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AHLA's Speaking of Health Law
Trends and Developments Related to the False Claims Act
Joe Wolfe, Attorney, Hall Render Killian Heath & Lyman PC, speaks with Robert S. Salcido, Partner, Akin Gump Strauss Hauer & Feld LLP, about the current landscape of the False Claims Act (FCA) in the health care industry. They discuss the recent district court opinion declaring the FCA’s qui tam provisions unconstitutional (Zafirov v. Florida Medical Associates LLC), enforcement trends and case law developments, the impact of Loper Bright, trends related to Civil Investigative Demands and self-disclosures, and emerging hot topics. Robert is author of AHLA’s False Claims Act & the Health Care Industry, Fifth Edition. From AHLA’s Fraud and Abuse Practice Group.
Watch the conversation here.
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Speaker 2:This episode of A HLA speaking of Health law is brought to you by A HLA members and donors like you. For more information, visit American health law.org.
Speaker 3:Uh, welcome everyone to today's, A-H-A-A-H-L-A podcast where I will be talking to Robert Salcito from Aon Gump about the False Claims Act, or , or the FCA, which we'll , we'll , we'll be using that term today. And key trends that we're seeing in the industry, in the healthcare industry. Um, Robert recently published the fifth edition of the ALA's False Claims Act and Healthcare Industry , uh, book. I have a copy of it right here with me. It's a great resource. Uh, today's podcast is brought to you by the American Health Law Association's Fraud and Abuse Practice Group. I'm in my last year of chairing the Practice Group, and our mission is to help , uh, all of you stay informed about healthcare fraud and abuse and, and compliance issues. We're midway through another program year, and our vice chairs are doing a great job of developing some awesome content for our members. If you aren't a member yet , uh, please check out the A HLA website and, and sign up now. Again, we'll be talking to Robert today, who just issued that fifth edition of the A-H-L-A-F-C-A book. Uh, it has some great information , uh, broken out by the , the history of the False Claims Act , um, discussing some substantive provisions of the FCA, how the FCA Civil Actions work with whistleblower actions in that damages and penalties, some procedure and jurisdictional information. Then some discussion about civil investigative demands and voluntary disclosure. So please check out that book. We might allude to it during the, the, the, the podcast here. Um, but it , it's a , it's a , a really strong resource, and I recommend picking one up. Um, and, and thanks again to Robert for participating. Uh , before we get started, Robert, could you introduce yourself?
Speaker 4:Yes, I , I'm, I'm Robert Sdo . I'm a , a partner at Aiken Gump Straus , Howard Ved . Um , for roughly 29 years, I was in the Washington DC office. Now I work out of , um, Southern California Aiken Gumps Irvine , um, in Los Angeles offices. I, I started my career as a trial attorney with the Civil fraud section of the United States Department of Justice, which a , as you know, has nationwide jurisdiction over the the False Claims Act.
Speaker 3:Great. Uh, thanks Robert. And again, I'm Joe Wolffe Chair, the American Health Law Association's Fraud and Abuse Practice Group. Uh, I'm a shareholder and healthcare practice group leader at Hall Render . Um, and we're a boutique , uh, national healthcare firm. I've been at Whole Render for 15 years , um, actually as of as the end of the month here. Um, and I've practiced nearly 20 years focused , uh, exclusively on, on healthcare. Um, and we're gonna start off here. I I just want to , and I want to give a high level overview of the False Claims Act, and , uh, Robert can correct me if I misstep , uh, along the way here. But , um, when we're talking about the, the False Claims Act at a high level , uh, what is the FCA? Uh , many of, of you listening in or watching , uh, know of this? Uh , you know, it has a long history , uh, enacted back in, in the mid 18 hundreds know sometimes called the Lincoln Law , um, and it's used to tar target fraud involving , uh, federal contracts and programs. And it's used to , uh, enforce , uh, actions under the , under the , uh, within the healthcare space. Um, it allows suits directly by the government as well as by whistleblowers or relators , uh, on behalf of the government as well. Uh, it, it can lead to significant exposure because of the, the damage calculations and , and how it works. Um, the , the , the False Claims Act calls for treble damages. So three times the total claims paid in, in many cases , uh, there are statutory penalties. There are per claim penalties and in excess of $20,000. And this actually creates a really challenging , uh, regulatory area because of the potential for these very large damage figures. And we look at the False Claims Act. Um, there are some key elements , um, when you look at the, the framework of the False Claims Act , um, at at its heart, it's, it , it focuses on some key terms that any person who knowingly presents or causes to be pre presented a false or fraudulent claim for payment , um, or knowingly makes CAU uses or causes to be made or used a false record or statement material to a false or fraudulent claim. And then lastly, anyone who , um, knowingly conceals or knowingly improperly avoids an o or decreases in obligation to pay or transmit money or property to the government can be liable for a civil penalty under this framework. Um, and in the, in the healthcare space, there are some key terms that I think are important to focus on. Robert might, might discuss some of these later, but when we're, we're analyzing False Claims Act, potential liability , um, we're talking about the concept of a claim and what is a claim. Um, and a claim is a request for government , um, money or property that is presented to an officer of the government presenting as submitting or requesting payment via claim. Um, and we might think of in the healthcare space , uh, the filing of reimbursement like a CMS 1500. Uh, we also are thinking about causing to be presented a claim. So defendants are not required to file the claim with the government themselves. They can engage in conduct that causes another to file a false claim. Um, some other final key terms here are materiality , um, knowingly whether the, the party under the, that is alleged to have violated the False Claim Act acted knowingly , um, whether there was an actual obligation to pay, and is there , we're , we're talking the case of a reverse false claim, the retention of a known overpayment, some other key concepts and , and are or falsity , uh, do we actually have falsity and there's factual falsity and legal falsity. Uh , we can be talking about false certification , um, a as a potential area where something could be legally false. Um, and one area of that, and we're talking about false certification , um, is, is express false certification. And that's where a person or entity submits a claim and expressly certifies compliance with a statute regulation or other legal requirement. And that goes back to the example when, when A CMS 1500 , um, is submitted, there's a certification that the services were medically necessary. This is where we start to drift into a potential liability under Stark and Kickback that when claims are submitted there , um, you, you are certifying that you've complied with , um, applicable, applicable legal requirements , um, as well under an implied False Claims Act theory. And so these are the, this is why the False Claims Act, potential liability does get a bit complex because of the , that terminology , um, I just went through rather quickly. Um, and lastly , uh, these False Claims Act , um, cases can be brought as I I mentioned earlier, under a whistleblower action. So brought in the name of the government by a Keam relator , um, Keam Relators , um, bring that case on behalf of the government. Um , when we think of Keam potential plaintiffs or relators, they're often insiders , uh, including current or former employees, competitors, patients , uh, there are professional , uh, relators as some would, would, would call them. Um, but, but these people have personal knowledge and specific information related to the claims, and then they must follow certain Ketan procedure to bring cases forward , um, where it initiates with , uh, a complaint filed under seal, followed by a government investigation while the case is under Steel seal . And then the importance of an intervention decision by the government where the government decides to proceeds with the action to intervene or to notify the court that it's going to decline that intervention. And then the whistleblower potentially could continue and bring that case on their own. Um, and that of course impacts the amount , uh, that the whistleblower could actually be awarded , um, under the action as well, depending on how that decision is handled. So again, a very rapid , uh, overview of some of the concepts related to the False Claims Act and how , uh, false Claims Act cases are, are alleged and , and carried forward. Robert's book does a really good job of, of working through those concepts and , and much more. Um, but here we're, we're, we're hoping to talk about some of the more practical current trends and issues related to the False Claims Act and what we're seeing in the market. Um, and so Robert, I just provided a very high level overview of, of the False Claims Act. Um, in addition to some of those concepts, I know there's been widespread coverage of, of the District Court opinion just a few weeks ago, declaring the false claims acts , ketan provisions unconstitutional. Uh, can you , uh, speak to and describe that issue and, and how that issue is likely to play out over the next couple of years ? And , and also speak to any other areas you are seeing involving significant FCA developments in the market right now?
Speaker 4:Yes, tha thank you very much, Joe . Um, I , in terms of constitutionality , um, that, that has been a major development that in fact has only come to life , um, with , with a court decision a approximately three weeks ago. But, but the catalyst for that was a decision by the Supreme Court , um, recently, and US X rail plants gave versus executive health resources where he had a concurrence by Justice Kavanaugh and Barrett. Um, that was also , um, um, a dissenting opinion by Justice Thomas, all of whom , um, mentioned that the court should at , at some point, review whether the , uh, <inaudible> provisions of the False Claims Act conform with the Constitution. The underlying issue there, as we all learned in constitutional law and , and law school , um, relates to separations of power. And , uh, more specifically, can Congress privatize law enforcement, can Congress provide , um, relators with authority to bring and enforce , uh, the False Claims Act on behalf of the United States, a government and wield executive power, such as deciding whom to sue and what, what theories to , uh, pursue, even if those theories undermine executive branch policies? Um, and , and so doing , so, there's two components that are frequently raised. One is the take care clause and , and Article two , that the executive branches to take care to enforce the law , uh, not private individuals. And then the , um, the focus of the district court opinion roughly three weeks ago, and Zoff v Florida Medical Associates , uh, related to the appointments clause , uh, relators are not appointed , um, as part of the executive branch. Um , so her, her , um, ruling was in essence that the appointments clause of the Constitution, article two had been, had been breached. And , um, in , in actions in which the government doesn't intervene, then those actions would be dismissed because the , um, relator wasn't appropriately appointed , uh, pursuant to the Constitution. Now, the, the repercussion of that , um, is that in just about every action , uh, defendants are gonna have to raise the constitutional issue , um, particularly with , with , in non INTERVEN cases, but , uh, potentially in , in interven cases as well. One, one potential stumbling block is that, of course , um, previously before the concurrence and dissent and Polansky courts going back more than a couple decades ago, had uniformly ruled that qui TAM provisions are constitutional. Um, you , you had the Ninth Circuit, fifth Circuit, second Circuit , um, all ruling that the , the qui TAM provisions , uh, were in , in fact, constitutional. Now, that issue is gonna be revisited. Um, there's gonna be significant briefing, it's gonna make its way up to the appellate courts. And even on a practical example, I've seen cases now where, for example, defendants have moved the Quah , CI Ds, where the, the catalyst of the CID is an underlying QAM action. And , um, the, the defendants are saying that those, those actions , um, have a , uh, impermissible , um, basis in , in a sense that it's, it stems from a relator wielding unconstitutional powers. So those are , um, that's the constitutional issue very , very briefly. Three other issues that are significant , um, from , from a defense standpoint. One is the Supreme Court's recent case, USX Row shoot versus Super value , which has to do with , um, false Claims Act knowledge. And the important issue there is of course , um, the Supreme Court reversed , um, the decision of Six Circuit courts appeals that it said that when defendants have a reasonable interpretation of ambiguous law, and there's no official governmental guidance to warn them away from that interpretation, that they were not acting with false claims accident or Supreme Court said , uh, no, you could have subjective knowledge, even , even if the, the , the underlying statute of regulation is , um, uh, uh, objectively ambiguous. Um, the focus now will be does that undermine the doctrine of objective falsehood in any way, or, or is that still an established doctrine for purposes of False Claims Act falsity? And what level of subjective knowledge is sufficient to trigger that defendants are acting with reckless disregard or deliberate ignorance under the False Claims Act? So that's one other issue that we're tracking in the case law. Another related to causation and, and kickbacks particularly, is the circuit split , um, that relates to whether , um, plaintiff must show, but for causation with respect to the anti kickback statute. And of course, there we have decisions , um, from the eighth Circuit and US Xal Carns versus DS Medical and , uh, US XL Martin versus ha ha and the sixth Circuit, this , that, say that, but for causation , uh, needs to be shown. Um, and then the, the other issue , um, that we're tracking , um, has to do of course, with , um, false Claims Act falsity and the exercise of clinical judgment and the split that we have between , um, US X Road dreading versus car alternatives in the third circuit in the United States versus Cera Care in the 11th circuit, where o of course, CER care using objective falsehood says that if reasonable clinicians could disagree, then the underlying claim by definition could not be a , a false claim for purposes of the False Claims Act and the dreading case in the third circuit, which , uh, indicates that ultimately that would be a, a jury question , um, to, to determine the tho those are the issues , um, where , where we're really watching the case law from an enforcement perspective. Joe, what , what kind of trends are you seeing?
Speaker 3:Yeah , thanks , uh, Robert, and , and thanks for that , uh, that, that overview and the , the , the case , especially the, the case law case in Florida. I'm licensed in Florida and was intrigued by , uh, looking at that opinion. Um, yeah, in , in , when we look at the enforcement and maybe some noteworthy cases, it , looking at the data from the last couple of years and, and we look at activity in this area, you know, the , the, the numbers around False Claims Act settlements and judgements continue to be , uh, to be significant. And I think the DOJ continues to focus on healthcare . Um, and we see in 2022, there's around 2.2 billion in FTCA settlements and 20 23, 2 0.68 , uh, billion. And , and on just the healthcare related , uh, from a healthcare related standpoint, we saw 1.7 billion in, in the healthcare space in 2022, and then 1.8 billion in 2023. So significant , uh, numbers involving healthcare. Uh, one interesting , uh, item we did see in some of this data is that , um, in 2022, around 11% of the, those judgments were brought by , uh, whistleblowers and or non whistleblowers. And then in 2023, 13%, so there's an uptick in , uh, judgments related to cases that were non , uh, ke TAM related . So that's an interesting development. We'll keep our eyes on that. Um, we, the, the cases , uh, that, that we're seeing in this space, in the healthcare space , um, have focused on , uh, pharma and testing , um, hospitals and health systems , um, healthcare and insurance. And we , we seen large cases involving physician groups , uh, as well. Um, we're seeing , uh, an uptick in , in what we and had anticipated covid , uh, related false Claims Act cases are, are on the rise. Um, and I think we're gonna continue to see that. Um, another trend is that managed care , uh, seems to be in the cross hairs of the government as well as there was an , uh, HHS and OIG strategic plan , uh, back in August of 2023. Uh , that, that is, is focusing in on the, the , the , the reliance of , um, Medicare funds on the Medicare Advantage Program because of the significant , uh, size of the Medicare Advantage program , um, that we, we do believe the government is going to continue to focus on , um, identifying and preventing fraud in managed care plans. Um, there is a primary focus in that enforcement space on the accuracy of risk adjustment scores. And so , uh, that's an area we're , we're keeping our, our eyes on , um, as well. And then of course, as, as Robert, as you alluded to some the recent case law developments and , and how our clients are reacting in responding to , um, the , uh, the recent , uh, holding in the Loper Bright case. And I think we'll be talking about that again in the , in sort of this post Chevron world and what that means for , uh, reliance on , um, on agency , uh, insight into, into regulations and actually how regulations are issued and what that's going to mean for our clients . So those are some big developments we're seeing more broadly. Um, in my practice, day to day , much of my work involves , um, stark and kickback compliance, especially related to , uh, compensation , uh, models and formulas more granularly. So we have seen an uptick in CIDs in that specific area. Um, and, and I don't expect that to , uh, be slowing down anytime soon. So those are a couple of the, a a few of the areas that, that I'm seeing or we're focusing on, I'm seeing , um, and, and I think you're gonna talk about it now, Robert, we're hearing so much about this , uh, recent Loper Bright decision and the over turning of the longstanding Chevron doctrine. Um , how do you see the court's decision impacting the FCA and healthcare enforcement in the short and long term from your perspective?
Speaker 4:Yeah, I don't think that , um, Loper Bright will have a significant impact. In fact, historically, if you were to search the, the Chevron Doctrine and False Claims Act, you , you would get very few hits. There's tens of thousands of published False Claims Act cases and, and , uh, a posity of, of , um, decisions that, that invoke the, the Chevron doctrine. And , and any way , on one level, you would think that the court's ruling in , in Luper Bright would be helpful in the sense that , um, it questions agency authority , um, and , um, agency rulemaking and in , in one important respect. However, on the flip side, you have the longstanding Supreme Court doctrine, Bryson versus United States, which says in essence that e even if the law is wrong, or even if the law is unconstitutional, if you knowingly breached a law, the fact that the the law is in invi , um, being invalid is not a defense ultimately. So , um, it , it's not as though you could violate a law and then say the agency , um, uh, um, interpretation of that law is invalid and therefore you , you get a j uh, a get outta jail ticket, that that has not been successful in terms of invoking that. So given the fact that you'll, you'll still be saddled with agency interpretations, if that is valid law and that is breached , uh, knowingly with respect to the False Claims Act elements, the government will probably still have, have a cause of action in , in , in terms of your practice. Joe, with respect to, I, I know a good part of it is responding to , to civil investigative demands and bringing false Claims Act cases to , to resolution. What, what trends are you seeing in that area?
Speaker 3:Yeah, and I think , thanks, Robert. As I mentioned earlier, we're seeing an uptick in, in CIDs , um, and especially I said in my practice related to Stark and Kickback compliance and, and , uh, financial arrangements with referral sources , um, uptick in that area. And I do think in developing some and following best practices in response to A CID is something it's very important , uh, for healthcare organizations to be thinking about. Um, you know, I, I think some steps or some thoughts on that is, you know, if you do, if you are issued A-A-C-I-D , uh, do consider retaining counsel to deal directly with the Department of of Justice , um, we wanna be careful about , uh, making statements to the government , um, outside of council , uh, try to maintain a close hold , uh, on the fact that that CID has, has been received. Um, that can , if , if you lose sort of control of that, of that information , um, the information that , that can cause a lot of confusion , um, within a health with a , within an organization, and it so just be, should be handled carefully. Um, you wanna make sure you notify the head of your it , um, department to make sure that your, your network and your systems are being handled appropriately. Um, as part of your , uh, document preservation process , uh, you wanna develop a, a response strategy with your counsel , um, work with counsel to , uh, reach out to and, and work with the Department of Justice. Um, look at issuing a formal legal hold memorandum. Um, we're gonna , you're gonna have to work on the responsive material. So these steps are all very important. Uh, of course, conduct an appropriate internal investigation remedy or compliance concerns, and make sure you're in a position where you can present that information , uh, to the Department of Justice , uh, appropriately. So I'm mainly on the CID side. I , I think those steps can be very helpful. Um, also consider, you know, the, the most important , um, proactive steps you can take to try to avoid some of the False Claims Act liability we've been discussing is to develop , um, a self-reporting strategy. And , and we, beyond working on CIDs , um, do help clients work through and assess and self-disclose , uh, their , uh, their compliance situations as well. It's , uh, really important 'cause you can diffuse compliance issues before they escalate , uh, further , uh, you can initiate a, a thorough and probing internal investigation to fix the issues and then , uh, take your , uh, concerns to the government , um, and , and in order to get a, a better resolution. Um, in that way it shows your organization's commitment to doing the right thing. Um, and , uh, through those, you know, through that kind of an approach, you have some different pathways. Um, the, the normal pathways we see are, you know, the, a voluntary refund , um, is one track that we , uh, support our clients with. The other is following the OIGs , uh, healthcare fraud, Self-Disclosure Protocol. Um, the other is the CMS Self-Disclosure Protocol. Um, and a final track may be going to your local office of the Assistant US Attorney. Um, of course, as we mentioned earlier, that the kind of exposure that is present under the False Claims Act is significant. Um, and if you choose these other paths to try to resolve , uh, these , uh, potential compliance issues , uh, the, the , the potential exposure, it just drops dramatically. Um, in the case of the OIG Self-Disclosure Protocol, you might be looking at a resolution of that , uh, liability within a year. Um, and then the settlement tends to be around one and a half times the amount of the overpayment , um, assuming the government agrees with your calculation. And on the Stark side , um, if you choose to bring some kind of self-disclosure through that, we're seeing some of the damage assessments. They're not published, but it , we , we we're, we've seen some data that says that the , uh, potential , uh, settlement amounts are roughly 2% of the potentially tainted referrals. And of course, in both cases, you , you , if you go the CMS route, you only get a stark release. Uh , usually if you go the OIG route, you can get both an anti-kickback and stark release, but it , it's important to work through , um, you know, that strategy and it can be a very effective and proactive way that you can try to minimize , um, and mitigate potential risk under the False Claims Act if you identify , uh, con , uh, potential compliance issue and then , uh, through your probing investigation, determine that those paths make, make sense. So , uh, we are , we're seeing an uptick in self-disclosure. We're seeing an uptick in CIDs as well , um, in my practice. And so Robert, you know, as , as you look forward, what do you see as the potential enforcement priorities of the government and , and emerging hot topics , uh, from your perspective?
Speaker 4:Yeah, in terms of emerging hot topics, the , this may be , um, at , at , at this point blaming out , but the, the huge spike that we saw had to do with , uh, actions related to CO relief , uh, paycheck protection program , uh, CIDs where , um, clients got a, a huge number , um, and , and also a large number of investigations having to do with skilled nursing facilities and how they adhered to , uh, evolving CO regulations during the pandemic. Um, and over the, the previous couple years, there's been a substantial amount of government investigations and civil investigative demands on , um, that particular area, including that particular area. Uh, the , the other area where the government has recently been very aggressive is bringing , uh, stark and kickback allegations and intervening in , in those actions. And one , one thing I would, I would say to those out there doing business with physicians or health systems with, with physicians, is continue to get , um, fair market value opinions, those things from a litigation perspective, our Golden, you , you have a course , uh, USX Row Bingham versus HCA whi , which says that payments at , um, fair market value do not constitute remuneration for purposes of the anti-kickback statute. Um, it's also , um, when , when you have , uh, jury instructions as you do in the anti-kickback sector, that you have to know that your conduct is wrongful , uh, and you have fair market value opinions saying that the, the remuneration is, is paid at fair market value , um, it , it , it will do a lot to , um, foreclose , um, uh, viable false Claims Act actions on both the anti kickback side and on the, the Stark side as well.
Speaker 3:Great. Um, thanks Robert. Uh, you know, we, we've had a , a chance to talk through some, some hot topics. I was just wondering if you had any final remarks for our, for our audience today?
Speaker 4:Yes. Um, and , and a lot will , we'll mimic what, what you said earlier , um, Joe, which is stay ahead in terms of , uh, monitoring compliance issues, I , I think that that one issue that clients continually need to be careful about, however, with respect to , um, overpayment issues, is that historically clients , um, particularly those who are risk averse would , um, if, if issues were close to the line , uh, even if they involve conditions of what , what are known as conditions of participation rather than conditions of payment, if they found a regulatory breach, they would make disclosures to the government. One of the , um, downsides of doing that in light of the Supreme Court's decision in an Escobar is if one makes , uh, repayments, the government takes that and relators take that as concession, that the entity believed that the breach , uh, was material to the government's determination to pay and will use that against them in subsequent litigation. So it , it's one thing always to consider when one is making a, a disclosure , uh, in terms of whether it really constitutes an overpayment for purposes of the False Claims Act, or whether the breach is one where the government would not insist on retrospective repayment , uh, but instead a corrective action plan or some other type of remedy. And if that's true, then it's probably not an overpayment due to the government. So that, that's one other issue to be sensitive to .
Speaker 3:Great . Uh , thank , thanks, Robert. And , uh, thanks to everyone for listening in to today's , uh, podcast or , or watching it through the , uh, pod the , the video podcast. Um, we are, it really enjoyed hearing from Robert. I encourage you again to go out and pick up the fifth edition of his False Claims Act book that was published through a HLA , uh, watch for our upcoming content , uh, from , from the, from the Fraud and Abuse Practice Group. Uh, not only will we have future podcasts that are, are in the pipeline, but , uh, we do have an upcoming webinar on the new Value-based, or the newer value-based enterprise Rules and Compliance Matters relate related to that. Um, if you are interested in becoming more involved in the Fraud and Abuse Practice group, please reach out to me through LinkedIn , um, or , uh, you could email me at jWolf@wholerender.com . Um, and I'd love to find an opportunity for you , uh, to get involved in the, in the future. Uh, thanks again, Robert, for being part of today's , uh, podcast. And thanks everyone for listening in, and have a great day.
Speaker 4:Thank you.
Speaker 2:Thank you for listening. If you enjoyed 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.