8 Key Trends in Healthcare False Claims and Antitrust Litigation

The government's enforcement efforts within the healthcare industry have substantially increased in recent years. Eight key trends concerning False Claims and Antitrust litigation were addressed during a March 12 teleconference hosted by McGuireWoods attorneys, Scott Becker, Angelo M. Russo and David J. Pivnick.

I. False Claims Trends 

1. The number of False Claims cases is growing 
The number of cases being filed against healthcare providers pursuant to the False Claims Act is growing. Most notable is the increase in qui tam or whistle-blower cases, in which private citizens are permitted to file lawsuits alleging false claims on behalf of the government. In 2008 there were 378 qui tam cases filed, and in 2013 that number soared to 752 cases.

A contributor to the increase in False Claims Act cases is the courts' unification. There used to be a division among circuits as to whether a Stark Law or Anti-Kickback claim could warrant a False Claims case. Today, due to legislation in the PPACA, "a Stark violation or Anti-Kickback violation warrants a False Claims case," said Mr. Becker. This clarity "opens broadly the amount of conduct that can lead to False Claims cases." 

Because a number of individuals, including physicians, employees, former employees and patients can bring claims under the False Claims Act, healthcare providers "should have a mechanism in place to allow internal reporting of concerns," said Mr. Pivnick. In order to lessen the number of qui tam cases filed, people need to know their "concerns are going to be taken seriously."

The vast majority of these cases include allegations under state law as well as the federal False Claims Act, and healthcare providers need to be aware of the risks associated with both state and federal law. Some states, for example Illinois and California, allow people to bring claims for fraudulent payment to private insurers; therefore, healthcare providers must be diligent with all payers, not just government payers. 

2. False Claims Act is gaining more attention 
In recent years, the False Claims Act has gained more attention, and people are learning they can use it as an avenue to get into court. Because of the increase in attention, there are individuals who have essentially become "professional whistle-blowers," said Mr. Pivnick. These individuals file multiple whistle-blower claims, and some have received substantial recovery in their cases. 

3. Government spending for healthcare fraud enforcement is increasing 
In recent years, the government has continually increased its spending for healthcare fraud enforcement. In 2012, the federal government spent $283 million on healthcare fraud enforcement, and that number has increased every year since. The continued increase in spending is due to the great return on investment the government is getting on the money it is spending in this area. 

In 2013, $3.8 billion was recovered by the government in False Claims litigation, and 60-70 percent of that recovery was from cases involving the healthcare industry. Because of the large amount of recovery, healthcare is going to continue to be the most prominent target in False Claims litigation. 

4. Government is intervening in more cases 
The government is intervening in double the amount of cases they were five years ago. Claims brought pursuant to the False Claims Act are filed in federal court under seal, and the government is given time to see if they want to intervene in the case. Today, the government intervenes in approximately 25 percent of False Claims Act cases, but 97 percent of the recovery from False Claims litigation comes from cases the government has intervened in. 

5. Increasing number of challenges to False Claims Act damages
There have been more challenges to the damages awarded in False Claims cases in recent years, many of which are Constitutional challenges arguing that the punishments are unjust. One of the successful challenges occurred in the Fourth Circuit Court of Appeals case of United States ex rel. Bunk v. Gosselin World Wide Moving, N.V., where the court set damages below the statutory minimum. 

6. Courts are suspending the statute of limitations 
Several courts around the country have recognized the wartime tolling statute in cases brought pursuant to the False Claims Act. The Wartime Suspension of Limitations Act was enacted to lengthen the time to prosecute offenses against the United States and its agencies during times of war, and it tolls the statute of limitations until five years after the war is over as proclaimed by the President or Congress. 

The False Claims Act statute of limitations is six years, meaning a case under the Act could not currently be pursued if the conduct occurred before March 2008, but with the Wartime Suspension of Limitations Act applied, cases could be brought for conduct that occurred as early as 2001, when the war in Afghanistan began. 

II. Antitrust Trends 

1. More aggressive merger review by the FTC 
In the past, hospital mergers did not warrant much review, but in recent years the FTC has been successful in challenging several hospital mergers and other integration combinations. In one notable case, Idaho-based St. Luke's hospital, the largest hospital in the state, was ordered to divest itself of Saltzer Medical Group, one of the largest multispecialty groups in the state. In that case, the court found that the acquisition of Saltzer by St. Luke's violated antitrust laws. Although the court acknowledged the purpose of the acquisition was to improve patient outcomes, the court still ordered the relationship to end. 

2. More scrutiny of payer and provider contract practices 
Today, more than ever, payer and provider contracts in the healthcare industry are being carefully examined by the government. Three areas that receive some of the most scrutiny in these contracts are: most favored nation provisions, exclusive dealing clauses and bundled discount clauses. 

In the healthcare industry, most favored nation clauses are commonly seen in contracts between insurers and hospitals. Under these provisions, if another insurer negotiates a lower rate with the hospital for a specific service, the first insurer is guaranteed to receive the same rate. "Most favored nation provisions warrant antitrust concerns when it is such an important source of revenue that almost all providers feel they need to participate," said Mr. Russo. 

Exclusive dealing clauses contained in contracts between hospitals and insurers raise antitrust concerns when the provisions would likely exclude an equally-qualified competitor.

Many hospitals today are offering payment bundling, which allows patients to pay for healthcare services with a single, comprehensive payment amount that covers multiple services and items received by the patient instead of making separate fee-for-service payments for each particular service.

Under a bundled payment plan, a hospital and physicians assume the financial risk for delivering all care for one price for one patient episode over a set period of time.

If a healthcare provider offers a bundled payment program, the court will apply the so-called "rule of reason" to determine whether the program is pro-competitive or anti-competitive on the relevant market. To help ensure that programs will withstand scrutiny, provider organizations should adopt antitrust protocols to safeguard against network participants making anti-competitive side agreements. 

More Articles on False Claims Litigation: 

False Claims Act Suit Settled Against Teva Pharmaceuticals for $27.6M 
Halifax to Institute Internal Monitoring as Part of $85M Settlement 
Case Expanding False Claims Act Exposure May Be Reviewed by Supreme Court 

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