HOW THE SAUSAGE IS MADE

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HOW THE SAUSAGE IS

MADE

How the Government Evaluates FCA Qui Tam Sealed Complaints and Helps Relators’ Counsel Build Their Cases

Compliance Institute April 19-22, 2015

Walt Disney World Swan and Dolphin Resort, Lake Buena Vista, FL

Discussion Leaders

Winston Y. Chan

Gibson Dunn & Crutcher

William J. Harrington

Goodwin Procter

Jeffrey E. Marcus

Marcus Neiman & Rashbaum

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Topics Covered

•Background

•Process

•Case Study

•Other Significant Healthcare Settlements

•Questions

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Background

The False Claims Act

•False Claims Act suits have become a primary

mechanism for government prosecutors to investigate and litigate against the Health Care industry.

•Many of these suits are started by Whistleblowers, who can share richly in any recovery that the Government obtains.

•Cases come in all shapes and sizes. But the most common types are schemes that violate (1) federal anti-kickback rules, (2) physician self-referral prohibitions, and (3) billing for services that were unnecessary, excessive (upcoded), or not delivered.

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Money Recovered

FY 2014

•$5.69 billion recovered overall

•$2.3 billion recovered for healthcare fraud

•$333 million recovered from hospitals

January 2009 through September 2014 •$22.75 billion recovered overall

•$14.5 billion recovered for healthcare fraud

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Qui Tam Actions

•More than 700 qui tam suits in FY 2014.

•Recovery in qui tam cases was almost $3 billion.

•Whistleblowers received $435 million.

•The health care industry remained the biggest focus.

Moving Beyond Whistleblowers

•Increasingly, private attorneys have pushed state attorney generals to authorize suits by private plaintiffs’ firms on the states’ behalf.

•“Lawyers Create Big Paydays by Coaxing Attorneys

General to Sue”, New York Times, December 18, 2014 •For example, in Mississippi, private plaintiffs’ firms have

collected fees of $57.5 million in last two years in such cases.

•Focus of this presentation, however, is the False Claims Act.

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Process

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Qui Tam Complaint

•31 U.S.C. § 3729(a)(1): “any person who . . . knowingly presents, or causes to be presented, a false or fraudulent claim for payment or approval . . . is liable to the United States Government for a civil penalty . . . plus 3 times the amount of damages which the Government sustains because of the act of that person.”

•31 U.S.C. § 3730(b)(1): “A person may bring a civil action for a violation of section 3729 for the person and for the United States Government.”

•The whistleblower can obtain a significant share of any recovery.

Notice to the Government

•31 U.S.C. §3730(b)(2): “A copy of the complaint and written disclosure of substantially all material evidence and information the person possesses shall be served on the Government pursuant to Rule 4(d)(4) of the Federal Rules of Civil Procedure. The complaint shall be filed in camera, shall remain under seal for at least 60 days, and shall not be served on the defendant until the court so orders. The Government may elect to intervene and proceed with the action within 60 days after it receives both the complaint and the material evidence and information.”

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The Investigation

From The Whistleblower’s Perspective

•Relator’s counsel know that they are more likely to attract the government’s interest if they can provide more concrete and specific information.

•The Government attorneys and the Whistleblowers meet often. They debrief the whistleblower and they analyze what ways the whistleblower might still gather information.

•Whistleblowers may rely on confidential documents accessible through their employment. That is a risky area for all parties, as shown by a recent suit involving Mount Sinai.

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The Investigation

•31 U.S.C. § 3733(a)(1): “Any information obtained by the Attorney General or a designee of the Attorney General under this section may be shared with any qui tam relator if the Attorney General or designee determine it is necessary as part of any false claims act investigation.”

The Investigation

•Common interest agreements between the United States and Relators are used as a means of sharing information and work product to facilitate investigation and case preparation.

•“In furtherance of their common interest, the Parties may find it beneficial to disclose to each other information that is protected under the attorney-client privilege, work product doctrine, investigative privilege and/or other privileges. As such, the Parties agree that the sharing of such information between them will not, in itself, constitute a waiver of any privileges or work product.”

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The Investigation

From The Government’s Perspective

•The Government will consider its investigative options. A key option is the civil investigative demand.

•31 U.S.C. § 3733(a)(1): “Whenever the Attorney General . . . has reason to believe that any person may be in possession, custody, or control of any documentary material or information relevant to a false claims law investigation, the Attorney General . . . may . . . before making an election under section 3730 (b), issue in writing and cause to be served upon such person, a civil investigative demand requiring such person—

(A) to produce such documentary material for inspection and copying,

(B) to answer in writing written interrogatories with respect to such documentary material or information, (C) to give oral testimony concerning such documentary material or information, or

(D) to furnish any combination of such material, answers, or testimony.”

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The Investigation

From The Government’s Perspective

•What Factors Are Government Attorneys Interested in Seeing?

•There is no single list, but certain factors are important.

•One component is the gravity of the financial damage resulting from the alleged misconduct.

•Another is the strength of the evidence supporting the alleged wrongdoing and the ease of proving the case.

•What about the seriousness of the public harm?

The Investigation

From The Medical Entity’s Perspective

•The Medical Entity usually first learns that there is a Qui Tam when they receive a CID.

•The Government may not share detailed allegations or a copy of the sealed Qui Tam – at least at first.

•Over time, the Medical Entity may have the chance to seek an early resolution of the claims. Calibrating how to engage with the Government is among the toughest judgment calls.

•The Medical Entity also needs to look internally and determine if the Qui Tam indicates a serious, broader problem.

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After Unsealing of Complaint

•31 U.S.C. § 3731(c): “If the Government elects to intervene and proceed with an action brought under [section] 3730(b), the Government may file its own complaint or amend the complaint of a person who has brought an action under section 3730(b) to clarify or add detail to the claims in which the Government is intervening and to add any additional claims with respect to which the Government contends it is entitled to relief.”

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Significant Healthcare Settlements

Carondelet Health Network

•Operator of two hospitals in Arizona.

•Allegations that it billed for services to patients who did not qualify for services.

•Settled for $35 million.

•Whistleblower awarded $5.95 million.

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Community Health Systems

•Nation’s largest operator of acute care hospitals.

•Allegations that it billed for inpatient services that could have been provided in outpatient setting.

•Settled for $98.15 million.

•Award to nine whistleblowers, former employees, to be determined.

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Community Health Systems Professional

Services Corp. (CHSPSC)

•CHSPSC is a subsidiary of Community Health Systems, which provides hospital management, consulting and advisory services to independent community hospitals and health systems.

•Allegations that CHSPSC and three affiliated New Mexico hospitals made illegal donations to county governments, which were used to fund the state share of Medicaid payments to hospitals.

•Whistleblower will receive $18,671,561.

Extendicare Health Services

•One of North America’s largest long-term care providers with 251 senior care centers and capacity for

approximately 27,600 residents.

•Allegations that it billed Medicare and Medicaid for medically unnecessary services.

•Two whistleblowers will receive a total of $2.05 million.

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Saint Joseph Health System

•Operator of several hospitals in Kentucky.

•Allegations that it billed for medically unnecessary procedures and gave kickbacks to physicians.

•Whistleblowers, three former cardiologists, awarded $2.46 million.

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Halifax Hospital Medical Center

•Florida-based hospital system.

•Allegations that it gave medically unnecessary care to patients and kickbacks to physicians.

Infirmary Health System

•Alabama-based hospital system, two affiliated clinics, and a physicians group.

•Allegations that the clinics paid the physicians group kickbacks for Medicare referrals.

•Whistleblower, formerly a physician with the physicians group, awarded $4.41 million.

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Daiichi Sankyo, Inc.

•Pharmaceutical company.

•Allegations that it gave kickbacks to physicians.

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Endo Pharmaceuticals & Endo Health

Solutions

•Pharmaceutical company and a subsidiary.

•Allegations that it promoted certain drugs for uses not approved by the FDA.

•Whistleblowers’ award has yet to be determined.

Ralex Services

•Nursing home operator in New York.

•Allegations that the company overstated the severity of its patients ailments.

•Whistleblower awarded $250,000 from money recovered by New York State, and award from federal portion of funds is to be determined.

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Amedisys

•One of the nation’s largest providers of home healthcare.

•Allegations that it billed for ineligible patients and services and gave kickbacks to physicians.

•Whistleblowers awarded total of $26 million.

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Questions?

Winston Y. Chan

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Winston Y. Chan is a litigation partner in Gibson, Dunn & Crutcher’s San Francisco office. He is an experienced trial and appellate attorney, and is a member of the firm’s White Collar Defense and Investigations Practice Group. He regularly represents entities and individuals in criminal and civil False Claims Act matters, and conducts internal investigations and compliance reviews for healthcare and life sciences companies.

From 2003 to 2011, Mr. Chan served as an Assistant United States Attorney in the Eastern District of New York, where he investigated and prosecuted a wide range of matters as part of that office’s Business and Securities Fraud Section, including False Claims Act matters, Foreign Corrupt Practices Act violations, hedge fund improprieties, insider trading, accounting fraud, market manipulation, and fraudulent offerings of securities. Mr. Chan served in a number of supervisory roles and received a variety of departmental awards and commendations. In particular, he served as that office’s Healthcare Fraud Coordinator, overseeing all qui tam and whistleblower investigations involving allegations of FCA violations, kickbacks, misbranding and off-label promotion.

Mr. Chan earned his undergraduate degree, magna cum laude, from Yale University, and his Juris Doctor from Yale Law School. In 2014, Mr. Chan was named in Law360 as one of just five nationwide “Rising Stars” in the government enforcement defense and investigations field. Benchmark Litigation has recognized Mr. Chan as a 2015 California Litigation Star for being “recommended consistently as a reputable and effective litigator by clients and peers.”

Email: wchan@gibsondunn.com Tel.: (415) 393-8362

William J. Harrington

Mr. Harrington is a partner in Goodwin Procter’s New York office. A former federal prosecutor, Mr. Harrington is an experienced trial lawyer and appellate advocate. He specializes in criminal defense, government civil and regulatory actions, and internal investigations. Mr. Harrington is an expert in federal civil fraud suits under the False Claims Act and FIRREA. In the last two years, he has defended a variety of entities against claims of civil fraud and related DOJ investigations, including a mortgage originator, a federally insured bank, a medical organization, a pharmaceutical company and a military contractor.

Mr. Harrington worked in the Criminal Division of the U.S. Attorney’s Office for the Southern District of New York from 2006 through 2012. In his last two years at the U.S. Attorney’s Office, Mr. Harrington regularly worked on parallel investigations with the Civil Division of the U.S. Attorney’s Office, including the management of criminal investigations based on qui tam complaints. He was appointed Criminal Health Care Fraud Coordinator, responsible for the S.D.N.Y.’s fraud prosecutions involving health care providers and pharmaceutical companies.

Mr. Harrington earned his B.A., magna cum laude, from Yale College, and his J.D. from Yale Law School. Mr. Harrington has been recognized as one of the leading White Collar Crime Lawyers in the world by the 2014 edition of Euromoney’s Expert Guides: White Collar Crime Lawyers. Email: wharrington@goodwinprocter.com

Tel.: (212) 459-7140

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Jeffrey Marcus

Jeffrey Marcus is a co-founder and partner of Marcus Neiman & Rashbaum in southern Florida. Jeff is an experienced trial lawyer and former federal prosecutor. His practice focuses on white collar criminal defense, complex civil litigation, qui tam litigation and internal investigations. He has a niche specialty in representing clients in qui tam False Claims Act cases in such areas as healthcare, pharmaceuticals, and government contracting.

Jeff has been recognized by a wide range of peer groups and publications for his litigation prowess. Chambers USA describes Jeff as “very smart” “with a keen eye for understanding the dynamics and strategy of a case,” observing that peers praise him for his “thorough and conscientious approach.” Jeff was a federal prosecutor in the Southern District of Florida’s Criminal Division where he successfully tried more than 25 cases to verdict and never lost a case as lead counsel. As a prosecutor, Jeff specialized in economic crimes, with an emphasis on healthcare and pharmaceuticals, and led numerous investigations involving corporations and their officers and employees Raised in Miami, Florida, Jeff earned his B.A., magna cum laude and Phi Beta Kappa (early selection) from Yale University and his J.D. from The Yale Law School.

Email: jmarcus@mnrlawfirm.com Tel.: (305) 400-4260