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Health Law Alert: Government Investigations and Recoveries Take Center Stage in Fiscal Year 2015

March 29, 2016

The Department of Justice (DOJ) recovered more than $3.5 billion in settlements and judgments from civil cases involving fraud and false claims against the government in the fiscal year ending September 30, 2015. This is the fourth year in a row the DOJ has exceeded $3.5 billion in cases under the False Claims Act (FCA) and brings total recoveries from January 2009 to the fiscal year ending September 30, 2015, to $26.4 billion.

Of the $3.5 billion recovered by the government in fiscal year 2015, $1.9 billion was recovered from companies and individuals in the health care industry for allegedly providing unnecessary or inadequate care, paying kickbacks to health care providers to induce the use or purchase of certain goods and services, or overcharging for goods and services paid for by federal health care programs including Medicare, Medicaid and TRICARE.

Although this $1.9 billion is down from the $2.3 billion recovered by the federal government in health care fraud recoveries in fiscal year 2014, this is still a substantial recovery by the federal government and clearly indicates the federal government is focused on fraud and abuse in the health care industry.

The government’s favorite enforcement and recovery tool is the FCA. Most false claim actions are filed under the FCA’s whistleblower or qui tam provisions that allow individuals to file lawsuits on behalf of the government and receive up to 30 percent of the recovery in successful cases. FCA cases are attractive to whistleblowers because if the government chooses to participate in the case, the government will use its resources and funds to pursue the case while the qui tam whistleblower generally sits back and waits to collect a check if the government is successful in receiving a settlement or judgment.

Including this past year’s $1.9 billion health care industry recovery, the DOJ has recovered nearly $16.5 billion in health care fraud since January 2009 through September 30, 2015 – more than half the health care fraud dollars recovered since the 1986 amendments to the FCA. Two of the largest health care recoveries in fiscal year 2015 were from DaVita Healthcare Partners, Inc., a leading dialysis services provider in the United States, which paid the government about $800 million for knowingly generating unnecessary waste in the administration of certain drugs, and to resolve alleged violations of the FCA for paying kickbacks to physicians to induce patient referrals to its clinics.

Hospitals were involved in nearly $330 million in settlements and judgments in fiscal year 2015. The DOJ settled with nearly 500 hospitals for a total of $250 million in a qui tam suit related to the alleged implantation of cardiac devices in Medicare patients contrary to criteria established by CMS. Several settlements involved hospitals’ alleged violations of the Stark Law, which prohibits certain financial relationships between hospitals and doctors that could improperly influence patient referrals. Claims involving the pharmaceutical industry accounted for $96 million in settlements and judgments. The DOJ also focused on skilled nursing facilities and rehabilitation facilities in its fiscal year 2015 recoveries.

In the past, the DOJ appeared to focus more on large providers or suppliers and institutional health care systems with respect to its investigations and recovery efforts. However, the DOJ made clear in a September 9, 2015, memorandum that it will hold individuals accountable for corporate wrongdoing. Specifically, on September 9, 2015, Deputy Attorney General Sally Quillian Yates issued a memorandum reinforcing the DOJ’s commitment to using the FCA and other civil enforcement tools to deter and redress fraud by individuals as well as corporate entities. Therefore, historical thinking that the government will focus on deeper pockets in its investigations is no longer the case. Individuals, including physicians and corporate executives, have clearly been put on notice they are on the government’s radar screen and will be held accountable for their actions.

It is likely fiscal year 2016 will be a sequel to fiscal year 2015 and that providers and suppliers should expect significant health care enforcement activities and initiatives to be prosecuted by state and federal government agencies. It is likely that the recoveries in fiscal year 2016 will at least equal or exceed those of fiscal year 2015 due to the fact that the government has invested more funds in its health care enforcement initiatives and because FCA actions are increasing in popularity due to the larger payouts being made to qui tam whistleblowers.

Based on the government’s increased health care enforcement efforts, providers and suppliers would be well served to bolster their compliance efforts by either adopting an appropriate compliance plan if they do not already have one, or updating and retooling their existing compliance plan. Providers and suppliers should also refresh and increase their compliance education activities to avoid their employees or staff from becoming complacent and taking their employer’s compliance plan for granted by not giving it the appropriate focus or attention it deserves.