DOJ and OIG Actions: 2023 Enforcement Trends Recap

In fiscal year (FY) 2023, ending September 30, DOJ reported $2.68 billion in FCA payments, with $1.8 billion attributable to healthcare cases. This healthcare amount represents about 67% of the total FCA payments, which is a decline from recent years. (In 2021 and 2022, healthcare settlements were 90% and 80% of total FCA payments, respectively.) The number of new healthcare FCA cases filed in FY 2023 also declined slightly when compared to prior years, with 348 filed by relators and 94 filed by the government. Even still, the total number represents between eight and nine new healthcare FCA cases filed each week.

Notable trends and topics include:

Anti-Kickback Statute (AKS) Allegations Are Frequent and Far Reaching

AKS allegations have long been one of the most common subjects of FCA and criminal actions. A significant portion of FCA settlement payments each year concern AKS allegations. The scope of the AKS is broad, touching on virtually all healthcare organizations’ financial relationships with each other and with their employees, contractors, vendors, referral sources and patients.

We found examples of enforcement actions along a wide spectrum of allegations, including:

• A manufacturer giving physicians lavish meals, trips and entertainment to induce ordering the manufacturer’s products or making referrals to another provider
• Entities providing employed, mid-level practitioners to referring physicians at no cost or below cost
• An electronic health records company paying current customers to recommend their product to others
• Specialists allocating non-fair market value (FMV) payments to referring physicians in the context of co-management agreements
• A skilled nursing facility paying hospital administrators to induce referrals
• Entities paying non-FMV for space rental
• Labs paying physicians through management service organizations (MSOs) to induce referrals or for specimen-collection services at above FMV
• Entities paying above FMV for physician consulting or medical director arrangements
• Entities routinely waiving Medicare beneficiary co-payments

The Return of the Stark Law

After somewhat of a hiatus, 2023 saw a notable increase in FCA matters, including Physician Self-Referral Law (known as the Stark Law) allegations alongside AKS allegations. Several organizations entered into FCA settlements for these issues, some of which were precipitated by the organization self-disclosing the issue to the government rather than as the result of a relator action. These settlements ranged from a few million dollars to $345 million, which is the largest-ever Stark Law-related FCA settlement.

Given the Stark Law’s focus on physician compensation, most of these actions concerned allegations that a physician’s compensation violated the Stark Law because it took into account the volume or value of designated health services (DHS) referrals, such as by transferring a portion of its operating margin or prescription-drug profits to physicians, or that the compensation was above FMV. Cases also alleged above FMV space rental and equipment rental payments.

Hospitals were not the only entities to settle Stark Law allegations:

• A dermatology-management company that manages and operates numerous dermatology practices, surgical centers and pathology laboratories self-disclosed and paid $8.9 million to resolve AKS and Stark Law claims that former senior managers had agreed to raise the purchase price of 11 acquired dermatology practices as part of an arrangement where the providers agreed to refer services to company-affiliated entities after the acquisition of their practices.

• A mobile cardiac positron emission tomography (PET) company and its owner, founder and CEO agreed to pay $85.48 million to resolve FCA allegations that the company paid referring cardiologists above FMV fees to supervise PET scans in violation of the AKS and Stark Law.

Lab Testing, Durable Medical Equipment, Prosthetics, Orthotics and Supplies (DMEPOS) and Telemedicine Are Under the Government’s Microscope

Every month we found several examples of criminal and civil actions involving labs, DMEPOS companies and telemedicine providers. Often, the alleged misconduct involved all three types of entities. These actions frequently alleged kickbacks between the lab (usually for genetic or urine drug testing), marketers, DMEPOS companies (usually involving orthotic braces), and the telemedicine companies to procure prescriptions for such tests or DMEPOS. Some of these actions became national projects, such as Operation Double Helix, a coordinated federal law-enforcement action led by the Health Care Fraud Unit of the DOJ’s Criminal Division.

In some cases, a single entity was alleged to be engaged in urine drug testing and DMEPOS misconduct. This occurred, for example, in a $6.5 million FCA settlement with a pain-management practice for billing for urine drug testing that was not medically necessary or relevant to their treatment of the patient, additional laboratory services that were not separately billable with the urine drug tests, and back braces that were medically unnecessary or otherwise ineligible for reimbursement.

Other laboratory practices also have been the subject of scrutiny, including percentage-of-revenue commission payments to independent sales representatives and third-party marketing vendors, as well as the creation or processing of tests under a “blanket” or “standing” order or “custom profile” in which physicians allegedly did not specifically order each test for a particular patient.

Medical Necessity and Medicare Billing Rules Also Can Create False Claims

While there was much attention on AKS and Stark Law FCA actions in 2023, many FCA actions involved allegations of either a lack of medical necessity or failure to follow Medicare billing rules. These actions included the following allegations:

• A hospital billing for concurrent surgeries
• A device company advising customers to bill its devices under a code for which the devices did not qualify
• A telehealth company enrolling patients in more-expensive cardiac monitoring device services than necessary
• Numerous physician practices billing for medically unnecessary services
• Entities billing for evaluation and management services that were not supported by the medical record
• Providers performing multiple mole-removal procedures on patients on a single date, but billing for the services as if they were performed on separate dates
• An imaging facility billing Medicare and Medicaid under its billing number for both the professional and technical components of imaging rendered by the hospital’s outpatient cancer screening center, after which the imaging facility then allegedly paid the center a portion of the Medicare- or Medicaid-reimbursed global fee for the technical services provided by the center (which was not enrolled in Medicare or Medicaid at the time and was thus ineligible to receive such payments)
• A hospital billing for services under a physician’s name and national provider identifier when the services were furnished by mid-level practitioners
• A physician practice billing Medicare for critical-care services provided to nursing-home residents when he provided only routine care

COVID-19-Related FCA Enforcement Is on the Rise

Finally, COVID-19-related FCA enforcement actions continue to increase. To date, more of the government’s COVID-19 enforcement has been criminally focused to reach the low-hanging fruit of improper billing to the Health Resources and Services Administration COVID-19 Uninsured Program (the HRSA Program). In April 2023, in one of the largest coordinated COVID-19 fraud actions to date, DOJ filed charged against 18 defendants in nine federal districts based on their alleged participation in various healthcare fraud schemes that exploited the COVID-19 pandemic and allegedly resulted in more than $490 million in COVID-19-related false billings to federal healthcare programs and the HRSA Program.

Now that some time has passed since the height of the pandemic, FCA settlements and actions have begun to occur, such as the following:

• A relatively small FCA settlement (for $300,479.58) with a billing company that billed for respiratory-pathogen panel tests at the direction of its lab client when the tests were not ordered by the physician listed on the claim

• A settlement, between a hospital system and the United States, for $2 million plus additional contingent payments, to resolve FCA allegations of double billing when the hospital system billed the federal government for COVID-19 tests and either the State of Texas or the City of Houston for those same tests

• A settlement with an urgent care company that agreed to pay more than $9.1 million to settle allegations that it had submitted false claims for medical services to Medicare, TRICARE and the HRSA Program for COVID-19 testing, as well as for physician-performed office visits (when a non-physician practitioner had actually conducted the visits) and up-coded office visits

DOJ’s 2024 Priorities

DOJ Principal Deputy Assistant Attorney General Brian Boynton discussed the fiscal year 2023 statistics and DOJ 2024 FCA priorities at the recent Federal Bar Association Qui Tam Section Conference. He described DOJ’s continued focus on healthcare fraud, specifically discussing their examination of financial relationships under the AKS and Stark Law and scrutinizing nursing homes, COVID-19 spending and participants in the Medicare Advantage Program, including providers, plans and vendors. He also mentioned DOJ’s interest in “third parties,” such as private equity investors, electronic health record software providers and coding consultants, and their impact on patient care delivery and federal program spending.

KEY TAKEAWAYS

As has been the case for many years, FCA actions by the government and whistleblowers have resulted in defendants (1) making significant payments to the government and (2) incurring significant costs associated with investigating and defending these cases. Healthcare organizations can help reduce the risk of being subject to such actions by maintaining effective compliance programs that assess the organization’s risks, monitor and audit those risks, and encourage employees to report potential compliance concerns so they can be properly reviewed and remedied, if necessary.