1st Circuit Court of Appeals Upholds Tax Refund In False Claims Act Case

August 18, 2014 By

The United States Court of Appeals for the First Circuit upheld the district court’s decision allowing Fresenius Medical Care Holdings, Inc. (f/k/a National Medical Care, Inc.) to deduct $95 Million from a $385 Million dollar civil settlement under the False Claims Act (“FCA”).  Accordingly, the First Circuit affirmed the district court’s tax refund judgment in favor of Fresenius in the amount of $50,420,512 (Fresenius Medical Care Holdings, Inc. v. United States, August 13, 2014, Case No. 13-2144).

The First Circuit held that, in determining the tax treatment of a FCA civil settlement, the court may consider factors beyond the presence or absence of a tax characterization agreement.  In reaching its decision, the Court applied generally accepted principles of tax law to depart from earlier contrary authority in Talley Industries Inc. v. Commissioner, 116 F.3d 392 (9th Cir. 1997).

Because Fresenius and the government did not agree on the tax characterization of the FCA civil settlement, the critical consideration in determining deductibility was the extent to which the disputed settlement payment was compensatory as opposed to punitive.  The Court acknowledged that no deduction may be made for fines or penalties paid to the government for legal violations, whereas compensatory damages paid to the government, which are deductible, do not constitute a fine or penalty.  26 U.S.C. §162(f).

The First Circuit rejected the government’s argument and interpretation of Talley, in part, based on the notion that substance prevails over form in tax characterizations of transactions between private parties, and that amounts paid or received in settlement should receive the same tax treatment, to the extent practicable, as would have applied had the dispute been litigated to judgment.

Judge Selya, who is known for using uncommon words and phrases to draw an intersection between jurisprudence and interesting prose, authored the Fresenius opinion for the First Circuit and he did not disappoint.  The opinion, makes use of several intriguing words and phrases, such as:  gallimaufry, explicated, ordained, asseverates, asseveration, talismanic, ferocity, expedient, indistinct beacon, inters, the graveyard of forgotten canons, perforce, infelicitous asymmetry, judicial fiat, paint the lily, remonstrance, calumnizes, patina of plausibility, pari passu, and praxis.

For additional information regarding the False Claims Act, please contact Adam Snyder.

 

 

Filed Under: False Claims Act, Tax Tagged With: ,

Surviving A Motion to Dismiss False Claims Act Suit

August 7, 2014 By

A federal district court recently denied defendant’s motion to dismiss a false claims act lawsuit, concluding that the realtor had alleged a sufficiently detailed factual basis for the claims and provided representative examples of the alleged false claims.  The complaint, filed by a nurse anesthesiologist, alleged that the defendant had violated (and was continuing to violate) the false claims act by indicating on a form that “medical direction” was provided at the time of the anesthesia services regardless of whether one of the defendant’s anesthesiologists prescribed the anesthesia and was present.  This form was then used by defendant’s billing office to prepare and submit payment requests.

In denying the motion to dismiss the false claims act complaint, the court generally noted that the realtor’s allegations were sufficiently specific to allow defendant to identify the instances provided as examples and respond to the allegations.  The court also observed that the examples alleged by realtor included details that only a person with personal knowledge of the events would know.  Finally, the court actually summarized the facts alleged by realtor that satisfied the who, what, when, where, and how necessary to survive a motion to dismiss a false claims act lawsuit.

In its decision, the court distinguished an earlier false claims act lawsuit involving similar allegations that was dismissed for failure to meet specificity requirements thereby providing practitioners with slightly more refined guidance as to the nature and specificity of allegations required for a false claims act lawsuit.

For questions regarding the false claims act please contact Greg Montgomery.

Filed Under: False Claims Act Tagged With: ,

New Law Would Limit Liability for Innocent Billing Errors

August 9, 2013 By

The Fairness in Health Care Claims, Guidance and Investigations Act, H.R. 2931  would amend the False Claims Act (“FCA”) by requiring that regulators satisfy procedural steps before embarking on costly fraud investigations.  The Bipartisan legislation, introduced by Representatives Howard Coble (R), North Carolina and David Scott (D), Georgia, would raise the burden of proof under the FCA, would except matters that do not exceed a ‘de minimus’ threshold, and would establish safe harbors for reliance on regulator guidance and implementation of model compliance programs.

The American Hospital Association issued a letter in support of the proposed legislation as well as a memo describing the legislation.

For more information regarding the False Claims Act or Government Investigations, please contact Adam Snyder at 206.447.7000.

Filed Under: Compliance, False Claims Act, OIG Tagged With:

Former Hospital CFO Blows Whistle On Effort To Buy Medicaid Referrals

August 1, 2013 By

Georgia recently joined a false claims act lawsuit alleging that Healthcare Management Associates, Inc. and Tenet Healthcare Corporation hospitals have been improperly paying for referrals for many years.  According to the complaint, the hospitals paid interpreter, management and other service fees to clinics in exchange for which the clinics referred pregnant, undocumented women to the hospitals for delivery and post-delivery care paid for, in part, from Medicaid funds available for emergency deliveries and post-delivery care of the newborn.  Georgia seeks to recover three times the dollar amount of false Medicaid claims plus civil penalties of between $11,000 and $15,000 for each false claim.

Tenet issued a statement to the effect that the agreements were legitimate and the hospitals were providing necessary healthcare services to women in underserved Hispanic communities served by the hospitals.  According to Tenet the services were designed to increase the likelihood of a safe birth and healthy baby.

The lawsuit was filed by Ralph Williams who served briefly as a CFO for one of the HMA hospitals before he was fired.  Among other things, the Complaint alleges:

  • Hospitals paid the clinics up to $15,000 to $20,000 a month for referrals
  • One hospital projected a 56.2% rate of return on its investment in a clinic’s “Hispanic Maternity Program”.
  • One clinic billed a hospital for in excess of 13 hours a day of interpreter services during June and July 2009 but Williams was unable to confirm that any clinic employee was on the hospital campus at any time during this period

Georgia brought its claims under its state false claims act based on the federal false claims act.  Washington has a virtually identical act applicable to Medicaid payments.

For more information please contact Greg Montgomery.

 

Filed Under: Compliance, False Claims Act, Medicaid

US Intervenes In Whistleblower False Claims Act Lawsuit Alleging Submission of More Than $500 Million in Improper Claims

July 19, 2013 By

After the United States decided to intervene, a whistleblower lawsuit under the federal false claims act was unsealed.  The Amended Complaint alleges that over the period 2004 to 2010, the defendants submitted over $500 million in claims to Medicare, Tricare, and Medicaid that were the result of physician compensation schemes in violation of Stark and Anti-Kickback laws.

According to the Amended Complaint, a seventy-one (71) member physician group provided outpatient care and treatment for clinic patients under a services contract with the clinic.  Under the contract, the clinic billed and collected for the physician services and split the net proceeds with the physician group.

The Amended Complaint alleges that the physician group received two additional components of compensation intended to induce referrals to the clinic and increase the tests ordered at the clinic.  According to the Amended Complaint, the clinic furnished the physician group with office space, equipment, and a variety of services at below fair market value.  In addition the physicians in the group were allegedly paid a percentage of the technical fees charged and collected by the clinic for tests they ordered.

The whistleblower is an interventional cardiologist who was employed by the physician group from 2003 until he was fired in 2011.

Filed Under: Anti-Kickback/Stark, Compliance, False Claims Act

Tacoma Physician Group Pays $14.5 Million To Settle Medicare Over-Billing Allegations

July 7, 2013 By

Sound Physicians, a Tacoma-based, national physician group that employs more than 700 hospitalists, paid $14.5 million to settle claims that it over-billed Medicare.  Former Sound Physicians’ employee Craig Thomas filed a whistleblower lawsuit under the qui tam provisions of the False Claims Act.  The lawsuit alleges that the company knowingly submitted inflated claims where documentation did not support the level of service billed.  Qui tam relators are generally entitled to 15 – 30 percent of the government’s recovery; Thomas will receive $2.7 million, or approximately 18.6%, of the $14.5 million settlement.  The settlement represents one of several recent settlements between the government and health care providers under the False Claims Act.

To read the Department of Justice press release click here.

To read qui tam Relator Craig Thomas’ statement click here.

For more information about government investigations, Medicare compliance, or the False Claims Act, please contact Adam Snyder.

Filed Under: Compliance, False Claims Act, Medicare, Washington Tagged With: ,

Urology Group Challenge to Stark Regulations Is Too Little Too Late

June 10, 2013 By

A recent federal district court decision granted summary judgment to the government in a lawsuit by a urology group challenging the 2008 changes in Stark regulations affecting “under arrangement” services for hospital patients.  The decision illustrates the significant barriers to a successful challenge to these regulations.

The challenge focused on the 2008 regulatory changes that swept entities performing DHS into the definition of entities “furnishing” DHS and reversed CMS’ 2001 regulatory approval of “per click” lease agreements.  Several challenges to these changes were dismissed for not being raised within the six year limitation period applicable under the federal Administrative Procedures Act.

The arguments against these changes that survived the timeliness bar failed to convince the court that the changes were contrary to express Congressional intent stated in the legislation or were an impermissible interpretation of the legislation.  The court rejected an argument that the group practice exception for certain compensation arrangements constituted a Congressional expression of intent that the term “entity” was not intended to include entities that furnished DHS.  The court readily concluded that including entities that performed DHS within the definition of entities “furnishing” DHS was a permissible interpretation of the legislation.

As for the revision in the regulations to prohibit the previously permitted “per click” lease arrangements, the court noted that CMS is entitled to change its mind as long as there is a reasonable basis for the change.

“Thus, the agency remains free to reinterpret a statute in a way that varies greatly from its past interpretations so long as the agency provides a reasoned basis for its new interpretation.”

For more information regarding the Stark law or False Claims Act in general please contact Greg Montgomery.

 

Filed Under: Anti-Kickback/Stark, Compliance, False Claims Act, Medicare, OIG, Stark Tagged With: , ,

Stark Law Really Does Have Teeth

May 9, 2013 By

Tuomey Jury Finds Monetary Value of $39 Million for 21,370 Claims Submitted in Violation of False Claims Act

On May 8, 2013, the jury in the False Claims Act lawsuit against Tuomey Healthcare Systems, Inc. returned its verdict.  Based on its finding that Tuomey violated the Stark law, the jury found that Tuomey also violated the False Claims Act by submitting 21,370 false claims with a total value in excess of $39 million.

The court instructed the jury that the government’s case was based on allegations that Tuomey entered into compensation arrangements with certain physicians that violated the Stark law.  The government sought relief under the False Claims Act for these alleged Stark law violations.

The court instructed the jury that damages for Stark based violations of the False Claims Act are to be based on what the Medicare program paid to Tuomey for claims submitted in violation of Stark.  Under the False Claims Act, each false claim is subject to a penalty of between $5,500 and $11,000.  In addition, damages may be tripled.

In what might be considered by some as a substantial understatement, one of the attorneys for Dr. Michael Drakeford, who initiated the lawsuit under the whistleblower provisions of the False Claims Act, was quoted as commenting:

“Perhaps the message to be taken from this verdict is that the Stark law really does have teeth and when a hospital decides to pay physicians for referrals, it risks paying a very high price.”

As part of its on-going quarterly lunch time webinar series, the Ogden Murphy Wallace Healthcare Practice Group will provide a presentation on self-disclosure options and avoidance of state and federal False Claims Act liability in its June 4, 2013 webinar (to register click here).  If you have questions regarding self-disclosure or Stark in general please contact Greg Montgomery.

 

Filed Under: Compliance, False Claims Act, Medicare, Stark

Whistleblowers Expected to Receive $2.8 Million in Settlement of Stark Based False Claims Act Lawsuit

May 7, 2013 By

The Department of Justice recently announced a settlement with Adventist Health System/West under which the Department of Justice and the state of California will collect $14.1 million in settlement of False Claims Act allegations.  The lawsuit was initially filed by private individuals as whistleblowers who will receive a significant portion of the settlement.  There was no determination or admission of liability.

According to the announcement, the lawsuit alleged that Adventist Health improperly compensated physicians at one of its facilities by transferring assets to the physicians at less than fair market value and by compensating physicians for teaching services at rates contended to be above fair market value.  These payments to physicians were alleged to violate the Stark law and anti-kickback laws.

In commenting on the settlement, a representative of the Office of Inspector General observed:

“Payouts by hospitals and clinics – as the government alleged in this case – raise substantial concerns about physician independence and objectivity.  Taxpayers and vulnerable patients rightfully expect such payments to be investigated and pursued.”

As part of its on-going quarterly lunch time webinar series, the Ogden Murphy Wallace Healthcare Practice Group will provide a presentation on self-disclosure options and avoidance of state and federal False Claims Act liability in its June 4, 2013 webinar (to register click here).  If you have questions regarding self-disclosure and overpayments in general please contact Greg Montgomery.

Filed Under: Anti-Kickback/Stark, Compliance, False Claims Act, Overpayment

False Claims Act Recoveries Top $14.2 Billion

May 2, 2013 By

On May 1, 2013, the  Department of Justice announced a settlement with two Montana hospitals that added $3.95 million to its recoveries under the False Claims Act.  According to the announcement, with this additional recovery,  the Department of Justice has used the False Claims Act to recover more than $14.2 billion in federal healthcare payments since January, 2009.

Once again, allegations of hospital-physician financial relationships that violated the Stark law prohibition against self-referral were the stated basis for the allegations of False Claims Act liability.  In this case, according to the announcement, it was alleged that the hospitals paid incentive compensation to certain physicians in a manner that took into consideration the value or volume of the referrals by the physicians to the hospital by improperly including certain designated health services in the formula for calculating physician incentive compensation.

This situation was voluntarily disclosed by the hospitals.  In this regard, an OIG representative was quoted as commenting:

 “There is an expectation that corporations providing services to Medicare and Medicaid beneficiaries adhere to the provisions of the Stark Law.  I applaud St. Vincent Healthcare and Holy Rosary Healthcare for recognizing their potential liability in this matter and making a disclosure”

As part of its on-going quarterly lunch time webinar series, the Ogden Murphy Wallace Healthcare Practice Group will provide a presentation on self-disclosure options and avoidance of state and federal false claims act liability in its June 4, 2013 webinar (to register click here).  If you have questions regarding self-disclosure and overpayments in general please contact Greg Montgomery.

Filed Under: Anti-Kickback/Stark, Compliance, False Claims Act, Hospitals, Medicare, Overpayment, Stark