In a September 9th letter the Centers for Medicare & Medicaid Services denied Delaware Insurance Commissioner Stewart’s application for an adjustment to the 80 percent medical loss ratio (“MLR”) standard applicable to the individual health insurance market in Delaware beginning in 2011 as a result of the federal health care reform legislation, the Patient Protection and Affordable Care Act (the “Act”). Section 1001 of the Act required issuers in the individual market to spend at least 80 percent of premium dollars on reimbursement for clinical services and activities that improve health care quality for enrollees. Beginning in 2011, if an issuer does not meet the 80 percent standard, it is required to provide rebates to enrollees.
The Act permits states to apply for adjustments to the 80 percent standard if applying that standard may destabilize the market for individual health insurance coverage in the state. Commissioner Stewart applied for an adjustment of the standard to 65 percent, 70 percent and 75 percent for the reporting years 2011, 2012 and 2013, respectively. Of the three largest issuers of individual health insurance coverage in the state, Blue Cross Blue Shield, Golden Rule, and Aetna, Blue Cross Blue Shield already meets the 80 percent standard but Golden Rule and Aetna do not and, according to media reports, threatened to pull out of the individual insurance market in Delaware if an adjustment was not obtained. Golden Rule and Aetna had not, however, provided the required 180-day notice of withdrawal from the Delaware individual market of the time of CMS’s decision. Some individual consumers and small business owners voiced objections to Commissioner Stewart’s application arguing it was a concession to the insurance companies and not in the best interest of Delaware consumers.
CMS, which has previously granted adjustment requests from five states and denied such a request from one state, North Dakota, denied Delaware’s request because the evidence presented did not establish that application of the 80 percent MLR standard would destabilize the Delaware individual market. Among other things, CMS found that Golden Rule and Aetna would remain “substantially profitable” even if they had to pay rebates as a result of not meeting the 80 percent MLR standard.
Friday, September 16, 2011
Wednesday, September 7, 2011
Third Circuit Adopts Implied False Certification Liability under False Claims Act
“Men must turn square corners when they deal with the government.”
While Justice Holmes penned the above quote in a different context, it was recently invoked by the United States Court of Appeals for the Third Circuit in its decision to adopt the implied false certification theory for liability under the False Claims Act (“FCA”). In United States ex rel Wilkins v. United Health Group, the Third Circuit joined the Second, Sixth, Ninth, Tenth, Eleventh, and District of Columbia Circuits in recognizing that healthcare providers can be liable under the FCA if the provider makes a claim for payment without disclosing that it violated regulations that affect its eligibility for payment. For Delaware providers, this means compliance with federal health laws has taken on a new dimension of exposure and they must be more careful than ever in submitting claims to the federal programs.
By way of review, in order to establish a prima facie violation under the FCA, the Government or a relator—a qui tam plaintiff—must prove: (1) that the provider presented or caused to be presented a claim for payment; (2) that was false or fraudulent; (3) that the provider knew to be false or fraudulent. The Courts have identified two categories of false or fraudulent claims under the FCA: (1) factually false and (2) legally false.
A factually false claim is one that misrepresents the items or services provided. A legally false claim is where the “false certification” theory originates, where a provider knowingly and falsely certifies that it has complied with a statute or regulation that is a condition of government payment. In Wilkins, the Third Circuit has now adopted a further distinction, and yet another avenue for FCA liability: (1) express false certifications and (2) implied false certifications.
An express false certification is where the provider falsely certifies that it is in compliance with the regulations that are prerequisites to payment in connection with the claim, such as a certification that the provider holds the requisite license to provide the services. Alternatively, the implied false certification rests on the idea that the mere act of submitting a claim, without any words of certification at all, implies compliance with the preconditions to payment. The Third Circuit noted that it must be proven that had the Government been aware of the provider’s violations of the Medicare laws and regulations, it would not have paid the claim. To state this condition another way, under the implied false certification theory, it must be shown that compliance with the regulation allegedly violated was a condition of payment, and not simply a condition of participation in the federal programs.
Under the facts of Wilkins, the relators first alleged that United Health personnel violated Medicare marketing regulations. The Third Circuit affirmed the District Court and dismissed that count of the complaint because compliance with the Medicare marketing regulations is not a condition of payment. However, the relators also alleged that United Health’s subsidiaries violated the Anti-Kickback Statute (“AKS”), also forming the basis of FCA liability. The Third Circuit found that the relators stated a claim in this regard, because Medicare regulations require Medicare Advantage and Prescription Drug Plan providers to enter into agreements with CMS, affirmatively agreeing to comply with the AKS. Therefore, the Court reasoned that “[t]o plead a claim for relief under an implied certification theory, appellants were required to allege, as they did, that appellees submitted claims for payment to the Government at a time that they knowingly violated a law, rule, or regulation which was a condition for receiving payment from the Government.
Delaware healthcare providers must be more vigilant than ever in submitting claims to the Government under federal health care programs. To steer clear of potential FCA liability, Delaware health care providers must be in compliance with all the federal health care laws that they agreed to follow when entering into contracts with CMS; when dealing with Government, always turn square corners.
While Justice Holmes penned the above quote in a different context, it was recently invoked by the United States Court of Appeals for the Third Circuit in its decision to adopt the implied false certification theory for liability under the False Claims Act (“FCA”). In United States ex rel Wilkins v. United Health Group, the Third Circuit joined the Second, Sixth, Ninth, Tenth, Eleventh, and District of Columbia Circuits in recognizing that healthcare providers can be liable under the FCA if the provider makes a claim for payment without disclosing that it violated regulations that affect its eligibility for payment. For Delaware providers, this means compliance with federal health laws has taken on a new dimension of exposure and they must be more careful than ever in submitting claims to the federal programs.
By way of review, in order to establish a prima facie violation under the FCA, the Government or a relator—a qui tam plaintiff—must prove: (1) that the provider presented or caused to be presented a claim for payment; (2) that was false or fraudulent; (3) that the provider knew to be false or fraudulent. The Courts have identified two categories of false or fraudulent claims under the FCA: (1) factually false and (2) legally false.
A factually false claim is one that misrepresents the items or services provided. A legally false claim is where the “false certification” theory originates, where a provider knowingly and falsely certifies that it has complied with a statute or regulation that is a condition of government payment. In Wilkins, the Third Circuit has now adopted a further distinction, and yet another avenue for FCA liability: (1) express false certifications and (2) implied false certifications.
An express false certification is where the provider falsely certifies that it is in compliance with the regulations that are prerequisites to payment in connection with the claim, such as a certification that the provider holds the requisite license to provide the services. Alternatively, the implied false certification rests on the idea that the mere act of submitting a claim, without any words of certification at all, implies compliance with the preconditions to payment. The Third Circuit noted that it must be proven that had the Government been aware of the provider’s violations of the Medicare laws and regulations, it would not have paid the claim. To state this condition another way, under the implied false certification theory, it must be shown that compliance with the regulation allegedly violated was a condition of payment, and not simply a condition of participation in the federal programs.
Under the facts of Wilkins, the relators first alleged that United Health personnel violated Medicare marketing regulations. The Third Circuit affirmed the District Court and dismissed that count of the complaint because compliance with the Medicare marketing regulations is not a condition of payment. However, the relators also alleged that United Health’s subsidiaries violated the Anti-Kickback Statute (“AKS”), also forming the basis of FCA liability. The Third Circuit found that the relators stated a claim in this regard, because Medicare regulations require Medicare Advantage and Prescription Drug Plan providers to enter into agreements with CMS, affirmatively agreeing to comply with the AKS. Therefore, the Court reasoned that “[t]o plead a claim for relief under an implied certification theory, appellants were required to allege, as they did, that appellees submitted claims for payment to the Government at a time that they knowingly violated a law, rule, or regulation which was a condition for receiving payment from the Government.
Delaware healthcare providers must be more vigilant than ever in submitting claims to the Government under federal health care programs. To steer clear of potential FCA liability, Delaware health care providers must be in compliance with all the federal health care laws that they agreed to follow when entering into contracts with CMS; when dealing with Government, always turn square corners.
Wednesday, June 22, 2011
New Delaware Health Care Facility Inspection Law Goes Into Effect
Just six weeks after Governor Markell signed into law HB 47 authorizing the Division of Public Health to investigate and inspect unsanitary or unsafe conditions in certain facilities where invasive medical procedures are performed, the Division shut down a Dover dermatology practice after receiving 10 complaints from patients and former employees of the Center for Dermatology. On Monday, June 15th, six investigators—three each from the Division of Public Health and the Division of Professional Regulation—arrived unannounced at the Center and, after spending most of the day there, ordered the practice to close. The unsafe conditions observed by the investigators included the use of unsterilized equipment such as scalpels, forceps and tweezers, health care staff failing to wash their hands before treating patients, and improper storage of controlled substances. The Division of Public Health was also concerned that the Center could not produce a written list of its safety policies and procedures.
HB 47 was introduced in the General Assembly in the wake of the publicity surrounding the case of Dr. Kermit Gosnell, a West Philadelphia abortion provider who is accused of murder in connection with the deaths of seven infants and was associated with clinics in Wilmington and Dover run by Atlantic Women's Medical Services. The bill gives the Division of Public Health authority to inspect and investigate facilities or health care practices (physicians, dentists, podiatrists, chiropractors) performing procedures in which anesthesia or sedation is or should be used upon receiving a complaint from a patient or the occurrence of an “adverse event,” e.g., death, serious injury, or the initiation of a criminal investigation. Facilities excluded from the bill are hospitals, freestanding birthing centers, freestanding surgery centers, and freestanding emergency centers.
HB 47 also authorizes the Division of Professional Regulation to investigate and inspect unsanitary and unsafe conditions maintained by individuals licensed by the Board of Medical Licensure and Discipline, and provides that maintenance of an unsanitary or unsafe condition is “unprofessional conduct” under the Medical Practice Act.
In light of these developments health care practices are well-advised to review their written safety policies and procedures and take measures to ensure that the procedures are followed.
HB 47 was introduced in the General Assembly in the wake of the publicity surrounding the case of Dr. Kermit Gosnell, a West Philadelphia abortion provider who is accused of murder in connection with the deaths of seven infants and was associated with clinics in Wilmington and Dover run by Atlantic Women's Medical Services. The bill gives the Division of Public Health authority to inspect and investigate facilities or health care practices (physicians, dentists, podiatrists, chiropractors) performing procedures in which anesthesia or sedation is or should be used upon receiving a complaint from a patient or the occurrence of an “adverse event,” e.g., death, serious injury, or the initiation of a criminal investigation. Facilities excluded from the bill are hospitals, freestanding birthing centers, freestanding surgery centers, and freestanding emergency centers.
HB 47 also authorizes the Division of Professional Regulation to investigate and inspect unsanitary and unsafe conditions maintained by individuals licensed by the Board of Medical Licensure and Discipline, and provides that maintenance of an unsanitary or unsafe condition is “unprofessional conduct” under the Medical Practice Act.
In light of these developments health care practices are well-advised to review their written safety policies and procedures and take measures to ensure that the procedures are followed.
Wednesday, November 24, 2010
Reverse False Claims-The Latest in False Claims Act Exposure
Earlier this week, the Department of Justice announced that it had its second largest annual recovery of civil fraud claims in history, securing $2.4 billion in settlements and judgments in cases involving fraud against the government in the fiscal year ending Sept. 30, 2009. In making this announcement, Tony West, the Assistant Attorney General for the Civil Division, reiterated that “rooting out fraud” remains one of the Justice Department’s highest priorities.” The government thanked its partners in these recovery efforts, mentioning the cooperation it receives from whistleblowers, State Departments of Justice, Medicaid Fraud Control Units, and Congress.
The reference to Congress’ role in assisting with fraud recovery efforts cannot be minimized. With the enactment of the Fraud Enforcement Recovery Act of 2009 (“FERA”) and the Patient Protection and Affordable Care Act (“PPACA,” sometimes referred to as the Healthcare Reform Act) in March of this year, Congress has significantly expanded the scope of liability for individuals and entities that receive government funds.
As a result of these reforms, one area where we are seeing considerable exposure for healthcare providers is with “reverse false claims.” There is no longer any doubt that the knowing retention of Medicare and Medicaid overpayments can serve as the basis for False Claims Act liability.
Under PPACA, health care providers are required to “report and refund” any overpayment by within 60 days after the date on which the overpayment was identified (or the date any corresponding cost report is due, whichever is later). The definition of overpayment under PPACA includes any funds received or retained under Medicare or Medicaid to which the provider is not entitled. And PPACA expressly makes the retention of any overpayment an obligation under the False Claims Act.
The Justice Department’s announcement last week that “A top priority for this administration is fighting health care fraud.” should come as no surprise to healthcare practitioners. In fiscal year 2009, health care fraud recoveries reached $1.6 billion, two-thirds of the year’s total. With the recent expansion to the Justice Department’s arsenal of recovery weapons, we will continue to see an increase in recovery efforts. Now more than ever it is essential to be vigilant in avoiding risk related to billing and collections.
The reference to Congress’ role in assisting with fraud recovery efforts cannot be minimized. With the enactment of the Fraud Enforcement Recovery Act of 2009 (“FERA”) and the Patient Protection and Affordable Care Act (“PPACA,” sometimes referred to as the Healthcare Reform Act) in March of this year, Congress has significantly expanded the scope of liability for individuals and entities that receive government funds.
As a result of these reforms, one area where we are seeing considerable exposure for healthcare providers is with “reverse false claims.” There is no longer any doubt that the knowing retention of Medicare and Medicaid overpayments can serve as the basis for False Claims Act liability.
Under PPACA, health care providers are required to “report and refund” any overpayment by within 60 days after the date on which the overpayment was identified (or the date any corresponding cost report is due, whichever is later). The definition of overpayment under PPACA includes any funds received or retained under Medicare or Medicaid to which the provider is not entitled. And PPACA expressly makes the retention of any overpayment an obligation under the False Claims Act.
The Justice Department’s announcement last week that “A top priority for this administration is fighting health care fraud.” should come as no surprise to healthcare practitioners. In fiscal year 2009, health care fraud recoveries reached $1.6 billion, two-thirds of the year’s total. With the recent expansion to the Justice Department’s arsenal of recovery weapons, we will continue to see an increase in recovery efforts. Now more than ever it is essential to be vigilant in avoiding risk related to billing and collections.
Thursday, September 30, 2010
Responding to Subpoenas
Recently there has been a surprising increase in the number of subpoenas served on health care providers. Fraud investigations, overpayment investigations, licensing board investigations, carrier audits, personal injury and workers compensation claims, all generate demands for production of records (and sometimes interviews). And while subpoenas have become commonplace for medical practices, the response to a subpoena cannot be treated lightly. A subpoena, particularly one issued by a government agency such as the Office of Inspector General, State Medicaid Fraud Control Unit, or Department of Justice, reveals the existence of an investigation and the potential for significant risk. Accordingly, every health care provider should be prepared to respond appropriately to service of a subpoena. Yet few health care providers have policies in place for responding to investigations.
We recommend that every healthcare provider implement a policy for responding to investigative demands. An effective policy will identify the primary concerns and decisions that result from a demand for production of records. Among the practical and strategic considerations triggered by receipt of a subpoena are: Who in the practice should respond to the subpoena? Does the subpoena request documents that should not be produced because of confidentiality concerns, because they may be protected by privilege or some other legitimate concern? Is the subpoena improperly broad? Should an attorney be consulted?
An effective policy serves as an essential checklist to assure that proper steps are taken to respond to the subpoena. The policy should ensure that one person or department is clearly identified as responsible for responding to the investigative demand. All employees must be aware that subpoenas should be immediately forwarded to the person or department in charge. Responses should be timely and complete. However, care should be taken to review the subpoena to ensure that it is not improperly broad. It is rarely beneficial to provide more information than is requested. And any response should ensure that confidential information, patient records and attorney/client privileged information in particular, are protected. Copies of anything produced should be retained and properly labeled to avoid subsequent confusion about what was produced.
A subpoena often announces an investigation of some kind, and information contained in the subpoena itself may reveal the nature and subject of the investigation. This information can be valuable to a provider, and the policy should identify the circumstances under which and the means by which the practice will conduct an internal investigation to quickly assess risk, rectify problems early and minimize exposure.
In light of increased enforcement efforts by both government and private payors, now is the time to establish a policy, or to review your practice’s existing policy, for responding to investigative demands to ensure your practice responds to such demands as efficiently as possible and in a manner consistent with the practice’s interests.
We recommend that every healthcare provider implement a policy for responding to investigative demands. An effective policy will identify the primary concerns and decisions that result from a demand for production of records. Among the practical and strategic considerations triggered by receipt of a subpoena are: Who in the practice should respond to the subpoena? Does the subpoena request documents that should not be produced because of confidentiality concerns, because they may be protected by privilege or some other legitimate concern? Is the subpoena improperly broad? Should an attorney be consulted?
An effective policy serves as an essential checklist to assure that proper steps are taken to respond to the subpoena. The policy should ensure that one person or department is clearly identified as responsible for responding to the investigative demand. All employees must be aware that subpoenas should be immediately forwarded to the person or department in charge. Responses should be timely and complete. However, care should be taken to review the subpoena to ensure that it is not improperly broad. It is rarely beneficial to provide more information than is requested. And any response should ensure that confidential information, patient records and attorney/client privileged information in particular, are protected. Copies of anything produced should be retained and properly labeled to avoid subsequent confusion about what was produced.
A subpoena often announces an investigation of some kind, and information contained in the subpoena itself may reveal the nature and subject of the investigation. This information can be valuable to a provider, and the policy should identify the circumstances under which and the means by which the practice will conduct an internal investigation to quickly assess risk, rectify problems early and minimize exposure.
In light of increased enforcement efforts by both government and private payors, now is the time to establish a policy, or to review your practice’s existing policy, for responding to investigative demands to ensure your practice responds to such demands as efficiently as possible and in a manner consistent with the practice’s interests.
Tuesday, July 13, 2010
Delaware Enacts New Laws Impacting Medical Professionals
In the wake of the investigation and prosecution of Dover pediatrician Earl Bradley on hundreds of counts of sexual assault and child molestation, the Delaware General Assembly passed a series of bills designed to enhance the effectiveness of regulators who license medical professionals and law enforcement officials charged with investigating and prosecuting crimes of abuse in Delaware, which bills were signed by Governor Markell on June 30, 2010. A summary of the bills can be found on the Governor's website at http://governor.delaware.gov/news/2010/1006june/20100630-legislation.shtml. Perhaps most significantly for physicians, the bills (1)require that there be another adult in the room when a physician is treating a person 15 years of age or younger and the child is disrobed or otherwise undergoing certain physical examinations, (2)provide for expedited suspensions of medical licenses if there is a threat to the public,(3) facilitate the ability of the Board of Medical Practice (now renamed the Board of Medical Licensure and Discipline) to obtain information from peer review panels, (4) impose stiffer sanctions for the failure to report physician misconduct, (5) require physicians to undergo background checks, and (6) require physicians to participate in training to recognize signs of child abuse.
Thursday, June 10, 2010
Delaware Court Upholds Restrictive Covenant in Physician Employment Agreement
In a recent Memorandum Opinion, Judge Herlihy of the Delaware Superior Court held that a restrictive covenant in a physician employment agreement that required the physician-employee to pay the medical practice employer $200,000 in liquidated damages if, during the 2-year period following termination of the agreement, the physician-employee practiced medicine or treated former patients of the employer within a 20-mile radius of the medical practice’s locations, is enforceable as a matter of law.
The medical practice, located in Sussex County, Delaware, employed the physician as an internist and pulmonologist, and it was undisputed that when he left the practice he breached the terms of the restrictive covenant by seeing former patients of the practice within a 20-mile radius of the practice’s offices. The Court held that the restrictive covenant complied with 6 Del. C. §2707, and that liquidated damages in the amount of $200,000 was a reasonable estimate of the damages caused by the physician’s breach of the restriction.
Whether the physician will actually be required to pay the practice liquidated damages, however, depends on whether the practice breached the employment agreement before the physician breached the restrictive covenant. The Court held that fact issues related to the employer’s alleged breach precluded summary judgment.
The medical practice, located in Sussex County, Delaware, employed the physician as an internist and pulmonologist, and it was undisputed that when he left the practice he breached the terms of the restrictive covenant by seeing former patients of the practice within a 20-mile radius of the practice’s offices. The Court held that the restrictive covenant complied with 6 Del. C. §2707, and that liquidated damages in the amount of $200,000 was a reasonable estimate of the damages caused by the physician’s breach of the restriction.
Whether the physician will actually be required to pay the practice liquidated damages, however, depends on whether the practice breached the employment agreement before the physician breached the restrictive covenant. The Court held that fact issues related to the employer’s alleged breach precluded summary judgment.
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