false claims act for labor and employment and health care practitioners

Co-presented by: Co-presented by:

False Claims Actfor Labor & Employment and

Health Care PractitionersPresented by: Polsinelli and Bennett Thrasher


Panel 1FCA Overview & Recent Developments

and TrendsPatrick Braley, Emma Cecil, Jeff Fitzgerald, and

Jonathan Rosen

Co-presented by:

Fraud & Abuse Laws

False Claims Act– Civil liability for submitting false claims for payment to the

government– Also, liability for failure to refund identified overpayment

within 60 days– Noncompliance with regulations can make claims “false”

so AKS and Stark can be bootstrapped– Penalty: up to 3x damages plus $11,000 per claim– Offers a bounty for whistleblowers

• Up to 25% of recovery plus fees• 90%+ of cases are whistleblower driven

Co-presented by:

Implied False Certification Theory

Traditional FCA liability arises in cases involving claims that are factually false– EX: a health care provider bills for goods or services that

were never performed or submits a bill containing altered CPT or ICD-9 codes

False certification liability involves claims that are legally false– EX: the person or entity submitting the claim for payment

has failed to comply with applicable statutes, regulations, or contractual provisions underlying the claim for payment

Co-presented by:

Express v. Implied Certifications

The “legally false” certification can be express or implied– An express false certification occurs when the

person/entity submitting the claim expressly certifies compliance with ancillary legal requirements, either at the time the claim is submitted or at some other point in time

– “Implied false certification” cases rest on the theory that a person or entity receiving federal funds implicitly certifies, every time it makes a claim for payment, that it has complied with applicable legal requirements, even though no express certification of compliance has been made

Co-presented by:

Implied False Certification Circuit Split

Second, Third, Sixth, Ninth, Tenth, and Eleventh Circuits recognize implied certification liability only where the statute, regulation, or contractual provision that has allegedly been violated expressly states that compliance with it is a precondition of payment

First, Fourth, and D.C. Circuits hold that liability attaches for any violation of statutory, regulatory, or contractual requirements, so long as compliance with those requirements was material to the government’s decision to pay

Materiality often determined in hindsight

Co-presented by:

Implications of Circuit Split

Many FCA cases rely on the implied certification theory of falsity– Relators who lack firsthand knowledge of the actual claims

can often survive motions to dismiss– Relators can argue that all claims submitted by a

defendant while in violation of a regulation, statute, or contract were false

Encourages and rewards forum shopping Different outcomes under factually identical

circumstances based on where the case is filed

Co-presented by:

What’s at Stake

Treble damages and civil penalties of up to $11,000 per claim Exclusion from participation in federal health care programs Payment suspension Potential criminal liability Follow-on suits under state false claims acts Reputational harm (DOJ announcements; SEC and other

mandatory public disclosures) Legal costs Increased scrutiny and monitoring (e.g., Corporate Integrity

Agreements)

Co-presented by:

Universal Health Services, Inc. v. United States ex rel. Escobar

– Supreme Court to resolve circuit split –United States ex rel. Escobar v. Universal

Health Services, Inc.,780 F.3d 504, 512-13 (1st Cir. 2015) • A claim is false or fraudulent whenever a defendant

fails to comply with a material—rather than express—regulatory precondition of payment

Co-presented by:

Issues on Appeal

– Whether the “implied certification” theory of legal falsity under the FCA is viable

– Whether, if the “implied certification” theory is viable:• Failure to comply with a statute, regulation, or contractual

provision that does not state that it is a condition of payment can result in liability for a legally false claim (1st, 4th, and D.C. Circuits);

• Liability for a legally false claim requires that the statute, regulation, or contractual provision expressly state that it is a condition of payment (2nd and 6th Circuits)

– 27 Amici Briefs have been filed

Co-presented by:

Oral ArgumentApril 19, 2016

UHS: – Supreme Court should reject the implied certification theory in its

entirety • FCA is a punitive statute that imposes treble damages and civil

penalties - should not be used to police compliance with every regulatory, statutory, or contractual requirement related to a claim for payment

• FCA’s treble damages and other penalties would eclipse the fines that the regulatory agencies deemed appropriate for the mental health clinic’s conduct

– Alternatively, should the Supreme Court recognize the theory, it should limit it to violations of requirements that are express preconditions to payment

Co-presented by:


Relators/Government– Limiting FCA liability to violations of legal

requirements that are express conditions to payment would create a loophole through which providers could escape liability for knowing violations of material requirements

Co-presented by:


Court appears likely to recognize implied certification liability in some form

Questions generally focused on where the line should be drawn—i.e., when does a statutory, regulatory, or contractual violation give rise to FCA liability? – Too narrow – FCA will not be able to reach the kinds of

fraud it was intended to combat– Too broad – application will result in mammoth damages

and civil penalties for every statutory, regulatory, contractual violation, no matter how de minimis

Co-presented by:

Practical Considerations

If the Court is deadlocked 4-4, the First Circuit’s decision in Escobar will be upheld and the Supreme Court’s decision will not be precedent on the other circuits, which would leave the current circuit split unresolved

The Court’s decision is expected by June 2016

Co-presented by:

Practical Considerations If served with an FCA complaint asserting implied certification claims, a defendant

should be thinking about: – A robust motion to dismiss strategy

• Regulation, statute or contract was not actually violated• Regulation is not a condition of payment

– Regulatory (or statutory, or contractual) scheme may designate other regulations as conditions of payment, but not the one at issue

– Regulatory infraction may be so minor that it could not conceivably be a condition of payment

– Government payor may have its own remedies for redressing violations, demonstrating payor did not condition payment on compliance

– Absence of a condition of payment requires dismissal for failure to plead both falsity and materiality

• Rule 9(b) remains a critical defense in implied certification cases - implied certification cases particularly ripe for Rule 9(b) dismissal

Co-presented by:

Practical Considerations

Make aggressive use of discovery to negate falsity, materiality, and knowledge and set up summary judgment in an implied certification case:– The government payor did not condition payment on

compliance with the regulation at issue– The regulation does not mean what the relator says it

means or that the regulation was ambiguous– The government knew about the defendant’s practices– In healthcare cases in particular, that reasonable medical

minds may differ on a service or treatment

Co-presented by:

Individual Liability Under the False Claims Act

Co-presented by:

DOJ Yates Memo: The Call For Increased Individual Liability

Increased Focus on Individuals “Cooperation Credit” “Focus on individuals” “Routine communication” among

criminal/civil attorneys No corporate resolution absent “clear plan”

on individuals

Co-presented by:

DOJ Yates Memo:Limited Individual Releases

Past practice: global individual release Present policy: no individual release absent

“extraordinary” circumstances Impacts: continued risk of criminal, civil,

administrative penalties

Co-presented by:

DOJ Yates Memo: Civil Enforcement and Ability to Pay

Not dispositive Must consider: seriousness of individual’s

misconduct, likelihood of judgment, existence of important “federal interest”

Co-presented by:

DOJ Yates Memo: Rhetoric or Reality

Potential implications– DOJ fear of bad precedent based on individual

enforcement risks– Chilling effect on individual interviews in

corporate internal investigations – Constrained corporate disclosures

Co-presented by:

Corporate Integrity Agreements(CIA)

Condition for continued funding from federal and state programs

Requires implementation of effective compliance program

OIG Monitor Annual reporting and IRO reviews Typically five-year proposition Additional costs above settlement amount

Co-presented by:

Columbus Regional Healthcare Systems, Inc.

CRHS – Columbus, GA– Settlement Date: September 3, 2015– Allegations:• Improper physician arrangement • Over-billing of office visits and other services

– Whistleblower – Administrator of cancer center – Settlement• Columbus Regional Healthcare Systems - $25,000,000+• Medical Director - $425,000

Co-presented by:

The Medical Center of Central Georgia, Inc.

MCCG – Macon, GA– Settlement Date: April 23, 2015– Allegations:• Improper billing of claims• Unnecessary inpatient admissions

– Health Care Fraud Prevention and Enforcement Action Team (HEAT)

– Settlement: $20,000,000

Co-presented by:

Memorial Health, Inc.

Memorial Health – Savannah, GA– Settlement Date: December 22, 2015– Allegation:• No business rationale for recruitment of PCPs• Overpayment of physicians for referrals

– Whistleblower – former CEO– Settlement: $10,000,000

Co-presented by:

Pediatric of Services of America, Inc.

PSA – Atlanta, GA– Settlement Date: July 27, 2015– Allegations:• Improper billing of unsupported and overstated claims

– Two Whistleblowers – billing specialist and director of clinical nursing

– Settlement: $6,900,000

Co-presented by:

Irwin County Hospital

ICH – Ocilla, GA– Settlement Date: April 21, 2015– Allegation:• Improper physician arrangements• Physician compensation in excess of FMV• Billing for services lacking appropriate supervision

– Whistleblowers – two x-ray technicians– Settlement: $520,000

Co-presented by:

Trends in Corporate Integrity Agreements

Independent directors

Board oversight of Compliance Program

Management Certifications

Executive compensation clawbacks

Training Plan

Co-presented by:

Trends in Corporate Integrity Agreements (cont.)

Annual Risk Assessment

Compliance Expert

Overpayments review

Increased fines related to false Implementation Reports and Annual Reports

Co-presented by:

Updated DOJ Statistics

Total recoveries down by almost $2.2B In FY15 85% of new matters based on qui tam actions, and recoveries from qui tam

actions exceeded DOJ initiated enforcement by ~$2.2B Huge jump in recoveries from non-intervened cases, largest $ in FCA history


Panel 2L&E Issues: Addressing and

Investigating Employee ComplaintsSteve Fox, Tim Jefferson, Nancy Rafuse, and Justin

Snell

Co-presented by:

Who is a Whistleblower?

Any employee, contractor, or agent … – Any employee, contractor or agent shall be

entitled to all relief necessary to make that employee, contractor or agent whole if that employee, contractor or agent is discharged, demoted, suspended, threatened, harassed, or in any other manner discriminated against in the terms and conditions of employments because of lawful acts done by the employee, contractor or agent or associated with others in furtherance of other efforts to stop 1 or more violations of this subchapter. 31 USC Section 3730(h)

Co-presented by:

Establishing Claim

To establish FCA retaliation claim, plaintiff must establish– He engaged in protected activity– Employer knew of these acts and– Employer took adverse action against him because of those acts

FCA applies same general burden shifting analysis and framework applied in discrimination cases:– Once the plaintiff establishes a prima facie case – protected

activity, adverse action and causal connection –employer produces evidence of a legitimate, non-discriminatory reason for the adverse action

– Plaintiff must prove that the reason is not the true reason, but a pretext for retaliation

Co-presented by:

Protected Activity

“The relevant inquiry when determining whether an employee’s actions are protected is whether (1) the employee in good faith believes and (2) a reasonable employee in the same or similar circumstances might believe that the employer is committing fraud against the government.”

Co-presented by:

Protected Activity

“Confused pharmacist” (Clinkscales v. Walgreens)– “Paul,

• Jackie told me tonight that you told her for me to do a bin reconciliation to see if we could clear up the register problem I believed occurred Tuesday 06/15 where rx’s were sold but still say ready in work Q on intercom+. The report is done over 200 rx’s were in (ready not in bin status) – highlighted in blue or rx’s that were generated after 06/15? – (I hope this makes verification of register transactions easier). The report is in mgr. box in office. Wes”

Co-presented by:

Protected Activity

“Confused pharmacist” (Clinkscales v. Walgreens)– “Paul,

• I just saw the note I jotted down of what Jackie was telling me that you were telling her for me to do. I wrote down that any item I could not find on bin recon – you wanted me to price modify to $0. Doe this mean I’ll need to print the 200 leaflets for the rx’s that showed up (ready not in the bins) then ring up at register. Also, if there are rx’s on bin recon that were not involved in the register problem how are they accounted for? I’m not sure how to correctly do this. Wes”

Co-presented by:

Protected Activity

“Confused pharmacist” (Clinkscales v. Walgreens)– Court held that pharmacist had not engaged in

protected activity• “[His] conduct amounts to merely asking how he could

correctly perform a job function, not reporting or attempting to stop misconduct under the FCA. [He] did not state that he thought the bin reconciliation was illegal or unlawful or express any concerns about it creating the potential for fraudulent billing. He also did not refuse to complete the bin reconciliation, he merely asked how to do it correctly. Such activity is not protected by the FCA whistleblower provision.”

Co-presented by:

Decision to InitiateInternal Investigation

Internal investigation warranted where allegations involve widespread misconduct, misconduct by sr. management, or violations of state/federal civil or criminal statutes (FCA, Stark, AKS)

Prompt internal investigation especially important where government scrutiny possible

Ignoring complaints could lead to disgruntled employee becoming FCA whistleblower

Internal investigation provides company with critical information early on

The faster facts are learned, the greater the chance company can minimize harmful consequences (reputational damage, loss of business, damages and penalties)

Co-presented by:

Releases

General release language releases party from all claims, causes of action and damages of whatsoever nature General exceptions

– “… except those claims that cannot lawfully be released” or “ … except those claims that cannot be released by law or statute.”

Specific exceptions– “Laundry-list” of carve outs: workers compensation claims, FLSA claims,

enforcement of the release agreement, certain state laws

Representations– Employee represents that he is not aware of any information and does not

have any documents which evidence any fraud by employer against the government and by signing this agreement is affirmatively representing that he is not aware of and has not been made aware of any such fraud

Co-presented by:

Confidentiality

Restriction on confidentiality agreements that limit or restrict employees from reporting fraud and abuse to government Requires government contractor to represent that it does not

require employees to sign confidentiality agreements that prohibit or otherwise restrict lawful reporting of waste, fraud or abuse

Return of confidential documents– Courts willing to recognize a public policy exception for confidential

documents that form the basis of a qui tam action

Co-presented by:

Federal Trade Secrets Bill

(b) IMMUNITY FROM LIABILITY FOR CONFIDENTIAL DISCLOSURE OF A TRADE SECRET TO THE GOVERNMENT OR IN A COURT FILING.— – (1) IMMUNITY.—An individual shall not be held criminally or civilly

liable under any Federal or State trade secret law for the disclosure of a trade secret that— • (A) is made

– (i) in confidence to a Federal, State, or local government official, either directly or indirectly, or to an attorney; and

– (ii) solely for the purpose of reporting or investigating a suspected violation of law; or

• (B) is made in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal.

Co-presented by:

Federal Trade Secrets Bill (3) NOTICE.—

– (A) IN GENERAL.—An employer shall provide notice of the immunity set forth in this subsection in any contract or agreement with an employee that governs the use of a trade secret or other confidential information.

– (B) POLICY DOCUMENT.—An employer shall be considered to be in compliance with the notice requirement in subparagraph (A) if the employer provides a cross-reference to a policy document provided to the employee that sets forth the employer's reporting policy for a suspected violation of law.

– (C) NON-COMPLIANCE.—If an employer does not comply with the notice requirement in subparagraph (A), the employer may not be awarded exemplary damages or attorney fees under subparagraph (C) or (D) of section 1836(b)(3) in an action against an employee to whom notice was not provided.

– (D) APPLICABILITY.—This paragraph shall apply to contracts and agreements that are entered into or updated after the date of enactment of this subsection.

– (4) EMPLOYEE DEFINED.—For purposes of this subsection, the term ‘employee’ includes any individual performing work as a contractor or consultant for an employer.

– (5) RULE OF CONSTRUCTION.—Except as expressly provided for under this subsection, nothing in this subsection shall be construed to authorize, or limit liability for, an act that is otherwise prohibited by law, such as the unlawful access of material by unauthorized means.

Co-presented by:

Potential Counterclaims v. Whistleblower

Breach of contract/fraud Theft of documents/trade secrets Computer fraud and abuse act Libel/slander/defamation

Co-presented by:

Investigations

Be Prepared– Risk Assessments – Investigative Protocols

Professional skepticism & minimization– Whistleblower bias– Overstating controls

Scoping and planning– Too broad or too narrow scope– Starting too soon– Planning considerations

Co-presented by:

Dealing with WhistleblowerDuring Investigation

Keep whistleblower informed of status of investigation Inform whistleblower of outcome of investigation (without

disclosing privileged information) Keep whistleblower’s identity confidential Protect whistleblower from obvious retaliatory conduct

(discharge, demotion, suspension, threats/discrimination) – Protect whistleblower from actions that could be perceived as

retaliatory (denying a leave request, scheduling the employee for fewer hours, excluding the employee from certain meetings or projects, or applying a higher level of scrutiny to the employee or his/her work)

Co-presented by:

Reporting Mechanisms

Design– History & Evolution– More than a hotline– Anonymity– Anti-Retaliation– Metrics

Evaluation– Periodic audits– Document changes


Panel 3Maintaining a Culture of Compliance: Prevention, Deterrence & Monitoring

Ross Burris, Billy Carr, Matt Grosvenor, and Jim Swartz

Co-presented by:

An Ounce of Prevention…

Healthcare in a fast moving reactionary environment Attorney’s and administrator’s fiduciary responsibility is to

the board and institution Deals often occur “behind closed doors”—but the earlier the

attorney becomes involved the better The best prevention is through a corporate compliance policy

and documentation Advise client to have an annual Corporate Compliance audit

by an outside source to review all contracts at risk in the past year and review current deals under discussion

Know your government representatives who participate in corporate investigations

Co-presented by:

Conducting Effective Internal Investigations

The (Not Always) Unique World of Health Care Investigations

Choosing Wisely – How and Who Should Conduct the Investigation

Following the Right Playbook - Protecting Your Client’s Interests and Maintaining Privilege

Where Do We Go From Here - Next Steps After Concluding the Investigation

Co-presented by:

They’re ALL Watching You …

RACs/ZPICs

StateLegislatures

State AGs

Congress Medicaid

HHS

FTC

FDA

DOJ/DOL/EEOCPlaintiff

Lawyers

Whistle-blowers

Commercial Payors

PersonalInjury

Litigants

CompetitorsOIG

PRESS

Medicare/CMS

YOU


Co-presented by:


It Usually Begins With…Search Warrant, Subpoena or Civil Investigative Demand (CID) from a government bodyResponse to problems uncovered through compliance program audit, hotline call, or HR issueResponse to allegations of wrongdoing reported through a whistleblowerState licensing boards or accreditation organizations Actual or threatened civil litigation (e.g., class actions)Response to allegations raised by customers, vendors or competitors

Co-presented by:


Spotting the Hidden ComplaintNot all complaints triggering investigation are easy to identify.Exit interview comments“Rumors” or overheard comments about inappropriate/illegal conductInformal comments about relationships between or treatment of certain employees/vendors

Magic words are not required to trigger an investigation.

Co-presented by:


The Benefits of an InvestigationDemonstrates a good-faith response by the Company Will allow the Company to take remedial action or make a self-disclosure Remedial actions or self-reporting may minimize the risk or potential penaltiesNegative consequences of not conducting an investigation could be increased penalties by government agencies and/or useful evidence may be lost or destroyed

Co-presented by:


Different Circumstances, Similar Goals…Quickly obtain accurate information to facilitate the necessary legal advice, compliance assessment, and informed decision makingMaintain the confidentiality of the investigation and protect the information acquired from an undesired or non-strategic disclosurePrepare for and implement remedial action and limit riskCooperate with the investigative body while protecting organization’s rights

Co-presented by:

Choosing Wisely – How and Who Should Conduct an Internal Investigation

Develop an Investigation Plan:– Define the purpose and scope– Issue a litigation hold notice to ensure no

essential information is destroyed– Identify witnesses to be interviewed– Determine potential sources of information– Put together the investigation team

Co-presented by:


Business and Operational Considerations:– Some problems are best handled by in-house lawyers, HR,

or compliance personnel – Can’t always pick up the phone and call outside counsel

• Cost • Managing personalities • Institutional knowledge

– Impact on business operations and availability of resources

Co-presented by:


Legal Considerations:– Protecting privilege – Litigation hold notice– Need for objectivity and independence – Relationships with or knowledge of the regulators– Subject matter experience – Is the approach going to be defensible?– Investigator may be a witness

Co-presented by:


Red Flags, When To Consider Calling Outside Counsel– Any time there is potential for criminal culpability – Allegations against senior management or board – Systemic or wide ranging issues spanning an extended

period of time – Financial risk to the organization is high (bet the company) – Anticipation of collateral litigation – In-house interviews may be considered as “business” in

nature, and therefore not protected

Circumstances change quickly, who conducts an investigation not set in stone

Co-presented by:

Following the Right Playbook - Protecting Your Client’s Interests

Preparation of a work plan, making decisions about scope

Getting the word out, taking a balanced approach to explain to employees purpose of investigation

Consider working with PR groups if allegations are publicly known

Co-presented by:


Collecting and Retaining Documents– Identify potential sources of relevant documents– Implement a “Do Not Destroy” notice or similar litigation hold notice– Notice should be sent to anyone who may have relevant documents– IT and other departments should be notified to suspend document

destruction policies

Potentially Responsive Documents May Include– Emails– Financial records– Complaints– Policies and procedures

Co-presented by:


Interviewing current and former employees– In-person is always best– Never conduct interviews alone– Interviews should not be recorded or transcribed (second

person can take notes)

Protect the attorney-client privilege and attorney work product materials– Discuss key documents with interviewees– Documents should be marked as privileged or attorney

work product

Co-presented by:


Give Upjohn warnings in some circumstances– Upjohn v. U.S., 449 U.S. 383 (1981), held that

communications between the Company’s counsel and employees is privileged (but the privilege belongs to the Company)

– Employees should be aware that you represent the Company, not them as individuals

Co-presented by:


Considering Joint Defense Agreements– Continental Oil Co. v. U.S., 330 F.2d 347 (9th Cir.

1964) recognized a “joint defense privilege” where some communications can be disclosed to a third party without waiving privilege

– Useful when employees engage their own counsel– Check local law to confirm scope and applicability

of this privilege

Co-presented by:


Assessing potential criminal, regulatory or civil liability Consider whether report will be oral or written Reporting requirements (need for self-disclosure):

– Government – Board of directors – Outside auditors

Notification requirements to insurance carriers, state licensing boards, NPDB

Need for employee disciplinary actions Modification of policies and procedures or corporate practices Extent and content of any communication with employees or the public

Co-presented by:


Practical Guidance for Health Care Governing Boards on Compliance Oversight– Office of the Inspector General, Department of Health and Human

Services– Association of Healthcare Internal Auditors– American Health Lawyers Association– Health Care Compliance Association

Board of Director Oversight– Compliance, Legal, Internal Audit: Roles and Relationships– Issue reporting within an organization– Risk identification approach– Enterprise-wide accountability for compliance goals

Co-presented by:

Discussion

Should I keep all deal deliberations under attorney client privilege?

What can human resources professionals do to assist with investigations?

What are the OIG’s expectations of Companies with respect to monitoring compliance?

What are some ways that Board members should be engaged with compliance?

Co-presented by:

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