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Major Expansion Of False Claims Act

On June 16th, the U.S. Supreme Court, in a unanimous decision in Universal Health Inc. v. U.S. et al. ex rel. Escobar et al., expanded the basis for turning otherwise valid claims for reimbursement into false claims and, therefore, expanded the universe of potential whistleblower lawsuits. It did so by finding that, in some circumstances, an implied false certification can be the basis for False Claims Act (“FCA”) liability.

The Theory

Claims for payment from the federal government are wrapped in specific representations about the goods or services provided. For example, the use of a CPT code constitutes a representation that the services underlying that code were actually delivered. 

The “implied false certification” concept holds that specific representations come bundled with implied certifications of certain underlying compliance with statutory, regulatory, or contractual requirements. Under that theory, if a claimant omits to inform the government that it is out of compliance with an underlying requirement, the claim is rendered false. 

The Supreme Court endorsed that reasoning, but only to the extent that compliance with the implied underlying statutory, regulatory, or contractual requirement is material to the Government’s payment decision. 

The Underlying Case

The facts of the case involved a teenage Medicaid patient who received psychiatric care at Arbour Counseling Services, a subsidiary of for-profit hospital chain Universal Health Services. The patient died due to an adverse drug reaction. Upon investigation, it was discovered that Arbour had few physicians or other licensed providers and that unlicensed staff had illegally prescribed the drugs to the patient.

A whistleblower filed an FCA action alleging that Universal Health through Arbour, had violated the FCA by  submitting reimbursement claims that made representations about the specific services provided by specific types of professionals, but that failed to disclose serious violations of regulations pertaining to staff qualifications and licensing requirements for these services.

The Holding

The Supreme Court held that the implied certification theory can be a basis for liability, at least where two conditions are satisfied:

1. The claim does not merely request payment, but also makes specific representations about the goods or services provided. [Note: CPT coded claims are such claims.] and

2. Failure to disclose noncompliance with material statutory, regulatory, or contractual requirements makes those representations misleading half-truths.

Materiality Is Key

The Court disagreed with Universal Health’s argument that a defendant should face FCA liability only if it fails to disclose the violation of a contrac­tual, statutory, or regulatory provision that the Government expressly designated a condition of payment.

The Court stated that under the FCA, the misrepresentation must be material to the other party’s course of action, but that statutory, regulatory, and contractual requirements are not automatically material, even if they are labeled conditions of payment. 

Materiality means "having a natural tendency to influence, or be capable of influencing, the payment or receipt of money or property.”

In describing examples, the Court stated that proof of materiality can include, but is not necessarily limited to, evidence that the defendant knows that the government consistently refuses to pay claims based on noncompliance with a particular statutory, regulatory, or contractual requirement. Conversely, if the government pays a particular claim in full despite its actual knowledge that certain requirements were violated, that is very strong evidence that those requirements are not material. Or, if the government regularly pays a particular type of claim in full despite actual knowledge that certain requirements were violated, and has signaled no change in position, that is strong evidence that the requirements are not material.

The Bottom Line For You

1. It’s likely that the case will result in more FCA whistleblower actions.

2. CPT coded services are specific representations as to the goods/services provided.

3. There are probably thousands of laws and regulations governing the operation of your business, so many that it’s probably the case that no single person or even group of persons could list them all for you. Compliance with a subset of those is likely material. Which ones are material in respect of any particular specific representation becomes the treble damages plus $11,000 per claim question. 

4. Materiality is a double-edged sword. It unlocks the key to implied false certification for whistleblowers. But the argument over lack of materiality is a defense for targets of this type of FCA case.

5. The best practical advice is to audit your medical group’s/business’s compliance with the broadest range of underlying regulations and laws. This can be stratified into those categories that are clearly material, those that may be material, and those that are less likely to be material. [Caveat: I have seen state court FCA counterpart cases that have used arcane requirements to deny millions in insurance company payments — arcane was seen as material.]


Wisdom. Applied. 90 - Aetna Obtains $37 Million Judgement Against ASC Manager

A Santa Clara County, California jury awarded the insurer Aetna a $37,452,199 judgment in a lawsuit against Bay Area Surgical Management, LLC, a surgery center management company, a number of its managed ASCs, and three of Bay Area’s executives.



All Things Personal

Brexit. It’s in the news and I’ve been asked what I think about it at work and over the phone by clients and contacts. Don’t worry, this relates to healthcare and to you.

Brexit has everything to do with asserting rights to elected governance and the rejection of the tyranny of “rule by regulation” imposed by unelected and unaccountable bureaucrats.

Hmm, unelected and unaccountable bureaucrats. Sound familiar? Take the hundreds of pages of regulatory pronouncements enforcing the federal anti-kickback statute, for instance. Or, the thousands of pages interpreting Stark. Or, the 962 pages of initial proposed rule making from CMS on MACRA.

At some point, regulation by an unelected technical class that believes that they know what's best for you, me and the rest of society is going to break.

Until then, you still have to operate your business wisely in a way to take advantage of what’s favored by applicable regulations as well as by what falls through the loophole cracks.

But at the same time, unless those in the industry rail against business-killing pronouncements, those doing the regulating will slip from the somewhat rational into the irrational, preventing you from operating in a manner that all sane people knew was reasonable until the lunatics took over the asylum.

Mark F. Weiss
The Mark F. Weiss Law Firm, a Professional Corporation
(Formerly known as Advisory Law Group, a Professional Corporation)
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Having fallen for the fallacy that there’s profit in market share, hospitals have gorged on acquisitions and on employment and alignment of physicians. Many physicians have been willing participants through practice sales and in the belief that there’s safety in hospital employment. But it’s becoming evident that physician employment leads to losses and that integrated care delivers neither better care nor lower costs. And now, technology is about to moot many of the reasons for a hospital’s existence. How can your practice survive and even thrive in the post-hospital world?
The Impending Death of Hospitals is available for purchase in hard copy or in Kindle format on Amazon or you can download a complimentary PDF version here.

Success Or Failure? Strategic Tools For Medical Group
Leaders - Book Cover 
Today’s medical groups must confront multiple challenges: The impact of Obamacare. Increasing commoditization. More competition, not just from other physicians and medical professionals, but also from hospitals, investor-owned groups, and disruptive ventures. Yet at the same time, the future of healthcare offers medical groups tremendous opportunity.
This small book is a collection of essays, of thoughts as thinking tools for your success. Read. Think. Succeed. Repeat.
Interesting Image 
Some days, it seems as if everyone, from anesthesia groups to vascular surgery practices, is talking about selling their practice to a larger group, to private equity investors, or to a hospital.

The reality is that some practices can be sold, some can never be sold, and some have nothing to sell.

The reality also is that there are a number of strategic alternatives to a practice sale.


A perfect storm of factors is accelerating the market for hospital-based medical group mergers and acquisitions.  


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Directions 2014 Cover
The healthcare market is changing rapidly, bringing new sets of problems.
How can you find a solution, how can you engage in the right development of strategy, and how can you to plan your, or your group’s, future without tools to help clarify your thinking?
Directions is a collection of thoughts as thinking tools, each intended to instruct, inform, and even more so, cause you to give pause to instruct and inform yourself.
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Recent Interviews and Published Articles
Finders keepers, losers weepers. Except in connection with overpayments from Medicare, then it’s a violation of the federal False Claims Act leading to significant liability—that is, unless you repay the overpaid sum within 60 days. Read CMS Resets the Clock for Return Of Medicare Overpayments published on AnesthesiologyNews.com in May 2016.

Mark's article
A New Strategy To Profit From Interventional Radiology , co-authored with Cecilia Kronawitter, was published on AuntMinne.com on May 23, 2016. Read or download here .

Three of Mark’s blog posts were republished as a column entitled
Practice Challenges in the Spring 2016 issue of the Pennsylvania Society of Anesthesiologists Newsletter, the Sentinel . Read or download here .
Mark's article Is There An Interventional Radiology ASC (irASC) In Your Future? was published in the April/May 2016 volume of Radiology Business Journal. Read or download here.
Mark's article Impending Death of Hospitals: Will Your Anesthesia Practice Survive? was published in the winter 2016 volume of Communique. Read or download here.
Mark was quoted in the article Practice Patterns Change While Outcomes Remain Steady Among Older Anesthesiologists, published in the December 2015 issue of Anesthesiology News. Read or download here.
Mark's article Anesthesia Group Mergers, Acquisitions and (Importantly) Alternatives was published in the summer 2015 volume of Communique. Read or download here.
Mark was quoted in the article Anesthesiology Acquisition Rate Still at Fevered Pace, published in the July 2015 issue of Anesthesiology News. Read or download here. 
Mark's article Seeking Certainty In Radiology: Mergers, Acquisitions and Alternatives was published in June 2015 on Imagingbiz.com. Read or download here.