Fraud & Abuse

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The False Claims Act (“FCA”) is a punitive civil statute that acts as the federal government’s primary tool for combatting fraud in government health care programs, such as Medicare, Medicaid, and Tricare. In fiscal year 2020 alone, the Department of Justice (“DOJ”) obtained more than $2.2 billion in FCA settlements and judgments (not including potential recoveries from pending cases or ongoing negotiations); the largest of these many recoveries came in the health care and pharmaceutical sectors, with several recoveries totaling over $100 million each.

Given the frequency of FCA application in the health care context, and despite this vast body of law and commentary spanning more than a century and a half since the FCA’s inception, novel applications and interpretations of the law still arise, especially as the health care industry evolves and new modes of payment and care delivery come to the fore. In 2021, the FCA has once again been the focal point of government attention, with a DOJ memorandum, proposed federal legislation, and recent federal court decisions adding new context and authority to guide future applications of the law.

This post is the first of three covering recent FCA updates, and in it we discuss the re-emergence of federal guidance as a tool in the belt of the DOJ in enforcing the FCA.

As demand, coverage and investment are all on the rise and transactions proliferate, we explore certain attributes of the fertility services industry.

Driving Factors

In 2019, there were 58.3 births for every 1,000 women ages 15 to 44 in the U.S., down from 59.1 in 2018.[1]  This marked the fifth consecutive year in which the fertility rate declined.  Many factors may be driving down the rate, including the lingering effects of the Great Recession, delays in marriage and an emphasis on career and educational objectives prior to having children. As women wait longer to have children, there is increasing interest in assisted reproductive technology (ART), including in vitro fertilization (IVF). Other demands for fertility services are driven by LGBTQ couples as well as people who wish to better understand their genetic makeup.

The early days of the COVID-19 pandemic saw an unprecedented coming together of the health care industry to treat communities beset by a deadly virus that strained provider resources across the country.  But just as normalcy returns, enforcement arms of the federal government have announced action against bad actors who took advantage of the COVID-19 pandemic to implement fraudulent schemes designed to specifically exploit the pandemic.

In separate actions on May 26, 2021, the Fraud Section of the Department of Justice (DOJ) and Center for Program Integrity, Centers for Medicare & Medicaid Services (CPI/CMS) announced cases against multiple defendants who perpetrated a variety of COVID-19-related scams on federal healthcare programs.  The DOJ charged 14 defendants who are alleged to have defrauded the government of over $143 million in false billings in the aggregate, while the CPI/CMS began administrative proceedings against more than 50 providers who took advantage of CMS programs meant to increase care access during the pandemic.

The U.S. Department of Justice (the “DOJ”) recently settled whistleblower False Claims Act (“FCA”) allegations against The University of Miami (“UMiami”) for $22 million, which resolves claims from three separate lawsuits related to billing practices at UMiami’s off-campus hospital-based facilities (“Off-Campus Hospital Facilities”) and fraudulent claims for laboratory services.

A recent Fourth Circuit decision, United States v. Mallory (988 F.3d 730), upheld damages and penalties for more than $100 million for violations of the Anti-Kickback Statute (42 U.S.C. § 1320a-7b(b)) (the “AKS”) and the False Claims Act (31 U.S.C. § 3729) by a blood testing laboratory and its contracted sales agents.  The Court held that commission payments made by the laboratory to its sales agents (sales companies that, in turn, hired and contracted salespeople to sell the laboratory blood tests), which were based on the percentage of revenue the sales agents generated for the laboratory through marketing services, constituted improper “remuneration” that intended to induce the sales agents to sell as many laboratory tests as possible. The defendants failed to show that the arrangements fit within an AKS Safe Harbor.

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