Clinical laboratories need to review how they compensate sales personnel following the passage of the Eliminating Kickbacks in Recovery Act of 2018 (“EKRA”) (Section 8122 of the SUPPORT Act) which is effective as of October 24, 2018.  The SUPPORT Act is a combination of more than 70 bills aimed at fighting the opioid epidemic, with EKRA intended to address patient brokering in exchange for kickbacks of individuals with substance abuse disorders.  However, as written, EKRA is far more expansive.

EKRA adds an all payor (public and private) anti-kickback rule to the health care fraud laws concerning improper remuneration for patient referrals to, or in exchange for an individual using the services of, a recovery home, clinical treatment facility or clinical laboratory.  This broad language enables the federal government to monitor provider arrangements intended to generate business for any laboratory services, not only those related to individuals in treatment for substance abuse disorders, payable by a federal health care program (“FHCP”) or commercial health insurer.

The prior version of the bill entitled “Opioid Crisis Response Act” (passed in the Senate on 9/17/18) did not include EKRA provisions, and it appears that laboratories were thrown into EKRA at the last minute, as multiple House bills proposing the addition of EKRA to the SUPPORT Act did not include laboratories.  Congressman Pallone expressed his concerns with EKRA in that “[i]t did not go through regular order and was not properly vetted . . . it was added at the very last minute . . .”  He further states that: “multiple stakeholders have raised concerns that the language does not do what we think it does. It may have unintended consequences.”  This is evident in our review and analysis of the EKRA provisions.

With regard to payment arrangements with sales personnel, one statutory exemption provides that compensation paid to both W-2 employees and 1099 contractors would not violate EKRA if the payment is not determined by or does not vary by:

  • the number of individuals referred;
  • the number of tests or procedures performed; or
  • the amount billed or received

By inclusion of the statutory exemption in EKRA, Congress indicates that payments to any employee or contractor related to the business they generate is prohibited unless the laboratory can meet the specific criteria under the three-prong exception.

As a comparison, the federal Anti-Kickback Statute (“AKS”)[1] prohibits improper remuneration “in return for referring an individual” or “purchasing, leasing, ordering, or arranging for or recommending purchasing, leasing, or ordering any good, facility, service, or item” directly or indirectly reimbursable by a federal health care program.  We know that the Office of the Inspector General (“OIG”) for the Department of Health and Human Services imposes a broad interpretation of the AKS (especially the phrase “arranging for or recommending”) and has taken the position that a pure marketing relationship to generate FHCP business could be a violation of the AKS.  However, compliance with the regulatory criteria under the Bona Fide Employee safe harbor[2] has been heavily relied upon in the health care industry to permit commission-based payments to sales personnel based on FHCP business they generate.[3]

On its face, EKRA would seem to make such commission-based payments to W-2 sales personnel, otherwise permissible under the AKS safe harbors, a criminal act that can carry up to $200,000 in fines and imprisonment up to (10) years for each occurrence.  However, Congress includes an exemption provision that states: “[t]his section shall not apply to conduct that is prohibited under section 1128B of the Social Security Act (42 U.S.C. 1320a–7b) [Anti-Kickback Statute].”  We are uncertain why Congress used the term “prohibited” instead of “not prohibited” or “permitted” in this provision.  This may have been a mere drafting error, but CMS will need to clarify whether it believes payments to sales personnel permitted under a AKS safe harbor are now prohibited by EKRA.  If that is the case, then the exemption should apply to the business generated by W-2 sales personnel for all payors (public and private) under EKRA.

Prior enforcement actions illustrate that the federal government takes the position that sales personnel can be deemed to induce patient referrals in violation of the federal AKS; however, to our knowledge this position has not been fully litigated and we do not believe this is a strong position.  Generally, sales personnel are in a position to solicit referrals and promote laboratory services but are not in a position to make a patient referral; exert undue influence on medical decision-making; or control an individual’s election of a laboratory service.  This distinction should be relevant to a criminal or civil prosecution; especially in the context of laboratory services where coverage requires an order by a physician or other authorized person.

Notwithstanding the above, EKRA would appear to permit a payment arrangement with sales personnel similar to the type that meets the criteria of the Personal Services and Management Contract safe harbor under the AKS.[4]  That safe harbor permits payments to sales personnel if the compensation is fixed in advance and not determined by the volume or value of the FHCP business they generate, which means commission-based payments do not qualify since there would be a nexus between the compensation and volume or value of business they generate.[5]

Finally, Congress does not address whether intent requires actual knowledge of the statute or specific intent to commit a violation, which is the standard in most criminal laws.  Multiple House bills proposing the addition of EKRA to the SUPPORT Act included intent language that did not ultimately make it into EKRA (“Neither actual knowledge of this section nor specific intent to commit a violation of this section shall be an element of an offense under this section.”)[6].  CMS will need to provide clarity.

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[1]  42 U.S.C. § 1320a-7b(b)(1)

[2] 42 C.F.R. §§ 1001952(i)

[3] 54 Fed.Reg. 3088, 3093 (1989)

[4] 42 C.F.R. §§ 1001952(d)

[5] See 64 Fed.Reg. 36360; OIG Advisory Opinion No. 98-10.

[6] See H.R. 6878 (Sept. 25, 2018).

A dental practice and related dental management company have become the first two entities to make their way on to the newly created “High Risk – Heightened Scrutiny” list from the Office of Inspector General for the United States Department of Health and Human Services (the “OIG”).[1]

ImmediaDent of Indiana, LLC, a professional dental practice (“ImmediaDent”), and Samson Dental Partners, LLC, a dental management company which provides management and administrative services to ImmediaDent and other dental practices in Indiana, Kentucky and Ohio (“Samson”), jointly agreed on October 31, 2018 to an approximately $5.14 Million settlement with the Department of Justice and the OIG.[2]  The settlement stems from a qui tam suit brought by Dr. Jihaad Abdul-Majid, DDS, a dentist formerly employed by ImmediaDent.  Dr. Abdul-Majid claimed that ImmediaDent and Samson perpetrated fraud against Indiana’s Medicaid program by way of upcoding certain tooth extraction procedures, in addition to improperly billing for tooth cleanings which were either not medically necessary or never performed.  Interestingly, the settlement also involves claims that Medicaid fraud occurred in part due to Samson’s violation of Indiana’s prohibition on the corporate practice of dentistry.  The theory proffered was that a pre-requisite to compliance with Indiana’s Medicaid program requirements was compliance with the law and regulations governing the practice of dentistry, including those requiring dentistry to only be practiced by licensed professionals.  The government contended that Samson violated Indiana’s prohibition on the corporate practice of dentistry, and thus illegally engaged in the unlicensed practice of dentistry, by exerting undue influence over ImmediaDent’s dentists and other dental staff, including by way of rewarding production, disciplining those who did not meet production goals and directly interfering with clinical judgment.

The High Risk – Heightened Scrutiny list is a part of a new, five tier Fraud Risk Indicator system promulgated by the OIG to assess future risk posed by individuals and entities that have been alleged to have engaged in healthcare fraud.[3] The tiers range from “Low Risk – Self Disclosure” to “Highest Risk – Exclusion”.   The second “riskiest” tier is “High Risk – Heightened Scrutiny”.  As part of this tier, the Federal government has begun listing entities that it believes “pose a significant risk to Federal healthcare programs and beneficiaries” and further need additional oversight, but have refused the government’s request to enter into a Corporate Integrity Agreement (“CIA”).

Though not required by statute or regulation, CIAs are typically utilized by the government as part of settlement negotiations with providers and other entities alleged to have perpetrated healthcare fraud.  CIAs are structured to monitor an entity’s compliance with Federal healthcare program requirements in order to show the OIG that it should waive its authority to exclude the entity from participation in Federal healthcare programs.  CIAs involve significant expense, requiring the ongoing engagement of specialized external auditors, or independent review organizations, and substantial investments in compliance systems and processes.  Thus, certain entities have fought the Federal government’s attempts to impose a CIA.  As a result, some have viewed the Heightened Scrutiny list as the government’s attempt to publicly shame entities who have refused to enter into a CIA.

The Heightened Scrutiny list has only formally been in place since October 1, 2018, and thus it remains to be seen if the government will actively add other entities to this list, and further whether the list will serve as a deterrent to entities considering pushing back on the government’s attempts to impose a CIA.

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[1] See https://oig.hhs.gov/compliance/corporate-integrity-agreements/high-risk.asp.

[2] See United States ex rel. Jihaad Abdul-Majid, et al. v. ImmediaDent Specialty, P.C., et al., Civil Action No. 3:13-cv-222-CRS.

[3] See https://oig.hhs.gov/compliance/corporate-integrity-agreements/risk.asp.

While the opioid crisis has inspired a wave of new legislation by Congress, the U.S. Department of Justice (“DOJ”) has continued to increase its own response to the prevalent rate of opioid-related drug crimes with a number of new initiatives.  On October 17th, Deputy Attorney General Rod Rosenstein recently delivered remarks at the America’s Health Insurance Plans 2018 National Conference on Medicaid and highlighted the Department’s continued determination to tackle the opioid crisis. Rosenstein’s remarks reiterated Attorney General Jeff Sessions’ recent statements on September 25th at the Office of Justice Programs’ National Institute of Justice Opioid Research where Sessions outlined the varying ways in which DOJ’s resources are being devoted to combating the “national public health emergency.” Both remarks demonstrate DOJ’s continued approach in using “every tool” available to increase prosecution of opioid-related crime – including not only traditional criminal prosecutions but also affirmative civil enforcement actions through the “first-ever civil injunctions under the Controlled Substances Act against doctors who allegedly prescribed opioids illegally” in August, while apparently diverting resources away from more traditional white-collar investigations and prosecutions. Rosenstein and Sessions both applauded the success of Operation Synthetic Opioid Surge, which focuses not on prosecuting drug users, but on “vigorously prosecuting” suppliers of synthetic opioids, such as fentanyl. Sessions in particular noted that shifting focus from users to suppliers, regardless of the quantity of drugs found at the time of arrest, has succeeded in reducing the amount of overdose deaths in Manatee County, Florida by half since last year. Hoping to replicate these results elsewhere, Sessions touted his placement of ten prosecutors who were sent to ten districts with high rates of drug-related deaths to implement the “no amount too small” strategy for prosecuting synthetic opioid trafficking. Sessions noted that this is in addition to the more than 300 new prosecutors he dispatched around the country, as well as the designation in each of the 93 U.S. Attorney’s Offices of an “Opioid Coordinator,” whose job it to “facilitate intake of cases involving prescription opioids, heroin, and fentanyl; and to convene a task force of federal, state, local, and tribal law enforcement.”

Data analytics continues to be one of the most important tools in the Department’s toolbox. In his remarks, Sessions discussed the implementation of an innovative data analytics program that identifies opioid-related health care fraud in various “hot spot districts” around the country. The “Opioid Fraud and Abuse Detection Unit” mines “federal health care databases” and will help federal prosecutors efficiently identify “suspicious outliers,” such as doctors who prescribe opioids at a higher rate than their peers, doctors whose patients have died within sixty days of receiving an opioid prescription, and pharmacies dispensing a disproportionate amount of opioids. Indeed, in August, DOJ established the nation’s first opioid–focused Medicare Strike Force in Newark/Philadelphia region.

Rosenstein and Sessions also praised the Department’s overall health care fraud enforcement efforts and accomplishments to date, focusing on their view that “we lost proper emphasis on drug cases under the previous administration.” Rosenstein noted that since January 2017, DOJ “has charged more than 200 doctors and 220 other medical personnel for opioid-related crimes. The cases involved tens of millions of pills prescribed illegally.”

In a recent case of note, in a Southern Florida takedown this summer, which was part of the DOJ annual Health Care Fraud Takedown, four individuals were prosecuted in connection with kickbacks received from Smart Lab, LLC (“Smart Lab”), a clinical laboratory in Palm Beach Gardens, Florida, which involved alcohol and drug addiction treatment centers. Last month, Smart Lab, the corporation’s Chief Executive and Chief Operating Officers, as well as the top sales representative plead guilty to a series of heath care fraud and money laundering schemes.

The charges alleged that hoping to monetize from the increased volume of opioid-related health care services, such as confirmatory urinary analysis testing, Smart Lab and its executives entered into employment agreements with “sales representatives” to solicit bodily fluid samples from various substance abuse treatment centers. Smart Lab then conducted expensive confirmatory and medically unnecessary drug testing on the samples and submitted the claim to insurance for reimbursement, including from federal health care programs. In exchange for the referrals, Smart Lab kicked back a portion of the reimbursement to the owners, operators, or clinicians of the substance abuse treatment centers. On November 1st, the two owners of Smart Lab, one of whom was a former pitcher for the Miami Marlins, were sentenced to 46 and 63 months in prison, respectively, for their involvement in the operation, repaid almost $3.8 million to defrauded insurers and received a total of $70,000 in fines. Smart Lab, as a corporation, was sentenced to three years’ probation. Smart Lab is just one example of many cases in which the Department is prosecuting both entities and individuals seeking to profit from the opioid crisis.

Beyond just prosecuting suppliers domestically, DOJ is also focusing on sending a strong warning message   to foreign synthetic opioid manufacturers. Indeed, the Department indicted two leaders of the Zheng drug trafficking organization this August, after it determined that the company was using shell companies to ship synthetic opioids and fentanyl analogues to over 25 countries and to 37 U.S. states.

In an effort to stop the supply and distribution of all kinds of opioids, DOJ is also focusing on targeting “web-based drug trafficking” of synthetic opioids. Rosenstein applauded the establishment of the Joint Criminal Opioid Darknet Enforcement Team, under which the FBI has “doubled its investment in the fight against online drug trafficking by devoting more than 50 Special Agents, Intelligence Analysts, and professional staff to help disrupt the sale of synthetic opioids.”

Overall, the message from Sessions and Rosenstein is clear: the DOJ is leveraging its resources to focus on opioid-related health care fraud and crimes. Accordingly, we can expect an increased rate of civil and criminal enforcement actions targeting opioids as DOJ continues to devote its focus towards combating the opioid crisis.

On October 24, 2018, President Trump signed sweeping bipartisan legislation to combat the opioid epidemic. The Substance Use–Disorder Prevention that Promotes Opioid Recovery and Treatment for Patients and Communities Act, or the SUPPORT for Patients and Communities Act (“H.R. 6” or “the Law”), aims to “reduce access to the supply of opioids by expanding access to prevention, treatment, and recovery services.”[1] Congress has already appropriated $8.5 billion to implement this “landmark legislation” in 2018 and 2019.

In a series of Client Alerts, Epstein Becker Green will provide an overview of key components of H.R. 6, focusing on substantive requirements impacting an array of providers, manufacturers, health care professionals, community services organizations, and other health care entities. Forthcoming topics include the impact on treatment measures for opioid use disorders, addiction prevention measures, clarifications to U.S. Food and Drug Administration and U.S. Drug Enforcement Administration regulation and enforcement authority over opioid products, Medicare and Medicaid funding provisions, enhanced health care fraud protection, new data & reporting provisions, and telehealth requirements.

H.R. 6’s breadth requires impacted entities to take careful note of the Law’s requirements and varying effective dates.

____

[1] Press Release, The White House, President Donald J. Trump Signed H.R. 6 into Law (Oct. 24, 2018), available at https://www.whitehouse.gov/briefings-statements/president-donald-j-trump-signed-h-r-6-law/.

[2] Press Release, U.S. Senate Committee on Health, Education, Labor & Pensions, President Trump Signs Alexander Bill to Fight Opioid Crisis (Oct. 24), available at https://www.help.senate.gov/chair/newsroom/press/president-trump-signs-alexander-bill-to-fight-opioid-crisis.

On Monday, August 12, 2018, the U.S. Department of Justice (“DOJ”) announced a new addition to its regional Medicare Fraud Strike Forces: a Newark/Philadelphia Regional Medicare Strike Force that will target both healthcare fraud and opioid overprescription.[1] The newly-formed Newark/Philadelphia Strike Force joins nine existing regional Medicare Strike Forces, all of which are focused in geographical areas of high healthcare fraud risk: Miami, Florida; Los Angeles, California; Detroit, Michigan; Southern Texas; Southern Louisiana; Brooklyn, New York; Tampa, Florida; Chicago, Illinois; and Dallas, Texas.[2] The Newark/Philadelphia Strike Force will be supported by the resources of several federal agencies, including the Health Care Fraud Unit of the Justice Department’s Criminal Division’s Fraud Section, the U.S. Attorney’s Offices for the District of New Jersey and the Eastern District of Pennsylvania, the FBI, U.S. Department of Health and Human Services Office of the Inspector General (“OIG”), and the U.S. Drug Enforcement Administration.[3]

The creation of the regional Newark/Philadelphia Strike Force comes as little surprise as this heavily populated region is home to many major players in the healthcare industry, including pharmaceutical companies and healthcare facilities. Significantly, earlier this year, Maureen Dixon, the Special Agent in Charge of OIG’s Philadelphia Regional Office testified before the U.S. Senate Committee on Finance’s Health Care Subcommittee and highlighted many cases in the New Jersey/Philadelphia region as prototypical examples of patient harm and prescription and treatment fraud and addressed efforts to prevent opioid overutilization and misuse.

Enforcement in the Region: Expect More Enforcement Against Providers and Home Health Care Agencies

The new Newark/Philadelphia Strike Force is expected to usher in quickly a new wave of fraud enforcement to the region. Historically, DOJ’s Strike Forces have targeted provider activity, with enforcement often aimed at clinicians and home health care agencies. The new Strike Force’s dedicated focus on opioid overutilization is in line with the priorities of the District of New Jersey’s U.S. Attorney Craig Carpenito, who has made the abuse of opioid prescriptions a target for his district.  In February of this year, the District of New Jersey’s U.S. Attorney’s Office reorganized and announced the formation of an Opioid Abuse Prevention and Enforcement Unit to complement the existing Healthcare and Government Fraud Unit within that Office’s Criminal Division.

Notably, the addition of the new Newark/Philadelphia Strike Force demonstrates DOJ’s continued belief that behavior – both on the provider and the patient sides – can be changed through enforcement. The Strike Forces’ data-driven model of health care enforcement eschews reliance on qui tam filings and whistleblowers for investigative leads in favor of identifying and targeting health care fraud through data analytics.  Nationwide, the Strike Forces have brought a significant increase in healthcare fraud prosecutions since the concept was first introduced in 2007. Indeed, since their creation in 2007, the Strike Forces have been instrumental in obtaining nearly 2,500 indictments related to over $3 billion in fraudulent health care payments.[4]Most recently, DOJ’s Medicare Strike Forces were in part responsible for the DOJ’s July 2018 health care fraud takedown, the nation’s largest to date, resulting in 601 arrests in connection with over $2 billion of fraudulent billings.[5] 162 defendants, including 32 doctors, were charged for their roles in prescribing and distributing opioids and other narcotics.[6]

Impact on Provider Exclusion Actions

It is likely that the number of exclusion actions pursued by OIG will increase in the region because of the Newark/Philadelphia Strike Force. In the intervening year between DOJ’s June 2017 and July 2018 health care fraud takedowns, the OIG issued nearly 600 exclusion notices to individuals and entities whose conduct “contributed to opioid diversion and abuse.”[7] Among those issued exclusion notices were 67 doctors, 402 nurses, and 40 pharmacy services.[8]

Opioid Overutilization Enforcement

The Newark/Philadelphia Strike Force is the first of its kind to have a specific focus on targeting opioid overutilization. Identifying and targeting the opioid epidemic is a top priority of both DOJ and the OIG; according to Assistant Attorney General Brian A. Benczkowski of the Justice Department’s Criminal Division, CDC data found that over 40 percent of all U.S. opioid overdose deaths involved a prescription opioid in 2016.[9][10] A 2018 OIG report on opioid abuse in the Medicare Part D program found that about 460,000 beneficiaries received high amounts of opioids in 2017, and about 71,000 beneficiaries are at serious risk of opioid misuse or overdose.[11]

* * *

Both the Eastern District of Pennsylvania and the District of New Jersey have developed novel, cutting-edge healthcare fraud cases time and time again over the past decade.  The addition of expertise and resources provided by the new Strike Force in these two districts demonstrate a clear intent to continue this trend. However, it remains to be seen if the new Strike Force and its opioid focus will divert resource away from other more long-term, complex investigations these Districts have traditionally concentrated on.

[1] https://www.justice.gov/opa/pr/assistant-attorney-general-benczkowski-announces-newarkphiladelphia-medicare-fraud-strike

[2] https://www.justice.gov/opa/pr/assistant-attorney-general-benczkowski-announces-newarkphiladelphia-medicare-fraud-strike

[3] Id.

[4] https://oig.hhs.gov/fraud/strike-force/

[5] https://www.justice.gov/opa/pr/national-health-care-fraud-takedown-results-charges-against-601-individuals-responsible-over

[6] https://www.fda.gov/ICECI/CriminalInvestigations/ucm612183.htm; https://oig.hhs.gov/newsroom/media-materials/2018/takedown/2018HealthCareTakedown_FactSheet.pdf; https://www.law360.com/articles/1064720/doj-s-health-care-enforcement-initiative-is-still-going-strong.

[7] https://oig.hhs.gov/newsroom/media-materials/2018/takedown/2018HealthCareTakedown_FactSheet.pdf

[8] Id.

[9] https://oig.hhs.gov/oei/reports/oei-02-18-00220.pdf; https://oig.hhs.gov/reports-and-publications/featured-topics/opioids/

[10] https://www.justice.gov/opa/pr/assistant-attorney-general-benczkowski-announces-newarkphiladelphia-medicare-fraud-strike

[11] https://oig.hhs.gov/oei/reports/oei-02-18-00220.pdf

On December 21, the Department of Justice (“DOJ”) reported its fraud recoveries for Fiscal Year 2017. While overall numbers were significant – $3.7 billion in settlements and judgments from civil cases involving allegations of fraud and false claims against the government – this was an approximate $1 billion drop from FY 2016. However, the statistics released by DOJ reflect themes significant to the healthcare industry.

Greatest Recoveries Come From The Healthcare Industry

As in years past, matters involving allegations of healthcare fraud were the driver, accounting for more than 66% of all fraud related recoveries in FY 2017. While the $2.47 billion was effectively constant from FY 2016, this was the fourth largest recovery in the past 30 years. It is also the eighth consecutive year that healthcare fraud recoveries exceeded $2 billion.  Largest recoveries came from settlements involving the drug and medical device sector.

Qui Tam Cases Lead Recoveries – and Healthcare Cases Dominate

Cases pursued under the False Claims Act’s qui tam provisions continue to drive matters pursued against healthcare entities. Of the 544 new matters brought in FY 2017, 491 were initiated by relators, down just slightly from 2016 but, nevertheless, the third largest annual filing since DOJ began keeping records in 1986.

Government intervention in these cases continues to generate the lions share of the recoveries. Of the $2.47 billion recovered in healthcare matters, $2.06 billion was generated from cases where the government intervened. While by contrast cases in which the government declined to intervene generated $380 million, this was the second-highest annual recovery from such cases in 30 years. Thus, while government intervention continues to be a significant concern, the reality is that more cases are being pursued by relators post declination, creating additional risk for healthcare entities.

DOJ statistics also confirm the significant financial incentives for relators to pursue these cases. In FY 2017, the government paid more than $392 million in relator share awards; more than $283 million of these payments came in connection with healthcare cases. Since 1987, almost $5 billion has been paid to realtors. These numbers suggest that the potential of a major financial reward is real and will continue to encourage the filing and pursuit of actions, particularly against those in the healthcare industry.

Individual Accountability Remains A Priority…Particularly in Healthcare
Finally, the report reflects the Department’s continued focus on individual accountability. Recoveries included individuals agreeing to hold themselves jointly and severally responsible for multimillion dollar settlements with the government, as well as individual settlements following, and separate and apart from, corporate resolutions.

Significantly, every case cited in DOJ’s press release on the issue of individual accountability was from the healthcare sector. This suggests that those employed in the healthcare industry remain key targets of both the government and qui tam relators.

*          *          *

The FY 2017 DOJ statistics reflect that a change in Administration has done little to alter the government’s belief that devoting time and resources to FCA cases makes “good business sense.” Health care entities—and, as important, individuals in the healthcare industry—need to be mindful of this focus, the potential for violations and to ensure the existence of strong compliance functions to deal with compliance-related matters in a way that is intended to prevent claims and litigation, and to serve as strong defenses when matters are pursued.