Tag: compliance

Buying, Selling, and Investing in Telehealth Companies: Navigating Structural and Compliance Issues

A multi-part series highlighting the unique health regulatory aspects of Telemedicine mergers and acquisitions, and financing transactions

Investors in the telehealth space and buyers and sellers of telehealth companies need to account for a set of health regulatory considerations that are unique to deals in this sector. As all parties to potential telehealth transactions analyze their long term role in the telehealth marketplace, two of the central issues to any transaction are compliance and structure – both in terms of structuring the telehealth transaction itself and due diligence issues that arise related to a target’s structure.

The COVID-19 pandemic, combined with strained health care staffing and provider availability, have accelerated the growth of the telehealth, and start-ups and traditional health systems alike are competing for access to patient populations in the telehealth space. However, as we adjust to life with COVID-19 as the norm, the expiration of the federal Public Health Emergency (PHE) looms, and the national economy contracts, we expect that the remainder of 2022 and into 2023 will see consolidation as the telehealth market begins to saturate and the long-term viability of certain platforms are tested. Telehealth companies, health systems, pharma companies and investors are all in potential positions to take advantage of this consolidation in a ripening M&A sector (while startups in the telehealth space continue to seek venture and institutional capital).

This is the first post in a series highlighting the unique health regulatory aspects of telehealth transactions. Future installments of this series are expected to cover licensure and regulatory approvals, compliance / clinical delivery models, and future market developments.

Telehealth Transaction Structure Considerations

The structure of any given telehealth transaction will largely depend on the business of the telehealth organization at play, but also will depend on the acquirer / investor. Regardless of whether a party is buying, selling or investing in a telehealth company, structuring the transaction appropriately will be important for all parties involved. While a standard stock purchase, asset purchase or merger may make sense for many of these transactions, we have also seen a proliferation of, affiliation arrangements, joint ventures (JV), alliances and partnerships.  These varieties of affiliation transactions can be a good choice for health systems that are not necessarily looking to manage or develop an existing platform, but instead are looking to leverage their patient populations and resources to partner with an existing technology platform. An affiliation or JV is more popular for telehealth companies operating purely as a technology platform (with no core business involving clinical services being provided). For parties in the traditional healthcare provider sector that provide clinical services, an affiliation or JV, which is easier to unwind or terminate than a traditional M&A transaction, can allow the parties to “test the waters” in a new, combined business venture. The affiliation or JV can take a variety of forms, including technology licensing agreements; the creation of a new entity to house the telehealth mission, which then has contractual arrangements with the both the JV parties; and exclusivity arrangements relating to use of the technology and access to patient populations.

While an affiliation or JV offers flexibility, can minimize the need for a large upfront investment, and can be an attractive alternative to a more permanent purchase or sale, there can be increased regulatory risk. Entrepreneurs, investors, and providers considering any such arrangement should bear in mind that in the wake of the COVID-19 pandemic and proliferation of telehealth, the Office of Inspector General of the Department of Health and Human Services (HHS-OIG) has expressed a heightened interest in investigating so called “telefraud” and recently issued a special fraud alert regarding suspect arrangements, discussed in this prior post. Further, the OIG’s guidance on contractual joint ventures that would run afoul of the federal Anti-Kickback Statute (AKS) should be front of mind and parties should strive to structure any affiliation or JV in a manner that meets or approximates an AKS safe harbor.

Target Telehealth Company Structure Compliance

Where telehealth companies are providing clinical services, and are not purely technology platforms, structuring and transaction diligence should focus on whether the target is operating in compliance with corporate practice of medicine (CPOM) laws. The CPOM doctrine is intended to maintain the independence of physician decision-making and reduce a “profits over people” mentality, and prevent physician employment by a lay-owned corporation unless an exception applies. Most states that have adopted CPOM impose similar restrictions on other types of clinical professionals, such as nurses, physical therapists, social workers, and psychologists. Telehealth companies often attempt to utilize a so-called “friendly PC” structure to comply with CPOM, whereby an investor-owned management services organization (“MSO”) affiliates with a physician-owned professional corporation (or other type of professional entity) (a “PC”) through a series of contractual agreements that foster a close working relationship between the MSO, PC, and PC owner and whereby the MSO provides management services, and sometimes start-up financing. The overall arrangement is intended to allow the MSO to handle the management side of the PC’s operations without impeding the professional judgment of the PC or the medical practice of its physicians and the PC owner.

CPOM Compliance Considerations and Diligence for Telehealth Companies

A sophisticated buyer will want to confirm that the target’s friendly PC structure is not only formally established, but is also operationalized properly and in a manner that minimizes fraud and abuse risk. If CPOM compliance gaps are identified in diligence this may, at worst, tank the deal and, at best, cause unexpected delays in the transaction timeline, as restructuring may be required or advisable. The buyer may also request additional deal concessions, such as a purchase price reduction and special indemnification coverage (with potentially a higher liability limit and an escrow as security). Accordingly, a telehealth company anticipating a sale or fund raise would be well served to engage in a self-audit to identify any CPOM compliance issues and undertake necessary corrective actions prior to the commencement of a transaction process.

Below are nine key questions with respect to CPOM compliance and related fraud and abuse issues that a buyer/investor in a telehealth transaction should examine carefully (and that the target should be prepared to answer):

  1. Does target have a PC that is properly incorporated or foreign qualified in all states where clinical services are provided (based on the location of the patient)?
  2. Does the PC owner (and any directors and officers of the PC, to the extent different from the PC owner) have a medical license in all states where the PC conducts business (to the extent in-state licensure is required)? To the extent the PC has multiple physician owners and directors/officers, are all such individuals licensed as required under applicable state law?
  3. Does the PC(s) have its own federal employer identification number, bank account (including double lockbox arrangement if enrolled in federal healthcare programs), and Medicare/Medicaid enrollments?
  4. Does the PC owner exercise meaningful oversight and control over the governance and clinical activities of the PC? Does the PC owner have background and expertise relevant to the business (e.g., a cardiologist would not have appropriate experience to be the PC owner of a PC that provides telemental health services)?
  5. Are the physicians and other professionals providing clinical services for the business employed or contracted through a PC (rather than the MSO)? Employment or independent contractor agreements should be reviewed, as well as W-2s, and payroll accounts.
  6. Is the PC properly contracted with customers (to the extent services are provided on a B2B basis) and payors?
  7. Do the contractual agreements between the MSO and PC respect the independent clinical judgment of the PC owner and PC physicians and otherwise comply with state CPOM laws.
  8. Do the financial arrangements between the MSO, PC, and PC owner comply with AKS, the federal Stark Law, and corollary state laws and fee-splitting prohibitions, to the extent applicable?
  9. Is the PC owner or any other physician performing clinical services for the PC an equity holder in the MSO? If so, are these equity interests tied to volume/value of referrals to the PC or MSO (i.e., if the MSO provides ancillary services such as lab or prescription drugs) or could equity interests be construed as an improper incentive to generate healthcare business (e.g., warrants that can only be exercised upon attainment of certain volume)?

Telehealth companies considering a sale or financing transaction, and potential buyers and investors, would be well served to spend time on the front end of a potential transaction assessing the above issues to determine potential risk areas that could impact deal terms or necessitate any friendly PC structuring.

Article By Hannah E. Zaitlin, Mitchell D. Lindstrom, David S. Sanders, and Natasha Allen of Foley & Lardner LLP

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

© 2022 Foley & Lardner LLP

NAVEX Report Reveals Increase in Whistleblower Retaliation and Reporting of Misconduct

NAVEX’s 2022 Risk & Compliance Hotline & Incident Management Benchmark Report reveals an increase in internal reporting about misconduct and an increase in allegations of retaliation.  The analysis of data from 3,470 organizations that received more than 1.37 million individual reports identified the following trends (see the full report for a discussion of additional trends and analysis of the data):

  • “More actual allegations of misconduct, rather than inquiries about policies or possible misconduct. Ninety percent of all reports in 2021 were allegations of misconduct, up from 86 percent last year and hitting an all-time high since our first benchmark report more than ten years ago.”

  • “Reports about retaliation, harassment and discrimination jumped – especially retaliation. In 2021, reports of retaliation nearly doubled . . . Taken altogether, these findings suggest employees are more attuned to workplace civility issues. That would fit with external trends such as more talk about systemic racism, income inequality and political divisions; as well as increasing protection for whistleblowers and employees’ awareness of  those protections.”

  • “Substantiation rates continue to edge upward. Overall substantiation rates rose from 42 percent in 2020 to 43 percent in 2021, and up from 36 percent a decade ago. The reports substantiated most often were data privacy concerns (63 percent), environmental issues (59 percent), and confidential and proprietary information (54 percent). The reports substantiated least often were about retaliation (24 percent).”

  • “The substantiation rate for reports of retaliation also went up slightly, from 23 percent in 2020 to  24 percent in 2021 – the highest substantiation rate seen since 2016. While steady, this substantiation rate is significantly below the overall median case substantiation rate of 43 percent in 2021. These cases, though difficult to prove, warrant attention.”

  • “Reports of harassment exceeded levels from the height of the #MeToo movement.”

Corporate Whistleblower Protections

Whistleblower retaliation remains all too prevalent.  A September 14, 2022 Bloomberg article titled Whistleblower retaliation remains all too prevalent discusses how “choosing to be a whistle-blower can also be a lonely, risky road” and identifies many deterrents to speaking up – “[t]hey may be afraid of litigation, ruining their reputations, losing security clearances or facing jail time.”

Fortunately, federal and state laws afford corporate whistleblowers remedies to combat retaliation, and whistleblower reward laws incentivize whistleblowers to take the considerable risks entailed in reporting fraud and other wrongdoing to the government.  For example, the

SEC Whistleblower Program offers awards to eligible whistleblowers who provide original information that leads to successful SEC enforcement actions with total monetary sanctions exceeding $1 million. A whistleblower may receive an award of between 10% and 30% of the total monetary sanctions collected in actions brought by the SEC and in related actions brought by other regulatory or law enforcement authorities. The SEC Whistleblower Program allows whistleblowers to submit tips anonymously if represented by an attorney in connection with their tip.

What is Whistleblower Retaliation?

Whistleblower retaliation laws prohibit a broad range of retaliatory actions against whistleblowers, including any act that would dissuade a worker from engaging in protected whistleblowing.  Examples of actionable whistleblower retaliation include:

  • Terminating a whistleblower;

  • Constructively discharging a whistleblower;

  • Demoting a whistleblower;

  • Suspending a whistleblower;

  • Harassing a whistleblower or subjecting the whistleblower to a hostile work environment;

  • Reassigning a whistleblower to a position with significantly different responsibilities;

  • Issuing a performance evaluation or performance improvement plan that supplies the necessary foundation for the eventual termination of the whistleblower’s employment, or a written warning or counseling session that is considered discipline by policy or practice and is routinely used as the first step in a progressive discipline policy;

  • Placing the whistleblower on administrative leave;

  • Threatening to take an adverse action against a whistleblower;

  • Subjecting a whistleblower to a retaliatory investigation or retaliatory surveillance;

  • Suing a whistleblower for the purpose of retaliating against the whistleblower;

  • Outing a whistleblower;

  • Intimidating a whistleblower;

  • Initiating a law enforcement investigation or facilitating an employee’s detention by U.S. ICE after the employee reported a serious injury; or

  • Discriminating against a whistleblower in the terms and conditions of employment because of whistleblowing.

The DOL Administrative Review Board has emphasized that statutory language prohibiting discrimination “in any way” must be broadly construed and therefore a whistleblower need not prove that a retaliatory act had a tangible impact on an employee’s terms and conditions of employment.

What Damages Can a Whistleblower Recover in a Whistleblower Retaliation Case?

Whistleblower retaliation can exact a serious toll, including lost pay and benefits, reputational harm, and emotional distress.  Indeed, whistleblower retaliation can derail a career and deprive the whistleblower of millions of dollars in lost future earnings.

Whistleblowers should be rewarded for doing the right thing, but all too often they suffer retaliation and find themselves marginalized and ostracized.  Federal and state whistleblower laws provide several remedies to compensate whistleblowers that have suffered retaliation, including:

  • back pay (lost wages and benefits);

  • emotional distress damages;

  • damages for reputational harm;

  • reinstatement or front pay in lieu thereof;

  • lost future earnings; and

  • punitive damages.

Combating Whistleblower Retaliation: How to Maximize Your Recovery

Whistleblower protection laws can provide a potent remedy, but before bringing a retaliation claim, it is crucial to assess the options under federal and state law and develop a strategy to achieve the optimal recovery.  Key issues to consider include the scope of protected whistleblowing, the burden of proof, the damages that a prevailing whistleblower can recover, the forum where the claim would be litigated, and the impact of the retaliation claim on a whistleblower rewards claim.

Scope of Protected Whistleblowing

There is no federal statute that provides general protection to corporate whistleblowers.  Instead, federal whistleblower protection laws protect specific types of disclosures, such as disclosures of securities fraud, tax fraud, procurement fraud, or consumer financial protection fraud.  The main sources of federal protection for corporate whistleblowers include the whistleblower protection provisions of the following:

  • The False Claims Act (FCA) — protecting disclosures about fraud directed toward the government, including actions taken in furtherance of a qui tam action and efforts to stop a violation of the FCA;

  • The Defense Contractor Whistleblower Protection Act (DCWPA) — protecting whistleblowing about gross mismanagement of a federal contract or grant; a gross waste of federal funds; an abuse of authority relating to a federal contract or grant or a substantial and specific danger to public health or safety, or a violation of law, rule, or regulation related to a federal contract;

  • The Sarbanes-Oxley Act (SOX) — protecting disclosures about mail fraud, wire fraud, bank fraud, securities fraud, a violation of any SEC rule, or shareholder fraud;

  • The Dodd-Frank Act (DFA) — protecting whistleblowing to the SEC about potential violations of federal securities laws;

  • The Taxpayer First Act (TFA) — protecting disclosures about tax fraud or tax underpayment;

  • The Consumer Financial Protection Act (CFPA) — protecting disclosures concerning violations of Consumer Financial Protection Bureau rules or federal laws regulating unfair, deceptive, or abusive practices in the provision of consumer financial products or services; and

  • The Anti-Money Laundering Act (AMLA) — protecting disclosures about violations of the Bank Secrecy Act.

While most of these anti-retaliation laws protect internal disclosures (e.g., reporting to a supervisor), whistleblower protection under the DFA is predicated on a showing that the whistleblower disclosed a potential violation of federal securities law to the SEC prior to suffering an adverse action.

State law may also provide a remedy, including the anti-retaliation provisions in state FCAs.  And approximately 42 states recognize a common law wrongful discharge tort action (a public policy exception to at-will employment), which generally protects refusal to engage in illegal activity and the exercise of a statutory right.

Burden of Proof

To maximize the likelihood of winning a case (or at least getting the case before a jury), it is useful to select a remedy with a favorable causation standard (the level of proof required to link the protected whistleblowing to the adverse employment action).  SOX has a favorable “contributing factor” causation standard, i.e., the whistleblower prevails by proving that their protected whistleblowing affected in any way the employer’s decision to take an adverse action.  In contrast, the FCA and DFA require the whistleblower to prove “but for” causation, i.e., the adverse action would not have happened “but for” the protected whistleblowing (albeit there is no need to prove that it was the sole factor).

Damages and Remedies in Whistleblower Retaliation Cases

Variations in the remedies available to whistleblowers under federal anti-retaliation laws may warrant bringing more than one claim.  For example, the DCWPA authorizes an award of back pay (the value of lost pay and benefits), and the FCA authorizes an award of double back pay.  If the whistleblower’s disclosures are protected under both statutes, then the whistleblower should bring both claims.

While a prevailing whistleblower can recover back pay under both the DFA and SOX (double back pay under the former and single back pay under the latter), the DFA does not authorize special damages, i.e., damages for emotional distress and reputational harm.  In contrast, SOX authorizes uncapped compensatory damages.  Therefore, a whistleblower protected under both statutes should bring the SOX claim within the much shorter SOX statute of limitations (180 days) to recover both double back pay and special damages.

State law may also provide a remedy, and if the whistleblower can pursue both a statutory remedy and a wrongful discharge tort, the latter may offer the opportunity to seek punitive damages.

Forum Selection and Administrative Exhaustion

When selecting the optimal remedy to combat retaliation, a whistleblower should consider the forum where the claim would be tried and determine whether the claim must initially be investigated by a federal agency before the whistleblower can litigate the claim.  SOX provides an unequivocal exemption from mandatory arbitration, but Dodd-Frank claims are subject to arbitration.  Accordingly, a whistleblower protected both by SOX and Dodd-Frank should file a SOX claim within the 180-day statute of limitations to preserve the option to try the case before a jury.

Several of the corporate whistleblower protection laws require that the whistleblower file the claim initially at a federal agency and permit the agency to investigate the claim before the whistleblower can litigate the claim.  This is called administrative exhaustion, and failure to comply with that requirement can waive the claim.  In contrast, the FCA and DFA do not require administrative exhaustion.

Impact of Whistleblower Retaliation Claim on Whistleblower Rewards Claim

Another important consideration is the potential impact of a retaliation case on a qui tam or whistleblower rewards case.  Filing an FCA retaliation claim while a qui tam suit is under seal poses some risk of violating the seal, which could bar the whistleblower from recovering a relator share.  Therefore, counsel should consider filing the FCA retaliation claim under seal along with the qui tam suit.

Further, whistleblowers pursuing rewards claims at federal agencies (e.g., SEC or IRS whistleblower claims) while simultaneously pursuing related retaliation claims (e.g., a SOX or TFA claim) should assess the potential impact of the retaliation claim and the potential discoverability of submissions to the SEC or IRS on the rewards claim(s).

Although the patchwork of whistleblower protection laws fails to protect disclosures about certain forms of fraud, there are important pockets of protection.  To effectively combat retaliation, whistleblowers should avail themselves of all appropriate remedies.

Article By Jason Zuckerman and Matthew Stock of Zuckerman Law

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

© 2022 Zuckerman Law

Children’s Advertising Rules Apply in the Metaverse Too, CARU Says

CARU, the Children’s Advertising Review Unit of BBB National programs, issued a compliance warning last week reminding industry that the self-regulating body on children’s advertising and privacy intends to enforce its advertising guidelines in the metaverse, just like in the real world.

CARU’s August 23 compliance warning puts companies on notice of what perhaps should have been obvious: its guidelines for advertising to children apply in the metaverse, too. The warning heavily analogizes the metaverse, augmented reality (AR) and virtual reality (VR) worlds to other digital spaces like smartphone apps and online videos. CARU emphasizes the need to:

  • avoid blurring the lines between advertising and non-advertising content;
  • clearly disclose the use of brand-sponsored avatar influencers;
  • avoid manipulative tactics that induce children to view or interact with ads or to make in-game purchases; and
  • use clear, understandable, easily noticeable and prominent disclosures, repeated if necessary to ensure children notice and understand them.

The metaverse is a new area of focus for CARU and BBB National Programs: two recent posts, Know the Rules: How to Be Age Appropriate in the Metaverse and Advertising And Privacy: The Rules Of The Road For The Metaverse, emphasize the need to make sure advertising is truthful, non-deceptive and clearly identifiable as advertising, especially in brand-sponsored worlds. CARU recommends that advertisers and operators anticipate and stay aware of how their child audiences interact with the metaverse experience, including how, when and where ads will be shown to them and how influencers will engage in the space.

Article By Phyllis H. Marcus and Samuel J. Thomas of Hunton Andrews Kurth

For more communications, media, and internet legal news, click here to visit the National Law Review.

Copyright © 2022, Hunton Andrews Kurth LLP. All Rights Reserved.

5 Keys to SEC Compliance Success

The best way to avoid the scrutiny from the Securities and Exchange Commission (SEC) that can lead to significant legal liability is to strictly comply with all of the agency’s rules and regulations. Unfortunately, given the complexity of these regulations and the constantly changing legal landscape of securities laws, such as the Securities Act of 1933 and Securities Exchange Act of 1934, this is much easier said than done.

Here are five keys to SEC compliance.

1. Identify Your Particular Needs

It should be an obvious first step, but many compliance attorneys treat all clients the same and offer a one-size-fits-all approach to complying with the regulations promulgated by the Securities and Exchange Commission (SEC). While this might not be a terrible approach – so long as it is all-encompassing, it will keep your company in line with the SEC across the board – it can saddle your firm with concerns and extraneous internal rules that have no bearing on how you conduct business.

A great example is a cryptocurrency. The SEC is, belatedly, beginning to issue rules and regulations for financial firms that focus on and trade in Bitcoin and other cryptocurrencies. If your brokerage firm is not buying or selling securities in crypto-assets and has no plans to do so soon, then implementing compliance measures for cryptocurrency regulations has no benefit to your company. Those measures will, however, make the regulated securities professionals who work for your firm jump through pointless hoops in the ordinary course of their business.

Adopting a compliance strategy that more precisely meets your company’s needs will let your workers perform to their full capacity while still insulating your firm from legal liability or SEC scrutiny. It will just have to be updated if you choose to expand into new forms of securities trading.

2. Craft an All-Encompassing Compliance Strategy

Based on your firm’s precise regulatory needs, the next key to success is to come up with a compliance strategy that takes into account all of the SEC’s rules that could impact your company. Given the breadth of the SEC’s jurisdiction and the sheer number of regulations that it has put forth, this can take a while.

Once your firm’s legal requirements have been ascertained, the next step is to come up with ways that you can satisfy them during the day-to-day business activities at your firm. This is another reason why every compliance strategy should be tailored to your business – a compliance technique that works well and is easy for one firm may be onerous and inconvenient for another one.

As Dr. Nick Oberheiden, founding partner of the SEC compliance law firm Oberheiden P.C., often tells clients, “All SEC compliance measures should protect the securities firm from SEC liability. However, those measures should also be judged by how burdensome they are on the firm that is employing them. The least inconvenient method to adequately insulate your firm from liability is the best. Learning about a brokerage firm and understanding its strengths and weaknesses and its capabilities help compliance lawyers craft the best solutions for their clients. Unfortunately, one of the most common complaints that securities professionals have about attorneys is that they do not listen to their particular concerns. We strive to do better.”

3. Train, Train, and Retrain Your Workers

No compliance strategy is effective if it is not implemented. Training your employees and workers in the intricacies of the compliance strategy, explaining why it is important for them to follow it strictly, and describing the penalties for noncompliance is the next key to success.

Even here, though, it is not a matter of simply giving your employees a handbook of rules, policies, and procedures to memorize. Just like how the compliance strategy should be tailored to your firm, so too should the instruction materials be tailored to each type of worker at your company. While it can help to train non-regulated administrative staff how to detect the signs of financial misconduct or fraud, there is no reason to bog them down in the details of SEC regulations that only pertain to traders – doing so can overload them with irrelevant information and make them lose sight of what they need to know.

It is also important to remember that training is not a one-time ordeal. New hires must be onboarded and taught the rules of internal compliance. Existing workers should be retrained to keep them apprised of any updates and to ensure that they remember their roles in the compliance protocol.

4. Keep Your Compliance Strategy Updated

Keeping your compliance strategy updated is also essential when it comes to compliance inspections. An out-of-date compliance protocol may still cover many of the bases for SEC compliance. However, there will be gaps in the compliance requirements that you will be unaware of, giving you a false sense of security.

The compliance strategy should not just be updated to account for new SEC regulations, though: It should also get updated whenever your brokerage firm branches out into new types of trading or adds a new kind of financial service to its portfolio. With that new line of business will likely come new SEC regulations to abide by.

5. Audit Yourself Regularly

Even if you have a good compliance program or plan, have trained workers to follow it, and keep the protocols updated, you are still moving forward blindly if you do not regularly conduct internal audits of your company to make sure that those compliance rules are working. Many compliance programs and strategies check off all of the boxes, only to lead to an SEC investigation that finds problems because a single worker did not actually understand how to correctly perform a job task.

These situations of compliance issues are incredibly frustrating. They can also be detected, identified, and corrected through a compliance strategy that includes internal auditing by outside counsel or an SEC compliance attorney with prior experience investigating securities fraud.

Article By Dr. Nick Oberheiden of Oberheiden P.C.

For more securities and SEC legal news, click here to visit the National Law Review.

Oberheiden P.C. © 2022

Immigration and Compliance Briefing: COVID-19 Summer Scoop & Quick Tips

Since March 2020, the U.S. Department of Homeland Security (DHS), Department of State (DOS), and Department of Labor (DOL) have issued and/or revised a significant number of rules and policies in response to the global COVID-19 pandemic. Below is a roundup of the current rules/policies covering the major areas of global mobility impacted by COVID-19.

International Travel

U.S. Land Borders

  • Canada: The border between the U.S. and Canada remains closed until July 21, 2021 except for essential workers and services. As of July 5, fully vaccinated Canadian citizens, permanent residents, and certain exempted individuals are not required to quarantine upon entry or undergo an 8-day COVID test.
  • Mexico: The border between the U.S. and Mexico remains closed until July 21, 2021 except for essential workers and services.

The U.S. land borders have been closed since March 21, 2020. While the border closures are currently set to expire on July 21, they may be extended for additional 30-day periods. As a reminder, the following types of travel/travelers are exempt from the restrictions:

  • U.S., Canadian, and Mexican citizens and permanent residents returning to their home country
  • Individuals traveling for medical purposes (e.g., to receive medical treatment)
  • Individuals traveling to attend educational institutions
  • Individuals traveling to work in the U.S.
  • Individuals traveling for emergency response and public health purposes (e.g., government officials or emergency responders)
  • Individuals engaged in lawful cross-border trade (e.g., truck drivers transporting cargo between the U.S., Canada and Mexico)
  • Individuals engaged in official government or diplomatic travel
  • Individuals engaged in military-related travel or operations

Geographical Travel Bans

Entry into the U.S. is prohibited, with some exceptions, for most travelers who have been in any of the following countries at any time within the past 14 days (including transit):

  • China; Iran; European Schengen area (Austria, Belgium, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Iceland, Italy, Latvia, Liechtenstein, Lithuania, Luxembourg, Malta, Netherlands, Norway, Poland, Portugal, Slovakia, Slovenia, Spain, Sweden, Switzerland, Monaco, San Marino, Vatican City); United Kingdom (England, Scotland, Wales, Northern Ireland); Republic of Ireland; Brazil; South Africa; India

Exceptions to this ban include, but are not limited to:

  • U.S. Citizens and Lawful Permanent Residents (LPRs)
  • Certain family members of U.S. citizens
  • Diplomatic Travelers
  • Individuals traveling with an approved National Interest Exception (NIE)

QUICK TIP: The current COVID-19 travel bans are based on physical presence and do not ban citizens or residents of any country.

QUICK TIP: Even a layover/connecting flight in an impacted countries is enough to trigger the entry ban, so if traveling to the U.S. from a non-banned country, travelers are advised to double-check their itineraries to ensure that they do not inadvertently become subject to the ban.

National Interest Exceptions

Travelers and their derivative beneficiaries who would otherwise be subject to the geographic travel ban may request a National Interest Exception (NIE) based on their visa type and/or their intended purpose of stay in the United States.

QUICK TIP: Effective July 6, 2021, the DOS announced that approved NIEs are valid for 12 months and multiple entries. This policy applies retroactively to travelers granted an NIE within the prior 12 months. Previously, NIEs were valid for a single entry within 30 days of approval.

On June 24, 2021, the DOS updated its guidance on NIEs, including categories of individuals who are automatically considered for an NIE at ports of entry and those who may apply for an NIE at the U.S. Consulate.

Individuals automatically considered for an NIE include:

  • Immigrants (those seeking permanent residence in the U.S.)
  • Fiancé(e)s of U.S. citizens and their dependents (K visas)
  • Students (F and M visas)

Note: New or returning students present in China, Brazil, Iran, South Africa, or India may arrive no earlier than 30 days before the start of an academic program beginning August 1, 2021 or after, including Optional Practical Training (OPT)

Individuals who may apply for an NIE include:

  • Certain J-visa holders (exchange visitors, students, and academics; Educational Commission for Foreign Medical Graduates (ECFMG) participants)
  • Journalists
  • Travelers providing executive direction or vital support for critical infrastructure sectors, or directly linked supply chains
  • Travelers providing vital support or executive direction for significant economic activity in the U.S.
  • Travelers whose purpose of travel falls within one of these categories: 1) Lifesaving medical treatment for the principal applicant and accompanying close family members; 2) Public health for those travelling to alleviate the effects of the COVID-19 pandemic, or to continue ongoing research in an area with substantial public health benefit (e.g., cancer or communicable disease research); 3) Humanitarian travel, including those providing care, medical escorts, and legal guardians
  • Travelers whose work is in the national interest of the U.S.
  • Derivative family members accompanying or following to join a noncitizen who has been granted or would be reasonably expected to receive an NIE

Individuals who are automatically considered for an NIE at a port of entry do not need to apply for the NIE at their consulate in advance of their travel. Those who believe they may be eligible for an NIE should contact their local consulate for instructions.

QUICK TIP:  Approved NIEs may be noted directly in a visa or an applicant may be notified via email that they have received a digital approval. Both formats are equally valid, and travelers are advised to carry copies of the application materials and confirmation of approval with them when they travel.

I-9 Compliance

Extended Flexibility

For employees hired between June 1, 2021 and August 31, 2021, Immigration and Customs Enforcement (ICE) has temporarily waived the in-person I-9 document inspection requirement for employers that are fully remote due to COVID-19. Initially implemented on March 20, 2020, this guidance has been extended in 30 to 60-day increments since and may be extended after August 31.

To avoid inadvertent I-9 regulatory violations, employers should note the following:

  • As of April 1, 2021, an employer may utilize the flexible I-9 guidelines even if some employees are present at the worksite. However, this flexibility ends once the employee begins non-remote work on a regular, consistent, or predictable basis. This guidance does not extend to remote employees whose employment is normally remote, but only applies to remote employees who are temporarily remote due to COVID-19.
  • Prior to April 1, 2021, these guidelines applied only to employers and workplaces operating fully remotely due to COVID-19. If employees were present at the worksite, no exceptions were permitted. This guidance did not extend to remote employees whose employment is normally remote, but only applied to remote employees who are temporarily remote due to COVID-19.
  • Within three days of the remote employee returning to regular in-person employment or the termination of the flexible guidelines, whichever is earlier, the employer must physically inspect any I-9 documents that were inspected electronically in reliance on this policy. Failure to timely physically inspect these documents constitutes an I-9 violation.

QUICK TIP:  To avoid missing the three-day deadline, employers may begin the physical I-9 document inspection for individual employees prior to the return to in-person employment.

QUICK TIP:  To avoid I-9 compliance violations, employers are encouraged to conduct regular internal I-9 audits and periodically review the M-274 Handbook for Employers, guidance for completing Form I-9.

Ongoing COVID-19 Flexibilities

Additional Time For Responding To Agency Requests

On June 24, 2021, U.S. Citizenship and Immigration Services (USCIS) extended its policy granting additional time to respond to the following types of agency requests as long as they were mailed by the agency between March 1, 2020 and September 30, 2021:

  • Requests for Evidence
  • Continuations to Request Evidence (N-14)
  • Notices of Intent to Deny, Revoke, Rescind, or Terminate
  • Motions to Reopen an N-400 Pursuant to 8 CFR 335.5

If a response to an eligible USCIS request and/or notice is received within 60 days of the stated deadline, then USCIS will consider the response prior to making a final determination.

Refiling Certain Applications Due To Delayed Rejection From USCIS Lockbox

Due to COVID-19, USCIS Lockbox facilities are experiencing significant delays in intake and processing of immigrant and nonimmigrant applications and petitions. In some cases, delayed rejections can prevent an applicant from timely refiling or cause an applicant to “age out” of a benefit. Therefore, for certain applications filed at a USCIS Lockbox between October 1, 2020 and August 9, 2021, the agency has issued the following guidance:

  • For applicants whose application was rejected solely because the filing fee expired due to USCIS Lockbox delays, the applicant may refile and USCIS will deem the application to have been received on the date the initial application was received. USCIS will also waive the $30 dishonored check fee.
  • For applicants, co-applicants, beneficiaries, or derivatives who aged out of eligibility for the requested benefit due to a delayed rejection from a USCIS lockbox, the applicant may refile and USCIS will deem the application to have been received on the date the initial application was received. This does not apply to Form N-600K, Application for Citizenship and Issuance of Certificate.

QUICK TIP:  Both petitioners and applicants should periodically review the USCIS COVID-19 Response webpage (https://www.uscis.gov/about-us./uscis-response-to-covid-19) and the websites of other government agencies for up-to-date information on guidance on COVID-19 related policies and flexibilities.

Form I-539 Biometrics

On May 3, 2021, USCIS announced that it will suspend the biometrics requirements for I-539 applicant categories (H-4, L-2, E-1, E-2, E-3) for a two-year period beginning on May 17, 2021. The suspension applies to Form I-539 applications that are 1) pending on May 17, 2021, and have not yet received a biometric services appointment notice, or 2) new applications received by USCIS from May 17, 2021, through May 23, 2022.

© 1998-2021 Wiggin and Dana LLP
For more articles on COVID-19 travel restrictions, visit the NLRImmigration section.

Are Your Workplace Policies Compliant with the NLRA?

NLRB issues Memorandum GC-21-03 Signaling Aggressive and Expanded Enforcement of Section 7 Rights

On 31 March 2021, Peter Sung Ohr, Acting General Counsel of the National Labor Relations Board (NLRB), issued Memorandum GC 21-03 (GC 21-03) to the regional field offices signaling significant changes to enforcement priorities under Section 7 of the National Labor Relations Act (NLRA). In part, GC 21-03 indicates that the NLRB will be “robustly enforcing the Act’s provisions that protect employees’ Section 7 rights” and that “cases involving the retaliation against concerted employee conduct will be vigorously pursued.” GC 21-03 cites to increased workplace health and safety issues resulting from the COVID-19 pandemic as well as employees’ political and social justice advocacy concerns as factors necessitating increased enforcement of the NLRA.

NLRA Protections

The NLRA is a federal law that grants employees the right to form or join unions; engage in protected, concerted activities; address or improve working conditions; or refrain from engaging in such activities. The NLRA applies to almost all private employers but does not apply to federal, state, or local governments; employers who employ only agricultural workers; and employers subject to the Railway Labor Act. Some employers are surprised to find that the NLRA protects nearly all employees in the private sector, not only union employees or employees seeking to form or join a union. In fact, concerted activities protected under the NLRA often occur outside of the context of union activity. The NLRA does not cover, however, government employees, agricultural laborers, independent contractors, and supervisors (with limited exceptions).

It is not uncommon for the NLRB and its general counsel to modify or reverse their interpretations of the NLRA with changes in the composition of the Board. The political party of the presidency enjoys majority representation on the NLRB. Consequently, changes in the presidential administration often lead to significant changes for employers. GC 21-03 is emblematic of that trend. It states that “recent decisions issued by the current Board have restricted [Section 7 rights] for employees.” Specifically, GC 21-03 criticizes Alstate Maintenance1 and Quicken Loans2 for applying “mutual aid and protection” narrowly. The enforcement priorities highlighted in GC 21-03 are in stark contrast to enforcement priorities under the previous administration and a clear indication that employers should expect increased NLRB oversight for the foreseeable future.

Broadened Concerted Activities for Mutual Aid and Protection

Section 7 of the NLRA grants all covered employees the right to engage in “concerted” activities for the purpose of “mutual aid or protection.” The phrase “mutual aid or protection” focuses on “whether there is a link between the activity and matters concerning the workplace or employees’ interests as employees.”3 GC 21-03 indicates that such a link will be broadly construed, and it outlines an expansive characterization of what constitutes protected, concerted activity. As noted in GC 21-03, employee advocacy can have the goal of “mutual aid or protection” even when the employees have not explicitly connected their activity to workplace concerns. As examples, GC 21-03 cites to a solo strike by a pizza shop employee to attend a convention; protests in response to a sudden crackdown on undocumented immigrants or social justice concerns; and a hotel interview with a journalist concerning minimum wage issues. In addition, GC 21-03 highlights how concerted activity can occur outside of the context of union activity—such as when employees raise health and safety issues resulting from the COVID-19 pandemic or seek protections from government agencies.

Renewed Application of Inherenty Concerted Conduct

In addition to a clear directive to interpret concerted and protected activity more broadly under the NLRA, GC 21-03 also signals a renewed enforcement of conduct that is deemed “inherently concerted.” As noted in GC 21-03, employee conduct generally becomes concerted when it is “engaged in with or on the authority of other employees”4 or when an employee seeks either “to initiate or to induce or to prepare for group action.”5 In other words, concerted conduct revolves around employees’ intention to band together to improve their wages or working conditions. However, contemplation of group action is not required and employee discussions surrounding certain employment policies may be sufficient to constitute inherently concerted activity—even if group action has not yet been contemplated or is in its early stages. Indeed, as noted in GC 21-03, inherently concerted conduct need only involve a “speaker and a listener.” Further, GC 21-03 emphasizes that there are no “magic works” required for concert to attach. However, the NLRB has previously found that certain categories of workplace life have been found to be “inherently concerted”—namely, exchanges of information concerning (i) wages or wage differentials, (ii) changes in work schedules, (iii) job security, (iv) workplace health and safety, and (v) racial discrimination. GC 21-03 expressly warns that the NLRB will be considering such categories as well as “other applications of the inherently concerted doctrine” for the foreseeable future.

Key Takeaways

  • Employers should work with their counsel to ensure their workplace policies are compliant with the NLRA, including the expansive definition of protected conduct that will be enforced for the foreseeable future.
  • Employers should expect an increase in NLRB oversight and NLRA enforcement.
  • Employers should expect an increase in complaints brought by the NLRB, including increased prosecution of cases involving retaliation against concerted employee conduct.
  • Employers should exercise caution when deciding whether or not to discipline or discharge employees who have engaged in discussions or activities related to workplace health and safety (importantly as related to the COVID-19 pandemic), social justice issues, or political views.

1 367 NLRB No. 68 (2019).

2 367 NLRB No. 112 (2019).

3 Fresh & Easy Neighborhood Mkt., Inc., 361 NLRB 151, 153 (2014).

4 Meyers Indus., 268 NLRB 493, 497 (1984) (Meyers 1), remanded sub nom. Prill v. NLRB, 755 F. 2d 941 (D.C. Cir. 1985), cert. den. 474 U.S. 948 (1985).

5 Meyers Indus., 281 NLRB 882, 887 (1986) (Meyers II), affd. sub nom. Prill v. NLRB, 835 F. 2d 1481 (D.C. Cir. 1987), cert. den. 487 U.S. 1205 (1988).

Copyright 2021 K & L Gates

ARTICLE BY Rosemary Alito and  Rio J. Gonzalez of K&L Gates
For more articles on the NLRB, visit the NLR Labor & Employment section.

10 Reasons Why FCPA Compliance Is Critically Important for Businesses

  • The Foreign Corrupt Practices Act (“FCPA”) prohibits companies from bribing foreign officials in an effort to obtain or retain business, and it requires that companies maintain adequate books, records, and internal controls to prevent unlawful payments.
  • The FCPA was passed in response to an increase in global corruption costs.
  • Implementing an effective FCPA compliance program can benefit companies financially and socially, and it can help companies seize opportunities for business expansion.
  • In drafted and implemented appropriately, an FCPA compliance program will: serve as an invaluable tool against corruption, promote ethical conduct within the company, reduce the societal costs of corruption, and foster business expansion domestically and globally.
  • Company leaders should consider hiring experienced legal counsel to provide advice and representation regarding FCPA compliance.

What is the Foreign Corrupt Practices Act?

Enacted in 1977, the Foreign Corrupt Practices Act (“FCPA”) is a federal law that prohibits bribery of foreign officials in an effort to obtain or retain business. It also requires companies to maintain adequate books, records, and internal controls in their accounting practices to prevent and detect unlawful transactions.

Congress passed the FCPA in response to growing concerns about corruption in the global economy. The FCPA includes provisions for both civil and criminal enforcement; and, over the past several decades, FCPA enforcement proceedings have resulted in billions of dollars in penalties, disgorgement orders, and other sanctions issued against companies accused of engaging in corrupt transactions with government entities.

What are the Risks of FCPA Non-Compliance?

The U.S. Department of Justice (“DOJ”) and the Securities and Exchange Commission (“SEC”) are the primary agencies tasked with enforcing the FCPA. These agencies take allegations of FCPA violations very seriously, motivated in large part by the damage that bribery and corruption of foreign officials can cause to the interests of the United States. Prosecutions under the FCPA have increased in recent years, with both companies and individuals being targeted.

Due to the risk of federal prosecution, companies that do business with foreign entities must implement compliance programs that are specifically designed to prevent, detect and allow for appropriate response to transactions that may run afoul of the FCPA. In addition to helping to prevent and remedy FCPA violations, adopting a robust compliance program also demonstrates intent to follow the law and can create a positive view of your company in the eyes of federal authorities.

“Implementing an effective FCPA compliance program serves a number of important purposes. Not only can companies mitigate the risk of their employees engaging in corrupt practices, but they can also discourage corrupt conduct by other entities and demonstrate to federal authorities that they are committed to complying with the law.” – Dr. Nick Oberheiden, Founding Attorney of Oberheiden P.C.

If your company is targeted by the DOJ or SEC for a suspected FCPA violation, it will be important to engage federal defense counsel promptly. Having counsel available to represent your company during an FCPA investigation is crucial for protecting your company and its owners, executives, and personal against civil or criminal prosecution.

Why Should Companies Implement FCPA Compliance Programs?

Here are 10 of the most important reasons why companies that do business with foreign entities need to adopt comprehensive and custom-tailored FCPA compliance programs:

  1. The FCPA is an invaluable tool in the federal government’s fight against foreign corruption.
    • The FCPA is a massive piece of legislation that is designed to allow the DOJ and SEC to effectively combat corruption and bribery involving foreign officials. Ultimately, enforcement of the FCPA is intended to eliminate the costs of foreign corruption to the United States.
    • An effective and robust FCPA compliance program promotes these objectives while also protecting companies and individuals against civil liability and criminal prosecution.
  2. Anti-corruption laws like the FCPA promote ethical conduct.
    • Companies that have comprehensive policies against bribery and corruption send a strong message to other companies and foreign officials that they are committed to aiding in the federal government’s fight against corruption.
    • Foreign officials are less likely to ask for bribes from companies that promote an anti-corruption corporate environment through their compliance policies and procedures.
    • Compliance with anti-corruption laws promotes positive morale among company personnel who feel the pride of working for a company that is committed to transparency and ethical conduct.
  3. The FCPA allows companies to develop strong internal controls and avoid a slippery slope toward an unethical culture.
    • Companies that regularly utilize bribes in their business operations are likely to eventually encounter multiple problems, both in the U.S. and abroad.
    • Once a foreign official knows that a company is willing to pay bribes, that foreign official will request larger bribe amounts. In order to continue business operations in the relevant jurisdiction, company personnel may continue to accept the foreign official’s terms and pay larger bribes.
    • If left unchecked, corrupt practices can become so prevalent that they create enormous liability exposure for the company.
    • Maintaining a focus on FCPA compliance allows companies to develop effective internal controls that promote efficiency in their business operations.
  4. The FCPA reduces the societal costs of corruption.
    • Corruption increases costs to society. This includes political, social, economic, and governmental costs resulting from unethical business conduct.
    • By adopting and enforcing strong FCPA compliance programs, companies can help reduce these costs.
  5. The FCPA reduces the internal business costs of corruption.
    • Corporate success depends on certainty, predictability, and accountability. An environment where corruption is rampant costs companies time and money, and it can lead to disruptions in the continuity of their business operations.
    • FCPA compliance instills predictability in investments, business transactions, and dealings with foreign officials.
  6. Corruption and bribery create an unfair business environment.
    • Companies are more likely to be successful in an environment that emphasizes fair competition, and in which all competitors sell their products and services based on differentiation, pricing, and efficiency.
    • Corruption and bribery allow for unfair results in the marketplace. For instance, companies that utilize bribes can achieve increased sales and increased market share despite offering an inferior product at an uncompetitive price.
  7. The penalties under the FCPA encourage compliance and accurate reporting.
    • The penalties imposed under the FCPA incentivize the disclosure and reporting of statutory violations. These penalties include fines, imprisonment, disgorgement, restitution, and debarment.
    • Whistleblowers can receive between 10% and 30% of amounts the federal government recovers in FCPA enforcement litigation, and this provides a strong incentive to report violations as well.
    • The risk of significant penalties is an important factor for companies to consider when deciding how much time, effort, and money to invest in constructing an FCPA compliance program.
  8. Anti-corruption laws foster business expansion and stability both domestically and globally.
    • For companies that plan to expand domestically or internationally, success depends on the existence of a competitive environment in which companies compete fairly based on product differentiation, price, and other market factors.
    • Fair competition and growth opportunities are hampered when competitors can simply bribe their way to success. Therefore, FCPA enforcement is essential to maintaining fair competition.
    • DOJ and SEC investigations can severely disrupt efforts to maintain stability and predictability, and they can lead to significant financial and reputational harm.
  9. Corruption leads to human rights abuses.
    • Companies that regularly utilize corruption and bribery to achieve their business goals often resort to other illegal practices as well. This includes forced labor and child labor.
    • These types of human rights abuses are commonplace in countries where corruption and bribery are widespread.
    • To reduce the risk of these human rights abuses, it is crucial for company personnel to be educated on the potentially disastrous consequences of corruption and bribery.
    • Developing a robust compliance policy is the best way to educate personnel, reduce the risks of corruption and bribery, and eliminate the human rights abuses associated with these risks.
  10. The FCPA encourages open communication between companies and their legal counsel.
    • With regard to FCPA compliance, it is a legal counsel’s job to represent the best interests of the company and help the company foster an environment of ethical conduct. Achieving these objectives requires open and honest communication between the company and legal counsel.
    • Due to the severe sanctions imposed under the FCPA, companies are incentivized to hire counsel to advise them with regard to compliance and to adopt and implement effective FCPA compliance programs.

Effective FCPA Compliance Programs Help Companies Avoid Costs, Loss of Business Opportunities, and Federal Liability

Working with legal counsel to develop robust FCPA compliance policies and procedures can help prevent company personnel from offering bribes and engaging in other corrupt practices while also encouraging the internal disclosure of suspected violations. Failing to maintain adequate internal controls and foster a culture of compliance can be detrimental to a company’s operations, and FCPA violations can lead to civil or criminal prosecution at the federal level. As a result, all companies that do business with foreign entities would be well-advised to work with legal counsel to develop comprehensive FCPA compliance policies and procedures.

Oberheiden P.C. © 2020

For more on the Foreign Corrupt Practices Act see the National Law Review Criminal Law & Business Crimes section.

Health Care Enforcement 2019: How 2018’s Enforcement Actions Can Shape Your Compliance Plan

While it’s impossible to predict what government enforcement officials are currently working on, the trends from 2018 provide strong guidance for planning compliance efforts in 2019. In fact, 2018 was another busy year for the Department of Justice (the DOJ) and the Office of the Inspector General for Health and Human Services (the OIG). The following are some notable enforcement trends that may be helpful in planning your 2019 compliance initiatives.

Anti-Kickback and Physician Self-Referral Law Enforcement

One of the most notable trends in the last several years is the prevalence of False Claims Act cases premised on physician compensation relationships that are alleged to violate the Physician Self-Referral Law (Stark) and/or the Anti-Kickback Statute (the AKS). Here is a summary of a few exemplary cases that were resolved in 2018:

  • The University of Pittsburgh Medical Center Hamot was alleged to have entered into medical director or administrative services contracts with twelve physicians that violated both Stark and the AKS. The government contended that there was no legitimate need for the agreements because the services were either not performed or were duplicative in that they were already being provided by other physicians who were not being paid. The case was resolved for $20.75 million.

  • Montana-based Kalispell Regional Healthcare System (KRH) was alleged to have paid excessive full-time compensation to 60 specialists, many of whom worked less than full-time, to induce referrals. In addition, a subsidiary of KRH allegedly provided administrative services at below fair market value to a hospital joint venture owned by both the KRH subsidiary and an affiliated physician group in order to reduce expenses and increase the profits for the physician investors as a means of inducing referrals. The whistleblower was the CFO of the physicians’ network for the health system. The allegations were resolved for $24 million.

  • Detroit’s William Beaumont Hospital paid $85.5 million to resolve the allegations made by four whistleblowers that Beaumont paid compensation substantially in excess of fair market value to physicians and provided office space and employees at below fair market value to physician groups. Specifically, the allegations made by the whistleblowers included:

    • Full-time salaried cardiologists were paid in excess of fair market value as evidenced by the fact that they also continued to maintain separate private practices from which they retained the compensation;

    • The hospital provided office space and leased employees to the physicians’ practices at less than fair market value; and

    • 56 salaried medical directorships and other leadership positions had no job descriptions, no performance standards, no metrics, and no recorded evidence of any activities in exchange for the payment and were above fair market value. Some physicians in these positions also maintained full-time private practices.

The settlement also resolved claims that Beaumont allegedly misrepresented that a CT radiology center qualified as an outpatient department of Beaumont.

False Claims Enforcement Related to Medical Necessity

Cases involving medically unnecessary services continue to be a significant focus for the DOJ. Importantly, the legal community awaits a long-pending decision by the 11th Circuit Court of Appeals that may impact the government’s ability to bring FCA cases based on a lack of medical necessity. In U.S. ex rel. Paradise vs. AseraCare (Docket No. 16-13004), the trial judge found that the government could not bring FCA claims against a hospice provider for medically unnecessary services. The judge reasoned that, because determinations of medical necessity are subjective medical determinations, the government’s expert testimony that patients were not terminally ill (and, therefore, the services were not medically necessary) was insufficient to establish that the claims were false. The government argued that determining the falsity of hospice claims does not rest simply on two conflicting expert opinions on subjective medical determinations. Rather, the government contended that the expert testimony goes to the more objective determination of whether the medical records contained clinical information and documentation to support the patient’s terminal prognosis.

Despite the pending 11th Circuit decision, several significant FCA cases based on medically unnecessary services were resolved in 2018. A key theme in several of these cases was that, when there was a vendor or supplier providing the services in a hospital or skilled nursing facility, the government pursued both entities for submitting false claims or causing false claims to be submitted. Therefore, effective compliance programs must monitor the medical necessity of services provided by any vendor or supplier. The following are several representative examples of resolutions involving medically unnecessary services:

  • Two cases were resolved in which the government contended that the hospitals billed Medicare for medically unnecessary inpatient stays, when less expensive outpatient or observation care could have been provided. Banner Health settled for $18 million and Prime Healthcare Services settled for $65 million.

  • Healogics settled allegations that it caused the submission of claims for medically unnecessary hyperbaric oxygen (HBO) therapy. Healogics managed hospital-based wound clinics and was alleged to have caused those clinics to submit claims for medically unnecessary HBO therapy. The case settled for $22.5 million. In addition, the OIG issued an audit report (A-01-15-00515) in 2018 concerning medically unnecessary HBO therapy. Medicare only pays for HBO therapy for diabetic patients that meet certain coverage criteria. The OIG audit found that a significant portion of HBO claims it analyzed were not supported by sufficient documentation that the beneficiary met the coverage criteria for diabetic patients.

  • The government continues to aggressively pursue medically unnecessary rehabilitation services provided by long term care facilities. Signature HealthCARE paid $30 million to resolve allegations of medically unnecessary rehabilitation claims caused by presumptively placing patients in the highest therapy reimbursement category rather than individually evaluating patients to determine the level of need and by pressuring therapists to complete planned therapy minutes even when the patients were ill or declined treatment. Similarly, Southern SNF Management, Rehab Services in Motion, and several skilled nursing facilities where they provided therapy services, paid $10 million to resolve allegations related to medically unnecessary therapy.

  • A post-acute medical management company and four hospitals paid $1.7 million to resolve allegations that they provided medically unnecessary intensive outpatient psychotherapy to patients.

Opioid-Related Enforcement

Opioid-related enforcement continues to be a major focus of DOJ. Most states now have an opioid task force that includes the DOJ and federal and local law enforcement. The DOJ’s 2018 national “health care fraud takedown” announced a significant number of opioid enforcement matters. Most of these were criminal “pill mill” type cases focused on providers unlawfully distributing of controlled substances, including opioids. As part of the takedown, the U.S. Attorney’s Office for the Eastern District of Wisconsin announced the indictment of an advanced nurse practitioner and several other individuals related to a cash-only pain clinic for conspiring to distribute oxycodone and methadone outside of professional medical practice and not for legitimate medical purposes.

The DEA continues to be a significant player in opioid enforcement related to institutional providers. In August, the DEA announced a $4.3 million civil settlement with the University of Michigan Health System primarily related to violations of the Controlled Substances Act’s (CSA) record-keeping requirement. After the opioid overdoses of two UMHS providers (one of which was fatal), the DEA conducted an investigation and concluded that a number of the hospital’s practices concerning controlled substances were in violation of the CSA. For example, UMHS failed to secure DEA registrations for 15 off-site ambulatory care locations, each of which received narcotics from the main hospital’s pharmacy and dispensed them to patients. The DEA also determined that UMHS failed to maintain complete and accurate records of certain controlled substances that it received, sold, delivered or otherwise disposed of, and failed to notify the DEA in a timely manner regarding certain instances of thefts or significant losses of controlled substances. It is note-worthy that the DEA has had a number of significant settlements in recent years related to providers failing to timely notify it of thefts or losses of controlled substances.

The Department of Health and Human Services (HHS) is also adding to the conversation of opioid related enforcement. In June, HHS’s Office of Evaluations and Inspections (OEI) issued a data brief concerning opioid use in Medicare Part D that ultimately focused on prescribers who issued an aberrant number of opioid prescriptions. OEI identified Medicare Part D beneficiaries receiving large numbers of opioid prescriptions and then drilled down to the prescribers issuing those prescriptions. The report concluded that, based on the data analyzed, there were 282 prescribers that stood out for questionable prescribing. The report specifically identified providers who ordered opioids for a high number of beneficiaries with non-cancer diagnoses who were receiving “extreme” amounts of opioids and those providers who wrote prescriptions for beneficiaries that the data showed the patient was likely doctor-shopping. It is likely that the OIG is looking further into the providers identified by OEI’s data analysis.

Yates Memo Revisions

After the change in administrations, there was a lot of buzz about comments from DOJ officials that the Yates Memo (officially, the “Memorandum on Individual Accountability for Wrongdoing”) was being “reviewed.” Recently, Deputy Attorney General Rod Rosenstein announced the results of that review but the changes are likely to be considered only minor adjustments or clarifications, rather than the hoped-for large-scale revisions. For criminal liability, the revisions clarify that companies seeking cooperation credit must identify every individual who was substantially involved in or responsible for any criminal conduct, rather than every employee involved regardless of relative culpability. Further, the revisions to the policy for civil cases recognizes that civil cases primarily target the recovery of funds and that pursuing all employees involved in wrong-doing may not be an efficient use of resources. As a result, the new policy makes clear that cooperation in a civil case is not an “all or nothing” proposition and that a company that identifies senior management but not lower level employees involved in wrongful conduct may qualify for at least partial cooperation credit.

HIPAA Enforcement

The penalties for violations of the Health Insurance Portability and Accountability Act (HIPAA) continue to stiffen. While providers for many years were focused on implementing HIPAA policies and procedures, the enforcement trends suggest the growing importance of rigorous audits and enforcement of those policies. The following are representative examples:

  • University of Texas MD Anderson Cancer Center (MD Anderson) was found to have violated HIPAA’s Privacy and Security Rules by an administrative law judge and ordered to pay $4,348,000 in civil money penalties. OCR investigated MD Anderson following three separate data breach reports in 2012 and 2013 involving the theft of an unencrypted laptop of an MD Anderson employee and the loss of two unencrypted USB drives containing the electronic protected health information (ePHI) of over 33,500 individuals. OCR’s investigation found that MD Anderson had written encryption policies as far back as 2006 and that MD Anderson’s own risk analyses had found that the lack of device-level encryption posed a high risk to the security of ePHI. Despite the policies and risk analysis findings, MD Anderson did not begin to adopt an enterprise-wide solution to implement encryption of ePHI until 2011 and failed to encrypt its inventory of electronic devices containing ePHI until 2013.

  • In February, a physician in Massachusetts pleaded guilty to a misdemeanor count of wrongful disclosure of individually identifiable health information in violation of HIPAA. The physician allowed a pharmaceutical sales representative to access the confidential medical information of patients to identify potential candidates for one of the pharmaceutical company’s drugs.

Conclusion

One of the hallmarks of an effective compliance program is to regularly engage in an assessment of the risks faced by the organization. One method of assessing those risks is to be familiar with the recent enforcement trends and evaluate whether those trends apply to the organization. Based on the past year, financial relationships with physicians and the medical necessity of services billed to Medicare and Medicaid are enforcement risk areas and should be considered for incorporation into compliance planning. As noted above, the evaluation of the medical necessity of services should not be limited to those provided internally as the government has sought to impose liability for services provided by external business partners. Moreover, with the ongoing and significant impact of the opioid epidemic on the country, law enforcement will undoubtedly continue to be focused on enforcing the Controlled Substances Act. Finally, while for many years providers have been focused on implementing HIPAA policies and procedures, the enforcement trends suggest that the focus needs to shift to ensuring that those policies and procedures are monitored and enforced to avoid exposure to increasing penalties.

 

©2019 von Briesen & Roper, s.c.
Read more health legal news on the National Law Review’s Health Page.

2nd Conflict Minerals Reporting and Supply Chain Transparency Conference- June 23-25, Chicago, IL

The National Law Review is pleased to bring you information about the 2nd Conflict Minerals Reporting and Supply Chain Transparency Conference, June 24-25, 2014, presented by Marcus Evans.Conflict-Minerals-250-x-250

Click here to register.

Where

Chicago, IL

When

June 24-25, 2014

What

The 2nd Sustaining Conflict Minerals Compliance Conference will break down each SEC filing requirement as well as examine direct filing examples from specific companies. Discussions will tackle key issues including refining conflict minerals teams to create a more successful conflict minerals management program, managing and developing consistent communication within the supply chain, and building an IT program that will continue to secure data from the various levels of the supply chain.

This conference will allow organizations to benchmark their conflict minerals management program against their peers to more efficiently meet SEC expectations and amend their program for future filings. Seating is limited to maintain and intimate educational environment that will cultivate the knowledge and experience of all participants.

Key Topics
  • Scrutinize the Securities and Exchange Commission (SEC) requirements and evaluate external resources for a more efficient conflict minerals rule with Newport News Shipbuilding, Huntington Ingalls Industries
  • Engineer a sustainable conflict minerals program for future filings with Alcatel-Lucent
  • Integrate filings and best practices from the first year of reporting with BlackBerry
  • Maintain a strong rapport with all tiers of your supply chain to increase transparency with KEMET
  • Obtain complete responses moving throughout the supply chain with Global Advanced Metals

Register today!

2nd Conflict Minerals Reporting and Supply Chain Transparency – June 23-25, Chicago, IL

The National Law Review is pleased to bring you information about the 2nd Conflict Minerals Reporting and Supply Chain Transparency Conference, June 24-25, 2014, presented by Marcus Evans.Conflict-Minerals-250-x-250

Click here to register.

Where

Chicago, IL

When

June 24-25, 2014

What

The 2nd Sustaining Conflict Minerals Compliance Conference will break down each SEC filing requirement as well as examine direct filing examples from specific companies. Discussions will tackle key issues including refining conflict minerals teams to create a more successful conflict minerals management program, managing and developing consistent communication within the supply chain, and building an IT program that will continue to secure data from the various levels of the supply chain.

This conference will allow organizations to benchmark their conflict minerals management program against their peers to more efficiently meet SEC expectations and amend their program for future filings. Seating is limited to maintain and intimate educational environment that will cultivate the knowledge and experience of all participants.

Key Topics
  • Scrutinize the Securities and Exchange Commission (SEC) requirements and evaluate external resources for a more efficient conflict minerals rule with Newport News Shipbuilding, Huntington Ingalls Industries
  • Engineer a sustainable conflict minerals program for future filings with Alcatel-Lucent
  • Integrate filings and best practices from the first year of reporting with BlackBerry
  • Maintain a strong rapport with all tiers of your supply chain to increase transparency with KEMET
  • Obtain complete responses moving throughout the supply chain with Global Advanced Metals

Register today!