Monthly Archives: April 2023
Supreme Court to Decide Mens Rea in FCA Claims!
First, I would like to give a quick shout out to my husband Scott. It’s his birthday today. Speaking of important days, another important day is imminent. Back in mid-January 2023, the United States Supreme Court granted certiorari in two consolidated cases from the 7th U.S. Circuit Court of Appeals — U.S. ex rel. Schutte v. SuperValu Inc., No. 21-1326, and U.S. ex rel. Proctor v. Safeway, Inc., No. 22-111 — which has teed up a case that could undermine one of the government’s most powerful tools for fighting fraud in government contracts and programs and, dare I say, overreaching tool. The False Claims Act (“FCA”). A jackhammer where a scalpel would suffice.
At issue is whether hundreds of major retail pharmacies across the country knowingly overcharged Medicaid and Medicare by overstating what their usual and customary prices were. In other words, the question presented is: Whether and when a defendant’s contemporaneous subjective understanding or beliefs about the lawfulness of its conduct are relevant to whether it “knowingly” violated the False Claims Act. Unlike most civil fraud actions, the FCA allows treble damages, which in “non-lawyer-ese” equals triple damages.
To Calculate Base Damages, you look at the injury. Determine what damages to the government resulted “because of” the defendant’s acts. The burden is on the government or the relator to prove that the damages sought were caused by the fraud. The defendant will want to be able to distance the alleged damages from the fraudulent acts to the extent possible (such that the damages cannot be said to have been caused by the defendant’s acts) in order to minimize its potential financial liability.
This case essentially began in 2006, when Walmart upended the retail pharmacy world by offering large numbers of frequently used drugs at very cheap prices — $4 for a 30-day supply — with automatic refills. That left the rest of the retail pharmacy industry desperately trying to figure out how to compete.
The pharmacies came up with various offers that matched Walmart’s prices for cash customers, but they billed Medicaid and Medicare using far higher prices, not what are alleged to be their usual and customary prices.
Walmart did report its discounted cash prices as usual and customary, but other chains did not, like Safeway and Supervalu. Even as the discounted prices became the majority of their cash sales, other retail pharmacies continued to bill the government at the previous and far higher prices.
For example, between 2008 and 2012, Safeway charged just $10 for almost all of its cash sales for a 90-day supply of a top-selling drug to reduce cholesterol. But it did not report $10 as its usual and customary price. Instead, Safeway told Medicare and Medicaid that its usual and customary price ranged from $81 to $109. In the Petition, Petitioner’s “expert estimated that Safeway received $127 million more in reimbursements from government health programs than it would have if it reported its price-match and discount club prices as its usual and customary prices.
A decision is expected this summer. Quote from the Petitioner about Safeway trying to hide their price matching policy from media or investigtors:
“With respect to price-matching, Safeway adopted an “official company policy” of denying that it would match Walmart prices “if an unidentified customer calls in. This is to avoid trouble with the media or competitors.” But “[i]f a regular customer known to you asks if we will match . . . the answer is YES.””
I foresee the pharmacies facing a looming overpayment. The Petition explains that, for example, after a pharmacy manager informed executives that Nebraska’s Medicaid program was requiring price-matched discount prices to be reported as U&C prices, an executive asked: “Does anyone think we have an issue here? My question is how the state of Nebraska will know that we offered to match any price out there.” In a follow-up communication, other executives pointed out that advertising their price-matching program would “Alert the Medicaid programs to start looking” into what Safeway was doing, and therefore stressed the “need to keep a low profile.” We shall see in June or July.
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Preparing for Post-PHE Medicare and Medicaid Audits
Hello and happy RACMonitor Monday! As the nation forges ahead in the wake of the COVID-19 pandemic, the audits continue after that brief hiatus in March 2020. Recovery Audit Contractors (RACs), UPICs, and other auditors are dutifully reviewing claims on a post-payment basis. However, since COVID, there is a staffing shortage, which have many provider facilities scrambling on a normal basis. Throw in an audit of 150 claims and you’ve got serious souff-laying.
Yes, audit preparation has changed since COVID. Now you have more to do to prepare. Audits create more work when you have less staff. Well, suck it up sippy-cup because post-PHE audits are here.
The most important pre-audit preparation is knowing the COVID exceptions germane to your health care services. During PHE over the last two years, there has been a firehose of regulatory exceptions. You need to use these exceptions to your advantage because, let’s face it, the exceptions made regulatory compliance easier. For the period of time during which the exceptions applied, you didn’t have to get some signatures, meet face-to-face, have supervision, or what not. The dates during which these exceptions apply is also pertinent. I suggest creating a folder for all the COVID exceptions that apply to your facility. While I would like to assume that whatever lawyer that you hire, because, yes, you need to hire a lawyer, would know all the COVID exceptions – or, at least, know to research them, you never know. It only benefits you to be prepared.
Any medical provider that submits claims to a government program may be subject to a Medicare or Medicaid audit. Just because you have been audited in the past, doesn’t change the fact that you may be audited again in the future. RAC audits are not one-time or intermittent reviews and can be triggered by anything from an innocent documentation error to outright fraud. I get that questions a lot: This is my 3rd audit. At what point is this harassment. I’ve never researched the answer to that question, but I would venture that auditors get tons of latitude. So, don’t be that provider that is low-hanging fruit and simply pays post-payment reviews.
While reduced staff, high patient loads or other challenges may be bogging down your team, it’s important to remember that timeliness is crucial for CMS audit responses.
Locating the corresponding medical records and information can be a hassle at the best of times, but there are a few key things your organization can do to better prepare for a RAC Audit:
According to CMS, if selected for review, providers should discuss with their contractor any COVID-19-related hardships they are experiencing that could affect audit response timeliness. CMS notes that all reviews will be conducted in accordance with statutory and regulatory provisions, as well as related billing and coding requirements. Waivers and flexibilities will also be applied if they were in place on the dates of service for any claims potentially selected for review.
Ensure that the auditor has the appropriate contact information for requesting audit-related documentation. With so many changes to hospitals teams, it’s important to make sure that auditors’ requests for medical records are actually making it to the correct person or team in a timely manner.
Provide your internal audit review teams with proper access to data and other software tools like those used to ensure timely electronic audit responses. With a mix of teams working from home and in the office, it’s a good idea to make sure that teams handling Additional Documentation Requests (ADRs) and audit responses have the necessary access to the data they will need to respond to requests.
Review and document any changes to your audit review team processes.
Meet with your teams to ensure they fully understand the processes and are poised to respond within the required timeframes.
Successfully completing these audits in a timely manner is made much easier when the above processes and steps are in place.
Dueling Ophthalmologists: Accusations of Violations of the False Claims Act for Refusal to Hire?
Today I have a story about dueling ophthalmologists. And, yes, I wrote “dueling,” as in fighting. This is a true story that the 6th Circuit heard about the False Claims Act (“FCA”). With the Appellate Circuit Courts split regarding the issue I will be discussing in this blog, I foresee the U.S. Supreme Court taking an appeal of this case for a final review if the losing ophthalmologist appeals. So, be on the watch. Because this case is defining what the FCA statute does not….remuneration.
Issue: Does renumeration cover (1) just payments and transfers of value; or (2) any act that may be valuable to another?
The case was published March 28, 2023, from the 6th Circuit. United States ex rel. Martin v. Hathaway, No. 22-1463, 2023 WL 2661358 (6th Cir. Mar. 28, 2023). In a rural part of Michigan, there was an ophthalmology group consisting of two physicians, the owner of the practice, Dr. Hathaway, and one employee physician, Dr. Martin. Dr. Martin overheard Dr. Hathaway negotiating a sale to a larger practice, and began to question her employment path. The sale fell through, but she had begun negotiations with the local hospital to become the hospital’s sole ophthalmologist. Well, Drs. Hathaway and Martin were the only ophthalmologists in this area, and Dr. Hathaway knew that if Dr. Martin went in-house to the local hospital Oaklawn that his business would suffer because his now-employee would become a competitor.
The hospital gave her a pending offer. Dr. Hathaway was infuriated. He told the hospital that if it hired Dr. Martin that he would move all his surgeries to another hospital. He even told the local hospital’s CEO that if the Board approved the hiring of Dr. Martin, it would be the “death knell” of his practice because the hospital’s future patients referrals would go to Dr. Martin and not him.
Dr. Hathaway pled with the CEO. It would be a lose-lose if you hire Dr. Martin, he said. It will cost hundreds of thousands of dollars to set up an internal ophthalmology line, while it would force Dr. Hathaway to pull his cases and go elsewhere.
Perhaps due to Dr. Hathaway’s threats, the Board elected to not hire Dr. Martin.
Dr. Martin did not take the rejection well.
She sued Dr. Hathaway, South Michigan, and Oaklawn in a qui tam action under the False Claims Act and Michigan’s False Claims Act. She accused Dr. Hathaway and Oaklawn Hospital of engaging in an illegal fraudulent scheme under the Anti-kickback Statute (“AKS”) and that claims for Medicare and Medicaid reimbursement resulting from the kickbacks violated the False Claims Act.
The definition of remuneration was at stake. The statute does not define renumeration. Does renumeration cover just payments and transfers of value or any act that may be valuable to another. The 6th Circuit held that renumeration only cover payments and other transfers of value.
The Complaint’s main theory of remuneration turns on the Oaklawn Board’s refusal to hire Dr. Martin in return for Dr. Hathaways general commitment to continue sending surgery referrals for his patients to Oaklawn.
You may recall that the FCA uses the word “payment,” whereas the AKS uses the word “remuneration,” which prompts the question whether remuneration means something broader.
The Court held, “no” – money and value needs to be defined as just that…money and value.
Dr. Hathaway gave Oaklawn no payment, no value. Dr. Martin lost in this case, but if she appeals, like I said, I foresee the US Supreme Court to weigh in.
