United States: Trinity Homecare Settlement: Five False Claims Trends

New York State Attorney General Eric Schneiderman recently announced that his office had reached a $2.5 million settlement in a federal False Claims Act (FCA) case with Trinity HomeCare and its related entities.  The case, filed as a qui tam action in federal district court in the Eastern District of New York, alleged that Trinity's violations of New York's Medicaid regulations in the delivery of hemophilia drugs resulted in its submission of false claims to the New York Medicaid Program, in violation of both the federal and state FCAs.

The Trinity settlement may seem relatively insignificant, especially in comparison to other FCA cases which settled for billions, not millions, of dollars.  But the Trinity case may be more representative of the future of FCA enforcement.  Indeed, there are five current FCA trends evidenced by the Trinity case.

1. FCA Case Pursued and Settled After Federal Government Declination

In the olden days of FCA litigation (meaning five or six years ago), federal government declination often meant the end of the case.  But now a federal declination is often just the first stage of FCA litigation.  As in the Trinity case, more and more FCA cases are being litigated by relators in the absence of federal intervention.

And that is especially so where the allegations involve Medicaid billings and are brought by a relator alleging violation of both the federal and a state FCA.  While the federal government may have declined the Trinity case, the New York Attorney General's Medicaid Fraud Control Unit (MFCU) took it on, launched its own investigation, and apparently was the driving force behind the settlement.

As noted in my recent blog post, FCA settlements without federal government intervention do pose risks for defendants, as evidenced by the Trinity settlement. While the federal government did not object to the settlement terms negotiated by the state MFCU, it also did not provide the defendants with a federal release.  HHS-OIG was not a party to the settlement and so no release from OIG's exclusion authority was provided to the defendants.

2. FCA Case Alleging a Single-State or Regional Billing Scheme

In the past, the majority of litigated FCA cases were brought against national companies and involved allegations of national schemes.  Now, as in Trinity, it is more common to see a FCA case being litigated against a health care provider operating in one state or a specific region.

There are multiple reasons for this trend, including increased FCA experience by government lawyers and the relator's bar, the proliferation of state FCAs, and employees and business associates who are more knowledgeable about the FCA.

But another reason may be the current focus on the pleading specificity required for a FCA action.  In Trinity, the plaintiffs cited to specific New York Medicaid Program preconditions for billing specialty drugs, such as the hemophilia drugs at the heart of the case, including delivery documentation/signature requirements.  The plaintiffs alleged that Trinity's failure to adhere to those requirements meant New York Medicaid should not have been billed, let alone have reimbursed Trinity, for the drugs, rendering the claims false and therefore actionable under the state and federal FCAs.

3. FCA Cases Based on Government Billings for Specialty Drugs

Specialty Drugs are big ticket items, with government health care reimbursements often running thousands of dollars for a single patient's single dose.  So it is not surprising that more and more FCAs are being filed involving government payments for specialty drugs.

In Trinity, the drugs at issue were a handful of hemophilia specialty drugs, which over four and half years accounted for more than $31 million dollars in New York Medicaid payments to Trinity.  The qui tam alleged that Trinity's policy on drug shipment/delivery resulted in unneeded and unused medications being billed to Medicaid. As part of its investigation, the New York MFCU audited Trinity's records for ten of the Medicaid patients and then interviewed the patients and their families, substantiating allegations in relation to nine of those ten patients.

4. FCA Cases Based on Conduct Subject to Prior Warnings/Administrative Actions

Health care billing requirements can be mind-numbingly complex. The red tape involved in distinguishing between different billing and documentation rules for individual government programs can be an attractive defense to a FCA case based on specific requirements for just one of those programs. The plaintiff must be able to establish more than mere negligence by the defendant in failing to follow the regulatory scheme applicable to the billings at issue.

The covered conduct addressed in the Trinity settlement ran from January 2007-September 2011.  The dates chosen were likely no accident:  Trinity's Medicaid billing practices in 2005-2006 had been subject to a prior New York Medicaid Inspector General administrative audit, resulting in an assessment of a Medicaid overpayment in excess of $3 million.  Despite that history, the relator alleged that Trinity managers specifically instructed employees to send/leave Medicaid-covered hemophilia drugs without obtaining the requisite signatures.  Relator also alleged that the problems with adherence to New York Medicaid billing requirements had been reported to Trinity's national sales director of hemophilia services, with no resulting action by management.

5. FCA Cases Involving Multiple Defendants Named in Multiple Complaints

It is increasingly common to see FCA cases that name multiple defendants and for there to be multiple FCA cases pending against the same defendant(s) for similar or related conduct.

The Trinity settlement documents established that Trinity is a New York State pharmacy and home care provider; in 2007 Trinity was acquired by Option Care and later that same year Walgreen Co. acquired Option Care.  At the time of the settlement, Trinity operated as a wholly owned subsidiary of Walgreen.  Trinity, Option care and Walgreen were all named in the Trinity case and signed off on the $2.5 million settlement.

But the $2.5 Trinity settlement is not the end of companies' involvement with the New York MFCU.  Several days after announcing the $2.5 settlement, Attorney General Schneiderman announced that his MFCU has reached a separate settlement with the same companies out of a separate qui tam filed in the federal district court in the Southern District of New York that involved the operations of Trinity.  In that separate case pending in a separate court, the relator alleged that Trinity had submitted false Medicaid claims for a specialty drug used to treat premature infants at risk for lung disease.  The drug at issue was reimbursed by Medicaid at up to $2,000 per vial.   According to the Attorney General's press release, when the new qui tam was filed, it immediately caught his staff's attention because of the ongoing investigation involving Trinity's billing for hemophilia drugs.

According to the settlement documents, through its investigation related to hemophilia drugs, the MFCU had learned of existing concerns about Trinity's practices related to this pediatric specialty drug.  Then the qui tam was filed by a physician who alleged that Trinity submitted Medicaid claims for this drug when it had not actually been prescribed by the infant's treating physician: Trinity allegedly inserted the name of a neonatal unit physician or other physician as prescriber, including the relator, when that physician had not treated the child at issue.  While the federal government again declined the qui tam, the state took it on and the defendants again settled with New York for just under $22.5 million.   And again, the federal government is not a signatory to the settlement.


While there still may be an occasional mega-FCA settlement out there, I expect to see many more of these smaller, state-specific FCA cases being filed and pursued, especially if the case involves some of the same factors present in the Trinity case.  And I expect these cases to continue to move forward even when the federal government declines to intervene in the case.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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Ellyn Sternfield
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