Recoveries down under federal False Claims Act but likely to rise again

The U.S. government collected less from health care companies under the False Claims Act in 2020 than in previous years but it may be a pandemic-induced blip.

In an annual review, the U.S. Department of Justice said it collected $1.8 billion from health care companies, down from $2.6 billion in 2019.

The totals were $2.5 billion in 2018 and $2.4 billion in 2017. The False Claims Act is the chief law for penalizing contractors that allegedly misuse federal funds.

Last year’s decline stemmed in part from Covid-19, which made investigations more difficult, attorneys said.

“One of the challenges of the pandemic is that traditional in-person government audits of all kinds of businesses isn’t taking place,” said Jeremy Sternberg, an attorney in the Boston office of law firm Holland & Knight.

Megan Jeschke, also an attorney at Holland & Knight, cautioned against reading too much into the drop. “The FCA statistics should be viewed holistically and when we do so, we see an overall trajectory of increased recoveries, increased cases and increased non-qui tam cases,” Jeschke said, referring to cases initiated by the government itself, as opposed to whistleblowers. “This indicates there will be active and robust FCA landscape for years to come.”

Resources may have shifted to rooting out fraud related to things like fake Covid-19 tests, lawyers said. But it also reflects some of the distractions that befell the Justice and Health and Human Service departments under the Trump administration. A new administration under President Joe Biden took office on Jan, 20.

“I think you’re going to see it start to rise again,” said Jeffrey Miller, senior counsel in the corporate health and life sciences practices at Saxton & Stump, a law firm in Lancaster, Pennsylvania.

In 2021, authorities will be looking at established targets like opioids, kickbacks and charities that cover drug costs for patients, attorneys said. Authorities also may set their sights on areas that have exploded during the pandemic, namely, the growing use of telemedicine.

The rules for telemedicine were issued at a fast clip last year as regulators sought to broaden its role in delivering care. The pace, however, made it hard for providers to keep up and stay compliant, said Miller. “What you saw was a series of rules that came out that were regularly changing or not entirely clear.”

Miller expects an increase in investigations and repayments related to telehealth. But, he said, there also will be pressure to forgive providers due to their front-line role in battling the pandemic.

A similar spotlight may fall on the billions of dollars in CARES Act money that went to health care providers.

“There are a lot of organizations that got a lot of money under the CARES Act,” said Tony Maida, a partner in the New York office of law firm McDermott Will & Emery. “I think that’ll be a topic that starts trending … as the pandemic hopefully winds down and people start looking at how that money was spent.”

The issue was raised in a July speech by Ethan P. Davis, principal deputy assistant attorney general, to the Institute for Legal Reform, an arm of the U.S. Chamber of Commerce.

“In a time when the government is injecting vast amounts of federal funds into the U.S. economy, vigorous FCA enforcement is more important than ever to ensure that taxpayer dollars are spent as intended,” Davis said in prepared remarks, noting that the agency will probe private-equity firms when appropriate.

He cited a 2019 settlement with a private equity firm involved in a scheme to generate referrals for costly prescriptions, regardless of patient need.

“When a private equity firm invests in a company in a highly regulated space like health care or the life sciences, the firm should be aware of laws and regulations designed to prevent fraud,” Davis said. “Where a private equity firm takes an active role in illegal conduct by the acquired company, it can expose itself to False Claims Act liability.”

One of the largest recoveries in 2020 came from Novartis Pharmaceuticals under a $729 million settlement to resolve a lawsuit over improper payments to patients and physicians. In a statement at the time, Novartis CEO Vasant Narasimhan attributed the issue to legacy compliance matters. “We are a different company today – with new leadership, a stronger culture, and a more comprehensive commitment to ethics embedded at the heart of our company,” he said.

Attention also has fallen on fraud related to electronic health records. As an example, the Justice Department cited a $145 million settlement last January with an IT company Practice Fusion Inc. over allegations that the company was paid by a drug company to tweak its EHR software to increase opioid prescriptions. The company was purchased by Allscripts in 2018 and rebranded as Veradigm. Allscripts has said the practices at issue predated its purchase and that it has taken steps to strengthen compliance, according to news reports at the time.

Attention also has fallen on fraud related to electronic health records. As an example, the Justice Department cited a $145 million settlement last January with San Francisco-based health IT company Practice Fusion Inc. over allegations that the company was paid by a drug company to tweak its EHR software to increase opioid prescriptions. The company was purchased in 2018 by Allscripts and rebranded as Veradigm.

The allegations stem from behavior that predates the Allscripts purchase, according to Allscripts spokesperson Concetta Rasiarmos. “Allscripts has a strong culture of compliance, and we began integrating Practice Fusion into the Allscripts compliance program following its acquisition in 2018,” Rasiarmos wrote in an email. “We continue to enact substantially more robust compliance programs than were in place at Practice Fusion when it was acquired.”

There is another factor that could boost the total for 2021: The 2020 numbers do not include a $2.8 billion false claims settlement with Purdue Pharma that is part of a larger $8.3 billion agreement stemming from alleged abuses in the company’s opioids business.

Update: The story has been updated with a comment from an Allscripts spokesperson

Photo: zimmytws, Getty Images

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