NYSHFA Audio Conference: Annual Update: Fraud, Waste & Abuse Enforcement Trends

Transcription

1 NYSHFA Audio Conference: Annual Update: Fraud, Waste & Abuse Enforcement Trends Brian M. Feldman, Esq. November 3, 2017 Edward (Ted) H. Townsend, Esq. Harter Secrest & Emery LLP Telephone No. (585)

2 2 INTRODUCTION

3 Speaker: Brian M. Feldman Represents health care facilities in: Responding to and resolving government investigations at the federal and state levels; and Responding to and investigating internal complaints, concerns, and critical incidents to advise facilities on meeting their legal obligations and reducing legal and reputational risk. Former Assistant U.S. Attorney: Six years with the U.S. Department of Justice in the U.S. Attorney s Office in Manhattan (S.D.N.Y.) Senior Litigation Counsel within the Civil Frauds Unit, which handled Medicare and Medicaid False Claims Act matters Conducted civil and criminal health care investigations 3

4 Speaker: Edward (Ted) H. Townsend Lawyer in HSE s healthcare group. Represents providers across the health care landscape, including long-term care facilities. Regularly counsels clients with respect to fraud and abuse questions and compliance concerns and assists clients in navigating government investigations, including with respect to Medicare and Medicaid voluntary self-disclosures. 4

5 Roadmap I. The Fraud, Waste & Abuse Enforcement Landscape II. III. IV. Enforcement Trends and Priorities Recurring Enforcement Issues Best Practices 5

6 I. THE FRAUD, WASTE & ABUSE ENFORCEMENT LANDSCAPE 6

7 The Primary Enforcement Agencies U.S. Department of Justice (DOJ) 7 HHS Office of Inspector General (HHS-OIG) N.Y. Attorney General, Medicaid Fraud Control Unit (MFCU) NY Office of Medicaid Inspector General (OMIG)

8 Overview: Justice Department (DOJ) The False Claims Act (FCA) is the Justice Department s primary weapon for deterring and redressing fraud. Massive recoveries: $31.3 billion in False Claims Act settlements and judgments since $4.7 billion in settlements and judgments in FY2016 (up $1.2 billion from FY2015). Third Highest Annual Recovery in FCA History. Focused on health care: $19.3 billion in health care settlements and judgments from Jan Oct Represents 57% of the recovery since the 1986 adoption of the False Claims Act. $2.5 billion in health care settlements and judgments in FY2016, $1.1 billion of which was from false claims for payments under government contracts. Primarily from whistleblower activity: Of the $4.7 billion recovered in FY2016, nearly $2.9 billion related to whistleblowers, paid $519 million. 702 qui tam suits filed by whistleblowers 8

9 Refresher: False Claims Act Government funds. False claims Falsity is a broad concept. It includes unallowable costs, improper codes, services not rendered. Recklessness or worse The Act requires no actual fraud (i.e., no intent to cheat or steal). Triggers treble damages (3x) plus penalties. Statute of limitations period of up to ten years. Government or whistleblower may initiate. 9

10 FCA Overview: 2016 Recoveries The largest recoveries this past year $1.2 billion came from the drug and medical device industry. Hospitals and outpatient clinics accounted for $360 million in recoveries. Large settlements were also made against drug companies; medical labs; rehabilitation providers; and skilled nursing facilities. 10

11 Refresher: Anti-Kickback Statute Anti-Kickback Statute, 42 USC b(b) Prohibits asking for or receiving anything of value in exchange for Medicare business or referrals DOJ also charges violations as triggering False Claims Act penalties: E.g., Meadow View Nursing Center (2010): Home received 52% discount from a laboratory for certain lab work billed to Medicare. Discount incentivized overutilization. Paid $161K in FCA settlement. 11

12 Refresher: Anti-Kickback Statute Anti-Kickback Statute (continued) Also triggers criminal penalties. E.g., Plea of Valentina Kovalienko (Sept. 15, 2017) Scheme by medical clinic owner to pay patients for referrals and for services rendered by unlicensed staff. Kovalienko was sentenced to 84 months in prison Also was ordered to forfeit $29,336,497. Egregious case. 12

13 Overview: HHS Office of Inspector General (HHS-OIG) Anti-Kickback Statute Stark (Physician Self-Referral) Civil Monetary Penalties Law Exclusion Authority OIG continues to bring enforcement actions against providers that employ excluded individuals. 5/30/17: Illinois nursing home company settles with OIG for $26,748 11/30/16: New York SNF settles with OIG for $205,089 11/15/16: New York SNF settles with OIG for $$110,223 8/2/16: Texas SNF settles with OIG for $408,160 13

14 Refresher: Stark (Physician Self-Referral) Stark Law (Physician Self-Referral), 42 USC 1395nn Strict liability statute. Prohibits any facility providing designated health services from accepting Medicare referrals from physicians with certain financial relationships with the facility. Designated health services include lab services, physical therapy, and occupational therapy. Referrals include orders. Pay attention to physicians who are owners, investors, or consultants. 14

15 Refresher: Stark (Physician Self-Referral) Stark Law (Physician Self-Referral) (continued) Complex statute; many complicated exceptions. Violations may lead to: Denial of payments/refund obligation HHS-OIG imposition of Civil Monetary Penalties Treble damages and penalties Program exclusion Where questions arise, seek legal guidance. 15

16 Overview: NY Attorney General s Medicaid Fraud Control Unit (MFCU) Prosecutes Medicaid Fraud Prosecutes Resident Abuse, Neglect, and Mistreatment Responsible for Medicaid False Claims Act Cases Under the New York False Claims Act 16

17 Refresher: New York State False Claims Act Similar to federal False Claims Act. Health care FCA cases litigated by MFCU in federal and state court. FCA applies retroactively. Written to have retroactive effect. New York Courts have conclusively determined that retroactivity is constitutional. People v. Sprint Nextel Corp, 26 NY3d 98 (2015) United States ex rel. Associates Against Outlier Fraud v. Huron Consulting Group, Inc., 09-cv (JSR) (S.D.N.Y. Aug. 25, 2010) 17

18 Overview: NY Office of Medicaid Inspector General (OMIG) 18 Audits Investigations As stated in OMIG s Work Plan, OMIG will use undercover investigators to identify fraud and assist other investigators in confirming the existence of fraud. Exclusions & Terminations Censure; Exclusion; Termination; limitations on Medicaid participation Referrals from NYSED, OPMC, HHS-OIG; review criminal convictions Compliance Program Reviews

19 II. ENFORCEMENT TRENDS & PRIORITIES 19

20 Top Enforcement Trends & Priorities Managed Care 2 Unnecessary Rehabilitation Therapy 3 Pharmacy Kickbacks 4 Lab Work 5 Refresher: Retention of Overpayments 20

21 1 Managed Care/Medicare Advantage Organizations Fertile ground for enforcement. Government is taking a more active role in combating healthcare fraud and billing practices, with a focus on Managed Care Organizations ( MCOs ) and Medicare Advantage Organizations ( MAO ). Typically manifests through government intervention in whistleblower actions. Focused on multiple avenues, mostly designed to maximize the payment that the MCO or MAO received: Inflated risk adjustment payments. Upcoding diagnosis codes. Implied certification of false claims. Retention of overpayments. 21

22 1 - U.S. DOJ Intervention: UnitedHealth Group In February and May 2017, the Government intervened in two whistleblower actions in the Central District of CA alleging that UnitedHealth Group obtained inflated risk adjustment payments based on untrue information about health status of beneficiaries. United States of America ex rel. Benjamin Poehling v. UnitedHealth Group, Inc., No (Feb. 2017) United States ex rel. Swoben v. Secure Horizons, et al., (May 2017) 22

23 1 - U.S. DOJ Intervention: UnitedHealth Group Allegations that UnitedHealth knowingly disregarded information about beneficiaries medical conditions, which increased its Medicare payments. UnitedHealth funded, but ignored, chart reviews for certain beneficiaries. Knowing disregard of the substance of those chart reviews led to increased risk adjustment payments. 23

24 1 - U.S. DOJ Intervention: UnitedHealth Group Medicare Advantage plans not only receive taxpayerfunded payments, but are intended for the health and welfare of the beneficiaries, This action sends a warning that our office will continue to scrutinize and hold accountable Medicare Advantage insurers to safeguard the integrity of the Medicare program. Sandra R. Brown, Acting U.S. Attorney for the Central District of California, May 2,

25 1 MAO Enforcement: Freedom Health Freedom Health, a Tampa, FL-based provider of managed care services, and related entities, agreed to pay $31.7 million to resolve allegations that they violated the False Claims Act. Freedom Health s COO paid $750,000 for his involvement in one scheme. Settlement resolved allegations of illegal schemes conducted by Freedom Health to maximize their payment from the government in connection with their Medicare Advantage plans. Initiated by whistleblower action. 25

26 1 MAO Enforcement: Freedom Health Specific allegations included that Freedom Health: Submitted unsupported diagnosis codes to CMS, resulting in inflated reimbursements for two plans. Made material misrepresentations regarding the scope and content of its provider network. 26

27 1 MAO Enforcement: Freedom Health Also entered into an innovative Corporate Integrity Agreement with the government, requiring: A more robust Compliance Program to be instituted, with certain Board oversight and management certifications as to such oversight. Certain review procedures to be implemented, including the engagement of an independent review organization to perform the following reviews: Risk Adjustment Provider and Facility Network Training plans and programs. 27

28 1 MCO/MAO Enforcement: Takeaways MCO/MAOs are central to the health care market. Review compliance programs and compliance plans and ensure proper oversight. Diagnosis codes need to be reviewed and supported this applies to providers, too. Like providers, MCOs and MAOs make certain express certifications to the government that information submitted is accurate, complete and truthful. If certifications are false, liability can arise. 28

29 2 - Unnecessary Rehabilitation Therapy The provision of Medicare benefits must be dictated by patient need, not by Medicare providers efforts to maximize profits by pressuring their employees to provide medically unnecessary services... The [DOJ] will continue to aggressively pursue companies that seek to engage in this kind of fraudulent scheme. Benjamin Mizer, Principal Deputy Asst. Attorney General, DOJ s Civil Division, Oct. 29,

30 2 - Unnecessary Rehabilitation Therapy DOJ remains focused on bringing actions against SNFs that provide medically unnecessary and unreasonable rehabilitation therapy services to patients. Enforcement is consistent with HHS OIG 2016 Work Plan and with the September 2015 OIG report, entitled The Medicare Payment System for Skilled Nursing Facilities Needs to be Reevaluated. Prior OIG reviews have found that Medicare payments for therapy greatly exceeded SNFs cost for therapy. In addition, we have found that SNFs have increasingly billed for the highest level of therapy even though key beneficiary characteristics remained largely the same. 30

31 2 - Unnecessary Rehabilitation Therapy: Life Care Centers of America Life Care Centers of America Inc. (Oct. 24, 2016) Massive Settlement. Agreed to pay a total of $145 million to resolve FCA allegations that it caused the submission of false claims for medically unnecessary rehabilitation services. $145 million + a five year Corporate Integrity Agreement. $29 million recovery for whistleblowers. 31

32 2 - Unnecessary Rehabilitation Therapy: Life Care Centers of America Cleveland, TN based SNF; owns and operates more than 220 skilled nursing facilities across the country. Stems from allegations that between Jan. 1, 2006 and Feb. 28, 2013, Life Care submitted false claims for rehabilitation therapy by engaging in a systematic effort to increase its Medicare and TRICARE billings. Highest level of Medicare reimbursement for skilled nursing facilities is for Ultra High patients who require a minimum of 720 minutes of skilled therapy from two therapy disciplines (e.g., physical, occupational, speech), one of which has to be provided five days a week. Corporate-wide policies and practices designed to place as many beneficiaries in the Ultra High reimbursement level irrespective of the clinical needs of the patients, resulting in the provision of unreasonable and unnecessary therapy to many beneficiaries. 32

33 2 - Unnecessary Rehabilitation Therapy: Life Care Centers of America Also sought to keep patients longer than was necessary in order to continue billing for rehabilitation therapy, even after the treating therapists felt that therapy should be discontinued. Life Care carefully tracked the minutes of therapy provided to each patient and number of days in therapy to ensure that as many patients as possible were at the highest level of reimbursement for the longest possible period. Corporate-wide policies and practices designed to place as many beneficiaries in the Ultra High reimbursement level irrespective of the clinical needs of the patients, resulting in the provision of unreasonable and unnecessary therapy to many beneficiaries. 33

34 2 - Unnecessary Rehabilitation Therapy: Life Care Centers of America This resolution is the largest settlement with a skilled nursing facility chain in the department s history. It is critically important that we protect the integrity of government health care programs by ensuring that services are provided based on clinical rather than financial considerations. Benjamin Mizer, Principal Deputy Asst. Attorney General, DOJ s Civil Division, Oct. 24,

35 2 - Unnecessary Rehabilitation Therapy: Life Care Centers of America Billing federal healthcare programs for medically unnecessary rehabilitation services not only undermines the viability of those programs, it exploits our most vulnerable citizens. Nancy Stallard Harr, U.S. Attorney, Eastern District of Tennessee, Oct. 24, 2016 It is imperative that providers make healthcare decisions based upon a patient s need for services rather than a self-serving desire to maximize financial profit. Our office will continue to investigate fraud allegations, in order to ensure that providers do not compromise the integrity of our public health care programs. Wilfredo A. Ferrer, U.S. Attorney, Southern District of Florida, Oct. 24,

36 2 - Unnecessary Rehabilitation Therapy: Life Care Centers of America Therapy provided in skilled nursing facilities must be medically reasonable and necessary, and we will continue to vigorously investigate companies that subject their residents to needless and unreasonable therapy. Daniel R. Levinson, HHS Inspector General, Oct. 24,

37 2 - Unnecessary Rehabilitation Therapy: Genesis Healthcare Genesis Healthcare Inc. (June 16, 2017) Agreed to pay $53,639,288, including interest, to settle six separate lawsuits alleging both Medically unnecessary therapy and hospice services; and Grossly substandard nursing care. $9.67 million recovery for five whistleblowers. 37

38 2 - Unnecessary Rehabilitation Therapy: Genesis Healthcare Four sets of allegations: Billed: (i) for hospice services for patients who were not terminally ill; and (ii) inappropriately for physician evaluation service; Provided therapy longer than medically necessary and/or billed more therapy minutes than the patients actually received. Related: billed patients at a higher Resource Utilization Group level. Outpatient services were billed that were (i) not medically necessary or (ii) unskilled. Worthless services, mainly a failure to provide sufficient nurse staffing. 38

39 2 - Unnecessary Rehabilitation Therapy: Genesis Healthcare It s disturbing when health care companies bill Medicare and Medicaid to care for vulnerable patients, but provide grossly substandard care and medically unnecessary services just to boost company profits We will continue to crack down on medical providers who betray the public s trust and the needs of vulnerable patients through fraudulent billing and irresponsible practices. Steven J. Ryan, Special Agent in Charge (HHS-OIG), Jun. 16,

40 2 - Unnecessary Rehabilitation Therapy: Genesis Healthcare Important: Settlement applied to both Genesis and companies and facilities that Genesis acquired over time. December 2012 acquisition; allegations were from Practice points: Due diligence considerations Disclosure schedules Representations and warranties Indemnification Insurance 40

41 2 - Unnecessary Rehabilitation Therapy: Reliant Care Group Reliant Care Group et al. (Jul. 5, 2017) and affiliated SNFs. Agreed to pay $8,368,878 to resolve allegations that, over six years, Reliant provided unnecessary physical, speech and occupational therapy to residents. Therapists were pressured to provide therapy to residents even when therapists believed the services were not medically necessary. Five Year Corporate Integrity Agreement. 41

42 2 - Unnecessary Rehabilitation Therapy: Foundations Health Solutions, et al Foundations Health Solutions, Olympia Therapy and Tridia Hospice Care and their executives (Jul. 17, 2017) Collectively agreed to pay $19.5 million to resolve allegations that: therapy services at 18 SNFs were provided at excessive levels; False claims were submitted for hospice services provided to patients who were ineligible for the hospice benefit due to lack of certifications or medical examinations; and The two executives received kickbacks to refer patients to a separate home health care services provider. Five Year Corporate Integrity Agreement. 42

43 2 - Unnecessary Rehabilitation Therapy: Foundations Health Solutions, et al It is unacceptable for an entity entrusted to care for our most vulnerable and elderly citizens to make decisions based on profit, not quality of care. Subjecting the elderly to inappropriate levels of therapy can be physically harmful, and failing to properly certify and re-certify hospice patients can have a devastating impact on the patients and their families. Benjamin C. Glassman, U.S. Attorney for the Southern District of Ohio, Jul. 17,

44 2 - Unnecessary Rehabilitation Therapy: Whittier Health Network Whittier Health Network (Haverhill, MA) and its Director of Long Term Care, Leo Curtin (Oct. 13, 2016) collectively agreed to pay $2.5 million to resolve allegations concerning inflated Medicare claims stemming from services performed at Whittier facilities in MA and NY by Therapy Resources Management ( TRM ), a rehabilitation services provider. Whittier and Mr. Curtin allegedly failed to prevent TRM from engaging in a pattern and practice of fraudulently inflating the reported amounts of therapy provided to Medicare Part A patients in Whittier facilities Specifically, bills were submitted for therapy that did not occur: billed for actual therapy services when only an initial evaluation occurred; Therapists rounded time estimates up from the actual minutes of therapy provided. 44

45 2 - Unnecessary Rehabilitation Therapy: Take Aways Massive settlements are on the table Squarely in the crosshairs To reiterate, assess whether your therapy levels are defensible. Are they appropriate? Are determinations adequately documented? Are you conducting and documenting all certifications? Think about the optics of the records you create and make sure that each clinical decision is clearly outlined Are there incentives that might be viewed as creating provider biases towards unnecessary therapy? Scope of liability extends to executives. Be aware of third party rehabilitation services contractors practices and be proactive about reviewing patterns and practices (e.g., Whittier) 45

46 3 Pharmacy Kickbacks: Omnicare Omnicare, Inc. (Oct. 17, 2016) Nation s largest nursing home pharmacy, paid $ million to resolve allegations that it solicited and received kickbacks. $20.3 million of the settlement to the United States. $7.8 million was allocated to cover Medicaid program claims by states that elect to participate in the settlement. $3 million whistleblower recovery. Alleged kickbacks were sought and received from drug manufacturer Abbot Laboratories in exchange for promoting Depakote for nursing home patients. 46

47 3 Pharmacy Kickbacks: Omnicare Kickbacks were disguised as grants and educational funding: Omnicare solicited and received contributions for its Re*View program, a purported health management/educational program that was actually a front for kickbacks to promote increased Depakote utilization. Internal documents described Re*View as a one extra script per patient program. Omnicare and Abbot entered into agreements for increasing levels of rebates based on the number of SNF residents serviced and the amount of Depakote prescribed to such residents. Abbot funded Omnicare management meetings on Amelia Island, FL. Ex: Abbot offered sports tickets to management and made other, unspecified payments to Omnicare pharmacies. 47

48 3 Pharmacy Kickbacks: Omnicare This settlement ensures that some of the most vulnerable amongst us, those suffering from dementia, are provided with the level of care they deserve, Families and loved ones who make the difficult decision to place those they care about into a nursing home must do so with the confidence that medical decisions are being made with the interests of the patient in mind, not big drug companies. John P. Fishwick Jr., U.S. Attorney for the Western District of Virginia, Oct. 17,

49 4 Lab Work: Prestige Healthcare Prestige Administrative Services, LLC, d/b/a Prestige Healthcare (Apr. 10, 2017). Louisville, KY-based owner and operator of nursing homes in several states, including WI, agreed to pay $995,000 to resolve allegations of a violation of the False Claims Act. Discovered during a survey conducted by WI regulators. Resolved civil liability against Prestige only; liability of other individuals and entities is still possible. 49

50 4 Lab Work: Prestige Healthcare Alleged scheme involved unnecessary genetic testing. Background: SNF operators place orders with clinical labs for diagnostic lab tests for residents. In order to be reimbursable, the test must considered medically necessary and be ordered by a treating physician. Prestige failed to obtain physician orders for such tests. In fact, Prestige physicians were not aware of and did not agree with the medical necessity of testing. Patients (or their personal representatives) were neither informed of the testing prior it being conducted, nor given the opportunity to object. 50

51 4 Lab Work: Prestige Healthcare 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. Lamont Pugh III, Special Agent in Charge (HHS-OIG), Apr. 10,

52 4 Lab Work: Prestige Healthcare Takeaways: Obtain appropriate orders. Keep residents and appropriate representatives fully informed. Document decisions, clearly and consistently. Understand issues so that state surveyors are not the ones discovering the issue. Keep abreast of new and evolving health care technologies, and make sure processes for such technologies are well-defined. 52

53 5 Refresher: Returning Overpayments It is illegal to knowingly retain an overpayment. Such retention violates the ACA, which requires providers to return Medicare/Medicaid overpayments within 60 days of identification. Retention violates the False Claims Act, as amended by the Fraud Enforcement Recovery Act of 2009 (FERA), which makes it illegal to knowingly avoid an obligation to the government. 53

54 5 - Retention of Overpayments: Continuum United States ex rel. Kane v. Continuum Health Partners, (S.D.N.Y.) Hospitals returned all overpayments, but not within 60 days; ultimately, took two years to calculate and repay. Whistleblower filed suit; settled for $2.95 above and beyond the overpayment. Government characterized as a fraud to hold onto money with the hopes that the government will not figure it out. 54

55 5 - Retention of Overpayments: Take Aways Expect more enforcement activity, at both federal and New York State level. Expect more whistleblower activity. Work diligently to identify, report, and refund overpayments. Consider attorney-client privileged investigations. 55

56 III. RECURRING ENFORCEMENT ISSUES 56

57 A Couple Classic Problems 1. Employment of Excluded Individuals 2. Worthless Services 57

58 1 Employment of Excluded Individuals Remains a recurring enforcement theme. Illinois-based Heritage Robinson, LLC and Burnsides Community Health Center, Inc. (collectively, "Heritage") settled with OIG on May 30, 2017 for $26, to resolve allegations that Heritage employed a licensed practical nurse who was excluded from participating in any Federal health care program. OIG's investigation revealed that the nurse provided items or services to Heritage patients that were billed to Federal health care programs. On November 30, 2016, Ditmas Park Rehab/Care Center in Brooklyn, New York, entered into a settlement agreement with OIG for $205, to resolve allegations that Ditmas Park employed a licensed practical nurse who was excluded from participating in any Federal health care program. OIG's investigation revealed that the nurse provided items or services to Heritage patients that were billed to Federal health care programs. Fort Tryon Rehabilitation and Healthcare Facility, LLC in New York, New York, entered into a $110, settlement agreement with OIG on November 15, 2016 to resolve allegations that Fort Tryon employed two individuals a registered nurse supervisor and a licensed practical nurse -- who were excluded from participating in Federal health care programs. While excluded, both individuals provided items or services to Fort Tryon patients that were billed to Federal health care programs. 58

59 1 Employment of Excluded Individuals New York expects providers to conduct monthly exclusion checks. Must check all employees, contractors, or service providers who are involved in generating a claim or bill for services being paid by Medicaid. See OMIG Guidance (June 8, 2010); see also DOH Medicaid Update Apr. 2010, Vol. 26, No. 6. Must check at initial hiring and on a monthly basis: OMIG database HHS-OIG database GSA Providers should maintain records of their monthly due diligence. Providers should conduct similar checks for staff involved with Medicare claims and services. 59

60 2 Worthless Services In order for poor care as opposed to an actual lack of care delivery to be considered under the False Claims Act, the performance of the service (must be) so deficient that for all practical purposes, it is the equivalent of no performance at all. Momence Meadows Typically triggered by non-existent or grossly substandard SNF services Consistent enforcement; settlement amounts have changed Refresher: Extendicare $38 million in

61 2 - Worthless Services: Vanguard United States vs. Vanguard, et al. CA 3:16 cv (M.D. Tenn 2016) (filed Sept. 7, 2016) Brentwood, TN-based Vanguard Healthcare LLC 14 long-term care nursing home providers operating in the U.S. U.S. DOJ filed a lawsuit against six Vanguard entities plus the Vanguard Director of Operations Alleged non-existent or grossly substandard SNF services 61

62 2 - Worthless Services: Vanguard Our seniors rely on the Medicare and Medicaid programs to help care for them with dignity and respect. It is critically important that we confront nursing home operators who put their own economic gain over the needs of their residents. Operators who bill Medicare and Medicaid while failing to provide essential services will be held accountable. Benjamin Mizer, Principal Deputy Asst. Attorney General, DOJ s Civil Division, Sept. 7,

63 2 - Worthless Services: Vanguard Allegations: between Jan 1., 2010 and Dec. 31, 2015, six facilities failed to provide the most basic and essential skilled nursing services to their residents. Examples: Chronic staffing and critical medical supply shortages Failure to provide standard infection control Failed to provide physician-ordered wound care Failed to manage residents pain Provided unnecessary and excessive psychotropic medication Using unnecessary physical restraints 63

64 2 - Worthless Services: Vanguard As a result, residents suffered: Pressure ulcers Falls Dehydration Malnutrition Among other harms 64

65 2 - Worthless Services: Vanguard Further alleged that the Vanguard Director of Operations from September 2011 through August 2014 knew resident care was non-existent or substandard and failed to act Four Vanguard facilities allegedly also fraudulently submitted falsified Pre-Admission Forms 65

66 2 - Worthless Services: Vanguard Action was investigated by: Commercial Litigation Branch of DOJ s Civil Division U.S. Attorney s Office for the Middle District of Tennessee OIG Tennessee Attorney General s Office Tennessee Bureau of Investigation Medicaid Fraud Control Unit 66

67 2 Worthless Services: Daybreak Daybreak Partners, LLC Holding companies for SNFs throughout Texas Settlement required Daybreak to pay $5.3 million to resolve allegations that it billed Medicare and Medicaid for materially substandard nursing services. Note: NOT non-existent or grossly substandard. 67

68 2 Worthless Services: Daybreak Between 2006 and 2010, examples of materially substandard and/or worthless services included Daybreak s failure to: follow appropriate fall protocols; follow appropriate pressure ulcer and infection control protocols; properly administer medications to several residents to avoid medication errors; follow doctors orders for several residents; provide appropriate mental health treatment to several residents; answer several residents call lights promptly; institute appropriate infection control measures for several residents; provide a habitable living environment, adequate equipment, and needed capital expenditures; and investigate and report serious incidents to appropriate authorities on several occasions. 68

69 2 Worthless Services: Daybreak In addition to our responsibility to preserve federal tax dollars, we have a special obligation to protect the most vulnerable members of our community. This settlement reflects our commitment to ensuring that medical providers for our ailing friends and family are not paid for substandard services. John Parker, U.S. Attorney, Northern District of Texas, Oct. 24,

70 2 Worthless Services: Health Services Management (HSM) HSM settled with the government for $5 million to resolve claims of worthless services and services that were never provided. (Oct. 19, 2017) HSM: Holding company for SNFs throughout Texas and the US. Whistleblower, an employee at Huntsville Health Center, a 92- bed HSM-owned Texas nursing home and rehab center, filed a qui tam action claiming that she witnessed abuse and neglect, inadequate care, physical and verbal abuse and denial of basic services such as food and water. 70

71 2 Worthless Services: Health Services Management (HSM) Investigation found substandard and deficient services that were potentially harmful to patients. Extent of worthless services provided was not outlined in the settlement. Claims filed for such services were deemed fraudulent. It's disturbing when a nursing home company accepts Medicare and Medicaid money to care for vulnerable nursing home residents and in return provides substandard care, as alleged in this case. C.J. Porter, Special Agent in Charge (DHHS-OIG), Oct. 19,

72 2 - Worthless Services: Take Aways Be prepared for more worthless services investigations, settlements, and litigation from DOJ. Be prepared for similar filings by whistleblowers and similar cases from MFCU. 72

73 73 IV. BEST PRACTICES

74 Best Practices A. Plan in advance for problems Robust compliance programs B. Deal with problems right away Effective internal investigations C. Take the Government seriously Strategic defense of government investigations 74

75 A. Advance Planning Robust compliance programs Reasons: 1. To prevent problems through education and deterrence; 2. To discover and put an end to problems; 3. To provide complainants with a constructive process to channel concerns; 4. To eke out some credit in the event things go terribly wrong. 75

76 Advance Planning Getting Credit Regulators and law enforcement consider compliance efforts in assessing sanctions for violations Compliance efforts are a factor in federal criminal charging decisions Compliance efforts are likewise a factor in federal organizational sentencing decisions. 76

77 Only Effective Programs Count Effective does not mean effective against all problems Paper program vs. effective program (USAM): Sufficient staff Adequately informed employees Belief, among employees, that program is legitimate Other factors (USSG): Oversight by high-level personnel Consistent enforcement of compliance standards, including disciplinary mechanisms Reasonable steps to respond to and prevent repeat violations 77

78 B. Deal With Problems Right Away Why? 1. To fix legitimate problems 2. To reduce risk and minimize legal exposure 3. To create a track record of prompt, effective action 4. To avoid inadvertently creating whistleblowers 78

79 Do Not Ignore Problems Whistle-Blowers' Experiences in Fraud Litigation against Pharmaceutical Companies, New England Journal of Medicine 362: (May 13, 2010) 1. Integrity is chief motivator. Whistleblowers most frequently reported issues internally and reluctantly turned to legal action when the companies failed to respond. 2. Public health is the second most frequent motivator. Compliance programs should be respectful of complainants and, to the extent feasible, include them in the process: Confirm receipt of complaint; provide updates, if appropriate; inform complainants of resolution 79

80 Investigate When Needed For potentially serious complaints (e.g., fraud or abuse), the response should include: Legal counsel; Administrator/Executives; and Governing body (e.g., Board or Audit Committee) Many times, an internal investigation will be necessary to: Ascertain the facts; Assess legal, regulatory, and/or policy violations; Recommend corrective action; and Defend actions later 80

81 Include Legal Counsel at the Outset Attorney-Client Privilege Privilege exists to promote frank and open exchange of information and legal advice Discussions, investigation, and reports will be subject to discovery if counsel is not directing the process to render legal advice Need for Legal Advice Complexity and counterintuitive laws and regulations (e.g., False Claims Act, Anti-Kickback Statute, Stark) Obligations to self-disclose Varying self-disclosure practices/procedures for different agencies & jurisdictions 81

82 Discuss These Preliminary Issues with Your Legal Counsel Mechanics of Attorney-Client Privilege Engagement & Lines-of-Reporting Insurance & Indemnification Preservation Protocols Investigations Team Legal Framework 82

83 Be Prepared to Self-Disclose Complex legal and strategic questions, dependent on particular factual scenario and jurisdiction Often, there is an obligation to self-disclose and refund overpayments (Medicare/Medicaid, including Medicare/Medicaid managed care): Reverse False Claims (31 USC 3729(a)(1)(G)) ACA -- Knowing retention of overpayment (42 U.S.C. 1320a-7k) Refusal to self-disclose and refund will increase organizational and personal risks 83

84 C. Take the Government Seriously Investigations may start with letters, subpoenas, or warrants. Investigations may end with jail, judgments, and exclusion. Even if the Government is wrong on the merits, there is still a danger of procedural violations: Obstruction of justice; perjury; contempt Spoliation; litigation sanctions Meritless investigations may still be public relations disasters. Seek legal counsel immediately. 84

85 Assess Legal Exposure ASAP Key questions for basic strategy decisions: Who has exposure? What level of exposure: Criminal? Civil? Administrative? Assessment may require simultaneous internal investigation 85

86 Ensure Internal Support, As Needed Defense may require team participation: Witnesses; custodians (document collection) In-house or external expertise (e.g., coding, billing, standards of care) Decision-making and budgeting Must be prioritized Keep stakes in mind Consider work coverage for employees needed for support (avoid alienating witnesses) 86

87 Get Ahead of the Government Understand Government priorities and theories, if possible Master factual context and legal analysis; gather evidentiary, expert, and legal support as necessary to advocate position Use discussions as opportunity to frame facts or positions; treat specific Government inquiries as opportunities to reeducate Government Ultimately, seek to address Government s concerns before the Government invests substantial efforts to draw its own conclusions (which may be harder to shake) 87

88 Do Not Get Obsessed With Leaks The Government generally will not and cannot reveal whether a new investigation arises out of a sealed FCA complaint Avoid a witch hunt Distracts from internal investigation; very little upside May create retaliation problem Atmospherics can lend credibility to whistleblowers complaints May alienate otherwise loyal employees If you discover the likely whistleblower, speak with legal counsel about measures to avoid retaliation claims. 88

89 Optimize Any Resolution Negotiate the settlement in the context of the Government s concerns: Understand Government settlement processes and priorities Deal strategically with collateral consequences: Other regulators (e.g., HHS-OIG, State/Federal) Private party actions (e.g., admissions, plaintiffs lawyers) Public relations (e.g., talking points) Sequence the settlement to avoid negative press 89

90 90 QUESTIONS?

91 THANK YOU. 91 Brian M. Feldman, Esq. Edward H. Townsend, Esq. Harter Secrest & Emery LLP Telephone No. (585)