May 31, 2022 – As the world slowly emerges from the COVID-19 pandemic in fits and spurts, healthcare fraud enforcement remains a top priority for the U.S. Department of Justice (DOJ) and other government agencies with enforcement authority. Specific areas have assumed particularly high priority as COVID-19 changed much about the healthcare landscape in some ways temporarily and in other ways more permanently.
The most obvious post-pandemic enforcement priority concerns the pandemic itself, which saw a variety of government-sponsored relief programs and funding distributed to healthcare providers. Even at the pandemic’s peak, DOJ officials made it clear that the use of such relief would be scrutinized and that has proven to be true.
Early investigations and prosecutions relating to COVID-19 relief concerned what may seem like “low hanging fruit,” but some of the most notable investigations involve allegations of relief funds being misappropriated for personal use, such as for purchasing sports cars and luxury items.
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In April of this year, the DOJ announced a large-scale, coordinated enforcement action that involved filing criminal charges against numerous defendants across the country for alleged misconduct, including using relief funds for personal purchases and billing patients for services provided that did not occur. This was not the first large-scale, coordinated COVID-related criminal enforcement effort, however, and it is unlikely to be the last.
In addition to criminal prosecutions, we expect the DOJ with the help of whistleblowers (or “relators”) to leverage civil remedies, such as the federal False Claims Act (FCA), to pursue perceived violations of the terms and conditions that providers were required to satisfy to participate in COVID-19 relief programs like the Provider Relief Fund, the Paycheck Protection Program and the COVID-19 Uninsured Program.
The legal theories in such matters are likely to be nuanced in many instances and hotly contested and will include noncompliance allegations with evolving, and sometimes haphazardly issued and unclear, technical rules attendant to receipt and use of relief funding.
We also expect more traditional investigation topics to take on a COVID-19 flavor, such as complying with Medicare billing rules when performing other services while administering a COVID-19 test or vaccine or examining financial relationships with physicians or other referral sources that may be relying on a physician self-referral law (known as the Stark Law) or a federal anti-kickback statute COVID-19 waiver.
However, hindsight may be 20/20 in these matters; memories fade and the crisis conditions in which healthcare providers were operating, combined with the rapidly issued and ever-changing nature of the rules, may be forgotten by skeptical prosecutors or relators seeking to pursue claims and substantial penalties based on what may have been technical “foot faults” causing no loss to the government.
The context will be important in defending these matters. If the rules of the road were messy and evolving, it should serve as an impediment to proving that a given provider or another recipient of COVID-19 relief acted in “reckless disregard” of those rules, as required to establish FCA liability.
COVID-19 enforcement scrutiny is unlikely to be limited to healthcare providers. For example, even before the pandemic, there was an increased government focus on private equity investors in healthcare.
As the pandemic unfolded, DOJ officials made it clear that scrutiny in the realm of COVID-19 relief would extend to private equity sponsors of providers and others who received relief funding. While such sponsors do not provide or bill payors for healthcare services, they have been pursued under the FCA for “causing” someone else, such as a provider in which they have invested, to do so.
In the context of private equity, the “causation” theory of liability has not yet been extensively litigated, though there is case law that has found it is a viable theory. This means private equity sponsors in the healthcare space have been increasingly involved in FCA investigations and named as defendants in FCA lawsuits if for no other reason than they are perceived as a deep pocket.
The allegations in these cases tend to focus on what the sponsor learned in due diligence prior to the investment, the role of the sponsor in the provider/portfolio company’s operations after investing and whether (or to what) extent that role caused the portfolio company to submit false claims to government payors.
These allegations can be highly attenuated, and there are many defenses to these claims as well as steps that can be taken to proactively mitigate risk in connection with a healthcare investment. However, there is no question that private equity investors will continue to be a focus of the DOJ’s enforcement efforts and of relators who bring many FCA cases to the DOJ’s attention.
Finally, there was an enormous uptick in the use of telehealth services during the pandemic. While this is not a surprise, the numbers are notable.
For example, statistics reported by the government show that during the first year of the pandemic, more than 28 million Medicare beneficiaries used telehealth services, whereas, in the preceding year, less than 350,000 Medicare beneficiaries used such services. Much of this shift was because of the government temporarily waiving requirements to allow Medicare beneficiaries access to expanded telehealth services.
With the increased use of telehealth, there has been a corresponding increase in telehealth enforcement scrutiny. Indeed, even before COVID-19, telehealth enforcement scrutiny was on the rise and is poised to continue in the wake of the pandemic.
Last September, the DOJ charged more than 43 defendants across the country with the submission of more than $1.1 billion in false and fraudulent claims relating to telemedicine. The allegations at issue in that enforcement action are similar to ones seen outside the telemedicine context and included things like unnecessary ordering of durable medical equipment (DME) supplies, pain medication and genetic testing, as well as kickback allegations and billing for “sham” consultations with patients. There is no question that we can expect to see further enforcement activity in this area.
In short, even though the healthcare industry has barely emerged from an unprecedented healthcare crisis, we see no respite from enforcement scrutiny in healthcare, and the pandemic itself has resulted in new areas of enforcement focus.
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