February MINNESOTA LAWYER Staying true to the False Claims Act

16 ■ February 8, 2008 MINNESOTA LAWYER Staying true to the False Claims Act ‘Qui tam’ provisions in the False Claims Act provide the federal government with a powerful tool for punishing fraud and abuse; effective compliance programs are the best way to avoid violations. BY JOHN M. DEGNAN AND S A L LY A . S C O G G I N In recent years, the U.S. government has made clear its intention to reduce fraud and abuse in government health care spending, particularly in the Medicare and Medicaid programs. Health care fraud investigations are among the highest priority within the FBI’s white collar crime program. So it is critical that health care institutions and providers understand the serious risks associated with violations of federal law, including qui tam provisions in the False Claims Act. The False Claims Act creates liability for anyone who knowingly submits a false or fraudulent claim for payment to the government. And under the law’s qui tam provisions, a private person may initiate a civil action for violations on behalf of the government. John Degnan Sally Scoggin Claims Act. If a law meets certain criteria, the state may keep a percentage of the recoveries obtained for its Medicaid program. Many hospitals, clinics and other health care providers have incurred multimillion-dollar settlements and judgments following allegations by qui tam whistleblowers that the provider submitted false claims under federal programs. However, a qui tam whistleblower must be the “original source” for information regarding the wrongdoing and have “direct and independent knowledge of the information on which the allegations are based,” as clarified by the U.S. Supreme Court in Rockwell International Corp. v. United States. In that case, a former employee initiated the government’s investigation, but was found not to be the original source because he lacked direct and independent knowledge of the specific allegations upon which the jury verdict was ultimately based. There are powerful incentives for employees and others to initiate these actions. Depending on several factors, including whether the government intervenes, a whistleblower may be awarded between 15 percent to 30 percent of the proceeds of any award or settlement, plus attorneys’ fees, costs and expenses of the action. The federal government recently offered additional incentives to states that adopt laws that parallel the False Health care fraud claims As of August 2006, more than 450 hospitals across the country were the subject of Medicare fraud investigations. Regardless of whether a settlement or judgment results, the cost of simply responding to an investigation can be significant. Detailed reviews of billing records and other documentation, often covering many years, may mean hiring or reassigning staff, in addition to attorney and expert fees. Last year, settlements and judgments from qui tam actions reportedly totaled over $1.45 billion. If a False Claims Act violation occurs, the federal government can recover treble damages plus civil penalties, which range from $5,500 to $11,000 per violation. Depending on the number of violations involved, these penalties can be enormous. In addition, individuals and institutions found to have undermined the integrity of Medicare or Medicaid risk exclusion from further participation. Recent qui tam cases provide dramatic examples of the outcomes and types of practices currently being targeted. Fraud schemes have included duplicate billing, overbilling, false cost reports, unbundling and billing for medically unnecessary services. For example Tenet Healthcare Corporation, the nation’s second largest hospital chain, paid more than $900 million for allegations of excessive outlier payments, kickbacks and upcoding. In 2005, HealthSouth found itself in trouble — four qui tam lawsuits accounted for $76 million of a $327 million settlement for Justice Department claims. Several health care organizations in Minnesota also have been targets of qui tam actions, resulting in settlements ranging from $500,000 to $8 million. Compliance programs are key Organizations engaged in claims filing should establish an effective compliance program that is not only designed to prevent fraud and abuse, but also to detect problems on an ongoing basis and respond quickly if issues do arise. An effective compliance program may not only reduce the likelihood of fraud and abuse, but may also reduce the penalties if, despite those efforts, it occurs. Such programs are relevant both with respect to criminal penalties under the U.S. Sentencing Commission Guidelines, and with respect to civil sanctions sought by the Justice Department’s Civil Division. An effective program focuses on prevention, including the implementation of policies and procedures that ensure the hiring of qualified coding, billing and financial personnel. Other important considerations include: • providing appropriate and ongoing training for those involved in claims submissions at all levels, such as physicians and other care providers, as well as those more directly involved in submitting bills • providing prompt information about changes in rules and laws that govern billing, such as changes in Medicare and Medicaid rules • monitoring staff performance • emphasizing a culture of compliance An effective program also provides mechanisms for detecting and responding to fraud and abuse if it occurs. This includes programs for auditing claims and establishing clear and effective measures for promptly reporting, investigating and correcting mistakes. Tip lines and other mechanisms for encouraging reports are often used. Where mistakes are uncovered, immediate action must be taken to remedy inaccuracies and, where appropriate, voluntarily approach the government with full disclosure and repayment of amounts owed. If an investigation is initiated, it is important to confer promptly with ‘QUI TAM’ TO PAGE 17 Serving our clients and their businesses for over 150 years. Contact us to learn how our health care attorneys can help your business. Moore Costello and Hart P.L.L.P. Attorneys at Law www.mchlaw.com 651-227-7683 Who holds the whistle? Under qui tam provisions, anyone with knowledge of wrongdoing may file a claim: vendors, contractors, physicians and nurses, as well as disgruntled former employees. The financial incentives for insiders to “tell all” are great — up to 30 percent of the amount recovered. MINNESOTA LAWYER February 11, 2008 ■ 17 ‘Qui tam’ Continued from page 16 MEDICAL MALPRACTICE — VERDICTS AND SETTLEMENTS Failure to Diagnose Injuries Alleged: Radiation, chemotherapy Settlement: $475,000 Plaintiff’s Attorneys: Bernie M. Dusich, Joshua M. Tuscherer, Sieben, Polk, LaVerdiere & Dusich, Hastings, MN Defense Attorney: Withheld Insurance Company: Withheld Case Name: Patient v. Local Radiologist Court: Hennepin County District Court Date of Disposition: October 2006 Plaintiff’s Expert: National radiologist; treating oncologist; radiologist Defense Expert: Withheld Plaintiff’s Summary of the Case: A 63year-old woman had a long history of normal mammograms. In 2001, the defendant doctor failed to identify a density present on the plaintiff’s mammogram. The defendant also failed to order additional high-resolution evaluations. The plaintiff’s treating oncologist testified that had the tumor been identified and treated in 2001, the plaintiff would have been lymph node negative and as a result the treatment protocol would have been considerably different. The plaintiff was required to undergo chemotherapy and a more aggressive course of radiation as a result of the delay. The plaintiff now suffers from lymphedema. Presently, the plaintiff is in remission and enjoys her retirement, golfing two to three times per week. The case settled after commencing suit. counsel to discuss a host of issues, including how best to investigate and end any potential violations, and how to manage the investigation. Additional topics for the agenda should include issues of preserving documents, responding to requests for information, consulting experts and interviewing witnesses. Data collection is also key. Any organization under the microscope should put an immediate freeze on activities that eliminate information, including both routine and nonroutine document shredding and email deletion systems. Cooperation with the government can also be an important factor in the outcome of any investigation or litigation. In some cases, the government has requested that companies under investigation agree to cooperate by waiving attorney-client privileges. These issues have been undergoing rapid change in recent years. Consultation with knowledgeable counsel is critical. With increasing medical costs, including those incurred in the Medicare and Medicaid systems, continued increased enforcement efforts are a near certainty. The False Claims Act, armed with its unique qui tam provisions, has emerged as a powerful tool in today’s fight against health care fraud. In this climate, compliance and risk management are crucial. Virtually every facet of the industry — from hospitals to pharmaceuticals to other providers — should be aware of the devastating implications of failing to comply with the federal law. Providers should take immediate action to ensure proper compliance with the very complex rules that govern payment of health care claims. John M. Degnan and Sally A. Scoggin are shareholders with Briggs and Morgan law firm in Minneapolis. Negligent Surgery Injuries Alleged: Eye injury Jury Award: $557 ,500 Demand: Unspecified Highest Offer: $350,000 Plaintiff’s Attorney: Michael A. Zimmer, M. A. Zimmer Law, Minneapolis, MN Defense Attorney: Eric D. Hylden, Reyelts, Leighton, Bateman, Hylden & Sturdevant, LTD, Duluth, MN Insurance Company: Minnesota Mutual Insurance Company Case Name: Lowell Larson v. Jeffrey R. Weis, M.D. and Northern Refractive Surgery Center Case Number: CV-05-927 Court: St. Louis County District Court Judge: Hon. Shaun R. Floerke Date of Disposition: Feb. 9, 2007 Plaintiff’s Experts: Minneapolis opthalmologist, Duluth optometrist Defense Expert: Minneapolis ophthalmologist Plaintiff’s Summary of the Case: The 34-year-old plaintiff had LASIK surgery in both eyes on Jan. 4, 2001. After the surgery, he developed severe night vision disturbance (NVD), including glare, starbursts and halos. The plaintiff alleged that the defendants incorrectly measured the size of his scotopic pupils (in the dark) during his screening examination. The defendants measured his pupils at 5.5 mm, but the true size was 7 mm. As a result, the defendants .5 failed to tell the plaintiff that he had large night-time pupils and was at an increased risk for NVD. Further, the defendants used a Visx S2 laser, which had a maximum treatment zone of 6.5 mm, which is 1 mm smaller than his pupil size when fully dilated. Finally, the plaintiff’s NVD was caused by the fact that at night light entered his eye through the untreated portion of his cornea between the outer edge of the 6.5 mm treatment zone and the outer edge of his 7 pupil. .5 The case was first tried in April 2006. That jury returned a verdict finding that the defendants were negligent with respect to the plaintiff’s surgery, and that they failed to obtain informed consent. The jury awarded the plaintiff $3,002,950. The defendants made several post-trial motions. On Aug. 2, 2006, the trial court judge issued an order upholding the jury’s findings of fault and causation, but granting a conditional remittitur in the amount of $100,000. The plaintiff declined the remittitur, so a second trial on the damage issue was scheduled. After the second trial, jury awarded the plaintiff damages in the amount of $557 ,500. Negligent Surgery Injuries Alleged: Thermal burn Settlement: $245,000 Plaintiff’s Attorney: Joshua M. Tuchscherer, Sieben Polk P Hastings, MN .A., Defense Attorney: Withheld Insurance Company: Self-insured Case Name: Plaintiff v. Local Hospital and OB/GYN Court: Ramsey County District Court Date of Disposition: May 7 2007 , Plaintiff’s Expert: Michigan OB/GYN Defense Expert: N/A Plaintiff’s Summary of the Case: The defendant OB/GYN performed an endometrial ablation at a local hospital. During the procedure and prior to activating the heating element, the defendant doctor failed to recognize and respond to obvious signs of uterine perforation. As a result he burned plaintiff’s intestine and colon. Ten days after the procedure, the plaintiff was rushed to the hospital with extreme abdominal pain. She was diagnosed with peritonitis and taken to surgery. During surgery, multiple bowel perforations, as well as rectosigmoid and uterine perforations were discov- ered. The ER surgeon removed 32 cm of small intestine and repaired the hole in plaintiff’s colon and uterus. Approximately two weeks later, the plaintiff returned with continued abdominal pain. She was hospitalized for two weeks for what her treating physicians believed was the original peritonitis. The plaintiff claimed that the physician performed the uterine ablation improperly and failed to recognize and treat the obvious uterine perforation. The matter settled at mediation prior to filing suit.