United States: COVID-19: Health Care Fraud In A Public Health Emergency

COVID-19: Healthcare Fraud in a Public

Health Emergency

June 26, 2020

This is the third in a series of client alerts addressing the likely role of the False Claims Act in the wake of the massive federal government response to the COVID-19 pandemic.¹

The healthcare industry is no stranger to False Claims Act (FCA) enforcement. In 2018, the Department of Justice (DOJ) recovered $2.5 billion in settlements and judgments for violations of the FCA by companies and individuals working in the healthcare industry, including large hospitals, drug and medical device manufacturers, pharmacies, hospice organizations, and doctors.² And in 2019, healthcare recoveries amounted to more than 85% ($2.6 billion out of $3 billion) of total amounts paid under the FCA.³

The COVID-19 pandemic is a public health emergency.⁴ In response, Congress passed the Coronavirus Aid, Relief, and Economic Security (CARES) Act, Pub. L 116-136 (2020), to reinforce the country's healthcare industry. The CARES Act has sought to do this in two ways: by promoting healthcare innovation among medical device and pharmaceutical manufacturers to combat COVID19, including by developing a vaccine, and by providing federal monies to healthcare providers who have been affected by the pandemic.⁵

Healthcare providers who participate in CARES Act programs must pay close attention to the attendant risks under the FCA, 31 U.S.C. § 3729 et seq. The FCA requires companies and individuals to make truthful and accurate representations about their eligibility to receive federal funds, and about the goods and services they provide through federally funded programs. It imposes treble damages and civil penalties of $11,665 to $23,331 per false claim (when adjusted for inflation),⁶ and it offers rewards for insiders who file claims on behalf of the government (known as qui tam plaintiffs).

This alert examines the potential liability risks under the FCA that are specific to the healthcare industry's response to the COVID-19 pandemic. Healthcare providers have typically found themselves to be targets of FCA enforcement because of their participation in Medicare or Medicaid, which condition reimbursement on the making of truthful certifications about, for example, the healthcare service provided, the amount of time involved and the proper billing code under applicable regulations.⁷ Under the fee-for-service billing structure of these programs, a doctor, nurse or physician's assistant, for instance, provides healthcare services to a patient and is then required to certify that the treatment was "medically necessary" in order to receive reimbursement. After providers are reimbursed, Medicare or Medicaid may conduct a post hoc audit to determine whether the claims were billed properly. Any claims for "unnecessary" treatment would be false claims.

Funds distributed to healthcare providers under the CARES Act are likely to be the focus of close scrutiny by federal and state oversight authorities and the plaintiffs' bar. Indeed, the chairpersons of two House committees have already expressed concerns about the CARES Act's Provider Relief Fund and the "lack of transparency with Congress and the American people about how funds are being spent or loans are being made."⁸ This early congressional attention provides a clear signal that recipients of these federal funds will be scrutinized, potentially by oversight authorities created by the CARES Act itself, DOJ or private civil plaintiffs through an FCA lawsuit.

Footnotes

1 Other alerts in this series include " COVID-19 What History Tells Us About the Importance of the False

Claims Act in a Time of Pandemic " (Matthew Benedetto and Elizabeth Purcell Phillips—May 11, 2020) and " COVID-19: FCA Risks for Industries Fighting the Pandemic " (Matthew Benedetto, Elizabeth Purcell Phillips and Joseph Michael Levy—May 29, 2020).

2 Department of Justice, Justice Department Recovers Over $2.8 Billion from False Claims Act Cases in Fiscal Year 2018 (Dec. 21, 2018), https://www.justice.gov/opa/pr/justice-department-recovers-over-28 billion-false-claims-act-cases-fiscal-year-2018 .

3 Department of Justice, Justice Department Recovers over $3 Billion from False Claims Act Cases in Fiscal Year 2019 (Jan. 9, 2020) , https://www.justice.gov/opa/pr/justice-department-recovers-over-3-billion-false claims-act-cases-fiscal-year-2019 .

4 Alex M. Azar II, "Determination that a Public Health Emergency Exists" (Jan. 31, 2020), https://www.phe.gov/emergency/news/healthactions/phe/Pages/2019-nCoV.aspx .

5 CARES Act Title VIII, Department of Health and Human Services; Paycheck Protection Program and Health Care Enhancement Act, Pub. L. No. 116–139, 134 Stat. 620 (2020).

6 15 CFR § 6.3(a)(3) (Jan. 15, 2020).

7 Medicare is an insurance program through which medical bills are paid from trust funds into which covered individuals have paid. It serves primarily people over age 65 and younger disabled people and dialysis patients. Medicaid is a federal–state assistance program that serves low-income people of every age at no cost. See Department of Health and Human Services, What is the difference between Medicare and Medicaid?, available a t https://www.hhs.gov/answers/medicare-and-medicaid/what-is-the-difference between-medicare-medicaid/index.html (last accessed June 22, 2020).

8 Letter from the Honorable Frank Pallone Jr., Chairman, Committee on Energy and Commerce, and the

Honorable Richard E. Neal, Chairman, Committee on Ways and Means, to the Honorable Alex M. Azar II, Secretary, Department of Health and Human Services, and the Honorable Seema Verma, Administrator, Centers for Medicare & Medicaid Services (May 7, 2020).

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Originally published 26 June, 2020

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