On December 7, 2017, the Institute for Continuing Legal Education (ICLE) of the State Bar of Georgia held its annual Health Care Fraud Institute. Topics discussed at the Institute included recent federal and state fraud and abuse initiatives, the use of statistical sampling in fraud cases, the use of mediation to resolve false claims cases, and notable developments in case law.

The program included a “fireside chat” with newly appointed United States Attorney for the Northern District of Georgia, Byung “Bjay” Pak. Mr. Pak described his “motto” for the upcoming year will be “bigger, better, faster,” meaning bigger False Claims Act cases, better cases (supported by more evidence) and faster resolutions. He also advised that in addition to usual fraud cases, a new focus will be on healthcare providers contributing to, or profiting from, the opioid addiction and crisis.

Government Enforcement: Federal & State Health Care Fraud Initiatives

The first panel of the day focused on health care fraud initiatives. The panel was moderated by Randy Chartash of the U.S. Attorney’s Office for the Northern District of Georgia. He was joined on the panel by Amy Berne, U.S. Attorney’s Office, Northern District of Georgia; Irvan A. Pearlberg, Georgia Medicaid Fraud Control Unit (MFCU); Georgia F. “Pete” Peterman, III, U.S. Attorney’s Office Middle District of Georgia; and Brian T. Rafferty, U.S. Attorney’s Office Southern District of Georgia, Savannah, GA.

The panel first discussed new Department of Justice guidance related to the Foreign Corrupt Practices Act (FCPA), and contained in a new section of the U.S. Attorney’s Manual. The new section outlines the benefits of voluntary disclosure of fraud and defines what constitutes voluntary disclosure. According to the guidance, if a criminal resolution is warranted for a company that has voluntarily self-disclosed, fully cooperated, and timely and appropriately remediated, the Fraud Section:

• will accord, or recommend to a sentencing court, a 50% reduction off of the low end of the U.S. Sentencing Guidelines (U.S.S.G.) fine range, except in the case of a criminal recidivist; and
• generally will not require appointment of a monitor if a company has, at the time of resolution, implemented an effective compliance program.

While the FCPA guidance is not controlling in healthcare, the panelists confirmed the guidance would be a good resource to guide voluntary disclosures by healthcare corporations.

Mr. Pearlberg also discussed the fast growth of the MFCU legal team, which now includes 15 attorneys, as well as the growth in MFCU’s multi-million dollar settlements. Mr. Pearlberg stated that a recent development in Medicaid fraud cases is the use of racketeering charges in cases of pervasive fraud.

Statistical Sampling and False Claims Act Liability: AseraCare

The second topic of the day focused on the False Claims Act case against AsceraCare, Inc. (“AseraCare”), a for-profit hospice chain that was alleged to have fraudulently submitted claims that falsely certified hospice eligibility for patients who were not terminally ill. The AseraCare case is a noteworthy case in that: (1) although some courts only permit statistical sampling in False Claims Act cases to estimate damages, the District Court in AseraCare permitted the use of statistical sampling to prove liability (i.e., the falsity of the claims), which remains an unsettled issue; (2) the District Court granted the defendant’s motion to bifurcate the trial between falsity and knowledge, which made the prosecution’s job much more difficult; and (3) the District Court ultimately held that a difference of opinion by medical experts was insufficient for the government to prove the falsity of a claim.

The defense bar had a lively discussion about how much weight statistical sampling should carry in any False Claims Act case and when sampling should be used (e.g., to prove falsity or to prove damages). According to AUSA Lena Amanti (NDGA), the Northern District uses statistical sampling as only one investigatory tool and as just one method to determine falsity of claims. Ms. Amanti stated that litigation of a False Claims Act case would not occur based solely on statistical sampling without other evidence of fraud.

Successfully Mediating Healthcare False Claims Act Cases

The next panel covered the use of mediation to resolve healthcare fraud cases. This panel included Honorable Janice M. Symchych of JAMS. Ms. Symchych provided several tips for successful mediation, including using written submissions, ex-parte submissions, and the need to bring evidence like pictures, emails, and other critical, hard facts, beyond statistical sampling. Ms. Symchych stated that oftentimes attorney presentations where both sides are present are not helpful and only cause more divide between the parties.

Confidentiality of mediations was raised as a concern among bar members, and the use of a mediation contract with confidentiality terms was presented as a potential solution. Reference was also made to a 1996 Department of Justice (DOJ) Policy encouraging the use of Alternative Dispute Resolution (ADR) techniques and case criteria for selection of cases for ADR. Amy Berne (AUSA, NDGA) discussed how the Northern District has utilized mediation in dozens of False Claims Act cases. Ms. Berne stated that the Northern District attorneys generally are authorized with settlement ranges when they go in to mediation.

Recent Developments in Healthcare False Claims Act cases

This panel highlighted the U.S. Supreme Court decision in Universal Health Services, Inc. v. United States ex rel. Escobar as the biggest False Claims Act development over the past year. Notably, in the Escobar case, the United States Supreme Court: (1) explicitly approved implied certification as grounds for proving falsity; and (2) required a heightened standard for the government to show “materiality” of the false claim.

It is axiomatic that a claim must be false for liability to attach under the False Claims Act. Courts have generally recognized two types of falsity—factual falsity and legal falsity. A claim is factually false if rendered not payable because it rests on inaccurate factual information about the product or service billed (e.g., billing for services not rendered). A legally false claim is one where the services or product were provided as stated in the claim, but a condition of payment was not met thereby rendering the claim not eligible for payment. The Escobar case dealt with implied false claims, and the Supreme Court held that in these cases, the government must meet a more “demanding” standard to show that the condition not met is material to the government’s payment decisions.

Neeli Ben-David, U.S. Attorney’s Office Northern District of Georgia joined the panel to provide the government’s viewpoint on the Escobar case and its impact in the Northern District. Ms. Ben-David indicated that the key questions to determine materiality are “what is the essence of the bargain” and “would a reasonable government agency in the position of this government agency have believed this fact to be material to a decision to pay the claim?”

Anti-Kickback Statute & Stark Compliance

The final panel of the day discussed developments in the Anti-Kickback Statute (AKS) and the Physician Self-Referral Law (Stark). The panel focused primarily on commercial reasonableness under the Stark Law, highlighting the following questions to ask during commercial reasonableness review:

• Is the service needed by hospital? Were alternative options considered?
• Are the volume of services being purchased commensurate with need?
• Does the party hired have ability to do services, and were the services actually performed?
• What is the total volume of all agreements between the parties?

With respect to physician compensation, the viewpoints of both the government and the defense bar were discussed. To the government, compensation above collections is often deemed not fair market value or commercially reasonable. To the defense bar, there is no statutory or regulatory basis for assuming that compensation above collections is not commercially reasonable, and taking such a viewpoint would present in some cases an insurmountable obstacle for hospitals to retain physicians.

A few procedural tips were discussed regarding the attorney-client privilege and not waiving the privilege during Stark or AKS cases. One such tip was to not stamp fair market value/commercial reasonableness analyses as privileged, lest they be needed for a defense and then the privilege may be threatened. Another tip was to be careful about answering a Stark/AKS complaint with the Advice of Counsel Defense. Answering a complaint with such defense may cause the defendant to receive a Motion to Compel from the government seeking otherwise privileged material.

Conclusion

The Health Care Fraud Institute covered timely and important topics for all types of health care providers. AGG attorneys attended the conference, including Aaron Danzig, Bill Kitchens, Jason Bring, Jenny Tyler, Sam Shapiro, and Sam Lyddan.