The Virginia Lawyers Weekly blog has an excellent post today on the importance of local counsel in the Rocket Docket.
Indeed, lawyers outside the rocket docket are often unfamiliar with the speed and intensity of litigation in the E.D.Va., and little things–like the fact that a lawyer has to begin preparing trial exhibits during discovery, and exchange trial exhibits just days after the close of discovery–often throw lawyers for a loop.
I also agree that local counsel should be involved in the drafting of the pleadings–as the complaint and answer frame the rest of the litigation, litigants must prepare those filings with the nature of litigation in this district in mind.
The comments from Judge Payne were part of a CLE seminar sponsored by the Richmond Bar Association.
Judge Payne says “Hire Local Counsel in the U.S. District Court for the Eastern District of Virginia”
“Kickback” definition in False Claims Act cases
“Kickback” definition in False Claims Act cases
Previously, I have blogged about the inherently complex and nuanced nature of qui tam litigation. Today I want to talk a little bit about the word “kickback” and the history of that word in the English language and in FCA jurisprudence.
While the concept of kickbacks is central to many different types of FCA cases, we most often see it in the health care context. That is because (1) there are lucrative incentives for physicians and other health care providers to pay or receive kickbacks for the referral of health care services; and (2) there are stringent prohibitions on the payment or receipt of kickbacks in exchange for the referral of health care services for which the government will ultimately pay.
These stringent prohibitions include the Anti-Kickback Statute (“AKS”) (42 U.S.C. § 1320a-7b(b)). The AKS is criminal statute which prohibits any person from making or accepting payment to induce or reward any person for referring, recommending, or arranging for the purchase of any item for which payment may be made under a federally-funded health care program.
Where reimbursement for health care services is claimed from the government, the provider is required to verify that no kickbacks were paid and/or received for the referral of the services for which reimbursement is requested. Every cost report, for example, contains a certification that must be signed by the chief administrator of the provider or a responsible designee of the administrator. Each and every cost report requires providers to certify that:
Misrepresentation or falsification of any information contained in this cost report may be punishable by criminal, civil and administrative action, fine and/or imprisonment under federal law. Furthermore, if services identified in this report were provided or procured through the payment directly or indirectly of a kickback or where otherwise illegal, criminal, civil and administrative action, fines and/or imprisonment may result.
This is just one example, but the overtones should be clear—government health care programs will not pay claims that are tainted in any way, shape, or form, by kickbacks. Thus, although AKS is a criminal statute with no private right of action, a violation of AKS renders each and every tainted claim submitted to the government “false” within the meaning the federal False Claims Act and/or Virginia Fraud Against Taxpayers Act.
So when is a payment a kickback? It turns out there are an almost infinite amount of ways for health care providers to pay or receive kickbacks, and a lawyer exploring the jurisprudence defining the term kickback is apt to be confused.
For example, some cases state that in order to be a kickback, the payments must be based on a percentage of the value of the services referred. In other words, “Provider A” agrees to refer patients in need of specific services to “Provider B” who will then pay Provider A a fee equal to 10% of the value of the imaging work.
It is true that where one provider pays another provider a percentage of the reimbursable value of the services referred, we normally have a clear-cut AKS violation. (I say “normally” because there are several safe-harbors, created by HHS-OIG, that permit arrangements that would otherwise be illegal).
Although percentage-based payments made by one health care provider to a provider with the power to refer patients may be clearly unlawful, it is by no means required that the payment amounts be based on a percentage in order to be kickbacks. You will, however, find published cases to this effect.
Perhaps more importantly, any qui tam lawyer handling a kickback case where the payments were not based on a percentage is apt to find themselves facing that argument on a 9(b) motion.
The idea that in order to be a kickback a payment must be based on a percentage does not come from FCA jurisprudence, but rather from some definitions of the term “kickback.” In fact, Webster’s Third International Dictionary defines a kickback as “a percentage payment … for granting assistance by one in a position to open up or control a source of income …”
But a payment does not have to be on a percentage basis in order to be a kickback. In fact, any payment from one provider to another with with a corrupt or unlawful purposes, and that will be covered in the next post in this series.
Announcing upcoming CLE Seminar on Statutory Attorney’s Fees in Virginia Courts
I will be speaking at an upcoming seminar through Virginia CLE which may be of interest to some readers. The seminar concerns court-awarded attorney’s fees in Virginia’s state and federal courts, with a focus on the mechanics of fee petitions, and fee-shifting litigation.
The seminar will be webcast on June 22, 2011 at noon, with several follow-up broadcasts to follow. Anyone wanting to register, or to read more about the seminar, can do so here.
Two noted experts on fee-shifting litigation round out the panel–John Rigby and Craig Wood–and I look forward to lively exchange. One of the interesting things about teaching CLEs is the chance to learn from your co-presenters at these seminars.
As regular readers know, under the Virginia Fraud Against Taxpayers Act or the federal False Claims Act, an award of attorney’s fees to a prevailing plaintiff is mandatory. In that regard, VFATA or FCA cases are similar to FLSA or FMLA litigation–that is to say, even a very small case can be worthwhile under the right circumstances.
In many ways, Virginia Fraud Against Taxpayers Act and/or False Claims Act cases are even better, because there is no requirement that the government even suffer damages–indeed, even one false claim to the government for payment subjects the defendant to liability for a single civil penalty of between $5,500 and $11,000, plus the entire fee incurred by the plaintiff’s attorney.
It is however one thing to be entitled to the award of your entire fee, and it is quite another to actually be awarded the entire fee…interested readers should tune in on June 22 to learn more.
Why do you think all the most business-friendly states have state False Claims Acts?
Over the past few years I have noticed that certain questions and objections sometimes arise when a state considers a state False Claims Act. Today’s post deals with the single most common objection and/or question.
As an aside, I have also noticed that when legislators beginning asking the questions addressed in this blog, the end result is almost always that the legislation fails. I have my theories about that, and I would appreciate the input of any of my readers….
The single most common objection is as follows: “A state false claims act will drive away business, and we want to improve our image as a business friendly state.”
This is easily shown to be false. The truth is that Virginia is always near the top of every pro-business ranking you can find, and we were one of the first states to have a false claims act. Just a few examples are the following rankings:
- The U.S. Chamber of Commerce ranks Virginia the most business-friendly state in the Union;
- The state rankings done by Forbes show that Virginia is “clearly the No. 1 place to do business.” Virginia was also the only state to score in the top ten in all six categories Forbes measured;
- CNBC.com ranked Virginia the most business-friendly in 2007 and 2009, and as number two in 2008 and 2010.
- Commercial real estate giant Pollina, Inc. ranked Virginia number one in 2010, and in the top three in most of the other years.
I could go on and on, but the bottom line here is that if a state False Claims Act drove away business or put legitimate businesses out of business, the Virginia Fraud Against Taxpayers Act wouldn’t have lasted eight years, and it certainly wouldn’t have been amended in 2011.
In fact, it seems that of the traditionally business-friendly states, most of the top ten have False Claims Acts. That fact would tend to encourage states to pass this legislation would it not?
Moreover, in Virginia, I have never, ever had this question from a legislator. Not once. In fact, when I discuss the battles being fought in other states over state FCA legislation, Virginia’s leading legislators (people like Del. Greg Habeeb (R-Salem), state Sen. Chap Petersen (D-Fairfax), and state Sen. Jill Vogel (R-Winchester) are all in agreement–“How could anyone be against a state false claims act?”
So here is my own interpretation of what it means when a state legislator asks that question. Because that question or objection obviously comes from anti-FCA lobbyists, it seems to me that such questions really mean that lobbyists have an enormous amount of power in that particular state’s legislative process.
So any state legislator who gets this pitch from a Chamber of Commerce lobbyist, for example, should merely ask why most of the states in the Chamber’s pro-business rankings vigorously prosecutes FCA cases….
The Washington State False Claims Act Legislative Battle Continues…
Washington State False Claims Act legislative battle continues…
I wanted to update readers on another legislative battle, this time in Washington state.
The Washington False Claims Act, has been introduced by state Sen. Adam Kline as SB 5310. Sen. Kline has blogged about the bill and has also posted a video arguing in favor of SB 5310.
It looks like the bill has been inactive since February of this year…
Important Considerations for Settlement in a Virginia Fraud Against Taxpayers Act case
As I have said many times, there is no practice area quite as complicated as false claims act litigation under either the federal False Claims Act or the Virginia Fraud Against Taxpayers Act (or for that matter under any of the other state false claims acts).
The complexities and nuances continue right on through to settlement of these cases. The issue of settling claims under the Virginia Fraud Against Taxpayer’s Act presents the same sort of thorny issues as settlement in a Federal False Claims Act case.
In non-intervened qui tam cases under the VFATA, the Virginia Attorney General must approve the settlement, just like the Attorney General of the United States must approve settlement of a federal FCA case.
However, whether the case is intervened or non-intervened, when it comes to the language of the settlement agreement, the Commonwealth should act to protect its interests in a number of ways, many of which might not be apparent on the face of the statute.
An excellent memo from the Department of Justice’s Commercial Litigation Branch is a must-read for anyone interested in the VFATA. The memo was prepared by Commercial Litigation Branch Director Michael F. Hertz in 1997, and was formerly available from the DOJ’s on-line Civil Fraud Monograph.
In no particular order, some of the more important differences are as follows:
The scope of the release is different in FCA or VFATA litigation . Civil litigators are accustomed to granting—and receiving—the broadest possible releases in exchange for money or other consideration. Phrases like “plaintiff hereby releases all claims, known or unknown, from the beginning of the world, up through the date of this agreement” are fairly common, and are in most civil litigation appropriate. False Claims litigation, however, such broad releases are inappropriate, and the Commonwealth should be unwilling to grant them.
The terms and conditions of the settlement, and the settlement agreement itself, will not be confidential. Confidentiality of terms is normal in most civil settlements. The Commonwealth, however, should not be willing to do so for a number of reasons. First and foremost, the public has a right to know the terms and conditions of settlement in these cases–it is, after all, the public that has been defrauded. Moreover, this is not North Korea–government operations in the United States should be open and available to the extent possible.
Even more important is the deterrent effect of publicity on other wrongdoers. Law enforcement must command a healthy respect in the community. Thus section 11 of the Hertz memo clearly states that “We do not agree to refrain issuing press releases, nor do we negotiate the contents of press releases or agree to allow the defendant to review the press release prior to its issuance.”
These are but a few of the major differences, but the bottom line is that settlement of these cases requires more thought and effort than a normal civil settlement.
The Ohio False Claims Act is Introduced…
Other than the changes to the Virginia Fraud Against Taxpayers Act and the Illinois False Claims Act, the 2011 legislative session has been rather uneventful in terms of state false claims act legislation.
However, in some late-breaking news from Ohio, Senate Bill No. 143 was introduced last week by state Senators Hughes (R-Canton) and Oelslager (R-North Canton) last week. Both Senators also sponsored a previous bill which died in the last legislative session.
The strong supporter of the legislation–he also supported the Ohio FCA as a state Senator in the last legislative session).
I don’t know how long the Ohio state legislative session is, but I hope it is long enough to get this important legislation passed. Stay tuned….
Two Major–and Historic–Events in the Past Seven Days…
In the last seven days, two major historic events occurred. Although very few Virginians paid attention or cared, we will all notice the benefit bestowed on our Commonwealth by these two events…
On Saturday, March 26th, Governor Bob McDonnell signed groundbreaking amendments to the Virginia Fraud Against Taxpayers Act (otherwise known as “SB1262” or “SB1262ER”) into law. As discussed previously, when the new Virginia Fraud Against Taxpayers Act becomes law on July 1, 2011, Virginia will become the very first state in the Union to have a fully-updated state false claims act.
It is important for a state’s FCA to match the federal FCA because states with a matching FCA obtain an extra 10% in federal Medicaid money. This extra 10% is an incentive to the states to encourage the passage of state FCAs, and it was put into place via the federal Deficit Reduction Act of 2005, which amended section 1909 of the Social Security Act.
That leads me to the second major event, which is important not only for Virginia but for all of her sister states as well.
In order for a State to qualify for the incentive under section 1909 of the Social Security Act, the State must have in effect a state false claims law that:
- Establishes liability to the State for false or fraudulent claims described in the Federal False Claims Act (FCA) with respect to any expenditures related to the State Medicaid plan;
- Contains provisions that are at least as effective in rewarding and facilitating qui tam actions for false or fraudulent claims as those described in the FCA;
- Contains a requirement for filing an action under seal for 60 days with review by the State Attorney General;
- Contains a civil penalty that is not less than the amount of the civil penalty authorized under the FCA.
Of those 24 states, only 14 state statutes have been approved. The Virginia Fraud Against Taxpayers Act was submitted in 2007 and was originally approved. At that time, however, the federal FCA had not been amended, and the VFATA was approved because it matched the federal statute.
Between March 2009 and July 2010, the federal False Claims Act was amended three times in very significant ways. Among other things, the three amendments expanded liability under the Federal False Claims Act and expanded certain rights of qui tam relators. As a result of the FERA, the ACA, and the Dodd-Frank Act, the Virginia Fraud Against Taxpayers Act is no longer in compliance with section 1909 of the Act.
As a result, a number of states with previously-approved FCA statutes now have non-compliant FCA statutes. Indeed, the Virginia Fraud Against Taxpayers Act was no longer as protective as the federal False Claims Act. In case there were any doubts about this, a Mixx Delicious Digg Facebook Twitter
U.S. Court of Appeals for the Fourth Circuit Issues Opinion in ACLU et al. v. Eric H. Holder, et al.
After several months of waiting, today the Fourth Circuit issued its numerous times over the past two years, as it wound its way through the courts. The case was argued last September, and today’s opinion is within the time frame of the Fourth Circuit’s normal 4 to 6 month window for issuing an opinion.
We will wait and see what the ACLU does…
The Washington Post misses the mark on doctor self-referrals, but they should still get points for trying…
The federal Physician Self-Referral Law (commonly referred to as the Stark law) is a “strict liability” statute, which means proof of intent to break the law is not needed, and indeed evidence of intent is not even relevant. So, if physicians did want to set up a self-referral scheme, they would have to make good and doggone sure that they didn’t self-refer any patients whose claims will be paid by a government program. 
Recently, the Washington Post featured an editorial applauding Maryland’s 18 year old statute banning physician self-referrals and encouraging other states to follow Maryland’s example. Sadly, the WaPo editorial misses the mark, although they do get points for trying.
WaPo misses the mark because if they were going to take up an esoteric–but important–subject, physician self-referrals should not have been the number one thing on the list. It would have been far more helpful if they had directed their efforts towards the passage of a Maryland False Claims Act last year, which they chose not to do.
Don’t get me wrong, physician self-referrals are something that needs to be purged from the health care system, but they are far from the worst thing going on in the world of health care fraud. Indeed, there is a way Maryland could have killed multiple birds with one stone, by cutting down on physician self-referrals, eliminating corrupt providers from the system, and at the same time freeing up more Medicaid money….
First things first. What are physician self-referrals, and why are physician self-referrals not a good idea?
The post does a good job of summing it up: imagine if physicians were allowed to sell prescription medications (and to profit from the sale of prescription medications). No one outside the medical profession thinks that such an arrangement would be a good idea–the urge on the part of some doctors to prescribe medications when patients only marginally needed them would be just too strong, and no doubt there are some doctors that would make sure every single patient they treat was prescribed something.
We don’t allow physicians to sell drugs, but in some circumstances physicians are allowed to profit from prescribing MRI scans, CT scans, and other types of imaging services. Why? Because the technology to perform these services has become cheaper and cheaper and many physicians can now afford to purchase the equipment themselves. When they do so, there is nothing to stop them from profiting from imaging services performed in their own offices.
The performing of such services in-house is known as a “self-referral” because the physicians prescribe an MRI or a CT scan and then “refer” the patient to themselves, because the services are performed in-house.
The WaPo article not only celebrates an old statute passed in Maryland in 1993 that prevents such self-referrals, the editorial announces that the statute should be “a model for the rest of the nation” and things like that.
Here are the reasons why it is a waste of time for the WaPo to get behind Maryland’s self-referral statute:
1. The fact is that self-referrals are already illegal for a very large percentage of the health care services performed all over the United States. That is because physicians are barred from self-referrals in connection with any health care claims that will be paid in full or in part by the United States government. That includes Medicare, Medicaid, Tricare, health care programs for federal employees, and so forth.
(Note: the Stark law is a purely civil statute, in contrast with the federal Anti-Kickback Statute, which is a criminal statute and requires evidence of intent or of a corrupt motive, etc.)
What usually happens is health providers who don’t care about the law aren’t scared of a rarely-enforced state self-referral law. On the other hand, those who do want to comply with the law will make sure they comply with the federal standard, and will not want the administrative nightmare of bothering to sort government health claims (for which self-referrals are already unlawful) from the private pay claims (where self-referrals would be lawful in the absence of a state self-referral law).
2. State self-referral statutes like Maryland’s are rarely enforced, and are only licensing statutes, which is not in the public interest.
Physicians and the health care services they provide are important to society. To me, it makes little sense to revoke a physician’s license for breaking the law and self-referring (unless other aggravating factors are present, such as a complete disregard for patient well-being). Moreover, a doc who loses his license is going to be unable to pay the fines and penalties needed to make society whole.
Instead, physicians should be forced to pay stiff fines and learn their lesson, and then should be allowed to go forth and heal.
Also, of course, the state self-referral statute only allows for enforcement by the Attorney General, and so enforcement of the statute is very much dependent on the state budget. I don’t know how many physicians in Maryland have lost their licenses as a result of the state, but the post editorial seems to admit that the number is not high.
I could go on and on, but the bottom line is this. Last year, we really needed help with passage of the Maryland False Claims Act, and the WaPo ignored us. This year, they chose to pick out an esoteric statute that, while well intentioned, does not do all it could, and may even harm Maryland health care providers in some ways.
What gives?