Tag: COVID-19

Cal/OSHA COVID-19 Regulations Will Likely Continue in 2023

The current Cal/OSHA COVID-19 Emergency Temporary Standard (ETS) expires at the end of 2022. But Cal/OSHA is not done with COVID-19 regulations. There is a Non-Emergency Regulation in process. The Standards Board recently published its proposed non-emergency regulation and announced a public hearing for September 15, 2022.

Though the proposal is a non-emergency regulation, the proposed text states the requirements would only remain in effect for two years, except for certain recordkeeping requirements.

Here are other highlights of the proposed regulation:

  • Directs employers to include COVID-19 procedures in their written Injury and Illness Prevention Program (IIPP) or as a separate document.

  • As part of an employer’s COVID-19 procedures, an employer must provide training to employees regarding COVID-19

  • Employers must have effective methods and procedures for responding to COVID-19 cases in the workplace such as exclusion and quarantine requirements.

  • Employers will still have certain notice requirements regarding positive cases in the workplace.

  • Face covering requirements shall still follow California Department of Public Health requirements

One notable omission from the proposed regulation is exclusion pay, which was a very contentious requirement under the ETS.

Article By Sean Paisan of Jackson Lewis P.C.

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

Jackson Lewis P.C. © 2022

The COVID-19 Change Order

During the pandemic it has become common for contractors to submit change orders to owners seeking reimbursement for COVID-19 related expenses and costs.  This is especially true for large construction projects.  These “COVID-19 Change Orders” seek reimbursement for everything from masks, dividers, hand sanitizer and other items required to follow and implement CDC guidelines (or to comply with state and local orders) for maintaining a safe work environment.  COVID-19 Change Orders also seek reimbursement for extended general conditions caused by having less workers on site because of social distancing requirements, lost time caused by shorter working hours, and lost time associated with CDC mandated hygiene breaks and temperature checks. On larger projects, COVID-19 Change Orders can escalate into millions of dollars and are often submitted without warning towards the end of a project when final completion and the payment of retainage are approaching.

For owners and contractors that are trying to complete their projects, many of which have been delayed or suffered from cost overruns, these unexpected COVID-19 Change Orders can be very problematic and hard to navigate.  Owners will argue that increased costs associated with the pandemic have affected all businesses, not just contractors.  Contractors will respond that these are real costs that they must pay to operate.  Often, the justification for reimbursement is not black and white because it is hard to find a specific contractual provision that addresses such an unprecedented situation, which causes uncertainty and strained relations between owners and contractors at the end of a project.

The justifications asserted for COVID-19 Change Orders vary from project to project and are sometimes asserted as an event of force majeure or more commonly as a general change in site conditions.  While many force majeure clauses expressly apply to acts of God, pandemics and government shutdowns, that is not the end of analyzing whether the clause applies.  While the application of a force majeure clause to these situations is highly dependent on the wording of such a clause, most require that performance be completely prevented and do not recognize commercial impracticability as a justification for delay.  There were a small number of projects that were shut down at the beginning of the pandemic by state and local orders in stricter jurisdictions, but for the most part complete shutdowns were uncommon because of various exceptions to such orders for businesses broadly defined as “essential.”  As the pandemic extended through late 2020, and into 2021, shutdowns became non-existent.  Finally, many force majeure clauses don’t allow for the reimbursement of costs for implementing required protective measures, they simply allow for an extension of the contract time.

As a result, many contractors have turned to other contractual provisions, such as language related to changes in site conditions or clauses related to change orders in general.  But prior to the pandemic these provisions were not drafted with this circumstance (a virus) in mind.  Instead, they usually apply to changes in “physical” conditions at the site that are specifically described, like subsurface conditions, otherwise concealed physical conditions or hazardous materials found at the site.   Making the argument that a virus is an unknown “physical” condition at the site can be a challenge since the virus is airborne, not necessarily part of the site itself and not unique to the site.  In addition, because many of these clauses require the approval of the owner or are only triggered by specific conditions, they may not support a unilateral change order.

Because of the ambiguity surrounding COVID-19 Change Orders, many owners will initially be reluctant to cover such reimbursements for their contractors.  Aside from the specific language in their construction contracts, Owners should consider other factors when deciding whether to reject, accept or partially accept COVID-19 Change Orders, including the risk of strained relations with its contractor, distractions at the project and the costs of a potential dispute with its contractor.  If there are remaining construction contingency funds available, and the project has otherwise run smoothly, the owner should consider offering all or part of it at the end of the project to avoid a dispute.  Likewise, contractors should be thoughtful and thorough when deciding whether to seek reimbursement for project costs associated with COVID-19, and make sure the costs at issue were necessary and can be verified.  Finally, if the contractor received government loans or payments because of the pandemic, including funds from the Paycheck Protection Program, it should strongly consider not seeking reimbursement from the owner.

Article By Richard F. Whiteley, Phillip L. Sampson Jr., and Stacianne M. Wilson of Bracewell LLP

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

© 2022 Bracewell LLP

Update to EEOC’s Position on Mandatory COVID Testing

On July 12, 2022, the Equal Employment Opportunity Commission (“EEOC”) updated its guidance regarding COVID-19 workplace viral screening testing. 

The EEOC’s original position on COVID-19 workplace viral screening testing was that it always met the Americans with Disabilities Act (“ADA”) standard for conducting medical examinations.

However, on July 12, 2022, the EEOC explained that going forward, “employers will need to assess whether current pandemic circumstances and individual workplace circumstances justify viral screening testing of employees to prevent workplace transmission of COVID-19.”

The EEOC’s FAQ A.6 now provides that an employer, as a mandatory screening measure, may administer a COVID-19 viral test “if the employer can show it is job-related and consistent with business necessity.”

Fortunately, the EEOC has provided eight factors for businesses to consider in determining whether the new “business necessity” standard is met:

  • the level of community transmission;
  • the vaccination status of employees;
  • the accuracy and speed of processing for different types of COVID-19 viral tests;
  • the degree to which breakthrough infections are possible for employees who are “up to date” on vaccinations;
  • the ease of transmissibility of the current variant(s);
  • the possible severity of illness from the current variant(s);
  • what types of contacts employees may have with others in the workplace or elsewhere that they are required to work (e.g., working with medically vulnerable individuals); and,
  • the potential impact on operations if an employee enters the workplace with COVID-19.

It is important for business owners to appropriately conduct and document the above analysis.

The EEOC’s COVID-19 guidance concerning COVID-19 workplace viral testing may further evolve, so it will be important for business owners to periodically review the EEOC’s current FAQs.

Article By William A. Oden, III of Ward and Smith, P.A.

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

© 2022 Ward and Smith, P.A.. All Rights Reserved.

Federal District Court Says Pre-Shift COVID Screening Time Not Compensable

In the first reported decision we’ve seen addressing the issue head on, a federal district court in California dismissed a putative collective action claim under the Fair Labor Standards Act (FLSA) seeking payment for time spent in pre-shift COVID screening.

Prior to clocking in each day, the plaintiff—a non-exempt truck driver whose job duties included loading and transporting automobile parts from a central distribution center to stores throughout southern California—was required to submit to COVID-related health screening conducted on his employer’s premises.  During the screening process, a company employee asked the plaintiff a series of questions and took the plaintiff’s temperature.  The total time spent in the screening process often exceeded five minutes, which included waiting time.

The plaintiff filed a collective action claim, contending that the time spent by him and other employees participating in the daily screening was compensable under the FLSA.

Starting with the premise that time spent in pre-shift activities is only compensable under the FLSA if it is “integral and indispensable” to the employee’s “principal activities or activities which [the] employee is employed to perform,” the district court granted the employer’s motion to dismiss the FLSA claims, noting:

A pre-shift COVID screening is not the “principal activity or activities which [the] employee is employed to perform.”  29 U.S.C. § 254(a)(1).  O’Reilly did not hire the employees to undergo health screenings, but instead to load and transport products to stores….  [T]he pre-shift COVID screenings were not “integral and indispensable” to the employees’ duties because the screening was not an intrinsic element of the loading and transporting of products to the stores.  The screenings were not indispensable to the employees’ duties because O’Reilly could eliminate them completely without hindering the employees’ ability to perform their duties….  A pre-shift COVID temperature check and short questions regarding exposure do not share the required nexus with Plaintiff’s duties of retrieving automotive parts and delivering them to auto part stores to make the screening a compensable activity that is integral and indispensable to those activities.

Notably, the court referenced—and then distinguished—the U.S. Department of Labor’s COVID-19 and the Fair Labor Standards Act Questions and Answers, which were issued during the height of the pandemic and which many employers felt were ambiguous on the issue of which COVID-related activities were and weren’t considered “hours worked” under the FLSA:

Unlike the nurse in the DOL example whose principal job duty is to keep patients healthy and has direct patient contact, Plaintiff’s principal activities consisted of manual labor and transportation of auto parts to stores.

We examined those agency Q&As—and the broader issues around compensability of time spent in vaccination, testing, and screening activities—in an earlier blog.

The decision is Pipich v. O’Reilly Auto Enterprises, LLC (S.D. Cal. Mar. 15, 2022).

Article By Allan S Bloom of Proskauer Rose LLP

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

© 2022 Proskauer Rose LLP.

EEOC Sanctions Employer for GINA Violations Relating to Collection of Employees’ Family Members’ COVID Test Results

On July 6, 2022, the Equal Employment Opportunity Commission (EEOC) announced it has entered into a conciliation agreement with a Florida-based medical practice for violations of the Genetic Information Non-Discrimination Act (GINA) arising out of the practice’s collection of employees’ family members’ COVID-19 testing results.

In a press release announcing the agreement, the EEOC stated that, following an investigation, it found that the medical practice – Brandon Dermatology – violated GINA by requesting the test results of employees’ family members and that “[s]uch conduct violates the GINA, which prohibits employers from requesting, requiring or purchasing genetic information about applicants or employees and their family members, except in very narrow circumstances which do not apply in this matter.”  GINA defines “genetic information” to include “the manifestation of a disease or disorder in an employee’s family members.”

While the press release includes limited details on the matter, the EEOC noted that “[i]n addition to compensating affected employees through restoration of leave time or back pay, as well as compensatory damages, the conciliation agreement resolving the charge requires Brandon Dermatology to review its COVID-19 policies; conduct training on EEO laws as they pertain to COVID-19; and post a notice.”

In its technical assistance guidance relating to COVID-19, the EEOC states that GINA “prohibits employers from asking employees medical questions about family members” including asking an employee who is physically coming into the workplace whether they have family members who have COVID-19 or symptoms associated with COVID-19.  However, the guidance goes on to state that “GINA . . . does not prohibit an employer from asking employees whether they have had contact with anyone diagnosed with COVID-19 or who may have symptoms associated with the disease.”  It also notes that “from a public health perspective, only asking about an employee’s contact with family members would unnecessarily limit the information obtained about an employee’s potential exposure to COVID-19.”

Article By Evandro C Gigante and Laura M. Fant of Proskauer Rose LLP

For more labor and employment legal news, click here to visit the National Law Review.

© 2022 Proskauer Rose LLP.

CMS Reduces COVID-19 Vaccine Mandate Surveys and Rescinds Surveyor Vaccination Requirements

In two recent memoranda, the Centers for Medicare and Medicaid Services (CMS) made changes to previously issued survey guidance related to COVID-19 vaccination issues.

In QSO-22-17-ALL, CMS modified the frequency by which State Agencies and Accreditation Organizations will survey for compliance with the federal staff vaccine mandate applicable to health care providers and suppliers (discussed in a prior post).  Noting that 95% of providers and suppliers surveyed have been found in substantial compliance with the rule, CMS is eliminating the previous requirement that State Agencies and Accreditation Organizations survey for compliance with the vaccine mandate during every survey.  Review of compliance with vaccine mandate is still required, however, during initial surveys, recertification surveys, and in response to specific complaint allegations that allege non-compliance with the staff vaccination requirement.  This means that a State Agency or Accreditation Organization is not required to review compliance with the staff vaccination requirement during, for example, a validation survey or a complaint survey unrelated to compliance with the staff vaccination requirement.  A State Agency or Accreditation Organization may still choose to expand any survey to include review of vaccine mandate compliance; however, the new guidance should result in a reduction in survey frequency of this issue for providers and suppliers.

In QSO-22-18-ALL, CMS rescinded, in its entirety, the previously issued QSO-22-10-ALL memorandum, which had mandated that surveyors of State Agencies and Accreditation Organizations be vaccinated for COVID-19.  However, CMS noted that the State Agencies and Accreditation Organizations were responsible for compliance and prohibited providers and suppliers from asking surveyors for proof of vaccination.  While CMS is now encouraging vaccination of surveyors performing federal oversight surveys, the mandate for vaccination is no longer in effect.

Article By Allen R. Killworth of Epstein Becker & Green, P.C.

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

©2022 Epstein Becker & Green, P.C. All rights reserved.

Governor Rolls Back California COVID-19 Executive Orders & Cal/OSHA Releases Draft Permanent COVID-19 Standard

On June 17, 2022, Governor Newsom issued an executive order terminating certain provisions of prior executive orders related to Cal/OSHA’s COVID-19 Emergency Temporary Standards (ETS). Some of the terminated orders were no longer necessary due to changes in the ETS. For example, previously the Governor had issued an executive order stating exclusion periods could not be longer than California Department of Public Health (CDPH) guidelines or local ordinances. However, since the ETS now defers to CDPH guidance on isolation and quarantine, the Governor has rescinded his prior executive order on this issue. Moreover, Cal/OSHA has issued guidance for employers on COVID-19 Isolation and Quarantine that aligns with CDPH requirements.

The current version of the ETS remains in effect until the end of 2022. However, Cal/OSHA won’t be done with COVID-19 regulations in 2023. The agency is currently working on a permanent COVID-19 Standard. Recently, the draft of the proposed regulation was released.

The draft regulation carries over many of the employer obligations from the current ETS. The following are some of the proposed requirements:

  • COVID-19 procedures, either included in their Injury and Illness Prevention Program (IIPP) or a separate document.
  • Exclusion and prevention requirements for positive employees and close contacts.
  • Employers would continue to be required to provide testing to employees who have a close contact in the workplace.
  • Employers would continue to have notice requirements for COVID-19 exposure.
  • Employers would continue to have to provide face coverings to employees.
  • Employers would continue to have reporting and recordkeeping requirements for COVID-19 cases and outbreaks in the workplace.

Currently, no public hearing has been set for the proposed permanent COVID-19 Standard, so it is uncertain how soon the regulations may be implemented.

Article By Sean Paisan of Jackson Lewis P.C.

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

Jackson Lewis P.C. © 2022

Employers Beware: Take-Home COVID Cases are on the Rise (US)

You’ve just been informed that an employee who apparently contracted COVID-19 from exposure in your workplace brought the virus home, and now his spouse, who is in a high-risk category, has contracted the virus and is in the hospital.  Do you as the employer face potential liability for the spouse’s illness?

More than two dozen so-called “take-home” COVID-19 lawsuits have been filed across the country, including against some of the largest employers in the US. This alarming pattern has prompted trade groups to warn employers of the potential for lawsuits stemming from COVID infections filed not only by workers’ family and friends but by anyone infected by that circle of people, creating a seemingly endless chain of liability for employers. Some states have enacted laws shielding employers from such suits, but where that is not the case, the legal theories and procedural paths under which these suits have proceeded vary – including some being brought in state courts, some in federal courts, and others brought under claims within the worker’s compensation system.

The issue is currently being tested in California, where the US Court of Appeals for the Ninth Circuit recently certified questions to the California Supreme Court seeking guidance on the state’s laws. The case, Kuciemba v. Victory Woodworks, Inc., arose after Mr. Kuciemba allegedly was exposed to COVID-19 through his work at one of his employer’s job sites.  According to the Kuciembas, Victory knowingly transferred workers from an infected construction site to the job site where Mr. Kuciemba was assigned without following the safety procedures required by the San Francisco Health Order. He was forced to work in close contact with these employees, and soon developed COVID-19, which he brought back home. His wife is over 65 years old and was at high risk from COVID-19, and the family had been careful to limit their exposure to the virus, with the exception of Mr. Kuciemba going to work. Mrs. Kuciemba subsequently tested positive for the disease and was hospitalized for over a month after developing severe symptoms. The Kuciembas filed suit, alleging that Victory caused Mrs. Kuciemba’s injuries by violating the Health Orders, and negligently allowed COVID-19 to spread from its worksite into their household.

The lower court dismissed the case, which was then appealed to the federal appeals court. After hearing the argument, the court asked the California Supreme Court to answer two questions of state law. First, whether Mrs. Kuciemba’s illness was an “injury” that was “derivative” of Mr. Kuciemba’s work-related injury, and therefore, Mrs. Kuciemba’s claims would be subject to the exclusive jurisdiction of the Worker’s Compensation Act (“WCA”); and second, assuming that the WCA is not the exclusive remedy, whether the employer owed a duty to the households of its employees to exercise ordinary care to prevent the spread of COVID-19. Neither question has been squarely answered by the California Supreme Court, although, as noted by the federal appeals court, in a somewhat analogous situation, California courts have allowed suits against employers who negligently allowed their employees to carry asbestos fibers home to their families.

While the Kuciemba case was pending, a California Court of Appeal in another case, See’s Candies v. Superior Court, ruled that the derivative injury doctrine does not bar third-party COVID-related claims. Under a similar fact pattern, the court allowed the negligence case to go forward while noting that the plaintiff would still need to prove that the employer owed a duty of care to non-employees infected with COVID-19 due to an employee contracting the virus at work. Acknowledging that an analysis of this duty “appear[s] worthy of exploration,” the state appellate court said the analysis would include an assessment of “public policy concerns that might support excluding certain kinds of plaintiffs or injuries from relief.” The California Supreme Court declined to review the See’s case, meaning that it’s holding still stands.

The California Supreme Court has not yet announced whether it will use its discretion to respond to the Ninth Circuit’s certified questions in the Kuciembas’ case. In the meantime, California employers cannot automatically rely on the exclusive remedial scheme provided under the worker’s compensation system to cover these claims and are not necessarily shielded from COVID-19 lawsuits brought by employees’ family members (and perhaps others). That said, even if employers owe their employees’ families a duty of care, affected employees will still have to prove that it was the employer’s negligence that caused the illness and that the virus was not contracted from another source – a tall order for a highly transmissible virus like COVID-19. In the meantime, however, it behooves all California employers to continue maintaining health and safety measures to prevent the spread of COVID-19, and react quickly and appropriately in the event of an outbreak of COVID-19 in the workplace.

Article By Karen E. Wentzel and Cristen R. Hintze of Squire Patton Boggs (US) LLP

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

© Copyright 2022 Squire Patton Boggs (US) LLP

COVID-19 Healthcare Enforcement Actions to Increase in 2022 and Beyond

“The Department remains committed to using every available federal tool—including criminal, civil, and administrative actions—to combat and prevent COVID-19 related fraud. We will continue to hold accountable those who seek to exploit the pandemic for personal gain, to protect vulnerable populations, and to safeguard the integrity of taxpayer-funded programs”

US Attorney General Merrick Garland – March 10, 2022, Remarks

The Biden Administration, US Department of Justice (DOJ), US Department of Health and Human Services Office of Inspector General (HHS-OIG), and other federal agencies have prioritized prosecuting COVID-19-related fraud since the pandemic began. Although the United States appears to be finally emerging from the pandemic, the government’s pandemic-related enforcement actions are here to stay for the foreseeable future. DOJ has made clear that the government’s COVID-19 enforcement efforts will accelerate, with a more significant focus on complex healthcare fraud cases and civil actions under the False Claims Act (FCA). As the federal government continues to devote additional resources towards its pandemic-related enforcement efforts, healthcare companies, hospital systems and providers should prepare for increased scrutiny.

Additional Resources Devoted to COVID-19 Fraud Enforcement Efforts

DOJ and other federal agencies have already devoted an unprecedented amount of resources to investigating and prosecuting pandemic-related fraud cases. These extensive efforts have led to immediate results. To date, DOJ has brought pandemic-related criminal charges against more than 1,000 individuals with the total alleged fraud losses exceeding $1 billion, and has seized more than $1.2 billion in fraudulently obtained relief funds.

DOJ’s pandemic-enforcement efforts show no sign of slowing down anytime soon. Less than a year after US Attorney General (AG) Merrick Garland established the COVID-19 Fraud Enforcement Task Force, the Biden administration announced that DOJ would appoint a chief prosecutor to expand on the Task Force’s “already robust efforts,” to focus on “most egregious forms of pandemic fraud” and to target particularly complex fraud schemes.

On March 10, 2022, DOJ announced that Kevin Chambers has been appointed as DOJ’s director for COVID-19 fraud enforcement. During his introductory remarks, Chambers said that DOJ would be “redoubling [its] efforts to identify pandemic fraud, to charge and prosecute those individuals responsible for it and whenever possible, to recover funds stolen from the American people.” He also indicated that DOJ would use “new tools” it has developed since the start of the pandemic to investigate such fraud.

In a March 2, 2022, speech before the American Bar Association’s Annual National Institute on White Collar Crime, AG Garland also announced that the Biden Administration will seek an additional $36.5 million in the 2022 budget for DOJ to “bolster efforts to combat pandemic-related fraud.” As evidence of this point, DOJ plans to hire 120 new prosecutors and 900 new Federal Bureau of Investigation agents who will focus on white-collar crime.

DOJ and HHS-OIG to Increasingly Focus on FCA Cases

For the past two years, officials from DOJ and HHS-OIG have identified civil and criminal healthcare fraud relating to COVID-19 as a high priority. As the effects of the pandemic subside, COVID-19-related civil enforcement actions targeting healthcare providers and healthcare companies seem set to increase.

During remarks at the Federal Bar Association’s annual Qui Tam Conference in February 2022, Gregory Demske, chief counsel to the inspector general for HHS-OIG, emphasized that COVID-19 remains a key enforcement priority. Demske indicated that HHS-OIG is focused on the use of COVID-19 to bill for medically unnecessary services, and fraud in connection with HHS’s Provider Relief Fund (PRF) and Uninsured Relief Fund. Demske also confirmed that HHS-OIG remains intensely focused on fraud in connection with telehealth services, the use of which increased exponentially during the pandemic. And, in March 2022, AG Garland reiterated that DOJ will use “every available federal tool—including criminal, civil, and administrative actions—to combat and prevent COVID-19 related fraud.”

The majority of pandemic-related healthcare enforcement actions to date have been criminal prosecutions involving truly blatant instances of fraud and abuse. Going forward, civil and administrative actions likely will be used to pursue cases that turn on lower mens rea requirements or involve more complex regulatory issues. These civil actions will include qui tam actions filed by whistleblowers, as well as FCA cases initiated directly by the DOJ.

In 2021, DOJ recovered more than $5 billion in connection with FCA cases involving the healthcare industry. Given the unprecedented amount of government funds expended to combat the COVID-19 pandemic, DOJ and HHS-OIG will undoubtedly rely on the FCA to maximize the government’s financial recovery. DOJ has already reached FCA settlements in several Paycheck Protection Program cases. It is only a matter of time before we see similar FCA investigations, complaints and settlements focused on relief funding to healthcare providers.

Pandemic-Related Healthcare Priorities

HHS’s PRF

The PRF was created as part of the Coronavirus Aid, Relief and Economic Security (CARES) Act to provide direct payments to “eligible health care providers for health care-related expenses [and] lost revenues that are attributable to coronavirus.” More than $140 billion has been disbursed to hospitals and healthcare providers under the PRF, which is administered by the Health Resources & Services Administration (HRSA).

Payments under the PRF are subject to specific terms and conditions. To retain PRF disbursements, providers must attest to “ongoing compliance” with these requirements and acknowledge that their “full compliance with all Terms and Conditions is material to the Secretary’s decision to disburse funds.” Notwithstanding ongoing concerns and confusion regarding the PRF program requirements, any noncompliance with the terms and conditions could result in criminal, civil and administrative enforcement actions. As recently as March 3, 2022, AG Garland identified fraud in connection with the PRF as a key DOJ enforcement priority.

To date, the Healthcare Fraud Unit of DOJ’s Criminal Division has already brought criminal charges against nine individuals for fraud relating to the PRF. These criminal cases, however, have almost exclusively focused on egregious allegations of fraud and abuses, such as misappropriating PRF disbursements and using the money for personal expenses. For example, in September 2021, DOJ charged five individuals with using PRF payments to gamble at Las Vegas casinos and purchase luxury cars.

DOJ, however, has long indicated that the FCA will also play a “significant role” in DOJ’s PRF enforcement efforts. It is now just a matter of time before such civil investigations and settlements emerge.

HRSA’s stated oversight plan includes post-payment analysis and review to determine whether HHS distributed PRF payments to eligible providers in the correct amounts; audits to assess whether recipients used the funds in accordance with laws, guidance, and terms and conditions; and the recovery of overpayments and unused or improperly used payments. Among other things, HRSA and HHS-OIG likely will evaluate ownership changes, double counting reimbursed expenses and losses, and compliance with the balanced billing requirements.

PRF oversight and enforcement actions have been delayed partly because of program complexities and extended reporting timelines. For example, the first report from PRF recipients on use of funds was not due until the end of 2021. Depending on the date funds were received, PRF recipients may have no reporting obligations through 2023. Entities that expended more than $750,000 in federal awards, including PRF payments, also must obtain an independent audit examining their financial statements; internal controls; and compliance with applicable statutes, regulations and program requirements. These independent audits of PRF payments must be submitted to the Federal Audit Clearinghouse, for nonprofit organizations, or the HRSA Division of Financial Integrity, for for-profit “commercial” organizations. Recipients also may be subject to separate audits by HHS, HHS-OIG or the Pandemic Response Accountability Committee to review copies of records and cost documentation and to ensure compliance with the applicable terms and conditions.

Finally, DOJ and HHS-OIG have increasingly relied on sophisticated data analytics to drive their healthcare enforcement efforts generally. Now that the first round of reports containing specific PRF data certifications are available to HRSA and HHS-OIG, we expect to see the use of such analytics, in conjunction with all the other available information, in connection with PRF enforcement.

Telehealth

Telehealth use expanded exponentially during the pandemic. A March 2022 HHS-OIG report showed that during the first year of the pandemic, more than 28 million Medicare beneficiaries (approximately 43% of all Medicare beneficiaries) used telehealth services—a “dramatic increase from the prior year” in which only 341,000 beneficiaries used telehealth. This increase was largely the result of HHS temporarily waiving statutory and regulatory requirements related to telehealth to allow Medicare beneficiaries to obtain expanded telehealth services.

Telehealth has been at the forefront of DOJ’s healthcare enforcement efforts for years now. For example, DOJ’s 2021 nationwide healthcare enforcement action included criminal charges against dozens of individuals for telehealth fraud schemes involving more than $1.1 billion in alleged loses. The majority of these telehealth enforcement actions to date have involved the use of telehealth to engage in traditional fraud healthcare schemes, such as illegal kickbacks and billing for medically unnecessary services and equipment.

DOJ, however, has increasingly pursued criminal enforcement actions directly related to the telehealth waivers HHS issued in response to the pandemic. For example, in November 2021, a defendant was sentenced to 82 months in prison for participating in a $73 million telehealth fraud scheme. The defendant owned laboratories that provided genetic testing and had paid his coconspirators to arrange for telehealth providers to order medically unnecessary genetic tests. The telehealth providers were not actually treating the beneficiaries, did not use the test results and often never even conducted the telemedicine consultation. Although this was primarily a traditional Anti-Kickback Statute/medical necessity case, DOJ also charged the defendant with using the COVID-19-related telehealth waivers to submit more than $1 million in false claims for sham telemedicine visits.

Similar criminal prosecutions and civil actions relating to the expanded telehealth waivers and sham telehealth encounters can be expected in the future. DOJ and HHS-OIG will likely focus on telehealth visits that resulted in claims for services and equipment with particularly high reimbursement rates, such as genetic testing and durable medical equipment. DOJ and HHS-OIG likely will use data analytics to focus on instances in which telehealth services were billed by providers with whom the beneficiary did not previously have a relationship.

Improper Billing Schemes

DOJ has also pursued criminal cases involving traditional healthcare fraud schemes that sought to take advantage of the COVID-19 pandemic. For example, in May 2021, DOJ announced criminal charges against numerous individuals who were improperly bundling COVID-19 tests with other more expensive laboratory tests, such as genetic testing, allergy testing and respiratory pathogen panel testing. DOJ has likewise pursued criminal cases in which defendants improperly used COVID-19 “emergency override” billing codes to circumvent preauthorization requirements and bill Medicare for expensive medications and treatments. Any improper billing schemes that relate to the pandemic will continue to be a focus of criminal and civil enforcement efforts going forward.

Key Takeaways and Recommendations

DOJ, HHS-OIG and other federal agencies remain focused on pursuing healthcare fraud relating to the COVID-19 pandemic. The best way for hospitals, health systems and other healthcare companies and providers to prepare for this increased enforcement activity and scrutiny is to ensure that they have a robust compliance program in place.

There is no one-size-fits-all approach to compliance, but companies can take several proactive and practical steps to minimize their enforcement risk:

  • Monitor federal and state regulatory and statutory changes. The rules, regulations and guidance relating to the COVID-19 pandemic, including for the PRF and expanded telehealth waivers, have repeatedly changed over the past two years and continue to evolve. Monitoring such changes will not only help prevent enforcement actions, but a company’s reasonable and good faith efforts to interpret and follow such rules and regulations can be a powerful defense should an investigation arise, as discussed in connection with the Allergan case, above. Further to that point, where regulatory requirements and associated guidance is ambiguous, a good documentary record of the basis for your entity’s interpretation of the rules is critical.
  • Incorporate data analytics into your compliance program. DOJ and HHS-OIG continue to rely heavily on sophisticated data analytics, including artificial intelligence, to identify and prosecute fraud. In March 2022, AG Garland emphasized DOJ’s use of “big data” to identify payment anomalies that are indicative of fraud. Healthcare companies already have access to vast amounts of data that they can and should use to proactively identify errors, monitor risk areas and address any potential misconduct.
  • Adapt your compliance program and internal controls, as appropriate, to support PRF compliance, reports and audits. Recipients should continue to practice good compliance hygiene and maintain contemporaneous records regarding the receipt and spending of federal funds. Doing so may involve implementing additional systems to track spending, recovery and relief to avoid overlapping use of funds among relief programs, or consulting with grant accounting and compliance advisors to augment existing infrastructure. Recipients also should periodically review policies, procedures and controls, particularly following major updates to program requirements and interpretations.
  • Ensure the accuracy of required PRF reports, certifications and submissions. Particularly in light of ongoing political pressure, HRSA and HHS-OIG likely will conduct extensive oversight of the PRF to identify potential errors, overpayments and improper use of funds. Recipients should carefully review guidance and instructions to avoid inadvertent errors and misstatements on all submissions. Recipients may consider revisiting prior submissions underlying significant disbursements to identify interpretative issues or compliance concerns that warrant additional supporting documentation or disclosure.
  • Carefully consider the implications before entering into arrangements with other parties. The biggest risk to healthcare companies often comes from those with whom they do business. Compliance programs should focus heavily on reducing the risk of entanglement with bad actors.
  • Be diligent in the design and oversight of marketing strategies. Healthcare companies and providers should regularly review their marketing strategies to ensure total transparency and compliance (both historic and prospective) with applicable state and federal anti-kickback statutes. Companies should confirm that patients are reached through appropriate channels. Although issues relating to COVID-19 may be the impetus for a government investigation, violations of the Anti-Kickback Statute frequently result in larger recoveries for the government.
  • Proactively examine coding and billing practices. Providers should immediately review and revisit their coding and billing practices to determine if their practices involved bundling COVID-19 testing with other claims, the use emergency override billing codes or billing for other COVID-19 related services with high reimbursement rates. There is a strong likelihood that the DOJ will review the claims data for any providers with statistically significant use of these billing and coding practices, particularly when the providers are located in geographical areas where the DOJ’s Healthcare Fraud Strike Force and HHS-OIG’s Medicare Fraud Strike Force operate.

Article By Julian L. André, Benton Curtis, and Dawn R. Helak of McDermott Will & Emery

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

© 2022 McDermott Will & Emery

DOJ Aggressively Targeting PPP Loan Recipients for Fraud: What Businesses Need to Know

More than five million businesses applied for emergency loans under the Paycheck Protection Program (PPP), and with a hurried implementation that prevented a full diligence process, it’s not surprising the program became a target for fraud. The government is now aggressively conducting investigations, employing both criminal and civil enforcement actions. On the civil lawsuit front, companies that received PPP loans should be aware of actions brought under the False Claims Act (FCA) and the Financial Institutions Reform, Recovery and Enforcement Act (FIRREA). This advisory details some of the key points of these enforcement tools and what the government looks for when prosecuting fraudulent conduct.

How will PPP Loan Fraud Enforcement Under the FCA Work?

A company can be liable under the FCA if it knowingly presents a false or fraudulent claim for payment or approval to the government or uses a falsified record in the course of making a false claim. 31 U.S.C. § 3729(a)(1)(A), (B). The FCA allows the government to recover up to three times the amount of the damages caused by the false claims in addition to financial penalties of not less than (as adjusted for inflation) $12,537, and not more than $25,076 for each claim.

The FCA can be enforced by individuals through qui tam lawsuits. This means a private individual, known as a relator, can file a lawsuit on behalf of the government. When a qui tam case is filed, it remains confidential (under seal) while the government reviews the claim and decides whether to intervene in the case. If the lawsuit is successful, the relator is entitled to a portion of the reward.

The False Claims Act has been used to pursue fraud claims in connection with PPP loan applications. Any company that participated in the PPP by applying for a loan should retain documentation justifying all statements made on the loan application and evidencing how any funds obtained through the loans were utilized.

How will PPP Loan Fraud Enforcement Under FIRREA Work?

The government is also utilizing FIRREA in response to fraudulent conduct related to PPP loans. FIRREA is a “hybrid” statute, predicating civil liability on the government’s ability to prove criminal violations. The statute allows the government to recover penalties against a person who violates specifically enumerated criminal statutes such as bank fraud, making false statements to a bank, or mail or wire fraud “affecting a federally insured financial institution.” 12 U.S.C. §1833a.

To establish liability under FIRREA, the government does not have to prove any additional element beyond the violation of that offense and that the violation “affect[ed] a federally insured financial institution.” The government has invoked FIRREA in the context of PPP loan fraud by stating the fraud related to obtaining the loan falls under one or more of the predicate offenses set forth in the statute.

What Factors Determine PPP Loan Fraud Penalties Under FIRREA?

While the assessment of a penalty is mandatory under FIRREA, the amount of the penalty is left to the discretion of the court but may not exceed $1.1 million per offense. There is an exception to this maximum penalty, however, if the person against which the action is brought profited from the violation by more than $1.1 million. FIRREA then allows the government to collect the entire amount gained by the perpetrator through the fraud. The actual amount of the penalty is determined by the court after weighing several factors including:

  • The good or bad faith of the defendant and the degree of his/her knowledge of wrongdoing;
  • The injury to the public, and whether the defendant’s conduct created substantial loss or the risk of substantial loss to other persons;
  • The egregiousness of the violation;
  • The isolated or repeated nature of the violation;
  • The defendant’s financial condition and ability to pay;
  • The criminal fine that could be levied for this conduct;
  • The amount the defendant sought to profit through his fraud;
  • The penalty range available under FIRREA; and
  • The appropriateness of the amount considering the relevant factors.

The government favors utilizing FIRREA penalties to pursue fraud claims for several reasons. The statute of limitations provided in 12 U.S.C. §1833a(h) is 10 years, which is much longer than most civil statutes of limitations. The standard of proof required to impose penalties is preponderance of the evidence, rather than the higher “beyond a reasonable doubt” standard that must be met in a criminal prosecution.

Checklist for PPP Loan Recipients

A company that applied for COVID relief funds, such as PPP loans, should ensure they satisfy the eligibility requirements for obtaining the loan, confirm false statements were not made during the application, and review the rules set forth by the SBA for applying for PPP. The government has shown it is willing to pursue remedies under the FCA and FIRREA for fraudulent statements made regarding a PPP loan application.

Article By Ronald G. DeWaard, Gary J. Mouw, and Gage M. Selvius of Varnum LLP

For more white collar crime and business fraud legal news, click here to visit the National Law Review.

© 2022 Varnum LLP