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Top Ten 2024: Fraud and Abuse Issues to Watch

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Based on AHLA’s annual Health Law Connections article, this special series brings together thought leaders from across the health law field to discuss the top ten issues of 2024. In the fourth episode, Lori Foley, Office Managing Principal, PYA, speaks with Jonathan A. Porter, Partner, Husch Blackwell LLP, about the major fraud and abuse issues in the health care space. They discuss the importance of the SuperValu case on the health care industry, the impact of split circuits, and key compliance takeaways for providers. From AHLA's Fraud and Abuse Practice Group. Sponsored by PYA.

Watch the conversation here.

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Speaker 1:

A HLA is pleased to present this special series highlighting the top 10 health law issues of 2024, where we bring together thought leaders from across the health law field to discuss the major trends and developments of the year. Support for A HLA in this series is provided by PYA, which helps clients find value in the complex challenges related to mergers and acquisitions, clinical integrations, regulatory compliance , business valuations , and fair market value assessments, and tax and assurance. For more information, visit PYA pc.com.

Speaker 2:

Hi everyone. Good afternoon. My name is Lori Foley , and I lead PY compliance advisory service line. It is a pleasure to join you today. I'm joined today by Jonathan Porter and be here with a HLA as we dig into these top 10 issues facing the healthcare environment. Here at PYAI lead our regulatory compliance and revenue services. I've been a healthcare consultant for over 25 years, and in healthcare for over 30 years , and so have really grown up through a number of the topics that we'll be talking about today. I'm located here in Atlanta and joined by Jonathan , who's also here in Georgia. Jonathan , you wanna introduce yourself?

Speaker 3:

Yeah, thanks, Lori , and thanks to a HLA for , uh, for, for putting on this podcast, inviting me on, and for PYA, for, for sponsoring. I'm Jonathan Porter. I'm a partner with Hush Blackwell. Um, I am in hush h's , uh, healthcare and white collar groups. My , uh, I , I'm a former federal prosecutor , uh, located here in Georgia, like Lori and , uh, but I have a national practice , uh, representing healthcare providers who are under federal investigation , um, federal investigations of , of all, of all type. Um, I also teach white collar crime at , uh, at Mercer Law in Macon, Georgia as a very, very part-time , uh, gig, just for the fun of it , um, that I enjoy that a lot. So , uh, Lori , I'm excited to dig into some of the big , uh, healthcare fraud issues facing the , the industry today.

Speaker 2:

Perfect. I know our clients are constantly reaching out about the number of issues that they face. Super values been on everyone's radar from a variety of different areas. Your article , um, really dug into some of those nuances. Why exactly is it so impactful? Why is that case in particular so impactful to this healthcare arena that we live in? Yeah.

Speaker 3:

Good . Good question, Lori . So, 2023 saw a lot of big, notable, notable developments in the, you know, healthcare fraud and abuse arena. You know, 2023 saw a lab owner who was sentenced to 27 years in federal prison following a, you know, healthcare fraud , uh, trial conviction involving a half billion dollar kickback scheme. An attorney was accused of a $1.4 billion , uh, rural toxicology healthcare fraud scheme, and he was acquitted of that. Uh, following trial, there have been , uh, covid fraud cases that have touched the healthcare space. DOJ has continued , uh, aggressive enforcement in the Medicare Advantage , uh, plan field , um, and also in the field of , uh, private equity investment into healthcare providers. Uh, we also saw the, the biggest stark loss settlement , uh, in over a decade. Those are all really notable, but none of them are gonna have the broad impact that super value will have across the entire healthcare sector. Um, that's why, to me, super value's impact is gonna be the thing to watch in the healthcare fraud and enforcement arena , uh, in 2024. So, super value's gonna give a lot of leverage to whistleblowers and the Justice Department, and it's gonna result in a lot of , uh, large settlements. And here's why. The key to defending modern litigation is identifying one clean element that you can win with without real factual dispute. So in litigation, the plaintiff has to prove every part of a claim to win. Uh, thinking back, for the lawyers listening, thinking back to the first year of law school, if , if you're gonna sue someone for battery, which is an intentional tort, and you've got incredible evidence about harm and damages, but you have zero on intent, the plaintiff can't win. You can't win. Um, you can be the most harmed and damaged person ever, but that doesn't matter if you can't prove the rest of the elements. And so in defending false Claims Act theories in the healthcare space, we typically look for an element that we can win. The easiest element is falsity. You know, you're, you're , you're billing Medicare for some obscure CPT code, and the whistleblower says it's improper. But the judge looks at the language and says, well, the provider was correct about the language of the CPT code and the whistleblower was wrong. That's not a false claim, because the claim was not false. And the beautiful thing about falsity as an element is that it's very much a black and white issue. It's either false or it's not. And that's critical because in the litigation world, you need a black and white element to avoid trial , uh, shades of gray or the legal term, A genuine issue of fact. That means a trial and falsity is great because it's a summary judgment issue. What super value stood for Lori was a second black and white False Claims Act element. The Seventh Circuit version said that even if you lose on actual falsity, providers can win on the knowledge element if there's some ambiguous regulation, and the provider can point to , um, an objectively, objectively reasonable interpretation of that ambiguous , uh, regulation. Um , now, Lori , I know that's a bunch of legal words , uh, right there in a row, but let , lemme point this out. This is a big deal. Objectively reasonable means summary judgment, no trial. It's black and white. It's an exit ramp out of the litigation regardless of falsity. The Seventh Circuit's interpretation was a big deal 'cause it was a legitimate exit ramp for providers that who were accused of fraud. But the Supreme Court closed that exit ramp rather emphatically. Uh , the Supreme Court framed the issue rather simply, it says, knowledge is wholly subjective. It's not objective. It doesn't matter what a reasonable person would've thought. It matters what a particular person or company actually thought. And that makes, that actually makes perfect sense. But here's the practical problem with that. For healthcare providers, knowledge is very rarely a black and white issue. The, the nature of knowledge, what a person or a company thought at any particular time is very, very murky. Let , let me explain it this way. Let's say you needed to prove that the American Health Law Association knew knowledge that the sky was blue Lawyers, they go and do their thing and they gather a HLA documents, emails, text messages, they depose a bunch of people and they go to court and point to, you know, maybe an email from David Cade talking about how pretty the blue sky was one day, or , uh, maybe, maybe it pops up in, in , uh, board meeting minutes about the sky being blue. But then you've got other lawyers who go and elicit statements in depositions about how the sky is known to turn other colors at some hours, or that people within a HLA think that the, the particles that we see don't actually have color. It's just the way that light waves scatter. What did a HLA know about the sky? Old super value says knowledge can be objective. Was it reasonable to think the sky was blue? That's something a judge can decide based on objective, objective reasonableness. But Supreme Court super value says it only matters what A HLA actually knew. And that's the problem, Lori , because there are questions about what a HLA actually knew. Um, that's the, some evidence says that A HLA knew and some says that it didn't. And when there are questions, when there's genuine issues of fact, that's typically not something that a judge can decide. That's a jury question, but Lori , it's actually even harder for healthcare providers than than that, than that, you know, flawed hypo , uh, because knowledge in the False Claims Act space, it isn't just actual knowledge. It's also deliberately avoided positive knowledge, which is con commonly called the ostrich defense. And it's reckless disregard, being aware of a substantial and unjustifiable risk of falsity, reckless disregard makes knowledge, even murkier was a HLA aware that the sky was an issue? Was it justifiable for a HLA not to figure out sky color? Um, these are far from black and white inquiries. And, and so super value isn't really about knowledge, it's about summary judgment. It's about that, that exit ramp for, for providers in, in litigation. So the, the lasting impact of super value will be that cases where providers end up being wrong on technical falsity, you know, the language of the CP CPT code and stuff like that. Those providers are in a world of trouble, Lori ,

Speaker 2:

And primarily , uh, Jonathan , just to summarize, because now rather than get that summary judgment and just kind of put a bookend on it and, and move on, it , it , there will be more that will go to a trial by jury.

Speaker 3:

Yeah, that , that's exactly right, Lori . That that's the real reason that super value is a , is a problem for providers in , in an ordinary civil case, like a , you know, tort case run of the mill tort case. If you have a question of fact, it's fine, just go try the case. You know, sometimes the jury's gonna agree with you, sometimes they're not gonna agree with you. Uh, maybe the jury will award punitive damages above and beyond actual damages. But, you know, in those cases, the pretrial settlement value is usually in the ballpark of what you'd expect the, you know, aggregated number of outcomes to, to be at trial. But that's not even close to the reality of False Claims Act trials. I mean, DOJ almost always settles cases based on a multiplier of single damages, right ? And they don't add in the, the per the per claim penalties in a, in a settlement posture, except in very rare instances. Uh, so, so Lori , for example, if Company a got $1 million from the government through false claims, they could probably settle before trial for, you know, 1.5 million, 2 million, 2.5 million, depending on how DOJ views the , the conduct as driving that multiplier. But let's say company A submitted a thousand claims that all added up to that $1 million number, and company a really wants a trial. Well, if company a loses it trial, it's not just treble damages or $3 million that they're on the hook for the per claim penalty under the False Claims Act right now is around $13,500 minimum per false claim. Uh , and it , and depending on when this airs, it could have gone up e even more , um, than than 13,500. That's 1000. Um, so you multiply 1000 claims by 13,500 and you get $13.5 million, that's $13.5 million that the Justice Department would not have asked for in pretrial settlement talks, right ? So we , so $1 million, Lori in improperly obtained funds ends up being $3 million in treble damages, plus 13.5 million in penalties. That's $16.5 million. That's a huge difference from what you'd be able to settle for pretrial. And ,

Speaker 2:

And , and the , the magnitude is, is astounding.

Speaker 3:

It , it , it really is. And , and Lori , these aren't just like goofy numbers that I'm just coming up with. Just to shock people. Um, there were two false Claims Act trials in 2023 , uh, that the Justice Department , uh, took and, and, and went to trial. They won them both. Um, the first one in Minnesota, single damages of $43 million, it ballooned to , uh, $487 million in, in, in a judgment after adding up all those penalties. And the second one here in, in, in Georgia, Lori , uh, single damages of $1.1 million ended up in a judgment of $27 million after penalties. This is the consequence of super value . Everyone knows who has the trial leverage, and it's not providers, right? Um , there are very few instances where it makes smart business sense to risk one of these false Claims Act trials, even if you feel really great about your, your facts, because the unusual trial penalties in the False Claims Act are, are really drastic. So super value , it cuts off an exit ramp, and it's gonna push more cases to trial. And that's a practical problem for providers, because it means you don't get your day in court the way that other, you know, defendants get their, their day in court because it's just way too risky. Way too risky, unlike any other civil case, just terribly risky. If you're wrong on technical falsity, and there's just not enough evidence of knowledge to potentially show recklessness, the, the answer isn't to try the case, it's to settle against someone who knows they have all the leverage. And that's why super value is a, is a problem. It's a matter of, you know, shifting leverage.

Speaker 2:

Well, you know, I know we always talk about how complex healthcare is, even for us that live in it every day , right? We eat, live, breathe, drink it. Um, there's just no way to make a jury expert in any of those circumstances in a , in a way that will get a positive outcome , um, you know, in order to, to mitigate any of that. So you just, I'm sure, open up Pandora's box as you're , as you're working through the ca uh , through the trial

Speaker 3:

Trial . Exactly. Exactly. And, and, and providers realize that they, they just, they don't need these, these trials are not worth the risk. And the, the, the big problem, Lori , is that there are , there are cases that really should not, that we would want to go to trial, that, that , uh, providers should want to ask, is this fraud? And those aren't , those cases aren't gonna really go to trial because of the huge trial penalty. There's an example this, this last year , um, of the, the University of Pittsburgh Medical Center , uh, UPMC, which happened right after I, I wrote the Top 10 article for A HLA, this was a declined key tam . So the , the Justice Department, they didn't wanna touch this, this legal theory because it's quite aggressive. Uh, the, the theory in a nutshell is UPMC was paying surgeons per , uh, WRVU as many PE systems do, right? The, the whistleblowers said that when surgeons do surgeries at UPMC, they get , they get paid. And more surgeries means more wvu, which means more money for surgeons, which means a stark violation , um, compensation , uh, is said to them varied based on the number of surgeries. And that's, they said was a stark violation. That's a very aggressive theory, but there just wasn't enough evidence to get past motions to dismiss and for summary judgment. Um, UPMC, they had great attorneys , uh, a great argument that compensating surgeons based on WVU is not, is just that , it's just how hospitals compensate surgeons , uh, and not designed to, you know, compensate for referrals and

Speaker 2:

IT to try to be compliant. Yeah,

Speaker 3:

Exactly. And , and , and I think Lori , more likely than not UPMC wins that trial. I, I , I , I honestly think that , uh, it was set to go to trial in late 2023, but UPMC settled, why? Because the trial multipliers are almost never worth the risk. And that's that not when you can settle pretrial for zero penalties in a reasonable multiplier. That's the, that that's the real consequence of super value . Um, and I think there's gonna be a lot of cases where healthcare providers , um, you know, adopted some reasonable practice that they think is the right thing to do. It ends up being technically wrong, and they end up paying some huge price because that knowledge exit ramp , um, that said that an objectable objectively reasonable interpretation is okay, that's gone. And so knowledge, which is largely a question of fact that's gonna push cases to trial, but I'm not sure the industry would love to. Um, you know, I , I think the industry would love to challenge a lot of these if they had a , a real forum. But they can't because it's just not a wise business decision. I, I think in the coming years, you're gonna see a lot of , uh, healthcare companies. They're gonna settle cases that are really not, you know, meritorious theories of wrongdoing because of super value . I'm not saying super value was wrong. Um, I'm saying that the False Claims Act gives way too much leverage to non meritorious theories of fraud, because there's, there's no real opportunity to contest issues of fact in court healthcare providers. They won't have their day in court because of the, you know, the confluence of issues of, of , of fact and these big, big, big trial penalties.

Speaker 2:

And where do you see others that might intercede? Do you see Congress getting involved? Do you see any other areas where there is some recourse for providers? Or you think it's just gonna continue down this path and get worse before it gets better?

Speaker 3:

Yeah. That, that, that's the big question for the healthcare industry, Lori , because I , you know, I think the , the healthcare industry honestly has not done all that great of a job sounding the alarm on this leverage imbalance. Um, and in fact, I think Congress appears to want to go even even further to empower whistleblowers to bring more, more different types of complaints. Uh, Senator Chuck Grassley, who, you know, is the, the, the grandfather of the False Claims Act, he's, he's championing whistleblowers, but I don't think he realizes that the False Claims Act and the current legal structure around it doesn't do a good job of separating out good whistleblowers with meritorious allegations of fraud from bad whistleblowers and weak with weak legal theories. There are a lot of great whistleblowers out there sounding the alarm on very real fraud. How do we incentivize those whistleblowers to come forward while also giving those accused of fraud, real chance to defend themselves? In the case of non meritorious accusations, the industry needs to talk about the current state of affairs, because this appears to be an issue of leverage for lawmakers to figure out. Uh, but hopefully there's gonna be some conversation going forward about, about these issues,

Speaker 2:

Especially as we worry about the decline and the number of physicians and providers in the healthcare space and underserved patients and populations. We need, we need all the, all the good providers out there that we, that we can possibly get.

Speaker 3:

Absolutely.

Speaker 2:

Can I turn for just a second in our compliance support work? I know a lot of times when we're doing IROs or we're , um, you know, helping a client investigate whether they have a potential overpayment issue, we have a very linear approach, right? We know where we're going, we know the process, we know how it is. In your article, you talk a good bit about the , um, the split circuits. As a non-attorney, help me understand the impact of those split circuits. Do I need to be monitoring what's happening in a particular region for my area or my provider type? Or is it kind of a bigger picture?

Speaker 3:

Yeah, great , great question, Lori . So, I , I, the , the , the big answer is don't go pay kickbacks just because there's a circuit split. That's the <laugh> that's the noted. If , if you take nothing else from this, do not take anything I'm about to say as, as reason to go and start paying, you know, kickbacks. So , um, the, the, but the, the more granular answer is, is this, I , I think a lot of people, they, a lot of people, those of us who practice in the False Claims Act world, we, we got excited about Justice Thomas's , uh, Polanski dissent, that sort of invited arguments. The key tams are unconstitutional. Uh, but I don't think that type of challenge will be the next FCA case to reach the Supreme Court. I, I think it's gonna be exactly what you're talking about. It's, it's gonna be the circuit split on causation. Um, and here's that issue in a nutshell, Lori . Um, false claims to the government, they come in a lot of forms. You can bill for services that you just never did. Uh, that one's pretty clear, clear cut. Um, you can bill for some service that the government says they didn't want to pay for. Like , uh, like in last year's , uh, false Claims Act trial in Georgia, that that doctor billed Medicare for collation therapy, which Medicare only pays for in the context of heavy metal poisoning. But that doctor was giving collation therapy to treat just about everything, headaches, fatigue, et cetera . Um, those are false claims too, because even though you, you provided some service , um, you're going against a condition the government is set for, for payment , um, but then you've got false claims based on violating some other law for, you know, for example, in UPMC, the whistleblower said, Hey, you, you violated Stark, and therefore, every claim that you made to Medicare that violated Stark was itself false for FCA purposes. Uh , you know, you use some other law as the predicate to the FCA violation. Well, one of the most commonly asserted predicates is the anti-Kickback statute. The , the , that was a theory in last year's Minnesota False Claims Act trial that we mentioned a , a minute ago. Um, you paid kickbacks and then you submitted claims caused by kickbacks. But here's the issue with the, the anti Kickback statute . The statute itself says that only claims resulting from kickbacks are false. For FCA purposes, results are outcomes of some action. Results means actual causation, not just loose relationship. Um, you know, a decade ago, the Supreme Court interpreted a , a , a different statute that had the, the words results from, and said that that means actual, actual causation, which we lawyers call, but for causation , um, the outcome would not have happened, but for the action. So here's why that's a big deal in healthcare. You've got a doctor who's prescribing some drug to, you know, to patients. If a patient comes in with X condition, she's prescribing y drug, well, let's say that y drug vendor then visits the doctor and gives her a big bag of cash. Um, this is the first time this has happened. Totally unexpected, totally unsolicited. The doctor gets the cash, goes to the next patient who comes in with X condition and then prescribes y drug. Well, did that, did that bag of cash cause the y drug prescription prior to the bag of cash, the doctor prescribed y drug to, to patients with , uh, with X condition . So why , who , who is to say that she wouldn't have continued that, that practice? That's the issue. If the, if the causation test is something other than, but for then, then yeah, a a jury could conclude that the, the bag of cash played some role in, in causing the claim. But if it's, but for causation, how can you, you know, how can you say that the doctor wouldn't have written the prescription, but for the bag of cash, that's the issue. Um, but instead of, you know, in today's healthcare, instead of bags of cash, these are cases playing out with other types of benefits like, you know, expensive trips like in the Minnesota False Claims Act trial , uh, to creative alternative physician agreements, like key opinion leader programs , uh, physician owned distributorships, and, and those, those types of arrangements. So this is a true circuit split. The third circuit , the , the third circuit said no to, but four causation. But the eighth circuits had said yes, and then last year, the sixth circuit weighed in on the side of requiring, but for causation , uh, the first circuit will decide a pair of divergent cases next. Um, but I don't see this one resolving itself without Supreme Court involvement. Um, do for , for what it's worth, do J's position on this issue is that Congress didn't mean to impose, but for causation when creating the a KS , um, language that's at issue. But that doesn't seem like a winning argument to me , Lori , um, given how courts undertake statutory interpretation. Um, so I, I would say that if Congress doesn't amend that resulting from , uh, subsection of the anti back statute, then I, I think the Supreme Court will eventually hear this case, and I'd predict, I , I'd predict that they'd hold that, you know, consistent with their prior precedent resulting from means , uh, but for causation, that's, that , that's my prediction, but that , that's gonna be a , a sort of a big issue in, in healthcare fraud litigation , uh, going forward.

Speaker 2:

So something definitely for us to watch for it to get all the way up to the Supreme Court and , and get adjusted or , um, get a final rule, if you will, from that perspective, versus while the circuit's kinda hammer it out themselves.

Speaker 3:

Mm-Hmm, <affirmative> , that's exactly right. But, but again, don't pay kickbacks just because there's a circuit split

Speaker 2:

Noted, duly noted. If our listeners don't go away with any one fact, but that do not pay kickbacks. Exactly . We'll just leave it at that part. So , um, in the meantime, I know we are actively advising our clients to really double down on their efforts, you know, to, to dust off their compliance program if they haven't in a while. Make sure it's addressing all the appropriate , um, you know, seven elements that they're doing, monitoring that they're asking questions, that compliance is really living and breathing within their organization. Are you providing any other advice to your clients as, as , as you think about all of these holistically and , and super value in particular?

Speaker 3:

Yeah, there , there , there's two big takeaways, I think from, from super value , um, and, and that, that providers should be thinking about in how to fix the, the , the big problem that, that they're gonna face going forward. The first one is this. If you're looking at ambiguous regulations, make a decision and document it in some non-privileged way. Write it down. Um, the super value issue was, was that there was a, a question as to whether super value actually held that reasonable interpretation of a vague regulation, or if their lawyers just made up that reasonable interpretation after the fact. You can largely fix that problem by writing down your interpretation of ambiguous regulations. Do it in some way that's not privileged , uh, like scope of waiver issues. You can avoid all that. Just write it down, say, this is the regulation, we're confused by this. We think it's X. And just roll with that. Have a document you can hand over and say, this is, we had good faith, we had, we had good faith reason to believe that we had , um, we were interpreted or interpreting this correctly. That a lot of times that's gonna take you from a false claims, that case to some sort of mirror overpayment case. That's one. The second one , uh, also think about what you're putting in writing and whether you want to explain to your team how jokes and thoughtless midnight emails can be taken out of context or interpreted differently when looking at them with the benefit of hindsight. Um, you have no idea how much stuff is being captured about you and how it can be used later to, to prove what you knew at a time. I had a, you know, a False Claims Act trial , um, I'm sorry, a , a healthcare fraud trial before I left the Justice Department. And, you know, there , there was this random email that where, where the defendant said , uh, you know, I, I've reviewed and signed the prescription. That ended up being like a key part of the case. It was sent at like 1:00 AM you know, probably didn't think anything of it, but that's the reason that that sort of proved the defendant knew that she was signing prescriptions. Um, there , your Google history, DOJ can, can get that. Uh , things that you look at on your, on your search history, there's all sorts of things that , um, that the, the Justice Department is capable of getting right now. So educate your team about emails, text messages, and how those can, can be used to show knowledge, because at least when it comes to knowledge, all it takes for DOJ or a whistleblower to get that trial leverage is enough evidence, enough knowledge, evidence that introduces a genuine issue of fact, and then a judge has to send it to, to trial. So one test , text message saying, yeah , we're acquiring , acquiring this physician group about to get rich, or, you know, referrals from this deal are gonna be huge. That , that , that

Speaker 2:

Can have a damaging really,

Speaker 3:

Really big impact , uh, that ordinary people surely don't, you know, appreciate in the moment when they're sending that email or text message. That's why leadership of these , uh, of , of , of larger , uh, healthcare providers needs to spend some time educating their people about how these writings can really be used against them because it, it , it can really have a huge difference.

Speaker 2:

Good sound advice. And I know as we think back even to the covid experience where information was coming so fast and people were just having to make decisions, hopefully they gained some of that experience to , um, you know, as part of their process to document where there's ambiguity and they're just having to make a call. Here's why they're making the call. Here's what they relied on and here's, here's our process and then we're following that part going forward. So great tips. I know , um, everyone will benefit from spending some time digging into the article. Much more to come it sounds like, to watch in the headlines and the A HLA publications, and I know you're writing and speaking about this as well. So look forward to seeing what comes as a result of , uh, super value in our future. Definitely keeps all of us on our toes. Appreciate your time today.

Speaker 3:

Thank you, Lori . I appreciate it .

Speaker 1:

Thank you for listening. If you enjoy this episode, be sure to subscribe to a HLA speaking of health law wherever you get your podcasts. To learn more about a HLA and the educational resources available to the health law community, visit American health law.org .