Pennsylvania Judge Holds that CIA violations May Result in FCA Liability

OIG

 

In late July, a federal district court in Pennsylvania joined in the flurry of False Claims Act (FCA) decisions. These decisions further interpreted the ACA’s amendments to the law. The court in United States ex rel. Boise v. Cephalon, Inc. considered two important issues. The issues regarded when a party has an obligation to pay the government, and when a failure to do so could result in reverse false claims liability. Providers should be on high alert and ensure that they are in compliance with all requirements. This includes the requirement to screen employees monthly in order to avoid being OIG’s next false claims target.

Background

The defendant in Cephalon failed to comply with its Corporate Integrity Agreement (CIA) and OIG sought repayment. OIG alleged that they failed to comply with the CIA, which caused reverse false claims and produced FCA liability.

Cephalon, a drug manufacturer, argued that it could have only had an obligation to pay penalties under the CIA if HHS-OIG actually demanded payment. The relator argued that Cephalon’s obligation to pay actually arose when it breached the CIA’s reporting requirements. The court disagreed with Cephalon and instead held for the relator. The court found that a CIA imposes contractual obligations through reporting requirements. Furthermore, a breach of these contractual obligations could cause a company to be liable for reverse false claims even if OIG had not yet demanded payment. Finally, the court elaborated that “specific contract remedies” like specific penalties create a “less contingent obligation to pay.”

Takeaways

The federal government is taking advantage of the new false claims recoupment tools made available to it through the ACA. If you are not screening your employees and contractors against state and federal exclusion lists, then now is the time to ensure your practice is complying with the law. Call Exclusion Screening, LLC for a free assessment of your needs and costs at 1-800- 294-0952 or fill out the form below.



 

Ashley Hudson

Ashley Hudson, Associate Attorney at Liles Parker, LLP and former Chief Operating Officer for Exclusion Screening, LLC, is the author of this article.

Southern District of New York Provides Clarity on “Identifying” Overpayments

false claims act

In early August of 2015, the Southern District of New York (SDNY) provided insight as to when the 60-day clock for returning an overpayment begins to run under the Patient Protection and Affordable Care Act of 2010 (ACA). This decision is particularly relevant to screening for exclusions because the government has started to penalize providers who submit claims for services provided directly or indirectly by an excluded individual or entity for the greater penalty of submitting a false claim. Simply stated, the government now views claims as legally false if an excluded person provided any part of that claim. This makes providers possibly liable pursuant to the false claims act.

The court’s additional clarity on when the 60-day clock begins to run for false claims act liability may be the OIG’s next tool in retrieving Federal dollars from those providers who fail to screen their employees or contractors monthly. Therefore, those providers could be in receipt of overpayments for monies received from services provided by excluded persons or entities.

I. Background – False Claims Act

The Fraud Enforcement and Recovery Act (FERA), enacted in 2009, amended the False Claims Act and added a “reverse false claims” provision. This reverse false claims provision imposes liability of $5,500 to $11,000 per false claim[1] on persons who “knowingly and improperly avoid[] or decrease[] an obligation to pay or transmit money or property to the Government.”[2] The term “knowingly” includes persons who have “actual knowledge of the information,” as well as those who “act in deliberate ignorance” or in “reckless disregard of the truth or falsity of the information.” The term “require[s] no proof of specific intent to defraud.”[3] In addition, FERA further clarified that an “obligation means an established duty, whether or not fixed, arising from an express or implied contractual, grantor-grantee, or licensor-licensee relationship, from a fee-based or similar relationship, from statute or regulation, or from the retention of any overpayment.”[4]

The ACA added additional clarification to the overpayment retention provision. Specifically, it required that a person who has received an overpayment must  “report[] and return[]” the overpayment “by the later of (A) the date which is 60 days after the date on which the overpayment was identified; or (B) the date any corresponding cost report is due, if applicable.” An overpayment is defined as any monies “received or retained” under Medicare or Medicaid to which a person is not entitled.[5] Failure to repay an overpayment by the 60-day deadline constitutes a reverse false claim under the False Claims Act. However, Congress failed to define “identified” in the statute, which caused ambiguity about when the 60-day clock begins to run.

II. United States ex rel. Kane v. Healthfirst, Inc., et al.

The United States ex rel. Kane v. Healthfirst, Inc., et al., case arose after relator Robert Kane, a former Continuum employee, conducted an internal investigation of the company. The investigation revealed that 900 specific claims amounting to over $1 million may have been wrongly submitted and paid by Medicaid as a secondary payor.[6]

According to the Complaint, Continuum was questioned about a “small number of claims” that the Comptroller’s office concluded were improperly submitted for Medicaid reimbursement.[7] After several conversations, the parties discovered that the problem was related to a software glitch that caused certain claims to contain a code which automatically referred the claim for additional payment for covered services. Continuum was sent a corrective software patch by the software vendor that would ensure that Continuum would not improperly bill any other secondary payors.[8]

Once the software problem was identified in December 2010, Continuum asked Kane to determine which claims were improperly submitted due to the software malfunction.[9] After reviewing the claims, Kane sent an email containing a spreadsheet identifying over 900 claims dating back to May 2009 and totaling more than $1 million. All of these claims contained the problematic code that caused the billing error to Continuum’s Vice President for Patient Financial Services, Continuum’s Assistant Vice President for Revenue Cycle Operations- Systems, and other Continuum management. Kane’s email stated that further scrutiny was necessary to confirm his findings, but the Defendants alleged that he had identified a large portion of the claims that were incorrectly billed. Kane was fired four days after sending this email. According to the Complaint, Continuum did nothing with the alleged overpayments Kane identified except for reimbursing five of the 900 erroneously submitted claims.[10]

The Comptroller, however, continued to review Continuum’s billing and found more claims which it promptly brought to Continuum’s attention from March 2011 through February 2012.[11] Continuum reimbursed the claims identified by the Comptroller beginning in April 2013 until March 2013. Continuum never brought Kane’s research to the Comptroller’s attention and only repaid around 300 claims after the Government issued a Civil Investigative Demand in June 2012. Due to its “intentional and reckless”[12] delay in repaying the alleged overpayment more than 60 days after they were identified, the Government, through Relator Kane, alleged that Continuum is liable for reverse false claims. Therefore, Continuum was allegedly liable for treble damages plus an $11,000 penalty for each overpayment illegally retained more than 60 days after identification.[13]

III. SDNY Court Defines “Identifying” Overpayments

Continuum responded to these allegations by filing a Motion to Dismiss arguing that Kane’s email merely “provided notice of potential overpayments and did not identify actual overpayments so as to trigger the ACA’s sixty-day report and return clock.”[14] The term “identified” was left undefined by Congress in the text of the ACA, which gave rise to Continuum’s motion.

In its motion, Continuum contended that the court should adopt a definition of “identified” as “classified with certainty.” The Government responded that instead “an entity ‘has identified an overpayment’ when it ‘has determined, or should have determined through the exercise of reasonable diligence, that [it] has received an overpayment.’” The Government’s definition would essentially define “identified” as when “a person is put on notice that a certain claim may have been overpaid.”[15]

In an effort to ascertain the plain meaning of “identify,” the court consulted dictionary definitions, but it found that the wide range of definitions alone were not particularly helpful. Next, the court utilized canons of construction, reviewed the ACA’s legislative history, and considered the legislative purpose behind including a mandate to return overpayments within the ACA. The court found the legislative history particularly revealing and noted that Congress chose to adopt the Senate’s version of the bill which contained “identified” instead of the House Bill which employed the term “known.” After a thorough evaluation, the court concluded that “identified” should be defined as the moment “when a provider is put on notice of a potential overpayment, rather than when an overpayment is conclusively ascertained, [which] is compatible with the legislative history of the False Claims Act and FERA.”[16]

The court tempered its decision in stating that “the mere existence of an ‘obligation’ does not establish a violation of the False Claims Act.” Instead, the court held that a reverse false claim is only triggered when “an obligation is knowingly concealed or knowingly and improperly avoided or decreased.” Therefore, the court advised that prosecutorial discretion be employed to avoid filing enforcement actions against “well-intentioned providers working with reasonable haste to address overpayments” because this would be “inconsistent with the spirit of the law.”

IV. Takeaways

This decision is significant because it is the first opinion interpreting the term “identify” as it is used in relation to the ACA’s 60-day overpayment reporting requirement. While it is only binding in the Southern District of New York, it will likely guide other court opinions as they arise.

Providers should be aware that they could be liable for overpayments 60 days after they are “put on notice of a potential overpayment.” Therefore, providers should act with “reasonable haste” in reviewing potential overpayments to demonstrate good faith compliance.

Finally, providers must continue to screen their employees and contractors against the Federal and state exclusion lists monthly. The Government has only recently begun to pursue excluded individuals for False Claims Act violations. The new interpretation of “identify” as being “on notice” could provide the Government with a brand new tactic to retrieve federal monies. One of the reasons we strongly advocate that providers check all federal and state exclusion lists monthly is to find potential exclusions and demonstrate maximum compliance before an exclusion problem arises.

V. Conclusion

Failing to screen thoroughly and verify potential matches each month is not a way to avoid liability. It is unlikely that OIG would excuse overpayment liability if a provider claimed he was not “on notice” about an employee’s excluded status if that provider failed to properly screen and verify employees. Further, if a provider has identified a potential match, then he must work diligently to verify this match and return any monies received for services provided by this employee if he is excluded because the initial identification date could potentially start the 60-day clock for false claims act liability. [17]

Are you taking the necessary precautions to ensure you are not working with an excluded entity? We know it can be difficult to screen every Federal and State exclusion list. Call Exclusion Screening at 1-800-294-0952 or fill out the form below to hear about our cost-effective solution and for a free quote and assessment of your needs.



 

Ashley Hudson

Ashley Hudson, Associate Attorney at Liles Parker, LLP and former Chief Operating Officer for Exclusion Screening, LLC, is the author of this article. Feel free to contact us at 1-800-294-0952 or online for a free consultation.


[1] Opinion and Order at 9 n.12, United States ex rel. Kane v. Healthfirst, Inc., et al., No. 11-2325 (S.D.N.Y Aug. 3, 2015).

[2] 31 U.S.C. § 3729(a)(1)(G) (2011).

[3] Id. § 3729(b)(1).

[4] Id. § 3729(b)(3) (emphasis added).

[5] 42 U.S.C. § 1320a-7k(d)(4)(B) (2010).

[6] Complaint-in-Intervention of the United States of America at 11, United States ex rel. Kane v. Healthfirst, Inc., et al., No. 11-2325 (S.D.N.Y. June 27, 2014).

[7] Id. at 10.

[8] Id.

[9] Id.at 11.

[10] Id.

[11] Id.

[12] Opinion and Order at 11, United States ex rel. Kane v. Healthfirst, Inc., et al., No. 11-2325 (S.D.N.Y Aug. 3, 2015).

[13] Id. at 8.

[14] Id. at 17.

[15] Id.  (emphasis added).

[16] Id. at 23.

[17] Exclusion Screening, LLC is not a law firm and does not provide legal advice. As such, this is not intended, and should not be taken, as legal advice. We strongly recommend that you seek the advice of counsel whenever decisions that may have legal consequences are made.

Exclusion Screening Basics for Providers

Doctor in Medical Records room. Exclusion Screening Basics

Exclusion Screening Is Mandatory

Providers of medical services that participate in Federal or State Health Care Programs are required to screen all of their employees, vendors, and contractors monthly to ensure that none have been excluded from either the Medicare or Medicaid programs. Practices that fail to meet this requirement risk Civil Monetary Penalties (CMPs) and overpayments because Federal and State regulations prohibit payment for any item or service that was provided, directly or indirectly, by an excluded person.

Enforcement cases involving the employment of excluded persons are increasing dramatically. The imposition of CMPs more than doubled from 2013 to 2014, and recent case investigations have been supported by data analysis projects by the Office of Audit Services and the Office of Evaluation and Inspections. In light of the increasing enforcement efforts and the potential consequences, it is critical that providers gain a basic understanding of the issues relating to Exclusion Screening and how they can be addressed.

What is an Exclusion?

HHS/OIG has the authority (by delegation from the Secretary) to deny persons and entities the ability to participate in federal healthcare programs. When such an action is taken by the OIG, that person or entity is said to be “excluded” and placed on the List of Excluded Individuals and Entities (commonly abbreviated “LEIE”).

Federal exclusions can be either mandatory or permissive, but both have the effect of barring participation in all federal healthcare programs until such time, if ever, that the government agrees to reinstatement. Mandatory exclusions last a minimum of 5 years and generally involve felony convictions for defrauding health care programs, felony drug offenses, and convictions for patient abuse or neglect. Permissive exclusions implicate a wider range of conduct and most often involve misdemeanor health care fraud, misdemeanor drug offenses, and licensing issues.

States also have the authority to exclude individuals and entities from participating in their own programs, such as Medicaid. Currently, 40 states maintain their own exclusion lists that are separate from the OIG’s LEIE. States will generally add OIG Exclusions to their own list, but they are also free to adopt their own exclusion criteria. It is important to note that states also often fail to report their own exclusions to CMS or the OIG such that it is not uncommon for an individual to end up on a state exclusion list and not the LEIE.

Federal and State Regulations Prohibit Payment for any Item or Service Performed by an Excluded Person

Neither Medicare nor Medicaid will pay for any item or service that results in a claim for reimbursement if an excluded individual contributed to it either directly or indirectly.  The so-called “payment prohibition” is broadly interpreted by the OIG. For instance, in it’s May, 2013 “Special Advisory on the Effect of Exclusions,” they expressed the view that the preparation of a surgical tray or the inputting of information by an excluded person or vendor could taint a claim. Even volunteer work by an excluded person could trigger the prohibition unless the volunteer activities were “wholly unrelated to federal health care programs.”

Thus, a practice that hires an excluded person or does business with an excluded vendor or contractor could find that every billable service he or it contributes to is tainted. They would then be liable for a potential overpayment. Most states have also adopted this rationale and apply it to their Medicaid claims.

Don’t Risk Civil Money Penalties, Overpayments and Potential Actions under the False Claims Act

CMPs are often employed by the OIG as an enforcement tool when it discovers that claims have been made for an item or service that was provided, or contributed to, by an excluded employee. CMPs are very difficult to defend since the OIG has interpreted the relevant federal regulations to mean that the entity either “knew” of the exclusion and still submitted the claim, or that the entity “should have known,” but failed to properly screen the employee. Either way, penalties are appropriate, according to the OIG.

It should also be noted that Section 6501 of the Affordable Care Act (ACA) requires “State Medicaid Agencies to terminate the participation of any individual or entity if such individual or entity is terminated under Medicare or any other State Medicaid plan.” As such, any person terminated under any federal or state authority is subject to exclusion by all federal or state authorities. Therefore, claims by them are potentially problematic.

The failure to screen also creates a risk for providers of being sued under the False Claims Act (FCA).  The theory behind FCA claims, which is employed with increasing frequency, asserts simply that since providers know that Medicare will not pay for a claim by an excluded person, a provider that fails to screen has constructive knowledge of the person’s status or is acting in deliberate ignorance.

Federal and State Screening Requirements

Federal screening requirements, as contained in the May, 2013 Special Advisory Bulletin, requires providers to check the LEIE for employees and contractors. According to the Bulletin’s guidance, providers should “review each job category or contractual relationship to determine whether the item or service being provided is directly or indirectly, in whole or in part, payable by a Federal health care program.” Then, providers should “screen everyone that perform[s] under that contract or in that job category” on a regular (read monthly) basis. If only it was that simple.

It is important to remember that the OIG’s guidance addresses only federal concerns. State Medicaid programs also have screening requirements that generally require, at a minimum, that providers screen their own State Exclusion List (37 States have them plus Washington, D.C.) in addition to the LEIE. Many also require screening of the System for Award Management list (SAM), and/or other State specific exclusions lists (such as sex offender lists, elder abuse lists, etc.). Furthermore, it is not uncommon for States to add onerous screening requirements in enrollment or re-enrollment applications and provider agreements. For example, a number of states require a certification that it has no employees that are suspended or excluded from any Federal or State Health Care Program. Some even require certification that their employees have never been excluded or suspended from any Federal or State exclusion list.

The Difficulty in Meeting Federal and State Exclusion Screening Requirements

Despite the OIG suggestions, the ability of individual practices to meet their federal screening requirements is difficult for a provider of any size. The current web-based LEIE interface allows only five employees to be screened at a time, each of which must be entered manually. Subsequently, potential matches must be verified individually by entering their Social Security Number. This might work for a provider who only has to screen a handful of employees or contractors. For a provider with a large number of employees, however, this would be a long and difficult undertaking.

The alternative OIG suggestion is to download the entire LEIE database and compare it to an employee list, but this is equally problematic – if not more so. The LEIE currently contains almost 60,000 names and few providers have the ability to compare that to their own employee database in any reliable or economically viable way.

Even if a provider has the ability to meet the OIG’s screening obligation, State exclusion lists must also be checked and they present additional problems. To start, State lists come in a variety of formats (Word, Excel, or PDF) with different data fields. Indeed, some State lists have little more than a name and an address. Furthermore, many states have additional state-specific screening requirements for lists. Finally, as previously indicated, practices need to be aware that a number of States have enrollment applications and provider agreements that require providers to certify that they have screened all employees and contractors with all federal and state exclusion lists.

Outsourcing is the Solution that makes Sense

In addition to the logistical problems associated with screening federal and state exclusion lists, there are the practical concerns associated with ensuring compliance with a repetitive and difficult task that may be viewed as “unnecessary” by the person tasked with the job. The best solution all around is to find a vendor who will perform the task for you for a reasonable fee. This fee will probably be considerably less than the cost of doing the screening yourself.

A provider’s choice of a company price is an obvious concern, but there are other important factors to consider. For instance, a provider should ask: What is the company’s background in healthcare? Does it have an understanding of exclusion related issues? Does it have a willingness and ability to assist the provider in determining vendor related issues (such as who to screen and vendor certifications)? Will it provide support as needed? Does it have complimentary products such as hotline services that it can provide at little or no cost? 

Conclusion

Exclusion Screening, LLC is one such vendor that is worthy of consideration. It’s co-founders, Robert Liles and Paul Weidenfeld, have both served as National Health Care Fraud Coordinators for the Department of Justice, and for the last several years they have both represented healthcare providers nationwide. They are healthcare lawyers who saw a problem that healthcare providers were having, and through Exclusion Screening, LLC they have created a simple and cost effective solution. A provider need only put together a list of employees and vendors (with our assistance), and it does the rest for prices that are hard to believe. 

Are you taking the necessary precautions to ensure you are not working with an excluded entity? We know it can be difficult to screen every Federal and State exclusion list. Call Exclusion Screening at 1-800-294-0952 or fill out the form below to hear about our cost-effective solution and for a free quote and assessment of your needs.



OIG Exclusion

Paul Weidenfeld is the author of this article. Contact Paul should you have any  questions at: pweidenfeld@exclusionscreening.com or 1-800-294-0952.