Healthcare Fraud Investiggations: Preparation and Response

Presenting a live 90‐minute webinar with interactive Q&A

Healthcare Fraud Investigations: gPreparation and Response StrategiesBest Practices to Minimize Liability Exposure in Medicare and Medicaid Enforcement Actions

T d ’ f l f

1pm Eastern | 12pm Central | 11am Mountain | 10am Pacific

THURSDAY, JUNE 9, 2011

Today’s faculty features:

William T. Mathias, Principal, Ober | Kaler, Baltimore

Donald J. Savery, Principal, Corso Savery, Boston

Lisa M. Noller, Partner, Foley & Lardner, Chicago

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H lth F d I ti tiHealthcare Fraud Investigations: Preparation and Response p pStrategies

Current Government Focus

Donald J. Savery, Esq.Corso | Savery LLP

BostonBostonTel. 617-227-0011

[email protected]

CORSO | SAVERY LLP 5

Strong commitment from DOJ to investigate and prosecute health care fraud:

U.S.A.G. Eric Holder (Mar. 2011)*:“In just the last fiscal year . . . we opened more than 2 000 new criminal and civil health care fraud2,000 new criminal and civil health care fraud investigations, reached an all-time high in the number of health care fraud defendants charged, stopped numerous large-scale fraud schemes in their tracks, and g ,returned more than $2.5 billion to the Medicare Trust Fund and more than $800 million to cash-strapped state Medicaid programs.”


DOJ statistics -- criminal* Criminal HCF investigations opened by DOJ:

2010: 1,116 2006: 836

Criminal HCF prosecutions filed by DOJ:

2010: 488 2006: 355

Defendants charged by DOJ:

2010: 931 (1.9/case) 2006: 579 (1.63/case)

C i ti t Conviction rate:

2010: 89.5% 2006: 87.2%


DOJ statistics -- civil*New HCF investigations opened:

2010: 942 2006: 698Pending civil cases:

2010: 1,130 2006: 748 FCA qui tam cases, as of 1/1/11:

1,341 qui tam cases under seal, awaiting intervention d i idecision

~70% allege health care fraud

Largest 150 involve pharmaceutical companies and medical Largest 150 involve pharmaceutical companies and medical device manufacturers


How is it happening? DOJ budgeting and commitment

DOJ’s budget increased to fight health care fraud Increased use of DOJ attorneys in criminal investigations Imposition of internal deadlines for intervention decisions in Imposition of internal deadlines for intervention decisions in

FCA cases

HEAT: Healthcare Fraud Prevention and E f t TEnforcement Team

Medicare Fraud Strike Force R l t F l Cl i A t i t Relators: False Claims Act qui tam cases


Strengthened False Claims Act PPACA: Patient Protection and Affordable Care Act

of 2010of 2010 Overpayment liability

AKS theories under FCA shored up AKS theories under FCA shored up CIDs: Civil Investigative Demands

Authority delegated to USAOs Authority delegated to USAOs Increased use expected


What cases interest the government?

Factors:

Have injuries resulted from the illegal conduct?j g

What is the scale of the conduct? Geographically? Within the company? Within the industry?

When did the illegal conduct occur? Is it ongoing? Did it end long ago?

What compliance structure is in place at the company? Now, and at the time of the conduct? What actions taken to respond to the conduct?What actions taken to respond to the conduct?


Corporate Executives in Crosshairs

Criminal Prosecution:

U.S. v. Stevens GSK VP and Assoc. General Counsel indicted for obstruction of justice. Case dismissed at trial.

HHS - Permissive Exclusion

HHS “Guidance for Implementing Permissive Exclusion Authority”Exclusion Authority

In re Howard Solomon, Chairman, CEO and President of Forest Laboratories. April 2011President of Forest Laboratories. April 2011 OIG “notice of intent to exclude”


Other Areas

Medical Devices Off-label promotionp

Kickbacks

Overlapping: off-label fueled by kickbacks

Examples: Heart Device Industry

Scientific studies – St. Jude Medical & Guidant

Consulting fees – Biotronic investigation (NV)

ICD investigation – industry-wide


Other Areas

Medical Devices

Examples:Examples: Investigations questioning efficacy and use

MDT’s CoreValve Division (D.Mass.)( )

MDT’s Activa DBS Device

Stents investigations (Abbot investigation; others)

FCA challenges in device cases


Other AreasOther AreasMedical Research FraudUS v. Reuben (D. Mass.); D. Mass. investigation

Overlap with AKS and off-label issues

Foreign Corrupt Practices Act cases


A.G. Eric Holder Comments at Detroit Health Care Fraud Prevention Summit (Mar. 15, 2011)

HHS and DOJ joint letter to Sen. Charles E. Grassley (Jan. 24, 2011)y ( )

HHS and DOJ Health Care Fraud and Abuse Control Program Annual Report for FY 2006Control Program Annual Report for FY 2006

HHS and DOJ Health Care Fraud and Abuse Control Program Annual Report for FY 2010Control Program Annual Report for FY 2010


Healthcare Fraud Healthcare Fraud Investigations:Preparation and

Response Strategiesp g

ill hiBill Mathias410-347-7667

[email protected]@ober.com

Ober | Kaler • www.ober.com

Morass of Medicare“There can be no doubt but that the statutes and provisions in question, involving the financing of

Morass of Medicare

provisions in question, involving the financing of Medicare and Medicaid, are among the most completely impenetrable texts within human experience Indeed one approaches them at theexperience. Indeed, one approaches them at the level of specificity herein demanded with dread, for not only are they dense reading of the most tortuous ki d b t C l i it th f tlkind, but Congress also revisits the area frequently, generously cutting and pruning in the process and making any solid grasp of matters addressed merely g y g p ya passing phase.”

Chief Judge ErvinUnited States Court of Appeals for the Fourth Circuit in Rehabilitation Association of Virginia v

Ober|Kaler • www.ober.com

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Circuit in Rehabilitation Association of Virginia v. Kozlowski, 42 F. 3d 1444, 1450 (4th Circuit 1994)

Why Are Internal Investigations I t t?Important?

Enforcement remains aggressive Enforcement remains aggressive– Federal Level

– State Level

Increasing promotion of self-identification Increasing promotion of self-identification and self-disclosure

G t ti t i F d Government continues to view Fraud, Waste, and Abuse as a significant source of revenue


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revenue

Have You Seen the OIG’s Website Lately?


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Fighting Fraud is Good Investment

The return on investment (ROI) for Health The return-on-investment (ROI) for Health Care Fraud and Abuse Control (HCFAC) programprogram– Since 1997, $4.9 returned for every $1.0

expendedexpended.

– 3-year average (2008-2010), $6.8 returned for every $1 0 expendedevery $1.0 expended


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“Health Care in the New Mill i ”Millennium”


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When Must You Investigate?When Must You Investigate?

Any time there is: Any time there is:– An allegation of a violation of law.

– A suggestion of improper conduct.

– A potential for an overpayment by theA potential for an overpayment by the government.

– A potential for a significant overpayment by aA potential for a significant overpayment by a commercial insurer or other third-party payor.

– A potential for whistleblower activity


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A potential for whistleblower activity.

How Much Must You I ti t ?Investigate?

Depends on the facts Depends on the facts.

Initially, need to investigate enough to gauge th dibilit f th ll tithe credibility of the allegation.– Believable on its face

– Documentary evidence exists

Dollar amount of potential exposure impacts Dollar amount of potential exposure impacts practical decisions regarding scope, depth, and personnel involved in investigation.


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p g

Who Should Investigate?Who Should Investigate?

Different categories of problems are best Different categories of problems are best investigated by different personnel:– Human resources issues (such as sexualHuman resources issues (such as sexual

harassment or discrimination) should generally be investigated by the HR Department and/or employment counsel.employment counsel.

– Other general issues (non-criminal in nature, unlikely to result in substantial civil liability) can be initially investigated in-house.

» Need to consider whether attorney-client privilege may be important involve counsel (in house or


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may be important – involve counsel (in house or outside).

Who Should Investigate?Who Should Investigate?

Different categories of problems are best

Criminal issues or issues likely to result in significant

Different categories of problems are best investigated by different personnel:– Criminal issues or issues likely to result in significant

civil liability (whistleblower situations, high dollar overpayments, systemic problems) should not be investigated without the assistance of legal counselinvestigated without the assistance of legal counsel.

» Attorney-client privilege important – may want outside counsel involved to strengthen argument supporting g g pp gattorney-client privilege.


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Identifying IssuesIdentifying Issues

What wrongdoing has already been identified? What wrongdoing has already been identified?

What other wrongdoing might be uncovered by i ti ti ?an investigation?


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Identifying IssuesIdentifying Issues

What are the potential risks and benefits of What are the potential risks and benefits of an investigation?

Risks include costs and disruptions– Risks include costs and disruptions

– Risk/Benefit of potentially uncovering unknown additional issuesadditional issues

– Benefits include potential advantages of early disclosure cooperation with any governmentdisclosure, cooperation with any government investigation, and potential for preferred treatment under sentencing guidelines and civil penalt pro isions


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penalty provisions.

Identify IndividualsIdentify Individuals

Who is likely to have relevant information Who is likely to have relevant information about the case?


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Preserve Relevant D tDocuments

Don’t destroy documents Don t destroy documents

Suspend routine document destruction.– Destroying relevant information could be viewed as criminal

obstruction.

– Destroying relevant information could ultimately lead to a negative inference by the judge and/or jury as to why documents were destroyed.

Issue litigation hold memo Issue litigation hold memo– All persons likely to have potentially relevant documents

– All potentially relevant documents (including home computers of


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p y ( g pemployees)

Identify Investigative P lPersonnel

Investigations of serious issues (large Investigations of serious issues (large amounts at stake, criminal issues) should be managed by counselmanaged by counsel.

Who should direct counsel? – Senior management

– Board of DirectorsBoard of Directors

– Audit or other independent committee of the Board


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Board

In-house or Outside C l?Counsel?

Advantages to outside counsel: Advantages to outside counsel:– Preserves independence of investigation (and

appearance of independence)– Likely more familiar with process for conducting internal

investigation Lik l f ili ith t f t– Likely more familiar with government enforcement tactics and priorities.

– May have relationships with government enforcement y p gofficials

– May be more familiar with the applicable laws, regulations and the potential penalties


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regulations, and the potential penalties

In-house or Outside C l?Counsel?

Advantages to in-house counsel: Advantages to in house counsel:– More familiar with internal politics of organization.– May have more credibility within the organization (not y y g (

always the case).– May be more familiar with substantive laws and

regulationsg Even if outside counsel is engaged, in-house

counsel plays a key role.Familiar with the organization invaluable in identifying– Familiar with the organization -- invaluable in identifying appropriate document sources, interview candidates, and describing standard policiesAssist in gathering documents and other resources and


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– Assist in gathering documents and other resources and keep costs down.

Attorney-Client PrivilegeAttorney Client Privilege

Attorney client privilege protects communications Attorney-client privilege protects communications between an attorney and client– Which were intended to be confidentialWhich were intended to be confidential– Which were made for the purpose of obtaining legal

advice (not business advice)– As to which confidentiality has not been waived by

disclosures to third parties or otherwise

More difficult to demonstrate that communications t i h l t h f thi t t


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to in-house counsel meet each prong of this test

Consultants & OthersConsultants & Others

Attorney-client privilege extends to agents retained Attorney-client privilege extends to agents retained by the attorney to assist in providing legal advice to the client.

A li i d l k– Applies to secretaries and clerks – Also applies to investigators, interviewers, technical

experts, accountants, consultants, and other specialists. Attorney-client privilege applies to communications

with agents as if communications had been with attorneyattorney.– Between client and agent– Between agent and attorney


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Conducting InvestigationD t R i– Document Reviews

First step is to gather and review documents First step is to gather and review documents– Authorized personnel should collect and deliver

documents to counsel.– Track where documents came from– Keep confidential documents confidential– Identify “hot” documents

» Documents that suggest wrongdoing» Documents that are exculpatory» Documents that raise questions and need further

clarification


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Conducting Investigationi– Interviews

Interviews should be conducted in private Interviews should be conducted in private.– To the extent practical, have witness (associate/paralegal) present

during interview to take notes and corroborate your understanding of facts and impressions of witnessp

Keep notes of interview– Do not record interviews – Do not transcribe interviews– Prepare written report describing facts of each interview

Management should only be present when necessary Management should only be present when necessary– Should Compliance Officer be present?


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Conducting Investigationi– Interviews

Employees must be advised that legal counsel Employees must be advised that legal counsel represents company, not employees individually, and what they say may not be kept private.– Depending on the severity of the allegations and

potential culpability of the employee, you may chose to advise them of the potential need for counseladvise them of the potential need for counsel.

– In some instances, company may pay for employee counsel.

Employees must be encouraged to report if they have been threatened or asked to change their stories.


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Investigation CompleteInvestigation Complete

Counsel should prepare a written report for Client Counsel should prepare a written report for Client, including – Discovered facts, – Remaining unknowns– All implicated or potentially implicated laws, and – Counsel’s analysis of the facts (and unknowns) in light of those– Counsel s analysis of the facts (and unknowns) in light of those

laws.

Report must be labeled attorney client-privileged Report must remain confidential – limit circulation

of report.


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Fix The ProblemFix The Problem

Using the report corrective action needed to fix Using the report, corrective action needed to fix the problem

Need to assess compliance process and policies Need to assess compliance process and policies to identify shortfalls in existing compliance programs and reporting mechanismsp g p g

Responsible employees should be disciplined, as appropriate pp p

Additional policies, procedures, or reporting layers should be added as necessary to prevent


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y preoccurrence.

Now What?Now What?

Need to discuss with client: Need to discuss with client:– Whether the past conduct needs to be reported

– To whom past conduct should be reported


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Need for a PlanNeed for a Plan


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Voluntary DisclosuresVoluntary Disclosures

Potential Benefits: Potential Benefits:– Potential to avoid criminal liability

– Potential to minimize civil exposure.

– Potential to avoid Corporate Integrity p g yAgreements.

– Potential to neutralize qui tam suitsq


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Voluntary DisclosuresVoluntary Disclosures

Potential Harms: Potential Harms:– Invites detailed scrutiny

– May encourage government to require additional investigation

– May result in penalties for conduct that would have remained undiscovered


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Disclosure CalculusDisclosure Calculus

Decision to disclose should be made in Decision to disclose should be made in conjunction with counsel, but is a business decision – weighing potential risks and benefits.– Where available, disclosure offers protections too

significant to pass up

Useful for substantial violations of law– Useful for substantial violations of law

– Leaves as an open question more minor or isolated violations – time + expense + minimum settlement pmay make minor disclosures prohibitively costly

– Continuing focus on compliance programs, good faith cooperation and prompt disclosure


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cooperation, and prompt disclosure

Questions?

Bill MathiasBill MathiasOber|KalerOber|Kaler410-347-7667

[email protected]


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Healthcare FraudHealthcare Fraud Investigations: Response St t iStrategies

Lisa NollerJune 9, 2011June 9, 2011

©2011 Foley & Lardner LLP • Attorney Advertising • Prior results do not guarantee a similar outcome • Models used are not clients but may be representative of clients • 321 N. Clark Street, Suite 2800, Chicago, IL 60654 • 312.832.4500

I ti ti G l

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Investigation Goals Collect data facts Collect data, facts Leave no stone unturned

C d t l l l i Conduct legal analysis Keep the client out of trouble

– Affirmative disclosure?– Remediation / education / compliancep

©2011 Foley & Lardner LLP

I ti ti F k

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Investigations Framework “Typical” Template Typical Template

– Issue document holdCollect documents– Collect documents

– Interview witnessesProvide advice and counsel– Provide advice and counsel

Tried and true Leaves the hard work until the end


P di Shift

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Paradigm Shift Consider why you’re collecting data and Consider why you re collecting data and

interviewing witnesses in the first placeIF truly internal stick with the game plan IF truly internal, stick with the game plan

IF possibly external . . .– Self-reporting– Pitching– Responding to an “invitation”

. . . Investigate with an eye toward the


g ypresentation

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Principles of Federal Prosecutions of Principles of Federal Prosecutions of Business Organizations

The “Filip Memo”– The Filip Memo– USAM 9-28

Criminal: required– Criminal: required– Civil: recommended

U S S t i G id li U.S. Sentencing Guidelines– Starting point for all courts, probation officers,

AUSA©2011 Foley & Lardner LLP

AUSAs

Nature and Seriousness of the Off

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Offense Was the public harmed? Was the public harmed?

– Patient deathsAdulterated or misbranded products– Adulterated or misbranded products

– Interpret available dataA t f l ? Amount of loss?– To whom is any money owed

Most egregious violator?– Apportioning responsibility where appropriate


P i f W d i

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Pervasiveness of Wrongdoing Many violators? Condoned by corporate Many violators? Condoned by corporate

management?Charge corporation– Charge corporation

Single act by rogue employee(s)?Ch i di id l( )– Charge individual(s)

In either case, look to role and conduct of management


P t Hi t

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Past History Easy to look forward, or narrow scopeEasy to look forward, or narrow scope Persons and entities are expected to learn

from their mistakes USAOs must consider:

– Non-criminal guidance– Warnings– Sanctions

Previous charges– Previous charges USAOs may consider:

– Corporate structure divisions affiliates etc


Corporate structure, divisions, affiliates, etc. Gather corporate documents

Timely and Voluntary Disclosure / C ti

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/ Cooperation Willingness to provide full, truthful Willingness to provide full, truthful

information Identify all relevant actors, through Identify all relevant actors, through

documents or interviews? Used to be a goal; now it’s expected Used to be a goal; now it s expected

– False Claims Act– Qui tamsQu ta s– Retention of overpayments

Diverts time and resources if not identified


Diverts time and resources if not identified quickly

Timely and Voluntary Disclosure ( t’d)

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(cont’d) Who was ultimately responsible? Who was ultimately responsible?

– Promoted? Fired? Transferred? Quit?– Why?Why?

Uncertainty about who promoted the activity can have negative consequencesactivity can have negative consequences for company and gov’t

Government cannot compel privileged Government cannot compel privileged information– But mitigating circumstance


But mitigating circumstance– Advice of counsel

Existence and Effectiveness of P i ti C li P

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Pre-existing Compliance Program Find any person, document which can be Find any person, document which can be

considered part of:– Trainingg– Compliance– Remediation

Does it have teeth?– Well designed / suited to the company?– Followed?– Applied earnestly and in good faith?

D t k d©2011 Foley & Lardner LLP

Does management know and understand it?

S t i G id li

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Sentencing Guidelines Section 8C2.5(f) of the November 2, 2010 ( )

Sentencing Guidelines provide companies with a 3-point reduction in the adjusted base offense level for an “Effective Compliance and Ethics pProgram”– Must have been in place at the time of the offense

FIND ANY DOCUMENT OR WITNESS WHO CAN BE FIND ANY DOCUMENT OR WITNESS WHO CAN BE APPROPRIATELY CONSIDERED “COMPLIANCE”

– Company must have reported the offense once became aware of it

Applies even if high-level officers involved in criminal activity– Specifically reverses the old Guidelines


Specifically reverses the old Guidelines

R d ti T

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Reduction Terms To be eligible (Section 8B2 1) an To be eligible (Section 8B2.1), an

organization shall:“Exercise due diligence to prevent and detect– Exercise due diligence to prevent and detect criminal conduct; and,

– Otherwise promote an organizational cultureOtherwise promote an organizational culture that encourages ethical conduct and a commitment to compliance with the law.”p


Eli ibilit R i t

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Eligibility Requirements Must have an actual compliance program Must have an actual compliance program “Shall be” reasonably designed,

implemented and enforcedimplemented and enforced Must be effective in preventing and

detecting criminal conductdetecting criminal conduct HOWEVER, The failure to detect an offense does not The failure to detect an offense does not

mean the program is ineligible for the reduction


reduction

Seven Components of an Eff ti P

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Effective Program Contains standards and proceduresContains standards and procedures Governing authority is on board Excludes criminals as decision-makers Communicates standards and procedures Reasonably ensures program is followed,

ff i deffective and anonymous Includes incentives and disciplinary measures

Takes reasonable steps to respond to and Takes reasonable steps to respond to and remedy problems


G d N !

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Good News! AT LEAST since Sarbanes-Oxley you’ve AT LEAST since Sarbanes Oxley, you ve

all been doing this.– Right?Right?

So now you get meaningful credit for it!3 point reduction is one of the largest reductions in– 3-point reduction is one of the largest reductions in Guidelines

– Reduces culpability score / multiplier Can shave millions off a fine or years off a

sentenceF t ff ti li ith th t


– Fronts effective compliance with the court

R di l A ti

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Remedial Actions Implement compliance programp p p g Improve existing compliance program Replace responsible managementp p g Discipline or terminate wrongdoers

– Difficult task– But DOJ expects employees are held to highest

ethical standards– Internal discipline is a powerful deterrentInternal discipline is a powerful deterrent

Pay restitution Cooperate


p

C ll t l C

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Collateral Consequences Harm to shareholders pension holders Harm to shareholders, pension holders,

employees, others not culpableImpact on the public Impact on the public

Debarment Pitch a non-prosecution agreement or

DPA– Helps restore integrity of company’s

operations


– Preserve financial viability of corporation

Ad f Alt t R di

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Adequacy of Alternate Remedies Criminal goals: Criminal goals:

– DeterrencePunishment– Punishment

– RehabilitationG th f t t it h ti f ti f Gather facts to pitch satisfaction of one or more goals


C t t I f ti

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Contact InformationLisa NollerLisa NollerFoley & Lardner321 N. Clark St.Suite 2800Chicago, IL 60654(312) 832 4363(312) [email protected]


Healthcare Fraud Investiggations: Preparation and Response

Documents

Transcript of Healthcare Fraud Investiggations: Preparation and Response