DOJ Announces False Claims Act Recoveries for FY 2022
On February 7, 2023, the Department of Justice (DOJ) announced its annual False Claims Act (FCA) recoveries for fiscal year 2022. DOJ recovered $2.2 billion from a total of 351 settlements and judgments—the second-highest number of settlements and judgments in a single year. Of the $2.2 billion, more than $1.7 billion—or roughly 77%—in settlements and judgments related to matters that involved the healthcare industry. Whistleblower cases continued to comprise the vast majority of the FCA cases filed. In fiscal year 2022, whistleblowers filed 652 qui tam suits and recovered over $488 million. Over $1.9 billion of the $2.2 billion in settlements and judgments arose from lawsuits that were filed under the qui tam provisions of the FCA.
Healthcare Industry Recoveries
Although the recovery of $2.2 billion is a significant drop from the previous year’s recovery of $5.7 billion, which was an aberration, the near-record number of 351 settlements and judgments in one year indicates that FCA enforcement activity has not slowed down. Significantly, healthcare fraud remained a leading source of FCA settlements and judgments. The $1.7 billion in healthcare industry recoveries included drug and medical device manufacturers, durable medical equipment, home health and managed care providers, hospitals, pharmacies, hospice providers, and physicians. DOJ noted that the $1.7 billion reflects recoveries arising only from federal losses and does not include the amounts recovered for states in Medicaid cases.
DOJ highlighted its continued focus on the traditional enforcement areas such as Medicaid fraud, the Anti-Kickback Statute, the Stark Law, medically unnecessary services, substandard care, and managed care billing. Of the $1.7 billion recovered from the healthcare industry, $843.8 million—or almost half—was recovered from a pharmaceutical company to resolve allegations that the company paid kickbacks to physicians in the form speaker programs. Other recoveries in the healthcare industry reflected DOJ’s new enforcement areas, such as COVID-related fraud and cybersecurity.
Holding Individuals Accountable
DOJ noted that it continues to be committed to holding individuals, as well as corporations, accountable by incentivizing changes in both corporate and individual behaviors. DOJ also noted that many of its enforcement actions in fiscal year 2022 involved claims against individuals. For example, an individual physician paid $9.5 million to resolve allegations that he submitted false claims to Medicare and Medi-Cal for tests that he never performed.
The DOJ press release is available here.
Reporter, Kristy Lundy, Atlanta, +1 404 572 4645, firstname.lastname@example.org.
New York Budget Bill Proposes New Approval Process for Acquisitions of Health Care Entities
The proposed FY 2024 New York State Executive Budget announced by Governor Kathy Hochul on February 1, 2023, includes a new requirement to seek approval from the New York Department of Health (DOH) for acquisitions and certain other transactions involving “health care entities.” The legislative purpose section of the New York bill cites a “proliferation of large physician practices being managed by entities that are investor-backed,” which allegedly “may have a negative impact on patient care, health care costs, and ultimately access to services.” If passed, the bill would have a significant impact on physician practices, private equity sponsors and other investor-backed entities, and could also have a major impact on others operating or investing in the healthcare sector in New York.
The bill would give DOH authority to review and approve “material transactions” involving any “health care entity.” The bill provides that “health care entity” shall include “but not be limited to” physician practices and management services organizations (MSOs) that provide comprehensive management services to physician practices. DOH would have authority to issue regulations to include other types of entities within the definition.
The bill’s definition of “material transaction” broadly includes:
- a merger with a health care entity;
- acquisition of one or more health care entities (including by sale of assets, sale of equity, or “the transfer of control”);
- an “affiliation or contract formed between a health care entity and another person;” and
- formation of “a partnership, joint venture, accountable care organization, parent organization, or management services organization for the purpose of administering contracts with health plans, third-party administrators, pharmacy benefit managers, or health care providers.”
The bill permits DOH to establish a dollar threshold for determining materiality.
DOH Review Process
The bill would require a covered health care entity to submit an application to DOH at least 30 days in advance of any such material transaction. The application would be subject to public disclosure and must include, among other things:
- copies of any definitive agreements;
- identification of all service locations of each party and the revenue generated from such locations;
- any plans to reduce or eliminate services or participation in specific plan networks; and
- the anticipated impact on cost, quality, access, health equity, and competition, which “may be supported by data and a formal market impact analysis” and any commitments to address anticipated impacts.
DOH would be required to issue a public notice of the transaction and accept public comments. The bill outlines several factors that DOH may consider in reviewing the application, including:
- the net impact on patient costs, access to services, health equity, and health outcomes;
- potential anticompetitive effects;
- the financial condition of the parties;
- the character and competence of the parties or their officers and directors;
- sources of funding or assets for the transaction; and
- the fairness of any exchange of consideration.
If DOH does not take any action within 30 days after the filing, then the transaction would be deemed approved. However, DOH may notify the parties during the 30-day period that it is withholding approval in order to conduct a “thorough examination,” which can include requesting additional information. The bill does not prescribe a deadline for DOH to make a final decision if it withholds approval, meaning the parties could face indefinite delays.
The bill would also give DOH authority to require undertakings as a condition of approval. Required undertaking can include, among other things, community investments, competition protections, and contributions to state-controlled funds.
The New York bill is similar to legislation recently passed in other states. Last summer, California Governor Gavin Newsom signed SB 184 into law, which established a new Office of Health Care Affordability (OHCA) and will require hospitals, ambulatory surgery centers, clinics, imaging centers, certain physician practices, and others to notify OHCA at least 90 days prior to closing and undergo a review process beginning in 2024. Washington and Oregon have also passed similar laws in recent years.
For a copy of the proposed FY2024 New York State Executive Budget, please click here.
Reporter, J. Gardner Armsby, Atlanta, +1 404 572 2760, email@example.com.
King & Spalding Client Alert: E.D. Texas Vacates IDR Portions of the No Surprises Act Final Rule
On February 6, 2023, Judge Kernodle of the Eastern District of Texas vacated portions of the Final Rule implementing the No Surprises Act’s Independent Dispute Resolution (IDR) process. Specifically, last Monday’s order vacates the portions of the Final Rule that once again elevated the importance of the Qualifying Payment Amount (QPA) over the other factors in the IDR process. In light of this order, CMS has halted all IDR disputes until revised guidance is published. Please click on the following link to read the Client Alert for additional insight from King & Spalding healthcare lawyers. More
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Life Sciences & Healthcare Roundtable Webinar
Join us for a roundtable webinar on February 15, 2023, from noon - 1:00 P.M. Our panel will explore healthcare fraud enforcement patterns from 2022 and will discuss what to expect from the government and whistleblowers in 2023. The panel will also consider how healthcare organizations can mitigate these False Claims Act enforcement risks by implementing proactive compliance strategies. Topics for discussion include:
- DOJ and OIG enforcement initiatives focused on healthcare organizations.
- Specific enforcement trends to be covered include:
- Proposed changes to the overpayment rule
- Continued pursuit of private equity investors
- Cyber breaches leading to FCA liability
- Academic medical center grant fraud enforcement
- Provider Relief Fund reporting
- Anti-Kickback Statute / Conflicts of Interest
- Strategies to reduce risk in light of enforcement trends and evolving data sources.
Please register soon. You do not have to be a client to attend, and there is no charge.
32nd Annual Health Law & Policy Forum
Join us Monday, March 20, 2023, for our annual forum focusing on the foremost legal and political developments impacting the healthcare industry. The event will be hosted at the St. Regis Atlanta Hotel.
Information regarding a room block at The St. Regis Atlanta can be found here. The group rate is available until 5 P.M. ET on Friday, February 17.
- Secretary Kathleen Sebelius speaking on the future of health policy
- Leading practitioners providing policy and regulatory enforcement updates, and other industry developments
- How changes in antitrust policy and enforcement are impacting the healthcare industry
- Democrats in the Senate and Republicans in the House: Healthcare in a divided Congress
To register for this year's event, please click here.
Cocktails & Conversation
Join us Thursday, March 23, 2023, for a reception at the AHLA Institute on Medicare & Medicaid Payment Issues. The event will be hosted at the Baltimore Marriott Waterfront. To RSVP for the reception, please click here.