Lions and tigers and bears Oh my A
Lions and tigers and bears! Oh my! A Fraud and Abuse Update David W. Gee, Esq. Partner, Davis Wright Tremaine LLP 2017 CCLA Annual Conference November 2, 2017
Overview § Lions: Individual Liability – in the wake of the Yates Memo § Tigers: Medical Necessity and the FCA § Bears: Commercial Payer Actions/Activity 2
Lions. . . Individual Liability – In the wake of the Yates Memo 3
The Yates Memo: Individual Accountability (Sept 2015) “One of the most effective ways to combat corporate misconduct is by seeking accountability from the individuals who perpetrated the wrongdoing. Such accountability is important for several reasons: § it deters future illegal activity, § it incentivizes changes in corporate behavior, § it ensures that the proper parties are held responsible for their actions, and § it promotes the public's confidence in our justice system. ” September 9, 2015 Department of Justice (“Yates Memo”) 4
The Yates Memo: Individual Accountability 1. 2. 3. 4. 5. 6. To be eligible for any cooperation credit, corporations must provide to the Department all relevant facts about the individuals involved in corporate misconduct. Both criminal and civil corporate investigations should focus on individuals from the inception of the investigation. Criminal and civil attorneys handling corporate investigations should be in routine communication with one another. Absent extraordinary circumstances, no corporate resolution will provide protection from criminal or civil liability for any individuals. Corporate cases should not be resolved without a clear plan to resolve related individual cases before the statute of limitations expires and declinations as to individuals in such cases must be memorialized. Civil attorneys should consistently focus on individuals as well as the company and evaluate whether to bring suit against an individual based on considerations beyond that individual's ability to pay. September 9, 2015 Department of Justice (“Yates Memo”) 5
The Yates Memo: Individual Accountability § DOJ has recovered $60 million in actions against individuals in 2017. – Bloomberg BNA 10/19/17 § New DOJ website on individual accountability: https: //www. justice. gov/dag/individual‐accountability § 11/30/16 Speech by Former DOJ Deputy AG Yates: “We’re getting exactly what we wanted ‐ companies showing up to their first meeting with the government with information about who did what. ” § 6/6/17 Speech by AUSA Margaret Hutchinson (ED PA): The Yates Memo is “still in place, and it’s still effective. ” – Bloomberg BNA 6/15/17 6
Individual Liability: Physicians Feb 7, 2017 § Laboratory services tainted by kickbacks and improper financial relationships § $18 million by Dr. Marder, Palm Beach Dermatologist, Owner of Allergy, Dermatology & Skin Cancer Centers - • Medically unnecessary biopsies (sent to Dr. Kendall) and radiology billed by Marder • Billed Medicare over $49 million for procedures not actually performed or supervised by Marder • $2. 8 million+ Medicare payments for AP testing billed globally (but not performed) by Marder § $250, 000 by Dr. Robert Kendall, Coral Gables pathologist (Kendall Medical Laboratory)- • Performed medically unnecessary AP testing • Diagnosed healthy skin as cancerous • Fraudulent client billing arrangement – KMP performed both TC + PC on all biopsies 7
Individual Liability - Criminal CLIA Violation Mar 23, 2017 § Gottfried Kellermann, founder/CEO of Neuro. Science and sister company Pharmasan Labs, sentenced: • 6 mos home confinement • $50, 000 fine • 5 years probation (can’t work at Neuroscience or Phamasan) § Neuro. Science sentenced to $140, 000 fine and 5 years probation with CIA § Pharmasan Labs conducted neurotransmitter testing § Neuro. Science recommended nutritional supplements to Pharmasan Labs patients based on the test results § Pharmasan Labs’ testing did not produce consistent results, so Kellermann allegedly manipulated the results to normalize using an “optimal range” he created, which identified 40% of patients as abnormal (needing nutritional supplements) 8
Individual Liability: Lab Tech and Sales Rep Jul 12, 2017 § Ivar Cantu Maldonado, sales rep for Quality Toxicology – San Antonio • Forged patient signatures, falsified medical records to obtain sales commissions § Omar Solis Sanchez, lab tech for Arrango Family Clinic – Mission, TX • Took urine specimens from Clinic patients and sent to Quality Toxicology without physician order or patient consent to receive commissions and collection fees § $850, 000 in fraudulent Medicare claims for medically unnecessary lab testing § Up to 10 years in federal prison § Possible monetary penalties of $166, 000+ 9
Individual Liability: 1099 Marketers + Middlemen July 13, 2017 As part of the Largest Health Care Fraud Enforcement Action in Department of Justice History, 4 individuals charged for their role in a $36 million fraud scheme involving unnecessary and improperly prescribed toxicology and DNA cancer screening tests which were billed to TRICARE. Each defendant faces a maximum statutory penalty of 5 years in federal prison and a $250, 000 fine. According to charges: • May 2014 to July 2017, operated ADAR Group in Killeen, Texas • Paid by Xpress Laboratories and Progen Lab for referring testing orders for TRICARE beneficiaries • Bugen and Sheffield gave Wal-Mart gift cards in exchange for urine and saliva specimens that were mailed to Xpress Laboratories and Progen Lab for unnecessary toxicology and DNA cancer screening tests and billed to TRICARE by Cockerell Dermatopathology in Dallas. • Bugen and Sheffield disguised the gift cards as a food assistance program for low-income beneficiaries. • ADAR Group employees collected urine and saliva samples from up to 200 patients per day. • Bugen and Sheffield paid doctors a flat fee per month to sign orders for toxicology and DNA cancer screening tests. The doctors never saw the patients and had no doctor-patient relationship with the patients. Beneficiaries did not receive the test results. • ADAR employees obtained signature stamps from the doctors and stamped the doctors’ signatures on testing orders before sending the forms to Xpress Laboratories and Progen Lab. • ADAR Group employees also placed false diagnosis codes on TRICARE claim submissions to make it appear that the beneficiary needed the testing…to ensure that TRICARE would accept, and pay, the claim. Erik Bugen (ADAR owner) Britt Hawrylak (marketer) Matthew Hawrylak (marketer) 10
Individual Liability: Lab Owner + Laboratory Director Sep 11, 2017 § Family Medicine Centers (FMC) of South Carolina submitted claims to Medicare that violated the Stark Law § FMC paid FMC’s physicians a percentage of the value of lab and other tests they ordered through FMC, which FMC then billed to Medicare § Dr. Serbin, FMC’s co-owner and CEO, allegedly initiated this compensation program and reminded FMC’s physicians to order tests and other services through FMC: • • § to increase FMC’s profits and to ensure that their take-home pay remained in the upper level nationwide for family practice doctors FMC, Dr. Serbin, and Victoria Serbin submitted and caused submission of false claims to Medicare and TRICARE for medically unnecessary lab services by: • • FMC's principal owner and former chief executive officer, Dr. Stephen F. Serbin, and its former Laboratory Director, Victoria Serbin, have agreed to pay $443, 000 creating custom laboratory panels of tests not appropriate for routine measurement performing these tests without an order from the treating physician implementing standing orders to assure these custom panels were performed with defined frequency and not in reaction to clinical need programming FMC’s billing software to systematically change billing codes to ensure payment by Medicare 11
Individual Liability: US v. Blue. Wave • • • 3 Qui Tam Cases: • US ex rel. Mayes v. Berkeley Heart. Lab Inc. , et al. • US ex rel. Riedel v. Health Diagnostic Laboratory, Inc. , et al. • US, et al. ex rel. Lutz, et al. v. Health Diagnostic Laboratory, Inc. , et al. April 2015 - Settlement Announcement: HDL ($47 miliion) + Singulex ($1. 5 million) • US declined to intervene vs. Singulex CEO Phillipe Goix and Quest Diagnostics June 2015 - Cases consolidated August 2015 – US files Intervenor Complaint April 2017 – Settlement Announcement: Berkeley Heartlab / Quest Diagnostics ($6 million) 4 defendants remaining – 3 individuals: • Blue. Wave Healthcare Consultants • La. Tonya Mallory (former CEO of HDL) • Floyd Calhoun Dent III (Blue. Wave owner) • Robert Bradford Johnson (Blue. Wave owner) 12
Individual Liability: NJ Biodiagnostic Lab Scam § Bribery scheme - millions of dollars in bribes § $100 million+ to BLS from Medicare and various private insurers § 50 convictions to date – 36 doctors § Believed to be the largest number of medical professionals ever prosecuted in a bribery case § $13 million+ recovered to date through forfeiture § 6/28/16, BLS - out of business - pleaded guilty and forfeited all of its assets 13
Individual Liability: Closer To Home. . 14
Tigers. . . Medical Necessity and the FCA 15
Medically Unnecessary (Genetic) Testing Karen Glassman, OIG senior counsel at Spring 2017 ACLA Annual Meeting: § "Genetic testing is a very large interest to the government right now … I'm not sure things we're seeing always existed or they're newer. " § “Right now, a lot of [pharmacogenetic testing] is considered not reasonable and necessary, and not payable by the Medicare program…. ” § § § Another example of violations OIG has been able to identify in genetic testing using CDAC analysis [Data Mining] involves CPT code GO 452. Used appropriately, GO 452 is used to report the interpretation and written report of a medically necessary molecular pathology test, but the interpretation must go beyond simply relaying the test result to the patient. CDAC analysts were able to track suspicious patterns in claims data, allowing OIG to send subpoenas to 24 doctors and physician practices and one lab. Further investigation showed that often there was no documentation or narrative report for why the code was claimed "These physicians were doing the genetic test and doing the same sort of interpretation that they would for any other test, just looking at [the report] and giving the results to the patient and not taking the extra steps that makes that code billable, " she said. The settlements with doctors and the lab have so far totaled nearly $900, 000. 16
Medically Unnecessary Testing Apr 28, 2017 According to the government: § Berkeley paid kickbacks to referring physicians disguised as “process and handling” fees. § Berkeley paid kickbacks to patients by routinely waiving copayments owed by certain patients who were legally required to pay for part of their tests. § Berkeley paid the kickbacks to induce both the physicians and patients who received them to choose Berkeley over other laboratories. § [T]hese illegal practices resulted in medically unnecessary cardiovascular tests being charged to federal healthcare programs. ASIDE: According to the Press Release: “The Anti-Kickback Statute also prohibits routinely waiving patient copayments to ensure that patients are appropriately incentivized to refuse unnecessary tests. ” 17
US ex rel. Groat v. Bos. Heart Diagnostics Jun 9, 2017 US District Court, District of Columbia –Memorandum Opinion § The Court agrees with the relator that Boston Heart has an obligation to establish that the tests for which it seeks government reimbursement are medically necessary because when it submits the CMS– 1500 form, it certifies that the tests performed were medically necessary. § Accordingly, the Court concludes that the relator pleaded facts sufficient to support her claim that Boston Heart's certifications of medical necessity were legally false because it had an independent obligation to certify that the tests for which it requested government reimbursement were medically necessary. 18
Medically Unnecessary (Drug) Testing Feb 1, 2017 “Dr. Windsor submitted or caused the submission of false claims to Medicare, the Georgia and Kentucky Medicaid programs, TRICARE, and FEHBP for medically *** screens unnecessary … qualitative drug performed in Georgia and Kentucky during the period from January 1, 2010 through June 30, 2014. ” 19
Medically Unnecessary (Molecular) Lab Tests Feb 1, 2017 § #1 referring physician of FISH tests in the country § 13, 000+ FISH tests on Medicare patients § Dr. Daller submitted claims to Medicare and Tricare for “FISH, ” tests that were not medically necessary § Dr. Daller was paid approx. $2 million in bonuses based, in part, on the number of FISH tests he referred to lab owned by 21 st Century Oncology § Dr. Daller to pay $3. 81 million to settle FCA action § 21 st Century Oncology previously paid $19. 75 million settlement § Individual urologists (Dr. Daller and 2 others) will pay a total of $5. 11 million in settlements (1 more yet to settle) 20
Medically Unnecessary (Genetic) Testing April 10, 2017 “As genetic testing technology is evolving, we see the same types of clinical testing abuses that are evident in more established testing … Along with our law enforcement partners, we will investigate and prosecute violations in these newer health care technologies. ” Allegations: § Prestige failed to ensure that physician orders were obtained for the genetic testing § Prestige physicians were not aware of and did not agree with the medical necessity of the testing § Prestige failed to ensure that patients were appropriately informed of the testing prior to its being conducted and provided opportunity to decline the testing § The lack of physician orders and patient consent was discovered during 2015 state survey 21
Medically Unnecessary (AP) Testing May 2, 2017 § § Among other things, government asserted that a pathologist should review the specimen with the routine H&E stain before any special stain is used on the specimen. Special stains are billed separately to government healthcare programs. The government considers the use of special stains before the analysis of the routine H&E stained specimen to be medically unnecessary. Piedmont Pathology lacked medical necessity for the special stains conducted on certain gastric biopsies before a pathologist reviewed the routine H&E stained specimen. May 1, 2017 § § § Poplar, directly and through a subsidiary known as GI Pathology, promoted and billed the government for diagnostic tests that the government contends were not medically necessary. Immunohistochemical mast cell tryptase stains were the subject of Poplar’s extensive, multiyear promotional campaign designed to promote the use of the stain, claiming that Poplar could use the test to definitively diagnose “mast cell enterocolitis. ” Poplar’s promotion of the test was not consistent with FDA approval requirements, and not supported by adequate scientific evidence. 22
And Bears. . . Commercial Payer Actions 23
“Sham” Hospital Lab Outreach Arrangements Jan 2, 2017 Texas UHC Allegations: § From 2011 -2016 Next Health and subsidiary drug and genetic testing labs defrauded UHC of $100 million+ through improper billing and kickback scheme involving: o unnecessary and expensive drug testing o standing test protocols regardless of patients’ medical histories or clinical conditions o performing and billing for testing services not ordered by physicians o billing for services that they did not perform o routine waiver of patients’ payment responsibilities § UHC identified illegal activity via routine claims review § UHC’s investigation revealed Next Health funneled kickbacks to providers in multiple geographic areas for drug and pharmacogenetic test orders 24
“Sham” Hospital Lab Outreach Arrangements May 4, 2017 BCBS Allegations: Mississipp i § $33. 8 M in “bogus claims” to BCBS of Mississippi for lab testing not performed at Sharkey-Issaquena Community Hospital contracted by BCBS (BCBS paid about $9. 8 million) § Hospital contracted with Sun Clinical Laboratory and Mission Toxicology (in Texas) to perform the testing § Hospital permitted labs (and middlemen) to submit claims to BCBS “Blue Cross contracted at this [higher] rate with the hospital as a hospital, and not as a laboratory for using Hospital’s name and billing non-hospital patients; and, certainly not to allow third information parties to take advantage of the percentage of charge rate”. § Hospital was paid by the labs § Lab testing was not ordered by a licensed physician with Hospital staff privileges § Hospital leased personnel and space to the labs “to further conceal the misrepresented claims” 25
“Sham” Hospital Lab Outreach Arrangements August 2017 Missour i § Deposits into the hospital's bank accounts for the months of December 2016 through May 2017, totaled approximately $92 million. For perspective, annual hospital revenues were $12. 7 million and $7. 5 million for fiscal years 2015 and 2016, respectively. § Approximately 80 percent of the new revenue generated from lab activity is disbursed to the laboratory companies, with an additional 6 percent going to the billing company, and another portion going towards payroll costs for out-ofstate phlebotomists. § [T]he laboratory company receiving millions of dollars from the hospital was incorporated a week after the initial management contract. § [A]s of January 23, 2017, the hospital's Unionville, Missouri lab had not begun processing tests § Our review of lab billings received by the hospital indicate the originating activity is for out-of-state patients for lab work not conducted in Putnam County. 26
“Sham” Hospital Lab Outreach Arrangements “During the audit, the State Auditor's Office was contacted by the fraud examiner of a private insurance company in Florida that had recently denied claims of approximately $700, 000 from the hospital due to the excessive cost of the claims, a lack of documentation to support the claims, and indications the billings may be fraudulent. This individual referred us to a fraud investigator for a second, much larger, private insurance company who stated payments of up to $4. 3 million in what the company considered fraudulent claims had been paid to the hospital in recent months. Based on this information, the second insurance company is no longer paying any claims from the hospital because the billings submitted are pass-through billings, which are indicative of a fraud scheme. ” 27
“SHAM” Outreach Arrangement Features-§ 28 Typically Toxicology or Pharmacogenetic Testing o Menu has expanded § 1099 Marketers + Middlemen + Aggregators + Brokers o Sometimes physician investors § Focus on HOSPITAL’s commercial payer contracts – o Higher reimbursement rates o In-Network Status § Bill for “purchased testing” using HOSPITAL’s Name and NPI (“under arrangements”) § Percentage-based compensation / Fee Splitting § HOSPITAL has little or no existing outreach business or capability § Territory, if delineated, extends far outside HOSPITAL’s usual geographic service area o To physicans outside the community, with NO other affiliation with HOSPITAL (no staffing privileges, etc. ) § HOSPITAL neither operates, nor commits substantial financial, capital or human resources to the Outreach business § LAB/Middlemen provide virtually all operations of the Outreach business § HOSPITAL has little or no business risk 28
Coverage Response by Commercial Health Plans 29
Conclusion: Takeaways 1. The Yates Memo is “still in place, and it’s still effective. ” 2. Labs must be prepared to support the medical necessity of their testing. 3. Private payers are on alert. 30
QUESTIONS? David W. Gee Davis Wright Tremaine LLP Partner davidgee@dwt. com 206. 757. 7059 31
- Slides: 31