AKS Archives - The National Law Forum

OIG Releases Special Fraud Alert About Suspect Payments in Marketing Arrangements Related to Medicare Advantage and Providers

On December 11, 2024, the Office of Inspector General for the U.S. Department of Health and Human Services (“OIG”) issued a special fraud alert warning about certain marketing schemes that involve questionable payments and referrals between Medicare Advantage (“MA”) health plans, health care professionals, and third-party marketers (e.g., agents and brokers) and that can mislead MA enrollees into choosing specific health plans or providers that may not be in the MA enrollees’ best interests or meet their needs (“MA Marketing Alert”). As we have previously advised, special fraud alerts are few and far between—OIG has only issued six in the past 20 years. The importance of the MA Marketing Alert, like its predecessors, should not be taken for granted because it may be instructive as to subsequent enforcement action taken by OIG and/or the U.S. Department of Justice (“DOJ”).

In the MA space, historical enforcement actions taken by both OIG, under their administrative authorities, and DOJ, under the False Claims Act (“FCA”), have related to alleged MA risk adjustment payment inflation schemes. See, e.g., DaVita, Sutter Health, Beaver Medical, Martin’s Point, and Cigna. While allegations of this nature continue to be a focus area (e.g., in OIG’s work plans), a light is also now being shone on inappropriate marketing schemes that could violate the Federal anti-kickback statute (“AKS”). And, based on historical empirical data connecting DOJ’s enforcement actions taken subsequent to OIG’s issuance of special fraud alerts, that light may broaden and brighten.

For example, in July 2022, OIG issued a special fraud alert about arrangements involving telemedicine companies. In a footnote, OIG provided three enforcement actions resolved under the FCA as examples of allegedly problematic arrangements. After providing the footnote examples, OIG described bullet-pointed “Suspect Characteristics” that tracked the allegedly inappropriate characteristics of the footnote examples. Since the alert’s issuance, DOJ has recovered millions under the FCA and also criminally charged and convicted many individuals and entities for allegedly submitting or causing the submission of more than $3.1 billion (in 2023 and 2024 pursuant to DOJ’s nationwide takedowns) in allegedly fraudulent Medicare claims resulting from telemedicine schemes.

While the MA Marketing Alert provides footnotes of only two enforcement actions resolved under the FCA as examples of allegedly problematic arrangements, the bullet point list of “Suspect Characteristics” is broader than and reaches beyond the footnote examples. This may signal OIG’s awareness of and current investigations into allegedly inappropriate arrangements relating to “Suspect Characteristics” that have yet to be settled or resolved.

It is possible that there may be forthcoming enforcement actions in these areas. And they may follow the same trend of enforcement actions taken by DOJ relating to telemedicine schemes after OIG’s July 2022 special fraud alert. We also note that the MA Marketing Alert aligns with the Centers for Medicare & Medicaid Services’ recently finalized regulatory updates relating to MA health plan marketing arrangements with agents, brokers, and Third-Party Marketing Organizations, which will be effective January 1, 2025, and prohibit such parties from creating direct or indirect incentives “that would reasonably be expected to inhibit an agent or broker’s ability to objectively assess and recommend which plan best fits the health care needs of a beneficiary.” Proskauer’s Health Care Group will continue to monitor these developments in and provide updates about these areas of scrutiny and enforcement.

FCA Enforcement & Compliance Digest — Fall 2024 False Claims Act Newsletter

Welcome to the Fall 2024 issue of “FCA Enforcement & Compliance Digest,” our quarterly newsletter in which we compile essential updates on False Claims Act (FCA) enforcement trends, litigation, agency guidance, and compliance tips. We bring you the most recent and significant insights in an accessible format, concluding with our main takeaways — aka “And the Fox Says…” — on what you need to know.

In this Fall 2024 edition, we cover:

Enforcement Trends: Manufacturers challenge AKS intent requirement as reflected in recent denials of OIG Advisory Opinion requests.
Litigation Developments: Implications of Florida judge’s ruling that the FCA qui tam provision is unconstitutional.
Compliance Corner: What health care companies need to know about AI.
ICYMI: Federal Court Permits Investors to Resume Kickback Suit Against Teva

1. Enforcement Trends

Do Violations of the AKS Require a ‘Corrupt’ Intent? Manufacturers Challenge the OIG’s Interpretation of the Statute

In a series of recent lawsuits filed by the pharmaceutical industry against the US Department of Health and Human Services (HHS) Office of the Inspector General (OIG), manufactures are challenging the OIG’s interpretation of the Anti-Kickback Statue (AKS), arguing that violations of the statute require a corrupt intent. While courts have so far ruled in OIG’s favor, should a court accept this argument, the AKS regulatory landscape could be upended, providing health care providers and suppliers the opportunity to develop and implement arrangements that have historically been prohibited by the OIG.

The challenges to OIG’s interpretation of the AKS come in the context of OIG Advisory Opinion requests submitted by the manufacturers (or a related charity) proposing various forms of patient assistance programs under which the manufacturers or their related charities offer financial assistance to patients on the manufacturers’ products. The OIG denied each of the Advisory Opinion requests, finding that the proposed forms of patient assistance would constitute remuneration intended to induce patients to purchase the manufacturers’ drugs in violation of the AKS.

The OIG has consistently reiterated its opposition to manufacturer-operated patient assistance programs, with both the OIG’s 2005 Special Advisory Bulletin: Patient Assistance Programs for Medicare Part D Enrollees and the 2014 Supplemental Special Advisory Bulletin: Independent Charity Patient Assistance Programs noting that manufacturers cannot provide co-pay assistance to federal health care program beneficiaries, as doing so would constitute a kickback. However, the guidance also described the parameters under which independent charities can provide co-pay assistance, including assistance to federal health care program beneficiaries (i.e., Medicare beneficiaries). One of the key factors with respect to the operation of charitable patient assistance programs, is the independence of the charities operating the programs. While the independent charities are primarily funded by manufacturers, to be considered independent for OIG’s purposes, the charities must retain independence from donors. This means the donors cannot influence the design or operation of the patient assistance programs, and the programs cannot favor patients on the donor’s drug (e.g., assistance cannot be contingent upon the patient being prescribed a donor’s drug).

In three separate litigations, Pfizer Inc. v. United States Department of Health and Human Services, Vertex Pharmaceuticals Incorporated v. United States Department of Health and Human Services et al., and Pharmaceutical Coalition for Patient Access v. United States of America et al., manufacturers are challenging OIG’s long-held position that manufacturers cannot provide patient assistance, including co-pay assistance, to federal health care program beneficiaries. In doing so, the goal of the manufacturers is to provide assistance to patients, including co-pay support, either directly or through a charity that is not considered independent by OIG’s standards due to the relationship of the proposed charities to the manufactures and the level of influence by the manufacturers over the proposed charities. In each litigation, the manufacturer or, in the case of the Pharmaceutical Coalition for Patient Access (PCPA), the charity controlled by the manufacturers, is challenging an unfavorable Advisory Opinion issued by OIG concluding that the proposed patient assistance programs would constitute remuneration intended to induce patients to use a particular manufacturer’s products.

Under the arrangements proposed by Pfizer and PCPA, the proposed charities would be funded exclusively by manufacturers and would only provide support to patients on those funders’ drugs. In Pfizer’s Advisory Opinion request, the company proposed two potential co-pay assistance programs: (1) a direct co-pay assistance program and (2) a Pfizer-supported charity co-pay assistance program. Similar to the proposed Pfizer-supported charity co-pay assistance program, PCPA, an organization funded by manufacturers of Part-D-covered oncology drugs, proposed to create its own patient assistance program that would provide co-pay assistance to patients who meet certain qualifying criteria and then invoice each participating manufacturer for “the total amount of cost-sharing subsidies provided to eligible Part D enrollees.”

Vertex’s Advisory Opinion request focused on a proposed “Fertility Preservation Program” under which Vertex would pay fertility providers through a third-party vendor for the treatments provided to patients enrolled in the program. While this proposed program involved coverage of related treatment costs (i.e., the costs of the fertility treatments) rather than coverage of the co-pay costs associated with the Vertex drug itself, OIG nonetheless applied the same reasoning as in the Pfizer and PCPA opinions, concluding that the program would constitute remuneration to the patients in violation of the AKS.

In each litigation, the manufacturer (or, in the case of PCPA, the manufacturer-related charity) is challenging OIG’s position that the manufacturer’s subsidies constitute “remuneration” meant “to induce” patients to purchase manufactures’ products. The manufacturers argue that the AKS criminalizes conduct that “leads or tempts to the commission of crime” through “remuneration” that corrupts medical decision-making, as part of a quid pro quo transaction. In other words, according to the manufacturers, “to induce” requires a corrupt intent. Therefore, because the manufactures’ efforts to assist patients with meeting Medicare co-pay obligations or gaining access to Medicare-covered treatments (or treatments otherwise covered by the federal health care programs) are not done with malice or corrupt intent, such programs would not violate the AKS.

To date, no court has agreed with the manufacturers’ position. While Vertex is still pending trial in the District Court for the District of Columbia, the District Court for the Southern District of New York ruled against Pfizer, noting that “the law is clear that absent an express carve-out, the Anti-Kickback Statute prohibits any remuneration intended to induce someone to purchase or receive a drug or medical service.” Similarly, the District Court for the Eastern District of Virginia ruled against PCPA, concluding that HHS OIG’s “interpretation of the AKS adheres faithfully [to] the statute’s plain text, comports with its context, and does not offend its history.” On appeal, the Second Circuit affirmed the District Court’s decision in Pfizer, finding that an AKS violation does not require “corrupt intent.” Pfizer then appealed to the US Supreme Court, which denied certiorari. PCPA’s case is currently on appeal with the Fourth Circuit.

Should the Vertex court or a court of appeals agree that the statutory terms “induce” and “remuneration” should be construed more narrowly and require a corrupt intent to violate the AKS, AKS regulatory interpretation and much of OIG’s guidance could be called into question. Arrangements that have historically been viewed as suspect by the OIG could be considered compliant to the extent the parties lacked a corrupt intent to violate the law.

And the Fox Says… Ongoing efforts challenging OIG’s statutory interpretation of the AKS demonstrate manufacturers’ interests in narrowing the scope of prohibited activities under the law. Providers and suppliers should continue monitoring the ongoing litigation and any future efforts to challenge OIG’s interpretation of the AKS, as any judicial narrowing of the interpretation could provide opportunities to develop innovative arrangements that may be beneficial to patients. Regardless, developing compliant arrangements to benefit patients can be complicated, and legal counsel can help to ensure you remain apprised of all relevant developments and assist in structuring compliant arrangements.

2. Litigation Developments

What Is the FCA Without Its Qui Player? A Look Into Zafirov’s Future Implications and the Enforceability of the FCA Without a Qui Tam Device

As we previously discussed, a Florida federal district court recently held in Zafirov v. Florida Medical Associates LLC that the FCA qui tam provision is unconstitutional. The court reasoned that a relator who litigates an FCA lawsuit on behalf of the United States is not a properly appointed “officer” under Article II of the US Constitution and, thus, does not have the authority to serve in that position. This article examines several questions: What does FCA enforcement look like without a qui tam device? What questions did Zafirov leave unresolved? And what should one expect in the coming years as this issue is litigated on appeal and among other courts?

Can the government successfully enforce the FCA without a qui tam device? If, in the end, the qui tam provision is voided, that does not spell doom for the FCA. This is because the government still has the authority to file FCA actions itself and could hire many more attorneys to investigate and prosecute them. The government also has other mechanisms to entice whistleblowers to come out of the woodwork and inform it of wrongdoing. For example, recently, the US Department of Justice (DOJ) announced the “Corporate Whistleblower Awards Pilot Program.” This enforcement program compensates whistleblowers who inform the DOJ of original and truthful information concerning corporate misconduct. If the information leads to a successful forfeiture of over $1 million, the whistleblower is compensated. Currently, however, the program does not cover FCA claims. But the DOJ or US Congress could theoretically expand this program, or create a new one, to attract whistleblowers who have information concerning FCA violations. Under such a program, the government’s litigation of FCA claims would not be all that different from what happens currently. Rather than intervene in a meritorious FCA case brought by a relator, the government would file its own case based on information provided by a whistleblower. This would avoid the constitutional pitfalls identified in Zafirov. A post-qui tam landscape will certainly see fewer FCA claims being filed overall, but the government would likely file more FCA claims than it does now.

Still, many questions remain unresolved under Zafirov concerning the extent to which relator suits are constitutionally permissible. In Zafirov, the relator was litigating an FCA suit in which the United States declined to intervene. But what happens if the United States does intervene and takes over the case? Are those suits permissible? Does the relator act as an “officer” if her role is just limited to filing a lawsuit? Could the government get around Zafirov by intervening in more cases? Or are all FCA lawsuits filed by a relator invalid ab initio even if the government intervenes? If so, would Congress have to create a mechanism to appoint a relator as an officer for FCA purposes? In short, it is unclear how broadly Zafirov will be read. On one hand, it could be read to only apply to non-intervened cases. On the other hand, the very act of filing a complaint on behalf of the United States may require a constitutional appointment, and the government’s intervention would not cure that taint. These questions will remain unresolved until they are addressed by the Supreme Court.

Only time will tell what will happen as this issue percolates in the courts. Already, several circuit courts have upheld the constitutionality of the qui tam provisions. In the district courts located in circuits that have not yet addressed this issue, defendants are filing dispositive motions arguing that the relator’s appointment is unconstitutional. Though the decision in Zafirov is currently an outlier, it soon may not be as more courts consider arguments that rely on Zafirov’s reasoning.

And the Fox Says… Zafirov is significant because it may be the first blow to a significant enforcement mechanism on which the government heavily relies. But the qui tam provision’s fate is not set in stone. The relator in Zafirov will almost certainly appeal the decision to the Atlanta-based Eleventh Circuit Court of Appeals. That court’s decision may then be appealed to the Supreme Court. The appeals process for Zafirov may take years before the Supreme Court grants certiorari on the issue (if it does at all). In the meantime, the issue is not going away, and Zafirov is unlikely to be a one-off case. Those who are in the throes of an FCA investigation or litigation should raise this issue as a possible litigation risk or as an affirmative defense. The best possible time to raise this issue amid litigation is on a Rule 12(b)(6) motion to dismiss. Even if a case is past this point, Zafirov supports the position that such an argument is not waived, given that the issue goes to the relator’s very authority to bring the suit. So, defendants litigating a case brought by a relator should raise this issue as soon as possible. We at ArentFox Schiff will continue to monitor developments to help our clients navigate this ever-changing legal landscape.

3. Compliance Corner

AI Under the DOJ Microscope: How Health Care Companies Should Respond

Many companies, including health care companies, have incorporated artificial intelligence (AI) into their business practices. While historically, AI has largely been unregulated, that is starting to change. Recently, state governments have begun regulating the use of AI in the health care setting, as our colleagues summarized here regarding recently passed California legislation requiring health care facilities, clinics, and physician practices in the state to disclose the use of AI in communications regarding patient clinical information. Now, AI has the attention of the DOJ.

This past March, Deputy Attorney General Lisa Monaco indicated the DOJ’s interest in AI, stating at the American Bar Association’s 39th National Institute on White Collar Crime that “fraud using AI is still fraud.” Following Monaco’s statement, in September, the Criminal Division of the DOJ updated its Evaluation of Corporate Compliance Programs (ECCP) guidelines to require DOJ prosecutors to consider whether a company’s compliance program safeguards against misuse of AI or other emerging technologies. As a brief primer, the ECCP is a DOJ document that prosecutors use to evaluate the effectiveness of a corporate compliance program in determining whether to criminally charge a company. The document is published publicly and provides helpful insight into the DOJ’s expectations for companies as they build and implement their corporate compliance programs.

Under the updated guidance, the DOJ emphasizes that companies need to assess AI-related risks as part of their overall enterprise risk management systems. Specifically, a corporate compliance program must consider whether it has specific policies and procedures to prevent “any potential negative or unintended consequences” resulting from the use of AI in its business practices and compliance program. Additionally, a company should proactively conduct risk analyses of its use of AI and mitigate the potential for “deliberate or reckless misuse of technologies” by company insiders. Other key considerations are whether the company trains its employees on the use of AI, whether there is a baseline of human decision-making used to assess AI-generated content, and how the company implements accountability over the use of AI.

In its September update, the DOJ also revised a section of the ECCP, asking whether compliance personnel have access to relevant data sources to allow for “timely and effective monitoring and/or testing” of policies, controls, and transactions. A key consideration is whether the assets, resources, and technology available to compliance programs are comparable to those available elsewhere in the company. An imbalance in access to technology and resources may indicate a compliance program’s inability to detect and mitigate risks, particularly if a business unit is given unfettered access to AI tools while compliance lags behind.

Compliance officers at health care companies should take steps now to ensure that the implementation and use of AI within their organizations do not raise any compliance red flags. Consider the recent Texas Attorney General settlement with Pieces Technologies, a company that markets generative AI products, which resolved allegations that the company made misleading statements regarding the accuracy of its products. As part of the settlement, Pieces agreed to provide more explicit disclosures to customers related to how the company’s products should be used and the potential harm that could result from the products.

Providers using such technologies may encounter data privacy and security risks, including cybersecurity risks such as ransomware and malware attacks, bias and fairness concerns with respect to the training of the AI systems that may result in preference for a particular drug or treatment, and reliability and accountability concerns affecting a health care professional’s ability to provide patient care. With that being said, the DOJ could conduct investigations similar to the Pieces investigation against health care providers that use AI without considering these risks.

To help mitigate the risks associated with AI, including in the event of a DOJ investigation, compliance officers should be involved during all stages of discussions around AI initiatives, including through implementation and use. Compliance officers should ensure their companies have appropriate policies and procedures governing the use of AI once it is introduced to their organizations and provide training to employees both on the AI technology and on the policies governing its use. Finally, compliance officers should ensure they have the necessary access to AI systems to conduct compliance oversight measures. Such oversight measures may include assessing AI-related risks as part of their organization’s annual risk assessment, conducting AI-related auditing, and monitoring to help identify potential issues with the technology as they arise.

And the Fox Says… The DOJ’s AI-focused compliance guidance is a call to action for companies to proactively address the legal and regulatory implications of AI technologies, reminding them that the age of AI requires more than just innovation — it demands robust compliance strategies. Companies that conduct regular risk assessments of their practices must consider the use of AI, update policies and procedures to address its use, provide compliance teams with equal data access, and regularly update training on the lawful use of these technologies. Empowering compliance personnel and working with outside compliance experts to make these regular updates will put a company in a good position to meet these new standards. By embracing these guidelines, companies can mitigate legal and regulatory risks while leveraging the capabilities of AI technologies.

4. In Case You Missed It

Our most popular blog post from the last quarter: Federal Court Permits Investors to Resume Kickback Suit Against Teva.

2023 Key Developments In The False Claims Act

2023 was another active year for the False Claims Act (FCA), marked by notable appellate decisions, emerging enforcement trends, and statutory amendments to state FCAs. We summarize the year’s most important developments for practitioners and government-facing businesses.

Developments in Caselaw

Supreme Court Holds That FCA Scienter Incorporates A Subjective Standard

The Supreme Court issued two consequential decisions on the False Claims Act this term. In the first, United States ex rel. Schutte v. SuperValu Co., 1 the Court held that objectively reasonable interpretations of ambiguous laws and regulations only provide a defense to the FCA’s scienter requirement if the defendant in fact interpreted the law or regulation that way during the relevant period. The Court held that the proper scienter inquiry is whether the defendant was “conscious of a substantial and unjustifiable risk” that their conduct was unlawful. 2 Previously, some courts (including the courts below in Schutte) had dismissed FCA claims based on an ambiguity in relevant statutory or regulatory provisions identified by a party’s attorneys, even if the party never actually believed that interpretation. Schutte precludes such a defense. That said, Schutte does require relators or the Government to allege facts to support an inference of actual knowledge of falsity, and some courts have granted motions to dismiss on that basis post-Schutte. 3

High Court Reaffirms Government’s Authority To Intervene And Dismiss Declined Actions, While Some Justices Raise Constitutional Questions

The Court also decided United States ex rel. Polansky v. Executive Health Resources, Inc., 4 which held that the Government may intervene in a declined action—i.e., where the Government declines to litigate the case at the outset under 31 U.S.C. § 3730(b)(4)(B)—for the purpose of dismissing it over the relator’s objection. The case essentially preserves the status quo, as courts widely recognized the authority of the Government to dismiss declined qui tams before Polansky. Polansky places two minor restrictions on the Government’s ability to dismiss declined actions. First, the Government has to intervene. 5 Second, the Government needs to articulate some rationale for dismissal to meet the standard of Rule 41(a), which the Court remarked that it will be able to do in “all but the most exceptional cases.” 6 More notably, however, three of the nine Justices (Justice Thomas in dissent and Justices Kavanaugh and Barrett in concurrence) signaled that they would entertain a challenge to the constitutionality of the qui tam mechanism under Article II. 7 Though the one court that has considered such arguments on the merits post-Polansky rejected them, 8 it remains likely that additional, similar challenges will be made.

Split In Authority Deepens On Causation In Kickback Cases

In FCA cases where the relator alleges a violation of the Anti-Kickback Statute (AKS), the payment of a kickback needs—at least in part—to have caused a submission of a false claim. That requirement flows from the statutory text of the AKS, which provides that claims “resulting from” AKS violations are “false or fraudulent claim[s]” for the purpose of the FCA. 9 But courts have not coalesced around a single standard for what it means for a false claim to “result from” a kickback. Before this year, the Third Circuit in United States ex rel. Greenfield v. Medco Health held that there needs to be “some link” between kickback and referral beyond temporal proximity. 10 On the other hand, the Eighth Circuit in United States ex rel. Cairns v. D.S. Medical, LLC, held that the kickback needs to be a but-for cause of the referral. 11 Earlier this year, the Sixth Circuit endorsed the Eighth Circuit’s interpretation of causation. The court reasoned that but-for causation is the “ordinary meaning” of “resulting from” and no other statutory language in the AKS or FCA justifies departure from a but-for standard. 12 But not every court has adopted the Sixth Circuit’s straightforward analysis.

In the District of Massachusetts, for example, two decisions issued this summer came out on opposite sides of the split. In both cases, United States v. Teva Pharmaceuticals USA, Inc., 13 and United States v. Regeneron Pharmaceuticals, Inc., 14 the Government alleged that the pharmaceutical companies were improperly paying copayment subsidies to patients for their drugs. Yet Teva adopted Greenfield’s “some link” standard, while Regeneron adopted the “but-for” standard of the Sixth and Eighth Circuits. The Teva court also certified an interlocutory appeal to the First Circuit to resolve the issue prior to trial, which remains pending. 15 FCA defendants in cases arising out of the AKS thus continue to face substantial uncertainty as to the applicable standard outside the Third, Sixth, and Eighth Circuits. That said, there is mounting skepticism of the Greenfield analysis, 16 and those defendants retain good arguments that the standard adopted by the Sixth and Eighth Circuits should apply.

Enforcement Trends

The also Government remained active in investigating and, in many cases, settling False Claims Act allegations. That enforcement activity included several large settlements, including a $377 million settlement with Booz Allen Hamilton arising out of its failure to comply with Federal Acquisition Regulation cost accounting standards. 17 Our review of this year’s activity revealed significant trends in both civil and criminal enforcement, which we briefly describe below.

Focus On Unsupported Coding In Medicare Advantage (Part C) Claims

Medicare recipients are increasingly turning to private insurers to manage the administration of their Medicare benefits: over half of Medicare enrollees now opt for managed care plans. 18 The Government announced several important enforcement actions focused on submissions to and the administration of Medicare Advantage plans.

On September 30, DOJ announced a $172 million settlement with Cigna due to an alleged scheme to submit unsupported Medicare coding to increase reimbursement rates. According to the press release, Cigna operated a “chart review” team that reviewed providers’ submitted materials and identified additional applicable diagnosis coding to include on requests for payment. The Government alleges that some of the coding Cigna added was not substantiated by the chart review. 19

Similarly, in October, the Government declined to prosecute insurer HealthSun for submitting diagnosis coding to CMS that increased applicable reimbursement rate of treatment without an actual underlying diagnosis by the treating physician. The declination was based on HealthSun’s voluntary self-disclosure of the conduct through the Criminal Division’s recently updated Corporate Enforcement and Voluntary Self-Disclosure Policy. 20 DOJ did, however, indict the company’s former Director of Medicare Risk Adjustment Analytics for conspiracy to commit healthcare fraud and several counts of wire fraud and major fraud against the Government in the Southern District of Florida. 21

In May, the United States Attorney’s Office for the Eastern District of Pennsylvania announced a settlement against a Philadelphia primary care practice based on the submission of allegedly unsupported Medicare diagnosis coding in Part C submissions. The press release asserts that the practice coded numerous claims with morbid obesity diagnoses when the patients lacked the required body-mass index for the diagnosis and diagnosed chronic obstructive pulmonary disease without appropriate substantiation. 22

Both managed care organizations and providers that submit claims to Medicare Advantage should review their claim coding practices to ensure that their claims accurately reflect the medical diagnoses of the treating physician, as well as the treatment provided.

DOJ Follows Through On Civil Cyber-Fraud Initiative

In 2021, DOJ announced the launch of its Civil Cyber-Fraud Initiative, 23 which was aimed at policing government contractors’ failures to adequately protect government information by meeting prescribed cybersecurity requirements. This year, the enforcement of that policy led the Government to alleged FCA violations based on implied or explicit certifications of compliance with cybersecurity regulations:

In September, the Government declined to intervene in a qui tam action against Pennsylvania State University alleging that Penn State falsely certified compliance with Defense Federal Acquisition Regulation Supplement 252.204-7012, which specifies controls required to safeguard defense-related information, during the length of its contract with the Defense Department. 24 However, the parties subsequently sought a 180 day stay of proceedings due to an ongoing government investigation, which was granted. 25 The application for the stay hinted that the Government may yet intervene in the action and file a superseding complaint. 26

DOJ also announced in September a $4 million settlement with Verizon Business Network Services LLC arising out of Verizon’s provision of internet services to federal agencies that was required to meet specific security standards. The Government’s press release, which specifically noted Verizon’s cooperation with the investigation, alleged that Verizon failed to implement “three required cybersecurity controls” in its provision of internet service, which were not individually specified. 27

Entities doing business with the Government should ensure that they are aware of all applicable cybersecurity laws and regulations governing that relationship and that they are meeting all such requirements.

Continued Crackdown On Telemedicine Fraud Schemes

Following OIG-HHS’s July 2022 Special Fraud Alert 28 regarding the recruitment of practitioners to prescribe treatment based on little to no patient interaction over telemedicine, DOJ announced several significant settlements involving that exact conduct. In many circumstances, the Government pursued criminal charges rather than civil FCA penalties alone.

In September, the United States Attorney’s Office for the District of Massachusetts announced a guilty plea to a conspiracy to commit health care fraud charge. The Government alleged that the defendant partnered with telemarketing companies to pay Medicare beneficiaries “on a per-order basis to generate orders for [durable medical equipment] and genetic testing,” and then found doctors willing to sign “prepopulated orders” based on telemedicine appointments that the doctors did not actually attend. 29

In June, as part of a “strategically coordinated” national enforcement action, DOJ announced action against several officers of a south Florida telemedicine company for an alleged $2 billion fraud involving the prescription of orthotic braces and other items to targeted Medicare recipients through cursory telemarketing appointments that were presented as in-person examinations. 30

Although enforcement in the telemedicine space to date has largely focused on obviously fraudulent conduct, practitioners should be aware that the Government may view overly short telemedicine appointments as insufficient to support diagnoses leading to claims for payment from the Government.

State False Claims Acts

Both Connecticut and New York made notable alterations to the scope of conduct covered by their state FCAs. Companies doing business with state governments should be aware that 32 states have their own FCAs, not all of which mirror the federal FCA.

Connecticut Expands FCA To Mirror Scope Of Federal Statute

Prior to this year, Connecticut’s False Claims Act covered only payments sought or received from a “stateadministered health or human services program” In June, however, Connecticut enacted a substantial revision to its state FCA, which seeks to mirror the scope and extent of the Federal FCA. 31 Those doing business with the state of Connecticut should conduct an FCA-focused compliance review of that business to avoid potential liability arising out of state law, and should also understand federal FCA jurisprudence, which is likely to have a significant influence on the new law’s interpretation.

New York Expands FCA To Cover Allow Tax-Related FCA Claims Against Non-Filers

New York is among the few states whose state FCAs cover tax-related claims. Prior to this year, though, the state and its municipalities could only assert tax-related claims against those who actually filed and whose filings contained false statements of fact. In May, New York amended its FCA to allow a cause of action against those who knowingly fail to file a New York tax return and pay New York taxes. 32 Companies doing business in New York should be aware that not filing required taxes in New York may potentially subject them to, among other things, the treble damages for which the FCA provides.

1 143 S. Ct. 1391 (2023).
2 Schutte, 143 S. Ct. at 1400-01.
3 See, e.g., United States ex rel. McSherry v. SLSCO, L.P., No. 18-CV-5981, 2023 WL 6050202,
at *4 (E.D.N.Y. Sept. 15, 2023).
4 143 S. Ct. 1720 (2023).
5 Id. at 1730.
6 Id. at 1734.
7 Id. at 1737 (Kavanaugh, J., concurring); id. at 1741-42 (Thomas, J., dissenting).
8 See United States ex rel. Wallace v. Exactech, Inc., No. 7:18-cv-01010, 2023 WL 8027309, at
*4-6 (N.D. Ala. Nov. 20, 2023).
9 See 42 U.S.C. § 1320a-7b(g).
10 United States ex rel. Greenfield v. Medco Health Sol’ns, 880 F.3d 89, 98-100 (3d Cir. 2018).
11 United States ex rel. Cairns v. D.S. Med., LLC, 42 F. 4th 828, 834-36 (8th Cir. 2022).
12 United States ex rel. Martin v. Hathaway, 63 F. 4th 1043, 1052-53 (6th Cir. 2023).
13 Civ. A. No. 20-11548, 2023 WL 4565105 (D. Mass. July 14, 2023).
14 Civ. A. No. 20-11217, 2023 WL 7016900 (D. Mass. Oct. 25, 2023)
15 See United States v. Teva Pharma USA, Inc., No. 23-1958 (1st Cir. 2023).
16 See, e.g., Regeneron, 2023 WL 7016900, at *11 (remarking that the Greenfield analysis is
“fraught with problems” and “disconnected from long-standing common-law principles of
causation”).
17 https://www.justice.gov/opa/pr/booz-allen-agrees-pay-37745-million-settle-false-claims-act-
allegations.
18 https://www.kff.org/policy-watch/half-of-all-eligible-medicare-beneficiaries-are-now-enrolled-
in-private-medicare-advantage-plans/.
19 https://www.justice.gov/opa/pr/cigna-group-pay-172-million-resolve-false-claims-act-
allegations.
20 See https://www.justice.gov/opa/speech/assistant-attorney-general-kenneth-polite-jr-delivers-
remarks-georgetown-university-law.
21 https://www.justice.gov/opa/pr/former-executive-medicare-advantage-organization-charged-
multimillion-dollar-medicare-fraud.
22 https://www.justice.gov/usao-edpa/pr/primary-care-physicians-pay-15-million-resolve-false-
claims-act-liability-submitting.
23 See https://www.justice.gov/opa/pr/deputy-attorney-general-lisa-o-monaco-announces-new-
civil-cyber-fraud-initiative.
24 See United States ex rel. Decker v. Penn. State Univ., Civ. A. No. 22-3895 (E.D. Pa. 2023).
25 Id. at ECF Nos. 24, 37.
26 Id. at ECF No. 24.

27 See https://www.justice.gov/opa/pr/cooperating-federal-contractor-resolves-liability-alleged-
false-claims-caused-failure-fully.
28 https://oig.hhs.gov/documents/root/1045/sfa-telefraud.pdf.
29 https://www.justice.gov/usao-ma/pr/owner-telemedicine-companies-pleads-guilty-44-million-
medicare-fraud-scheme.
30 https://www.justice.gov/opa/pr/national-enforcement-action-results-78-individuals-charged-
25b-health-care-fraud.
31 See Conn. Gen. Stat. §§ 4-274–4-289.
32 See N.Y. State Fin. Law § 189(4)(a).

Comparison of Three Federal Fraud and Abuse Laws

In the post-COVID era, health care fraud and abuse issues will be aggressively and swiftly enforced by the government. The legal framework and regulations in the health care space can be intimidating. Below is a comparison of three of the big federal fraud and abuse laws that the government actively enforces; but they are not an exclusive list. The summary below is a primer on the three main federal fraud and abuse laws and is intended to increase your basic understanding of these laws.

False Claims Act (FCA)

PROHIBITIONS:

Prohibits the submission of false or fraudulent claims, false statements material to a false claim, and conspiracy to commit violation
Prohibits concealing or avoiding obligation to repay money to government (failure to return overpayments)
Claims that violate AKS or Stark can also be considered false claims
Common false claims include lack of medical necessity; quality of care; billing/coding issues; off-labeled marketing; retention of overpayments

EXCEPTIONS:

PENALTIES:

Treble damages and as of May 9, 2022 per claim penalties between $12,537 and $25,076
Regulated by the DOJ

Physician Self-Referral (Stark)

PROHIBITIONS:

Prohibits referrals of designated health services by a physician (or an immediate family member) if the physician has a financial relationship with the entity performing the designated health service
Regulates financial relationships with physicians (and physician’s immediate family members) only

EXCEPTIONS:

The arrangement must completely satisfy an exception or it violates the Stark law

PENALTIES:

No criminal enforcement; CMP enforcement for knowing violations: per violation penalties– 3x claims and/or per circumvention scheme penalties; Nonpayment of claims arising from prohibited arrangement; Recoupment of amounts received; Exclusion from federal health programs; FCA liability
Regulated by CMS

Anti-Kickback Statute (AKS)

PROHIBITIONS:

Prohibits offers of, solicitation of, or payment or receipt of remuneration intended to induce referrals for health care services covered by a government program
Covers provision of anything of value to a person who refers, orders/purchases or recommends

EXCEPTIONS:

Voluntary safe harbors exist, but arrangements are not required to fit within a safe harbors

PENALTIES:

Applies to either party involved in an arrangement that violates AKS; Criminal penalties $100,000 /violation, up to 10 years imprisonment); Civil penalties (CMP3x unlawful remuneration and $100,000/violation); Exclusion from federal health programs; FCA liability
Regulated by the OIG

Providers should also be aware of other enforcement statutes such as the Eliminating Kickbacks in Recovery (“EKRA”), the Civil Monetary Penalties Act (“CMP”), and the Travel Act, to name a few, in addition to being well versed in the relevant state health care fraud and abuse frameworks.

Article By Courtney G. Tito of Nelson Mullins

For more criminal law and business crimes legal news, click here to visit the National Law Review.

Fair Market Value Defensibility Analysis: Why is It Different from a Fair Market Value Opinion?

Fair market value is a pinnacle issue for compliance under the Stark Law and Anti-Kickback Statute. Compensation arrangements that are required to be representative of fair market value under Stark/AKS include employment, independent contractor, medical directorships, exclusive service arrangements, call coverage, quality reviews, medical staff officer stipends, etc.

Many consulting firms provide fair market value opinions relying extensively on the application of benchmark data. Based upon CMS’s statements in the Stark Law Final Rules, although application of benchmark data is a resource that can be utilized, fair market value can and should include the application of market/service area issues (i.e., deficiency of specialty) or physician-specific issues (i.e., expertise, productivity).

Commercial reasonableness is a separate concept from fair market value under Stark/AKS. Commercial reasonableness also entails whether the application of benchmark/market factors are defensible.

When analyzing the defensibility of compensation arrangements, it is important to view fair market value and commercial reasonableness as if advocating the facts and circumstances of the proposed compensation arrangement before a governmental entity (i.e., CMS, OIG, DOJ). When an attorney is rendering a fair market value defensibility analysis, not only will the analysis be protected under the attorney-client privilege, but the analysis will also include references and attachments to all of the applicable documentation and relevant information in case the compensation arrangement is ever required to be defended.

Article By Bob Wade of Nelson Mullins

For more healthcare legal news, click here to visit the National Law Review.

Tag: AKS

OIG Releases Special Fraud Alert About Suspect Payments in Marketing Arrangements Related to Medicare Advantage and Providers

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