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The Often Overlooked Codification of False Claims in 42 U.S.C. § 1320a-7b(g)

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The Often Overlooked Codification of False Claims in 42 U.S.C. § 1320a-7b(g)

It has been widely discussed that the Affordable Care Act amended the Anti-Kickback Statute (42 U.S.C. § 1320a-7b(b)) (“AKS”) in order to ensure that all claims resulting from illegal kickbacks are subject to civil prosecution under the False Claims Act (31 U.S.C. §§ 3729 et seq.) (“FCA”). The amendment, set forth in 42 U.S.C. § 1320a-7b(g), states that: “In addition to the penalties provided for in this section or section 1320a-7a of this title, a claim that includes items or services resulting from a violation of this section constitutes a false or fraudulent claim for purposes of [the FCA].” Thus, anyone who knowingly submits a claim to Medicare arising from an AKS violation is also violating the FCA, as a matter of statutory law.

Court decisions discussing this provision invariably refer to the AKS in discussing how the amendment codifies claims submitted in violation of that law as “false or fraudulent” under the FCA. The legislative history is consistent with this focus. Former Senator Ted Kaufman of Delaware, in comments that he made when the amendment was introduced stated:

The Department of Justice has had success both prosecuting illegal kickbacks and pursuing False Claims Act matters based on underlying violations of the Anti-Kickback Statute. Nevertheless, defendants in such FCA cases continue to mount legal challenges that sometimes defeat legitimate enforcement efforts.

For example, a court recently held that, even though a device company may have paid a kickback to a doctor to use a particular medical device, the bill to the government for the procedure to implant the device was not false or fraudulent because the claim was submitted by the innocent hospital, and not by the guilty doctor. In other words, a claim that results from a kickback and that is fraudulent when submitted by a wrongdoer is laundered into a ‘‘clean’’ claim when an innocent third party finally submits the claim to the government for payment. This has the effect of insulating both the payor and the recipient of the kickback from False Claims Act liability. This obstacle to a successful action particularly limits the ability of the Department of Justice to recover from pharmaceutical and device manufacturers, because in such instances the claims arising from the illegal kickbacks typically are not submitted by the doctors who received the kickbacks, but by pharmacies and hospitals that had no knowledge of the underlying unlawful conduct.

This bill remedies the problem by amending the anti-kickback statute to ensure that all claims resulting from illegal kickbacks are ‘‘false or fraudulent,’’ even when the claims are not submitted directly by the wrongdoers themselves. I want to emphasize that in such circumstances, neither antikickback nor False Claims Act liability will lie against the innocent third party that submitted the claim.

155 Cong. Rec. S10854 (daily ed. Oct. 28, 2009) (emphasis added). Senator Kaufman was referencing the decision of the court in United States ex rel. Thomas v. Bailey, No. 06 Civ. 465, 2008 WL 4853630 (E.D. Ark. Nov. 6, 2008), in which a hospital had submitted claims for medical devices that resulted from a violation of the AKS by a surgeon and a device company, and the court held that the claims were not “false” under the FCA because the hospital and not known about the violation (and so had not falsely certified compliance either impliedly or expressly) and the devices had all been actually implanted in the patients (so the claims were not factually false). See Discussion in United States ex rel. Kester v. Novartis Pharmaceuticals Corp., 41 F. Supp. 3d 323, 332-335 (S.D.N.Y. 2014). The amendment to the law was designed to close this loophole by making it clear that any claim resulting from a kickback is false under the FCA even if the claim is submitted by an innocent party.

Less noticed, however, is the fact that the statutory language in § 1320a-7b(g) is not, by its terms, limited to the AKS, which is in subsection (b) of §1320a-7b. The amendment refers to any “claim that includes items or services resulting from a violation of this section” (emphasis added), which unmistakably refers to the entirety of §1320a-7b, and includes, but is not limited to the AKS provisions in subsection (b). The amendment thus is not limited to claims resulting solely from a violation of the AKS, which forms only part of that section of the law. See Kimbrell Colburn, DAB No. 2683 (Mar. 24, 2016) (H.H.S.) 2016 WL 2851176 at *5 n.3 (upholding exclusion from federal health care programs based on conviction under § 1320a-7b(a)(3)(B) and noting that § 1320a-7b(g) applies to § 1320a-7b, “which includes the anti-kickback provision in section 1320a-7b(b)”) (emphasis added).

This frequently overlooked fact is highly significant, since subsection (a) of § 1320a-7b criminalizes a wide range of conduct related to false statements or representations affecting federal health care programs, including:

(1) knowingly and willfully makes or causes to be made any false statement or representation of a material fact in any application for any benefit or payment under a Federal health care program . . .,

(2) at any time knowingly and willfully makes or causes to be made any false statement or representation of a material fact for use in determining rights to such benefit or payment,

(3) having knowledge of the occurrence of any event affecting (A) his initial or continued right to any such benefit or payment, or (B) the initial or continued right to any such benefit or payment of any other individual in whose behalf he has applied for or is receiving such benefit or payment, conceals or fails to disclose such event with an intent fraudulently to secure such benefit or payment either in a greater amount or quantity than is due or when no such benefit or payment is authorized,

(4) having made application to receive any such benefit or payment for the use and benefit of another and having received it, knowingly and willfully converts such benefit or payment or any part thereof to a use other than for the use and benefit of such other person,

(5) presents or causes to be presented a claim for a physician’s service for which payment may be made under a Federal health care program and knows that the individual who furnished the service was not licensed as a physician, or

(6) for a fee knowingly and willfully counsels or assists an individual to dispose of assets (including by any transfer in trust) in order for the individual to become eligible for medical assistance under a State plan under subchapter XIX, if disposing of the assets results in the imposition of a period of ineligibility for such assistance under section 1396p(c) of this title . . . .

A claim that includes any item or service resulting from violating any of the above provisions under § 1320a-7b(a) will, by operation of § 1320a-7b(g), also be a “false or fraudulent claim” under the FCA. On one level, this may not seem very consequential, since a claim that arises from a criminal false statement or misrepresentation would also be expected to satisfy the lesser requirements for FCA liability.  However, just as with violations of the AKS, what happens if an innocent third party submits a claim that “results from” a violation of § 1320a-7b(a) without the claimant’s knowledge? 

For example, one can imagine a hospital or other health care organization submitting a claim for reimbursement based on false representations made by others concerning the medical necessity of the underlying items or services.  The items or services may have been provided just as described, and hence the claim may not be factually false.  Nor would the innocent claimant have “knowingly” submitted a false certification (express or implied) regarding medical necessity. Similarly, what if a hospice or nursing home submitted claims in the names of residents, unaware that the resulting reimbursement amounts were criminally converted by others for self-interested purposes unrelated to the care of the patients in whose names the funding was obtained?  How would such violations of § 1320a-7b(a)(3) or (4) result in FCA liability for those who are engaged in the criminal conversion of those proceeds, when the claimant itself was unaware of the underlying violations and thus could not have “knowingly” submitted false claims.  Short of facts justifying a finding that the claimant had been reckless or willfully blind, or an argument that the claims were knowingly rendered factually false due to regular conversion of monies provided for maintenance of the hospice or nursing home residents, it might be difficult to establish liability under the FCA without the assistance of § 1320a-7b(g).

In summary, while  § 1320a-7b(g) has been generally discussed in the context of its impact on FCA liability resulting from AKS violations, more attention should be paid to how this amendment arguably also closes a loophole in FCA liability resulting from violations of criminal provisions elsewhere in § 1320a-7b, specifically in subsection (a), when an individual or entity submitting a claim is unaware of the underlying violation making the claim “false.”

False Claims Act Materiality Standard’s Odd Application To Payment Terms

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False Claims Act Materiality Standard's Odd Application To Payment Terms

By Geoffrey Kaiser

Recently, in U.S. v. Sanofi U.S. Services Inc.,[1] the U.S. District Court for the Eastern District of Pennsylvania interpreted the U.S. Supreme Court’s ruling on materiality in Universal Health Services Inc. v. Escobar.[2]

In the process, the ruling highlighted a puzzling aspect of the Escobar ruling in which the high court discussed the relationship between an express condition of payment and materiality, and concluded that the former is not conclusive as to the latter.

In Escobar, the Supreme Court affirmed the validity of an implied false certification theory under the False Claims Act by holding that there may

be liability under the statute when a claim for payment makes specific representations about the goods or services provided, but does not disclose the claimant’s noncompliance with a material statutory, regulatory or contractual requirement that renders those representations misleading half-truths.[3]

Justice Clarence Thomas, writing for the court, clarified that such noncompliance “must be material to the Government’s payment decision in order to be actionable under the False Claims Act.”[4]

The concept of materiality as articulated in Escobar has been the subject of much analysis in ensuing judicial opinions. Escobar engaged in an extended discussion of the materiality requirement and how it should be enforced in False Claims Act cases.

Specifically, Justice Thomas wrote that while it is not necessary that an undisclosed “violation of a contractual, statutory, or regulatory provision” be “expressly designated a condition of payment” in order to trigger liability under the False Claims Act, neither is such a designation determinative, and that “[w]hether a provision is labeled a condition of payment is relevant to but not dispositive of the materiality inquiry.”[5]

The opinion continues:

A misrepresentation cannot be deemed material merely because the Government designates compliance with a particular statutory, regulatory, or contractual requirement as a condition of payment. Nor is it sufficient for a finding of materiality that the Government would have the option to decline to pay if it knew of the defendant’s noncompliance. Materiality, in addition, cannot be found where noncompliance is minor or insubstantial.      

In sum, when evaluating materiality under the False Claims Act, the Government’s decision to expressly identify a provision as a condition of payment is relevant, but not automatically dispositive. Likewise, proof of materiality can include, but is not necessarily limited to, evidence that the defendant knows that the Government consistently refuses to pay claims in the mine run of cases based on noncompliance with the particular statutory, regulatory, or contractual requirement. Conversely, if the Government pays a particular claim in full despite its actual knowledge that certain requirements were violated, that is very strong evidence that those requirements are not material. Or, if the Government regularly pays a particular type of claim in full

despite actual knowledge that certain requirements were violated, and has signaled no change in position, that is strong evidence that the requirements are not material.[6]

This discussion has been interpreted by lower courts as requiring a holistic approach to the issue of materiality in which one considers multiple nonexclusive and nondispositive factors, including whether a requirement is denominated a condition of payment, whether the violation is minor or insubstantial and whether the government pays claims despite knowing of a violation.[7]

As analyzed in Escobar, materiality under the False Claims Act can be proven or disproven by how the government behaves in handling claims with full knowledge of a claimant’s noncompliance, irrespective of whether the government has designated a particular requirement a condition of payment which, again, is not dispositive.

In Sanofi, the court applied this concept of materiality in a False Claims Act case involving alleged kickbacks to induce the prescription of a cancer drug. In its ruling denying summary judgment, the court discussed the Escobar materiality standard.

Using a hypothetical referenced in the Escobar decision, the court explained:

[I]f Congress passed a law that government contractors could not be paid unless they only used American-made staplers, and a given contractor failed to disclose that its office used a single Canadian-made stapler, that may well satisfy the “legal falsity” requirement. But the violation may fail the “materiality” requirement if it was so insubstantial that the government would have paid the contractor even if it knew of the violation.[8]

Certainly, the court’s conclusion in Sanofi that designation of a condition of payment by Congress is not dispositive on the issue of materiality would seem to follow logically from the Supreme Court’s ruling in Escobar that “[a] misrepresentation cannot be deemed material merely because the Government designates compliance with a particular statutory, regulatory, or contractual requirement as a condition of payment.”[9]

And yet, there is much to question here. Presumably, the part of the government that is paying the claims is an executive branch agency, but if Congress — another part of the government — designates a requirement a condition of payment, no agency may override that decision. Arguably, this makes the condition material as a matter of law.[10]

When the Supreme Court held in Escobar that, to be actionable under the False Claims Act, an instance of noncompliance must be material to the government’s payment decision, surely it did not mean that any executive branch agency may unilaterally dictate what is material to such a payment decision by taking unlawful action contrary to a statutory mandate imposed by Congress.

In that regard, Congress is the final say on whether a condition of payment is minor or insubstantial.

That being so, nothing an agency may do in choosing to pay claims despite full knowledge of noncompliance with a statutory condition of payment should render such a violation immaterial to the government’s payment decision.

Likewise, it is fair to question whether an agency that expressly designates a requirement as a condition of payment in its own regulations may ignore those regulations in paying claims notwithstanding knowledge that such condition has not been satisfied, Moreover, it is fair to question whether doing so renders compliance with that regulation immaterial to the government’s payment decision.[11]

While an agency may sometimes waive its own regulations, that is the exception rather than the rule.[12] Any waiver presumably needs to be a result of deliberate agency action rather than mere inadvertence or the consequence of agency personnel without waiver authority paying claims in violation of agency regulations.

The Supreme Court’s conclusion in Escobar that “the Government’s decision to expressly identify a provision as a condition of payment is relevant, but not automatically dispositive” thus is difficult to square with basic principles governing and limiting agency action.

Why is the express designation of a provision as a condition of payment not dispositive? Arguably, it must be dispositive where it is Congress making the designation by statute, and also where it is the agency paying the claims that makes the designation by regulation, at least when there is no evidence that the agency has otherwise validly waived its own regulatory condition.

It is not as though the Supreme Court has not recognized the concept of materiality as a matter of law. In the securities fraud context, the High Court has noted:

[Where] established omissions are so obviously important to an investor, that reasonable minds cannot differ on the question of materiality … the ultimate issue of materiality appropriately [may be] resolved as a matter of law by summary judgment.[13]

Even in the Escobar decision itself, the court did “not foreclose the possibility that a statutory requirement may be so central to the functioning of a government program that noncompliance is material as a matter of law.”[14]

The question then is why Escobar treated express conditions of payment as relevant, but not automatically dispositive on the issue of materiality, without also addressing well-worn legal principles limiting agency action in violation of statutory and regulatory mandates. It will be interesting to see how case law under the False Claims Act continues to evolve in this area and whether more courts will be required to grapple with this particular aspect of Escobar’s ruling on materiality.

Geoffrey R. Kaiser is the founder of Kaiser Law Firm PLLC.

The opinions expressed are those of the author(s) and do not necessarily reflect the views of the firm, its clients, or Portfolio Media Inc., or any of its or their respective affiliates. This article is for general information purposes and is not intended to be and should not be taken as legal advice.

  • United States ex rel. Gohil v. Sanofi U.S. Servs. , 02-2964, 2020 U.S. Dist. LEXIS 131083 (E.D. Pa. July 21, 2020).
  • Universal Health Services, Inc. v. U.S. ex rel. Escobar, 136 S. Ct. 1989 (2016).
  • at 1999-2000.
  • at 1994.
  • at 2001.
  • at 2003-2004.
  • Sanofi U.S. Services Inc., 2020 WL 4260797 at *14.
  • at *13.
  • Escobar, 136 S. Ct. at 2003.
  • See, e.g., Lyng v. Payne, 476 U.S. 926, 937 (1986) (“no … rule or regulation can confer on the agency any greater authority than that conferred under the governing statute” and “a contract entered by an agency may not override statutory limitations”); In re Aiken County, 725 F.3d 255, 260 (D.C. Cir. 2013) (“the President and federal agencies may not ignore statutory mandates or prohibitions merely because of policy disagreement with Congress”).
  • S. v. Krieger, 773 F.Supp. 580, 584 (S.D.N.Y. 1991) (“Where, as here, Congress has delegated to an administrative agency the power to give meaning to statutory provisions or to promulgate standards, regulations adopted by the administrative agency in the exercise of that delegated authority have the force of law . . . and the agency is therefore bound by its own regulations.”) (citations omitted).
  • Woerner v. Small Business Admin., No. 89–2674 98, 1990 WL 109018 (D.D.C. Jul. 17, 1990) (“whether an agency is entitled to waive adherence to its own regulations turns on whether the regulations were intended to confer important procedural benefits upon the parties before the agency or whether they are merely procedural rules for the orderly transaction of agency business” and if the latter, “an agency will be required to adhere to its own regulations where the complaining party will suffer ‘substantial prejudice’ in the absence of such adherence”).
  • TSC Indus. v. Northway Inc., 426 U.S. 438, 450 (1976) (internal quotation marks omitted).
  • S. ex rel. Brown v. Celgene Corporation, 226 F.Supp.3d 1032, 1049 (C.D. Cal. 2016).

New York City Health and Hospitals Corporation and Former Program Director of the Podiatric Medicine and Surgery Residency Program at Coney Island Hospital Pay $1.25 million to Settle Whistleblower Lawsuit Alleging Submission of False Claims to Medicare and Medicaid

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New York City Health and Hospitals Corporation and Former Program Director of the Podiatric Medicine and Surgery Residency Program at Coney Island Hospital Pay $1.25 million to Settle Whistleblower Lawsuit Alleging Submission of False Claims to Medicare and Medicaid

Brooklyn, New York, September 24, 2020 – The New York City Health and Hospital Corporation (“HHC”) and Glenn J. Donovan, DPM (“Dr. Donovan”), former Program Director of the Podiatric Medicine and Surgery Residency Program at Coney Island Hospital (“CIH”), have agreed to pay $1.25 million under the False Claims Act (“FCA”) to settle a whistleblower case brought by a podiatrist, Irina Gelman, DPM, who alleged that HHC and Dr. Donovan knowingly violated Medicare and Medicaid program requirements in submitting claims for hospital and professional services, and in operating the PMSR program at CIH.

Dr. Gelman’s “qui tam” (whistleblower) lawsuit against HHC and Dr. Donovan was filed in 2012 in federal district court in Brooklyn. Dr. Gelman was represented by the law firms Farrell Fritz, P.C., Kaiser Law Firm, PLLC and Weiss Zarett Brofman Sonnenklar & Levy P.C.

“Dr. Gelman is a medical professional of utmost integrity who refused, at great personal cost and over the course of eight long years, to look away from what she knew were wrongful billing and operational practices inside the podiatry residency program at Coney Island Hospital,” said Geoffrey R. Kaiser, a whistleblower attorney and Principal of Kaiser Law Firm, PLLC. “She never once wavered in her confidence and belief.” 

The whistleblower complaint alleges that HHC and Donovan: (1) submitted or caused to be submitted claims for payment to Medicare and Medicaid, which violated Medicare and Medicaid program requirements governing payment for inpatient and outpatient hospital services for podiatry at CIH, payment for professional podiatrist services furnished by Dr. Donovan, and payment for the costs of direct and indirect graduate medical education relating to the podiatric and surgical residency program for podiatry residents at CIH; (2) violated standards and requirements established by the Council on Podiatric Medical Education governing the podiatric medicine and surgery residency program at CIH; and (3) submitted or caused to be submitted claims for payment for the costs of graduate medical education and indirect medical education, and for hospital and professional services in which certain podiatry residents at CIH participated, during periods when those podiatry residents lacked a Limited Residency Permit established pursuant to § 7008 of the New York Education Law.

Dr. Gelman served as a podiatric resident, including in the position of Chief Resident, in the PMSR program at CIH from July 2010 until in or about late 2013. As a podiatry resident, Dr. Gelman witnessed the improper billing and operational practices that compelled her to commence her whistleblower lawsuit. 

“This case highlights the importance of people being willing to step forward and expose improper conduct and billing involving federal and state funds,” said Kevin P. Mulry, a litigation partner at Farrell Fritz, “particularly where the allegations involve a troubling lack of training and supervision in one of our public hospitals.”  

“From the moment I met Dr. Gelman, I was singularly impressed by her desire to expose institutional wrongs impacting the public fisc,” notes David A. Zarett, Esq., a founding member of Weiss Zarett Brofman Sonnenklar & Levy, P.C., “and her confidence and self-determination to pursue this issue in court rather than look the other way.” 

An important aspect of the case is that Dr. Gelman and her attorneys litigated it entirely on their own to recover federal and state taxpayer money since the government declined to intervene in the qui tam lawsuit.

“The government is frequently the first to point out that a declination does not mean that a case lacks merit, since there are many reasons that the government may sometimes elect not to intervene in a whistleblower case,” Kaiser said.  “We could not be more pleased to have played a part in prosecuting this important case, and to have recovered significant proceeds for taxpayers.”

$1,030,325.00 of the settlement amount will be paid to the United States for Medicare-related conduct and the federal portion of Medicaid-related conduct. $219,675.00 will be paid to New York State for the state portion of Medicaid-related conduct covered under the settlement agreement. 

The federal False Claims Act and similar state laws offer whistleblowers (frequently called “Relators”) protections and rewards to encourage them to file qui tam lawsuits against individuals and entities that are stealing from the government through Medicare fraud and other types of fraud. The laws also allow whistleblowers and their counsel to independently pursue FCA claims on behalf of the government when the government declines to join a qui tam lawsuit, which is what happened in Dr. Gelman’s case. 

Case citation: United States of America, et al., ex rel. Gelman vs. Glenn J. Donovan, DPM, et al., Case No. 12-CV-5142

About Farrell Fritz, P.C.

Farrell Fritz, P.C. is a full service law firm of more than 90 attorneys based in Uniondale, New York, with offices in New York City, Albany, Hauppauge and Water Mill.  The firm has earned a strong reputation in the New York business community, including within the healthcare industry.  Our attorneys work collaboratively with individuals and with the leaders of companies of every size and type – and with each other – providing clients throughout the New York metropolitan area and beyond with seamless access to in-depth legal expertise.  www.farrellfritz.com

About Kaiser Law Firm, PLLC

Kaiser Law Firm, PLLC is a boutique law firm dedicated to providing experienced representation for whistleblowers reporting fraud against the government.  Founded by Geoffrey R. Kaiser, a former federal prosecutor in both the Southern and Eastern Districts of New York, Kaiser Law Firm, PLLC has notable expertise in health care fraud and other financial fraud against the government, as well as complex fraud investigations.  The firm’s Whistleblower Practice focuses on the representation of individuals and entities bringing claims under fraud and abuse laws, including federal and state False Claims Acts. www.kaiserfirm.com 

About Weiss Zarett Brofman Sonnenklar & Levy P.C.

Weiss Zarett Brofman Sonnenklar & Levy, P.C., is a boutique sized Long Island, New York law firm providing a wide array of legal services to the members of the health care community, including physicians, podiatrists, dentists and residents/fellows. The depth and breadth of our practice includes healthcare transactional and compliance matters, professional discipline and medical staff privileging disputes, healthcare fraud investigations before the US Attorney and Attorney General, insurance company audits, and litigation in state and federal courts or before arbitration tribunals. The Firm also represents an array of businesses in commercial and real estate transactional, lending and litigation matters. www.weisszarett.com

Ghanshyam Bhambhani and New York Cardiology, P.C. Pay $2 Million to Settle Whistleblower Lawsuit Alleging Submission of False Claims to Medicare and Medicaid

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Ghanshyam Bhambhani and New York Cardiology, P.C. Pay $2 Million to Settle Whistleblower Lawsuit Alleging Submission of False Claims to Medicare and Medicaid

August 20, 2020 – Former Cardiologist Ghanshyam Bhambhani and his former medical practice New York Cardiology, P.C. have agreed to pay $2 million under the False Claims Act (“FCA”) and to settle a whistleblower case brought by a Relator who alleged that Bhambhani and New York Cardiology violated the Anti-Kickback Statute, 42 U.S.C. § 1320a-7b(b) (“AKS”) through an unlawful rental arrangement with referring physicians and generated false claims for cardiac procedures using fraudulent documentation, thereby defrauding the Medicare and Medicaid programs.

The “qui tam” (whistleblower) lawsuit against Bhambhani and New York Cardiology was filed in 2014 in federal district court in Brooklyn and remained pending during a parallel criminal investigation and prosecution of Bhambhani by the Eastern District U.S. Attorney’s Office. In 2018, Bhambhani was convicted on a guilty plea of one count of conspiracy to pay healthcare kickbacks and sentenced to 34 months in prison and three years of supervised release.

In agreeing to the settlement, Bhambhani and New York Cardiology admitted that they falsified records to justify cardiac procedures and provided compensation to certain physicians, disguised as rent, which was actually compensation for referrals of patients.

The Relator who brought the lawsuit against Bhambhani and New York Cardiology under the FCA was represented by Kaiser Law Firm, PLLC.

“This case reflects the importance of using all the tools in the government’s arsenal, both civil and criminal, to hold unscrupulous medical providers accountable,” said Geoffrey R. Kaiser, a whistleblower attorney and Principal of Kaiser Law Firm, PLLC, “especially where, as here, Bhambhani not only defrauded Medicare and Medicaid through violations of the anti-kickback statute, but also jeopardized public health by generating claims for medically unnecessary cardiac procedures using fraudulent documentation.”

$1,370,294.50 of the settlement amount will be paid to the United States for Medicare-related conduct and the federal portion of Medicaid-related conduct.

$629,705.50 will be paid to New York State for the state portion of Medicaid- related conduct covered under the settlement agreement.

The federal False Claims Act and similar state laws offer whistleblowers (frequently called “Relators”) protections and rewards to encourage them to file qui tam lawsuits against individuals and entities that are stealing from the government through Medicare fraud and other types of fraud. The laws also allow whistleblowers and their counsel to independently pursue FCA claims on behalf of the government when the government declines to join a qui tam lawsuit.

Case citation: United States of America, et al., ex rel. FNU-LNU LLC vs. New York Cardiology, P.C. and Ghanshyam Bhambhani, Case No. 14-CV-4581

About Kaiser Law Firm, PLLC

Kaiser Law Firm, PLLC is a boutique law firm dedicated to providing experienced representation for whistleblowers reporting fraud against the government. Founded by Geoffrey R. Kaiser, a former federal prosecutor in both the Southern and Eastern Districts of New York, Kaiser Law Firm, PLLC has notable expertise in health care fraud and other financial fraud against the government, as well as complex fraud investigations. The firm’s Whistleblower Practice focuses on the representation of individuals and entities bringing claims under fraud and abuse laws, including federal and state False Claims Acts. www.kaiserfirm.com

New York Cardiology to Pay $2 Million False Claims Settlement

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NEW YORK CARDIOLOGY TO PAY $2 MILLION FALSE CLAIMS SETTLEMENT

  • Defendants accused of violating FCA in patient referral scheme
  • Using false records to justify procedures also alleged

New York Cardiology PC and a former physician will pay $2 million to the U.S. and New York to resolve claims they defrauded Medicare and Medicaid in violation of the False Claims Act by engaging in an unlawful rent payment arrangement to get patient referrals, according to a filing in a New York federal court.

The defendants, who were also accused of falsifying records to justify medical procedures, admit they engaged in the alleged conduct, a settlement agreement filed Wednesday with the U.S. District Court for the Eastern District of New York said.

The physician, Ghanshyam Bhambhani, pleaded guilty in 2018 to one count of conspiracy to pay healthcare kickbacks, and sentenced to 34 months in prison with three years of supervised release, the settlement said.

“This case reflects the importance of using all the tools in the government’s arsenal, both civil and criminal, to hold unscrupulous medical providers accountable,” said Geoffrey R. Kaiser, a whistleblower attorney and Principal of Kaiser Law Firm PLLC, in a press release.

Kaiser represented whistleblower FNU-LLC, which filed the false claims suit in 2014.

Judge Carol Bagley Amon presided over the case.

The case is United States ex rel. FNU-LNU LLC v. N.Y. Cardiology PC , E.D.N.Y., No. 14-4581, settlement agreement 8/19/20 .

To contact the reporter on this story: Daniel Seiden in Washington at dseiden@bloomberglaw.com

To contact the editors responsible for this story: Rob Tricchinelli at rtricchinelli@bloomberglaw.com; Nicholas Datlowe at ndatlowe@bloomberglaw.com

MJHS Hospice and Palliative Care, Inc. Pays $5.225 Million to Settle Whistleblower Lawsuit Alleging Submission of False Claims to Medicare and Medicaid

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MJHS Hospice and Palliative Care, Inc. Pays $5.225 Million to Settle Whistleblower Lawsuit Alleging Submission of False Claims to Medicare and Medicaid

August 20, 2020 – MJHS Hospice and Palliative Care, Inc. (“MJHS Hospice”) has agreed to pay $5.225 million under the False Claims Act (“FCA”) to settle a whistleblower case brought by a former nurse employee, Ellyn D. Ward, who alleged that MJHS Hospice (1) violated the False Claims Act (“FCA”) by, among other things, presenting claims to Medicare and Medicaid for hospice services at medically unnecessary levels of care; and (2) retaliated against her for protesting these practices by taking adverse employment actions.

Ms. Ward’s “qui tam” (whistleblower) lawsuit against MJHS Hospice was filed in 2014 in federal district court in Brooklyn. Ms. Ward was represented by Kaiser Law Firm, PLLC and Kaiser Saurborn & Mair, P.C.

“Ms. Ward’s deep moral integrity and respect for the rule of law compelled her to bring this lawsuit, at great personal cost, because she could not stay silent in the face of what she knew were improper billing practices at MJHS,” said Geoffrey R. Kaiser, a whistleblower attorney and Principal of Kaiser Law Firm, PLLC. “We are pleased that this matter has been concluded successfully and that substantial insurance proceeds that were wrongfully taken from the Medicare and Medicaid programs have been recovered for taxpayers.”

Under the Medicare and Medicaid programs, a hospice provider may seek payment for several levels of care, including heightened levels known as “CHC” (continuous home care services) and “GIP” (general inpatient services). To receive reimbursement for CHC, a hospice provider must show that a patient is experiencing acute medical symptoms, and to receive reimbursement for GIP, a patient must need pain control, or acute or chronic symptom management, which must be managed in a hospital.

The government’s investigation determined that MJHS Hospice: (a) from January 1, 2011 to December 31, 2015, submitted or caused to be submitted to Medicare claims for the CHC level of care for patients who did not qualify for this heightened level of care; (b) from January 1, 2012 to December 31, 2012, submitted or caused to be submitted to Medicare claims for the GIP level of care

for patients who did not qualify for this heightened level of care; and (c) from January 1, 2011 to December 31, 2015, submitted or caused to be submitted false claims to the New York Medicaid Program for the CHC level of care for patients who did not qualify for this heightened level of care.

$4,850,000 of the settlement amount will be paid to the United States for Medicare-related conduct and the federal portion of Medicaid-related conduct. $375,000 will be paid to New York State for the state portion of Medicaid-related conduct covered under the settlement agreement.

The federal False Claims Act and similar state laws offer whistleblowers (frequently called “Relators”) protections and rewards to encourage them to file qui tam lawsuits against individuals and entities that are stealing from the government through Medicare fraud and other types of fraud. The laws also allow whistleblowers and their counsel to independently pursue FCA claims on behalf of the government when the government declines to join a qui tam lawsuit.

Case citation: United States of America, et al., ex rel. Ellyn D. Ward vs. MJHS Hospice and Palliative Care, Inc., et al., Case No. 14-CV-4201

About Kaiser Law Firm, PLLC

Kaiser Law Firm, PLLC is a boutique law firm dedicated to providing experienced representation for whistleblowers reporting fraud against the government. Founded by Geoffrey R. Kaiser, a former federal prosecutor in both the Southern and Eastern Districts of New York, Kaiser Law Firm, PLLC has notable expertise in health care fraud and other financial fraud against the government, as well as complex fraud investigations. The firm’s Whistleblower Practice focuses on the representation of individuals and entities bringing claims under fraud and abuse laws, including federal and state False Claims Acts. www.kaiserfirm.com

About Kaiser Saurborn & Mair PC

Kaiser Saurborn & Mair, PC is a leading employee whistleblower law firm representing employees and executives across all sectors of business, finance, academia and professional firms. The firm is widely recognized for its use of dynamic and innovative litigation strategies to expand the scope of legal protections for its clients. www.ksmlaw.com

DOJ SIGNALS INTENTION TO USE THE FALSE CLAIMS ACT TO PROSECUTE COVID

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DOJ SIGNALS INTENTION TO USE THE FALSE CLAIMS ACT TO PROSECUTE COVID-19 FRAUD SCHEMES

On June 26, 2020, Principal Deputy Assistant Attorney General Ethan P. Davis delivered remarks on the False Claims Act before the U.S. Chamber of Commerce in Washington, D.C.  During his remarks, Davis clearly signaled that the Department of Justice (“DOJ”) will be moving aggressively under the FCA to prosecute unscrupulous fraudsters who would seek to profit off the current COVID-19 public health emergency.  

Davis declared that “[DOJ] will energetically use every enforcement tool available to prevent wrongdoers from exploiting the COVID-19 crisis,” and that “[i]n that effort, the False Claims Act is one of the most effective weapons in our arsenal.”  Specifically, Davis explained that “[DOJ] will deploy the False Claims Act against those who commit fraud related to the various COVID-19 stimulus programs, like the Paycheck Protection Program and the Main Street Credit Facility” that were created under the CARES Act.   

The Paycheck Protection Program (“PPP”) offers loans to provide incentives for small businesses to retain employees on payroll, and those loans are forgiven if businesses those employees are retained for eight weeks and the money is used for payroll, rent, mortgage interest, or utilities.  Thus far, the PPP has issued forgivable loans totaling more than $500 billion. Davis explained that those receiving such loans are required to certify compliance with the program’s conditions, and when seeking forgiveness of the loan, must certify that the funds were used for eligible costs.  If the borrower offers false certifications, FCA liability may result. Given that the federal government is injecting enormous financial resources into the economy, Davis stressed that “vigorous FCA enforcement is more important than ever to ensure that taxpayer dollars are spent as intended,” and that “the Civil Division’s Fraud Section has implemented a number of initiatives to identify, monitor, and investigate potential violations of the FCA in this area,” including coordination within DOJ and with other agencies to “identify potential program vulnerabilities and safeguard PPP funds, as well as to identify any potential wrongdoing that warrants investigation.”

Likewise, Davis addressed the fraud risks involving other assistance programs like the Main Street Credit Facility (“MSCF”), which provides loans to small and medium-sized businesses that require financial assistance to maintain their operations during the current public health emergency, and the Provider Relief Fund (“PRF”), under which HHS has been providing billions of dollars to providers “on the front lines of the COVID-19 crisis.” 

The MSCF requires funding recipients to comply with certain requirements, including eligibility requirements, and Davis stated that DOJ “will use the False Claims Act to hold accountable those who knowingly attempt to skirt those requirements.”  Likewise, providers who receive funds under the PRF must agree to various terms and conditions, including that they have provided or are providing care to those with actual or possible cases of COVID-19, and must agree to restrictions on balance billing patients.  Davis emphasized that “[w]here a provider knowingly violates these requirements, the False Claims Act may come into play.”

Davis also indicated that DOJ’s enforcement actions may include civil prosecution of private equity firms investing in companies receiving CARES Act funding.  According to Davis, “[w]hen a private equity firm invests in a company in a highly-regulated space like health care or the life sciences, the firm should be aware of laws and regulations designed to prevent fraud” and that if that firm “takes an active role in illegal conduct by the acquired company, it can expose itself to False Claims Act liability.” Davis warned that “[w]here a private equity firm knowingly engages in fraud related to the CARES Act, [DOJ] will hold it accountable.”

At the same time, Davis assured his audience that, consistent with the FCA not being an “all-purpose anti-fraud statute” designed for “garden-variety breaches of contract or regulatory violations,” DOJ would not pursue businesses for making “immaterial or inadvertent technical mistakes in processing paperwork, or that simply and honestly misunderstood the rules, terms and conditions, or certification requirements.”  Rather, Davis stressed that DOJ would “pursue cases only where the borrower knowingly failed to comply with material legal obligations and certifications” and that companies who have acted in good faith “will have nothing to fear from [DOJ],” which is “concerned only with actionable fraud.”

Given the hundreds of billions of taxpayer dollars that Congress has appropriated in response to the COVID-19 pandemic, and DOJ’s determination to use the FCA to recover any amounts taken through fraud, we can expect to see many such cases filed over the course of the next year and beyond.  Whistleblowers who uncover and bring such FCA cases on behalf of the government are eligible to receive 15%-30% of any recovery.  If you have information concerning any such fraud schemes, Kaiser Law Firm, PLLC will be happy to assist you in evaluating the merits of the case.  Just call toll free at 844-800-6657 or complete an email contact form on our website: https://kaiserfirm.com/contact-us/

An Overview of the False Claims Act

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AN OVERVIEW OF THE FALSE CLAIMS ACT.

The False Claims Act gives assurance to workers who are fought back against by a business in light of the representative’s cooperation in a qui tam activity. The assurance is accessible to any representative who is terminated, downgraded, undermined, bugged or in any case victimized by their boss in light of the fact that the worker examines, documents or takes an interest in a qui tam activity.

Think You Have a Case? Speak With Kaiser Law Firm, PLLC – False Claims Act Law Firm

Whistleblowers offer a significant support by exposing extortion that blocks powerful administration and wastes citizen cash. Experienced lawful portrayal improves the opportunity that your case will be effectively settled and your informant recuperation will be ensured. A legal advisor can likewise assist with guaranteeing that your employer doesn’t make retaliatory move against you for recording a case.

Before you blow the whistle, talk with the broadly perceived New York City law office of Kaiser Law Firm, PLLC During a free case audit we’ll clarify the entirety of your lawful rights and alternatives as they relate to the False Claims Act.

FALSE CLAIMS LIABILITY AND THE PROVIDER RELIEF FUND

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FALSE CLAIMS LIABILITY AND THE PROVIDER RELIEF FUND

Geoffrey R. Kaiser, Esq.

The Coronavirus Aid, Relief, and Economic Security (CARES) Act created a $175 billion Provider Relief Fund (“PRF”) for expenses and lost revenues attributable to the coronavirus pandemic.  Those funds are being disbursed through “General” and “Targeted” distributions.  Significantly, all providers retaining funds must sign an attestation and accept the terms and conditions associated with payment, and keeping the funds after 90 days is viewed as acceptance of those terms and conditions. Further, the Department of Health and Human Services (“HHS”) stated that it reserves the right to audit Provider Relief Fund recipients in the future and collect any PRF amounts that were used inappropriately. The requirement that providers agree to specific terms and conditions in accepting funding immediately raises the prospect that the government might not merely request that funds improperly obtained or utilized be returned, but that may also pursue providers under the False Claims Act (“FCA”) for accepting funding under false pretenses.  If that happens, the provider may be liable for up to three times the amount of the funding accepted plus civil monetary penalties, and those who uncover and bring such FCA cases on behalf of the government are eligible to receive 15%-30% of any recovery.

Among other things, a provider must certify (1) that it was eligible to receive the funds (because it providers or provided after January 31, 2020, diagnoses, testing, or care for individuals with possible or actual cases of COVID-19); (2) that the funds were used as permitted (i.e., to prevent, prepare for, and respond to coronavirus); (3) that it will not use the payment to reimburse expenses or losses that have been reimbursed from other sources or that other sources are obligated to reimburse; and (4) that for care provided to actual or presumptive COVID-19 patients, it will not engage in prohibited balance billing by charging a patient an amount greater than what the patient would otherwise be required to pay to an in-network provider. Violating any of these conditions could create a predicate for the government to argue that the provider violated the FCA.

HHS has stated that it will have significant anti-fraud monitoring of the distributed funds and will provide oversight as required in the CARES Act to ensure appropriate use of the money.  Therefore, providers who accept money without being eligible or use money in unauthorized ways run a risk that their behavior will come under scrutiny.  The guidance identifies various expenses and lost revenues that are considered eligible for reimbursement.  Some qualifying expenses include: 

  • supplies used to provide healthcare services for possible or actual COVID-19 patients; • equipment used to provide healthcare services for possible or actual COVID-19 patients;
    • workforce training;
    • developing and staffing emergency operation centers;
    • reporting COVID-19 test results to federal, state, or local governments;
    • building or constructing temporary structures to expand capacity for COVID-19 patient care or to provide healthcare services to non-COVID-19 patients in a separate area from where COVID-19 patients are being treated; and
    • acquiring additional resources, including facilities, equipment, supplies, healthcare practices, staffing, and technology to expand or preserve care delivery. 

Qualifying “lost revenues” attributable to coronavirus may include revenues lost as a consequence of fewer outpatient visits, canceled elective procedures or services, or increased uncompensated care, and may use the funding to cover any cost that the lost revenue would otherwise have paid for, provided that the cost is one which prevents, prepares for or responds to coronavirus. Examples of such costs might include employee or contractor payroll, employee health insurance, rent or mortgage payments, equipment lease payments and electronic health record licensing fees.  When the health emergency is over, providers also are expected to return any unused PRF money that they were unable to spend on authorized expenses or losses.  If the provider uses the funding for unauthorized categories of expenses and revenues that are unrelated to COVID-19, there is always the potential for FCA liability.

Given the enormous amount of funding allocated to the PRF and rushed into the marketplace, it is inevitable that unscrupulous providers will seek to take advantage of the program through fraud.  If you have information concerning any such fraud schemes, Kaiser Law Firm, PLLC will be happy to assist you in evaluating the merits of the case.  Just call toll free at 844-800-6657 or complete an email contact form on our website: https://kaiserfirm.com/contact-us/

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