News & Insights


February 5, 2018

Health Headlines – February 5, 2018

DOJ Issues Memorandum Urging Government Lawyers to Dismiss ‘Meritless’ False Claims Act Cases – The U.S. Department of Justice (DOJ) recently issued an internal guidance memo to DOJ attorneys regarding the dismissal of meritless False Claims Act (FCA) cases.  The leaked memo formalizes comments made in late 2017 by the Director of DOJ’s Civil Fraud Section and signals the important institutional interest DOJ has in dismissing cases that will unnecessarily consume scarce resources and could create adverse legal precedent.  While its full impact remains to be seen, in the interim it provides companies with a roadmap for making presentations by laying out the factors DOJ will consider in deciding whether to intervene or seek dismissal of qui tam actions.  While broadly applicable, the memo is particularly relevant for healthcare companies, which are frequently the target of FCA litigation. 

The memo provides a “non-exhaustive” list of seven factors for DOJ lawyers to consider when evaluating whether to dismiss a FCA case, including: (1) curbing meritless qui tams, (2) preventing parasitic or opportunistic qui tam actions, (3) preventing interference with agency policies and programs, (4) controlling litigation brought on behalf of the United States, (5) safeguarding classified information and national security interests, (6) preserving government resources, and (7) addressing egregious procedural errors. 

To view the memo, click here. A more detailed analysis of the memo’s impact is discussed in a recent King & Spalding Client Alert, available here

Reporter, Daniel Sale, Washington, D.C., +1 202 626 2900,

CMS Proposes to Increase Payments to Medicare Managed Care Plans for 2019 – CMS has released its proposal for 2019 Medicare Part C rates. CMS indicated it expects an average change in revenue of 1.84 percent for Medicare managed care plans for 2019 as a result of the proposed policy changes.

The chart below details the expected impact of the proposed policy changes on plan payments relative to last year:


2019 Advance Notice

Effective Growth Rate

4.35 percent



Change in Star Ratings

-0.2 percent

Medicare Advantage coding intensity adjustment

0.01 percent

Risk Model Revision

0.28 percent

Encounter Data Transition

-0.04 percent

Employer Group Waiver Payment Policy

-0.3 percent


-2.26 percent

Expected Average Change in Revenue

1.84 percent

Notably, the 1.84 percent increase does not include an adjustment for underlying coding trends on risk scores. CMS has predicted that risk scores will increase, on average, by 3.1 percent. This increase along with the proposed rate increase could mean that Medicare Advantage plans could see payment rates rise by an average of 4.94 percent.

On December 27, 2017, CMS released Part I of the Advanced Notice, which proposed changes to the risk adjustment model for MA plans. The proposed model includes adjusting for mental health, substance use disorder, chronic kidney disease conditions, and the presence of multiple conditions. The proposed changes reflect CMS’s broader mandate under the 21st Century Cures Act to improve risk adjustment to better reflect the needs of the enrolled beneficiaries. CMS is proposing to begin the phase-in of this new model in 2019, starting with a blend of 75 percent of the risk adjustment model used for payment in 2017 and 2018 and 25 percent of the new risk adjustment model proposed. By 2022, CMS will have fully phased-in the new model.

CMS is accepting comments on the proposal until March 5, 2018. The final 2019 Rate Announcement will be published April 2, 2019. To view Part II of the Advance Notice, click here. CMS’s Fact Sheet is available here.

Reporter, Kirstin Rodrigues, Atlanta, + 1 404 572 4671,

Kickback Case Results in Jury Verdict Exceeding $50 Million – A South Carolina jury found three individuals liable for violations of the Federal False Claims Act (FCA) in a qui tam whistleblower action in which DOJ intervened. The defendants, owners of a specialized laboratory company and an affiliated marketing company, were found to have operated a scheme to pay kickbacks to physicians for laboratory test referrals.

The defendants paid referring physicians “process and handling” fees ranging from $10 to $20 for each laboratory test ordered. The whistleblowers and DOJ alleged that these payments were made to induce referrals and therefore constituted illegal kickbacks prohibited under the federal Anti-Kickback Statute, meaning that all Medicare and TRICARE claims for which these payments were made were submitted in violation of the FCA.

All three defendants were found jointly and severally liable for submitting over 35,000 false claims worth over $16.6 million. Two of the defendants were also found liable for submitting over 3,000 false claims worth over $400,000. Under the FCA, these amounts are automatically trebled, resulting in potential total liability of over $50 million.

The case is United States ex rel. Lutz v. BlueWave Healthcare Consultants Inc., No. 9:14-cv-00230-RMG (D.S.C.). A copy of DOJ’s Complaint in Intervention is available here.

Reporter, J. Gardner Armsby, Atlanta, +1 404 572 2760,

Also in the News:

Upcoming Roundtable on Lessons Learned from 2017 FDA Enforcement Letters and Other Key Developments – On February 20, 2018, King & Spalding will host a Life Sciences & Healthcare Roundtable to review key takeaways from FDA’s 2017 drug and device advertising and promotion enforcement letters and discuss related regulatory developments. Learn about key issues and what they can mean for your business, including OPDP, APLB and CDRH enforcement review, key cases involving advertising and promotion activities, other important FDA initiatives, including “intended use,” and predictions for what is expected in 2018. The Roundtable will be held as a webinar from 12:30 – 1:30 p.m. ET. Please click here to register.

Upcoming King & Spalding Life Sciences and Healthcare Roundtable on Reimbursement for Allied Health Education – On February 22, 2018, King & Spalding will host a Roundtable titled, “Emerging Trends in Reimbursement for Allied Health Education,” which will aim to (1) explain the regulatory framework governing allied health programs; (2) discuss the extent to which hospitals may work with nonhospital entities to administer these programs;
(3) identify emerging trends in audits of allied health program costs; and (4) strategize for possible appeal of audit adjustments. The Roundtable will take place from 1:00-2:00 pm ET and will be available only by webinar. To register, please click here.

27th Annual King & Spalding Health Law & Policy Forum – Please join us on March 19, 2018, for a one-day conference at the St. Regis Hotel in Atlanta focusing on the latest legal and political developments affecting the healthcare industry. The keynote speaker will be Jeffrey Toobin. A nationally recognized figure in law and politics, Toobin is a high-profile senior analyst for CNN and staff writer for The New Yorker. Hear him discuss the Supreme Court and how it may affect health policy in the coming years. For registration information, please click here.