosures in the news media and in federal, not state or local, proceedings."
Lower courts previously interpreted the language of the prior version of the "public disclosure" bar to include disclosures made in state, local, and federal proceedings. Ironically, the Supreme Court clarified on March 30, 2010, in Graham County Soil and Water Conservation District v. U.S. ex rei. Wilson 23 that the defmition of "public disclosure" under the prior version of the FCA specifically included disclosures made in state and county reports. In light of the Graham County decision, the public disclosure provision of the FCA for suits prior to the effective date of the Healthcare Reform Law will bar whistleblowers who base their claims on information in state and local reports, while FCA claims brought on the same information after the effective date will experience no such prohibition.
c. Definition of Overpayment Where the 2009 amendments made
under FERA left open the definition of overpayment, the 2010 amendments to
THE CHAMPION
the FCA attempted to fill that void. The Healthcare Reform Law defines the term overpayment as "any funds that a person receives or retains [from a federal payor] to which the person, after applicable reconciliation is not entitled. . .. "24 The Healthcare Reform Law then provides that all overpayments must be reported and refunded within 60 days after the identification of the overpayment or the date any corresponding report is due. Finally, the 2010 amendments clarify that a repayment retained after the deadline for reporting and repaying it is an "obligation" for FCA purposes.2S
\-\'hether this definition of overpayment provides any assistance to providers and suppliers in the context of a reverse false claim is up for debate. Many of the same questions surrounding the 2009 reverse false claims act amendments are left unresolved, and new levels of unanswered questions are added by these 2010 provisions. When, for example, is an overpayment "identified" for purposes of the statute such that the 60-day reportlrefund window is triggered? And in the absence of guidance on these types of issues from the government, how is a provider or supplier to gauge how to govern itself? In this environment, with increased focus on enforcemen t and unprecedented expansion of potential FCA liability, the industry should err significantly on the side of caution.
III. Expansion of the AntiKickback Statute The Healthcare Reform Law also
changes the Anti-Kickback Statute (AKS). Specifically, it clarifies that a showing of "specific intent" to violate the AKS is not required. 26 This change results in an easier standard for the government to show there is a violation of the AKS. The Healthcare Reform Law also makes expl icit what several federal courts had already determined - that claims resulting from kickback arrangements constitute "false or fraudulent claims" under the FCA.
One potentially positive change for providers is the Healthcare Reform Law's amendment to the definition of remuneration in the beneficiary inducement provisions of the Civil Monetary Penalties. Remuneration, which is the key to the application of the AKS, now excludes from its definition any remuneration that both promotes access to care and does not pose a significant risk of harm to pa tients or the federal payors. Many provider activities would ostensibly fall within this seemingly broad exclusion.
IV. Changes to the Healthcare Criminal Fraud Statute Another important change under
the Healthcare Reform Law is the lowering of the intent requirement contained in the healthcare fraud criminal statute, 18 U.s.c. § 1347. Proof of actual knowledge of the healthcare fraud statute or of specific intent to violate the statute is no longer required. The definition of healthcare offense under 18 U.s.c. § 24(a) was also amended to include violations of the AKS and the Food, Drug, and Cosmetic Act.
Conclusion
From a healthcare provider and practitioner perspective, the recent changes are not good news. The increased funding for fraud investigations and the significant loosening of the whistleblower lawsuit constraints virtuaBy ensure that the current high level of scrutiny on providers will increase. White collar practitioners are more likely than ever to be called upon to navigate the perilous waters of the healthcare regulatory arena, and they should not delve too deeply into these substantive waters without bringing in a healthcare specialist. A basic understanding of the meaningful way this landscape has changed, however, is a valuable tool for a]] white co]]ar practitioners.
26. Prior to this clarification, several courts required the government to demonstrate a heightened knowledge requirement to satisfy the elements of the Anti-Kickback Statute. In Hanlester Network v. Shalala, 51 F.3d 1390, 1400 (9th Cir. 1995), the court determined that the "knowingly and willfully" language in the Anti-Kickback Statute required that the defendant (1) know that the statute prohibits offering or paying remuneration to induce referrals, and (2) engage in prohibited conduct with the specific intent to disobey the law. The Fifth, Eighth, and Eleventh Circuits declined to go as far as the Ninth Circuit in Hanlester, but nonetheless imposed a heightened knowledge requirement that the defendant know his conduct was wrongful but not necessarily that it violated a legal duty. See United States v. Davis, 132 F.3d 1092, 1094 (5th Cir. 1998); United States v. Jain, 93
F.3d 436,441 (8th Cir. 1996); United States v.
Starks, 157 F.3d 883 (11th Cir. 1998).
About the Author Holly Pierson is Of Counsel at Morris
Manning & Martin LLP in the firm's Healthcare, Fraud & Abuse Defense, and Commercial Litigation Practices. She concentrates on internal investigations, white col
lar defense and special litigation, including healthcare fraud, whistleblower actions, identity theft, mortgage and banking fraud, environmental issues, and public corruption.
liolly Pierson Morris, Manning & Martin LLP 1600 Atlanta Financial Center 3343 Peachtree Road NE Atlanta, GA 30326 404-504-7665 Fax 404-365-95321 -14M!- [email protected]