Archive for June, 2017

Whistleblowers’ Should Seek Counsel – Not Line the Pockets of Short Sellers

Thursday, June 29th, 2017

A recent news article in the New York Times, “The Bounty Hunter of Wall Street,” featured Andrew Left, an “activist” short seller who receives leaked documents and other intelligence about publicly-traded companies from confidential sources. Armed with this information, short sellers leak negative information to the press. When the information negatively impacts the target company’s stock price, the short sellers make millions.

As the article states, short sellers use inside information related to potential wrongdoing by publicly-traded health care companies, including pharmacy benefit managers (PBMs). PBMs are involved in literally every prescription that is dispensed, nationwide, every day. They play a critical role in the Medicare prescription drug program, Medicare Part D. The PBM industry is also one of the most opaque segments of the healthcare arena. It will take someone with access to drug data received by the PBM and drug data generated by the PBM to shed light on the inner workings of this multi-billion dollar industry.

Like PBMs, virtually every healthcare company earns significant revenues from billings to government funded programs, most notably Medicare and Medicaid.  There are significant federal dollars spent on the federal employees health benefits program (FEHBP), and the healthcare programs for our military, including Tricare. A major portion of state budgets are also dedicated to funding healthcare for state and county employees.

However, there is a more appropriate use for inside information related to potential wrongdoing by publicly-traded or privately held healthcare companies, including PBMs. When the inside information is related to potential healthcare fraud (or other government contractor fraud), the taxpayers who contribute their hard-earned money to federal and state treasuries, and the person who assists in that endeavor by providing needed information, should be benefitting from that information – not wealthy short sellers.

There are programs that reward insiders who assist in ferreting out wrongdoing and returning fraudulent profits to federal and state governments. Those with knowledge of potential wrongdoing by any company that profits from federal or state government funds would do well to seek competent counsel who specializes in bringing cases under the federal False Claims Act, analogous state false claims acts, or the private insurance whistleblower statutes of California and Illinois. All of these statutes provide the relator, a person who is the source of such information, with share of the recovery (from 15 to 30%, and in the case of the California statute, potentially higher), in recognition of the whistleblower’s efforts.

Attention Clinical Laboratories: You Can’t Make the Doctor the Fall Guy Anymore

Friday, June 16th, 2017

On June 9, 2017, U.S. District Judge Reggie B. Walton (D.C.) denied a clinical laboratory defendant’s motion to dismiss a whistleblower’s False Claims Act case. The Court flatly rejected the lab’s attempt to avoid liability by arguing the doctor, not the lab, determines the medical necessity of a particular test. The court found, instead, that the lab has an independent duty to ensure that the tests it performs and seeks payment for are medically necessary. The Court’s ruling was based, in large part, on the certification of medical necessity submitted by the lab on claims forms such as the CMS-1500.

In United States of America, et al. ex rel. Tina D. Groat v. Boston Heart Diagnostics Corp., Dr. Groat, National Medical Director of Women’s Health and Genetics at United Healthcare, alleged that Boston Heart Diagnostics Corporation (“Boston Heart”) performed various genetic and non-genetic tests that were not medically necessary for particular patients.  Dr. Groat alleged that Boston Heart’s marketing of tests that screened for cardiac-related issues and predicted future cardiac risk resulted in the submission of false claims for tests performed on patients with no history or current known risk or symptoms of having a cardiac problem.  Despite the lack of medical necessity, Boston Heart completed and submitted CMS-1500 forms and sought Government reimbursement for the tests performed.

As part of their marketing efforts, labs frequently supply doctors with pre-printed test requisition forms. Doctors then fill out the forms and send them to a lab with the patient’s sample (i.e., blood) to be tested. Lab providers (such as Boston Heart) must complete and submit a CMS-1500 form to get reimbursed for the services provided. This form requires the entity submitting the claim, whether a “physician or supplier,” to certify the medical necessity of the services. CMS-1500, p.2 (Emphasis added).

In finding that Boston Heart, the lab submitting the claim, was responsible for certifying the medical necessity of the tests at issue, the Court focused on the plain language of the Medicare claim form. The CMS-1500 requires the submitting physician or supplier (i.e. the lab) to complete the required data fields and certification. The Court rejected the defendant’s attempt to argue that Medicare regulations related to maintenance of documentation regarding medical necessity, 42 C.F.R. §410.32(d)(2), shifts responsibility to the patient’s physician, finding instead that the regulation requires both the doctor and lab to maintain records. The Court also noted that the lab’s independent obligation to determine medical necessity is particularly appropriate where the lab created the requisition forms as part of its marketing activities, and the lab – not the physician – was billing the Government for the tests at issue.

This important ruling will have a real-life impact on healthcare fraud enforcement efforts in the laboratory arena. Service providers are on notice that they will be held accountable for the certifications they submit to the Government in order to receive payment. Labs can no longer dodge FCA liability by pointing to medical necessity determinations which appear to have been made by or in the name of a patient’s treating physician. The lab bears primary responsibility for the truthfulness of medical necessity certifications that are made on the face of the CMS-1500 form. The Government relies on the truthfulness of these certifications in making over $7 billion in Medicare Part B payments to clinical labs annually (FYE 2015).