Morris Manning & Martin, LLP

A Review of Healthcare Fraud Enforcement in 2020

12.21.2020

Despite the COVID-19 pandemic, this was another banner year for healthcare enforcement, particularly in the latter half where we saw the government hold companies and executives accountable for contributing to the opioid crisis.1 Other notable settlements and enforcement actions show that Department of Justice (DOJ) and Office of Inspector General (OIG) priorities largely remained the same as in prior years.2 Certainly, a new focus area for law enforcement were fraud schemes related to COVID-19 equipment, supplies, and testing.3 Even with a new administration, healthcare fraud enforcement will likely be an important and immediate priority in the coming year largely due to the groundwork set this past year. Below are some additional highlights from 2020 relating to healthcare enforcement.

Telemedicine Schemes

On September 30, 2020, DOJ announced the results of a sweeping joint healthcare fraud takedown that resulted in charges against 345 different defendants who were responsible for over $6 billion in government losses.4 The vast majority of those charged were involved in telemedicine schemes whereby telemedicine companies allegedly paid doctors and nurse practitioners to order unnecessary durable medical equipment, genetic and other diagnostic testing, and pain medications, either without any patient interaction or with only a brief telephone conversation with patients they had never met or seen. These interactions then led to thousands of claims for unwanted or unnecessary items and services that were paid by the federal healthcare programs.

Early investigations involving COVID-19-related fraud indicate that these types of schemes are becoming more prevalent. Scammers are using telemarketing calls, text messages and other social media platforms to reach beneficiaries, then immediately directing them to providers for a telemedicine consult that invariably results in ordering unnecessary medical items and testing.5 The unnecessary items and testing, as well as the telemedicine consult itself, are then billed to the government. With the continuing expansion of telemedicine services, scrutiny of these types of schemes will certainly continue.

Laboratory Testing Scrutiny

In 2020, the government continued its pursuit of laboratories which are ordering and processing medically unnecessary drug screening tests. Logan Laboratories, a reference lab in Tampa, Florida, paid $41 million to resolve a False Claims Act whistleblower action based on allegations of presumptive and definitive urinary drug testing without regard to whether such testing was medically indicated or appropriate.6

There has been a proliferation of laboratories offering genetic testing such as the PGx and CGx panels. Due to a lack of familiarity with the science of genomics, regulators continue to question, often under inconsistent guidance from Centers for Medicare and Medicaid Services (CMS), whether such testing is medically necessary. This past year, DOJ opened several new investigations into large national labs that offer and bill for genetic testing.

An obvious emerging area of enforcement relates to COVID-19 testing fraud. DOJ recently announced charges against a medical technology company for alleged false claims concerning its ability to provide fast and accurate COVID-19 test results.7 Additionally, laboratories and providers can expect further scrutiny for their part in ordering or performing unnecessary COVID-19 testing.

Focus on the False Claims Act

The FCA remains an important tool in the government’s ongoing battle to combat healthcare fraud, waste, and abuse. There was a slight dip in overall FCA recoveries for DOJ this past year, although the healthcare industry certainly remained the enforcement focus. In fiscal year 2020, out of more than $2.1 billion in overall FCA recoveries, roughly $1.9 billion was recovered from healthcare and life sciences companies.

Two cases of note involved allegations against pharmaceutical companies. Novartis Pharmaceuticals Corporation agreed to pay of $642 million in two separate settlements to resolve FCA allegations, including (1) claims it illegally used three foundations in order to cover copayments of Medicare patients taking two of its drugs, Gilenya and Afinitor; and (2) payment of kickbacks to doctors in induce their prescribing of Novartis drugs.8 As a result of the government’s focus on the opioid epidemic, opioid manufacturer Purdue Pharma LP agreed to globally resolve criminal and civil investigations into its opioid marketing and selling practices, including a criminal fine of $3.544 billion, $2 billion in criminal forfeiture and a civil settlement of $2.8 billion.9 Additionally, the individual shareholders agreed to settle their individual False Claims Act liability for $255 million.

Relationships between hospitals and physician groups continued to be scrutinized carefully, particularly where there is evidence that physicians are compensated directly or indirectly because of referrals of patients for designated health services under the Stark Law, or for any services compensated by governmental payors under the Anti-Kickback Statute. Compensation that hospitals pay above fair market value also continues to be scrutinized carefully and continues to prove costly and damaging to health systems. For example, an orthopedic specialty hospital in Oklahoma paid $72.3MM in a settlement with DOJ regarding an alleged years-long scheme to provide below market rent and to pay compensation to physicians in excess of fair market value. In Wheeling, West Virginia, a hospital paid $50MM to settle allegations that it paid physicians above fair market value and compensated physicians on the basis of referrals.

The government also continued its focus on quality of care and levels of care, resulting in a settlement of $122MM with a large hospital company in connection with behavioral health services. Other settlements involved quality of care issues.

In Georgia, FCA enforcement was alive and well in 2020. There were significant settlements involving hospital systems alleging improper inducements for referrals and quality of care, as well as inpatient admission criteria.

Next year, expect to see a shift in DOJ’s use of the FCA to address fraud involving the Provider Relief Fund and other COVID-19 related programs. We anticipate continued heavy scrutiny of hospital/physician arrangements, too.

EMTALA Enforcement Ongoing

HHS-OIG continued to investigate and resolve violations of the Emergency Medical Treatment and Active Labor Act (EMTALA) against participating hospitals.

For example, a Maryland hospital paid $106,965 to resolve allegations that it failed to provide a medical screening examination to a homeless patient. The patient had presented to the hospital the prior night, was discharged and, after refusing to sign discharge papers, escorted off the property wearing only a hospital gown. The patient was transported by ambulance to the hospital the following day after a bystander called 911 when noticing the individual in a hospital gown. The hospital discharged the patient without an additional medical screening examination. There were other significant EMTALA settlements, indicating the OIG’s continuing emphasis on compliance with EMTALA requirements.

There seemed to be several “lower-dollar” settlements involving alleged systemic or policy-driven shortcomings that appear to have resulted in hospitals’ failing to provide an appropriate medical screening exam within the capability of a hospital’s emergency department. Several patients were documented as having left without being seen (LWBT). This lapse may have been attributed to hospital’s wanting to triage and process as many patients as possible and focus on the sickest of patients who presented though the emergency room.

Furthermore, many hospitals made modifications to their established triage, ED and transfer policies and procedures to mitigate risks associated with treating actual or potential COVID-19 patients. Those same modifications, however, could give rise to additional and unwanted EMTALA risk.

HHS-OIG Declares Paid Speaker Programs Dead

On November 16, 2020, the OIG issued a Special Fraud Alert “highlight[ing] the fraud and abuse risks associated with the offer, payment, solicitation, or receipt of remuneration relating to speaker programs by pharmaceutical and medical device companies.”10 Companies have routinely invited physicians and other healthcare professionals to make presentations regarding company products. The speakers are often paid an honorarium and other remuneration such as free meals and travel. Moreover, companies have reported paying over $2 billion to these speakers over the past three years.

HHS-OIG identified specific Anti-Kickback Statute (AKS) concerns that these paid engagements improperly influence physician ordering and generate prohibited referrals. If the requisite intent under the AKS can be established, both the company and the healthcare professional can be subject to criminal, civil, and administrative enforcement actions.

One settlement from this year mirrors the OIG’s concerns from the Fraud Alert about improper inducements and other educational programs directed at physicians. In October, Merit Medical Systems, a medical device manufacturer, paid $18 million in a FCA settlement involving allegations that for many years Merit paid physicians and hospitals to purchase and use Merit products for surgeries on Medicare, Medicaid, and Tricare beneficiaries. The payments were disguised through various marketing programs, speaking fees, and educational grants. As part of the settlement, Merit was required to enter into a five-year corporate integrity agreement with the OIG.11

Long-Term Care Facility Enforcement

Consistent with DOJ’s Nursing Home and Elder Justice Initiative, long term care facilities continue to be an enforcement focus. A $15.4 million FCA settlement was reached with Guardian Elder Care Holdings, an operator of over 50 nursing homes, to resolve allegations it knowingly overbilled government payors for medically unnecessary rehabilitation therapy services.12 Interestingly, the government linked excessive rehabilitation therapy to potential patient harm.

DOJ has also indicated it is actively scrutinizing the effect of COVID-19 orders on nursing home residents. DOJ has made information requests to several state governors to determine whether to initiate investigations under the Civil Rights of Institutionalized Persons Act, specifically whether COVID-19 orders resulted in resident deaths.13

Long-term care facilities and nursing homes will likely continue to be a focus for 2021 as these providers deal with the continuing effects of COVID-19.

If you have any questions about this legal update, please contact a member of the MMM healthcare group.


[1] https://www.justice.gov/opa/pr/justice-department-announces-global-resolution-criminal-and-civil-investigations-opioid
[2] https://www.justice.gov/news
[3] https://oig.hhs.gov/coronavirus/letter-grimm-03232020.asp
[4] https://www.justice.gov/opa/pr/national-health-care-fraud-and-opioid-takedown-results-charges-against-345-defendants
[5] https://oig.hhs.gov/coronavirus/fraud-alert-covid19.asp
[6] https://www.justice.gov/opa/pr/reference-laboratory-pain-clinic-and-two-individuals-agree-pay-41-million-resolve-allegations
[7] https://www.justice.gov/opa/pr/medical-technology-company-president-charged-scheme-defraud-investors-and-health-care-benefit
[8] https://www.justice.gov/opa/pr/novartis-pays-over-642-million-settle-allegations-improper-payments-patients-and-physicians
[9] https://www.justice.gov/usao-nj/pr/justice-department-announces-global-resolution-criminal-and-civil-investigations-opioid
[10] https://oig.hhs.gov/fraud/docs/alertsandbulletins/2020/SpecialFraudAlertSpeakerPrograms.pdf
[11] https://www.justice.gov/opa/pr/medical-device-maker-merit-medical-pay-18-million-settle-allegations-improper-payments
[12] https://www.justice.gov/opa/pr/guardian-elder-care-holdings-and-related-entities-agree-pay-154-million-resolve-false-claims
[13] https://www.justice.gov/opa/pr/department-justice-requesting-data-governors-states-issued-covid-19-orders-may-have-resulted