Recently, the First Circuit had an opportunity t apply its renewed reading of “false or fraudulent” statements, in United States ex rel. Jones v. Brigham and Women’s Hospital, No. 10-2301 (1st Cir. May 7, 2012). In this Medicare fraud case, the defendants allegedly violated the False Claims Act by including false statements in a grant application that was submitted to the NIH. Importantly, at least from the defendants’ point of view, the application did not include the supposed false data that formed the basis of their study proposal.

In reversing the lower court’s decision, the First Circuit ruled that the statements in the grant application were still sufficiently “false” to trigger FCA liability. According to the Court, “Although it is true that the allegedly false [ ] data was not itself included in the Application, that fact is not determinative of the false claim allegation. The statute makes it a violation to ‘use . . . a false record or statement to get a false or fraudulent claim paid or approved by the Government.’ 31 U.SC. § 3729(a)(2).”

In a sense, the underlying false data tainted the subsequent statements in the grant application. The court noted, “These statements rel[ied] on the data challenged by [the Relator] as false. In the language of the FCA, they ‘use[d] . . . a false record.’ Thus premised, the statements would not be ‘true, complete and accurate’ as required by the certifications signed” by the Defendants.

The Court stressed that the relator would still need to clear two other FCA elements—materiality and knowledge. However, the “falsity” element was sufficiently pled, even if the allegations did not neatly fit into an “express certification” or “implied certification” box.

More information for whistleblowers is located at the Nolan & Auerbach, P.A. website.

Since the False Claims Act was modernized in 1986, the federal government has used the Act to return over $30 billion to the US Treasury. Attorney General Holder noted that of that figure, $20 billion in recoveries were reported as the result of qui tam whistleblower actions, including Medicare fraud and Medicaid fraud.

Assistant Attorney General West highlighted the tremendous recent success of the Act, which was recently updated in 2009. Specifically, West noted that over 25% of all dollars recovered under Act have been realized since 2009. Notably, during this three-year span, 84% of the recoveries were the result of whistleblower-initiated False Claims Act actions.

Senator Leahy and Congressman Berman, co-sponsors of the recent False Claims Act Amendments of 2009, echoed their support for the Act’s public-private partnership. They encouraged the audience to continue the fight against government fraud, especially as the country faces mounting fiscal concerns.

More information for healthcare fraud whistleblowers is located at the Nolan & Auerbach, P.A. website.

Under 31 U.S.C. 3731(b), the statute of limitations for the False Claims Act provides that a civil action may not be brought more than six years after the date on which the violation is committed or more than three years after the date when facts material to the right of action are known or reasonably should be known by a Department of Justice official charged with responsibility to act, whichever occurs last.

Most of the confusion surrounding this statute of limitations language involves the application of the three-year tolling provision. This uncertainty recently played out in a Middle District of Tennessee courthouse, where the government attempted to use the tolling provision to reach actions from the late 1990s.

In this case, United States v. Carrell, No. 3:09-cv-00445 (M.D. Tenn. Dec. 19, 2011), the court denied a defendant’s summary judgment motion, for there were genuine issues of material fact as to when the government knew or should have known that eight cost reports from a home health management company were false or fraudulent.

Medicare reimburses the total amounts that a home health management company charges in cases involving unrelated parties, but for related parties Medicare reimburses only the management company’s actual costs, without profits. Here, the government alleged that the defendants submitted false and fraudulent claims in their 1999, 2000, and 2002 cost reports to Medicare because it failed to disclose the related party status of their home health agencies and the management company that provided services to those agencies.

The defendants maintained that the government’s related party allegations were known to it as far back as 1989 and were repeatedly investigated and pursued by government agents. For example, the defendants alleged, the fiscal intermediary received an anonymous letter in 1989 that raised the possibility of Medicare fraud with regard to the ownership and operation of their home health care agencies.

The court, in rejecting this argument, found that the material fact of which the government needs to be aware prior to taking any action was not simply the alleged related party relationship, but the filing of fraudulent and falsified cost reports that failed to disclose the relationship. According to the court, this information was not fully revealed to the government until the government’s fiscal intermediary conducted a comprehensive final audit of the cost reports and issued a written notice of program reimbursement (NPR). Here, the first NPR was not issued until 2004 and the remaining cost reports were not suspended until 2009. Thus, the court concluded that genuine issues of fact remained as to when the government knew or reasonably should have known that they were false and/or fraudulent.

For more information about qui tam law and healthcare fraud, contact Nolan & Auerbach, P.A.

According to the government’s complaint, Johnson & Johnson paid $50 million to Omnicare between 1999 and 2004 to get it to push Risperdal to elderly patients with dementia, and then hid those kickbacks as payments for services that Omnicare never actually provided. Omnicare then enacted intervention programs such as the “Risperdal Initiative” to persuade physicians to prescribe the drug to elderly dementia patients.

In an effort to derail the action, Johnson & Johnson argued that the so-called “illegal kickbacks” were actually legal rebates, permissible under the controlling Medicare regulations. However, after extensive briefing, Judge Sterns sided with the plaintiffs and denied Johnson & Johnson’s motion to dismiss.

This case was originally filed nearly eight years ago by an Omnicare pharmacist that was troubled by his employer’s business practices of accepting kickbacks from drug makers. Ultimately, he decided to take a stand and filed qui tam actions against Ominicare and several pharmaceutical companies.

In 2009, Omnicare settled the FCA allegations for $98 million, quieting claims that the company accepted kickbacks that were hidden as data fees, education fees and as payments to attend Omnicare meetings. However, Johnson & Johnson sought to silence the whistleblower’s action through the legal system. Now, with the government intervening in the action in 2010 and the court giving a green light to the action last week, Johnson & Johnson might be reconsidering options.

For more information about qui tam law and health care fraud, contact Nolan & Auerbach, P.A.

The senate unanimously passed the amended bipartisan legislation, according to the release, and the bill is now headed to the President’s desk to be signed into law.

To see the press release, go to iowapolitics.com

For more information about Qui Tam law and Health Care Fraud, contact Nolan and Auerbach, PA.

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Medicare and Medicaid programs depend on physicians and other health care professionals to exercise independent judgment in the best interests of patients. Financial incentives tied to referrals have a tendency to corrupt the healthcare delivery system in ways that harm the federal programs and their beneficiaries. Corruption of medical decision-making can result when a physician refers a patient to a provider on the basis of the physician’s financial self-interest instead of the patient’s best interests. Restrictions on the practice of self-referral exist at both the state and federal levels.

Medical directorships, interest free loans/forgiveness of debts, illegal recruitment arrangements and improper discounts in the form of professional courtesy, may represent additional financial windfalls to physicians, resulting in hospital referrals and a violation of the “Stark” statute. A Stark scenario may also be present when a hospital circumvents potentially compliant contracts by providing outside of what appear to be legitimate contracts, office space, renovations, equipment, furniture, housekeeping services, office supplies, copy and fax machines, telephone, utility and transcription services to referring physicians for free or less than fair market value.