Fraud and Abuse Developments

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At the Federal Bar Association’s (FBA) Annual Qui Tam Conference on February 20, 2025, Department of Justice (DOJ) representatives Michael Granston (Deputy Assistant Attorney General for Commercial Litigation) and Jamie Yavelberg (Director of the Fraud Section in the Civil Division) discussed enforcement priorities for the False Claims Act (FCA), including Medicare Advantage, cybersecurity, and pandemic…

On January 15, the Department of Justice (DOJ) reported that False Claims Act (FCA) recoveries for civil cases in fiscal year 2024 totaled approximately $2.9 billion, representing about a $200 million increase from 2023. And these numbers do not account for two major settlements that were reached shortly after the close of the fiscal year that would have added an additional $830 million to the total. Of the total recovered by DOJ in 2024, approximately $1.67 billion (58%) related to matters involving the health care sector. Although a lower percentage of these recoveries related to health care than prior years, the health care sector remains the primary industry under scrutiny.  

For the second year in a row, the total number of qui tam lawsuits increased, demonstrating continued fraud enforcement by the agency and an active environment for private whistleblowers. The 979 qui tam cases filed in 2024 is a new record, blowing past the prior record of 757 cases in 2013 and far exceeding last year’s total of 713. And while the number of government-initiated cases dropped from last year’s record pace, the 423 non qui tam cases filed in 2024 is an order of magnitude higher than any other year since 1986.

This increase in FCA activity comes at a time of uncertainty for the law. As Reed Smith covered last fall, a federal judge in Florida ruled that the qui tam provisions of the FCA violated the Appointments Clause of the Constitution by investing core executive powers into unappointed whistleblowers. That decision followed reasoning in a Supreme Court dissent and is on appeal to the U.S. Court of Appeals for the Eleventh Circuit. Incoming Attorney General Pam Bondi assured senators during her confirmation hearing that she would defend the constitutionality of the provisions.Continue Reading DOJ exceeds $2.9 billion in FCA recoveries in 2024 and reports a record number of qui tams

The Department of Health and Human Services Office of Inspector General (OIG) recently issued an advisory opinion related to a proposed arrangement offering discounts to dental providers. This favorable advisory opinion, issued on December 9, 2024, offers fresh guidance and reminders to dental professionals and dental services organizations (DSOs) about how to structure discount programs.

Are the qui tam provisions of the False Claims Act an unconstitutional delegation of authority to private citizens? One federal court, accepting an invitation from a Supreme Court dissent, ruled the answer is yes.

In an opinion issued yesterday dismissing a False Claims Act case, Judge Kathryn Kimball Mizelle of the U.S. District Court for the Middle District of Florida ruled that the statute’s provisions that permit a private citizen to bring a claim for a violation of the False Claims Act in the absence of intervention by the Federal Government are an unconstitutional delegation of executive authority that violated the Appointments Clause of Article II of the Constitution.

According to the court, the qui tam provisions, as strengthened by the False Claims Act Amendments Act of 1986 (Pub. L. No. 99-562), established a mechanism whereby “unaccountable, unsworn, private actors” are permitted “to exercise core executive power with substantial consequences to members of the public.” The court ruled that such a provision was unconstitutional as it permitted a private citizen to stand in as the “avatar in litigation” in which the interest of the United States is in issue.Continue Reading Are False Claims Act Whistleblower Cases Unconstitutional?

The Office of Inspector General of the Department of Health and Human Services (OIG) has published an unfavorable advisory opinion involving a proposal by a Medicare Advantage Organization (MAO) offering Employer Group Waiver Plans (EGWPs) to share a percentage of its savings with certain groups to which it provides coverage.

With this advisory opinion (AO 24-08) OIG highlighted how it analyzes certain risk-sharing arrangements for managed care organizations and found that this particular arrangement did not present a sufficiently low enough fraud and abuse risk under the federal Anti-Kickback Statute (AKS).Continue Reading OIG Issues Unfavorable Opinion on Medicare Advantage Gainsharing Arrangements

The Department of Health and Human Services Office of Inspector General (“OIG”) recently issued a favorable advisory opinion regarding whether a proposed patient assistance program (“PAP”) would run afoul of Federal antifraud statutes.

Under the proposed PAP, a nonprofit organization would subsidize certain cost-sharing obligations for low-income Medicare enrollees who have diabetes and reside in a specified rural area. Although the PAP displayed the potential for the generation of prohibited remuneration and did not fall under a safe harbor for either the Federal Anti-kickback Statute (AKS) or the beneficiary inducement provisions of the Civil Monetary Penalties statute (CMP), OIG stated that it would not impose administrative sanctions on the requesting entity.

While this advisory opinion is only applicable to the specific program at issue and can only be relied upon by the requestor, there are some potential considerations that could be applied more broadly to other arrangements.Continue Reading HHS OIG won’t enforce antifraud statutes against patient assistance program

The Department of Health and Human Services Office of Inspector General (OIG) recently issued two advisory opinions related to proposed arrangements offering financial assistance to individuals who receive gene therapy treatments. These arrangements were specifically targeted to patients who may suffer from infertility as a result of the treatments’ required chemotherapy-based fully myeloablative conditioning (Conditioning).

While proposed arrangements for travel support (as discussed below and in a June 14, 2024 advisory opinion) appear to receive approval from OIG, other proposed financialsupports for infertility services have received unfavorable opinions primarily because of a lack of data available to OIG regarding whether the proposed assistance would improve the ability of patients to access the gene treatment therapies.

These unfavorable decisions effectively chill arrangements to provide additional financial support to individuals who are enrolled in federal and state health care programs and require gene therapy treatments, though OIG has indicated that it may issue favorable decisions in the future if it receives additional data.  Continue Reading OIG Issues Opinions On Arrangements Involving Gene Therapy Treatments

The Department of Health and Human Services Office of Inspector General (“OIG”) recently issued a favorable advisory opinion that relates to whether two drug assistance programs would run afoul of the Federal anti-kickback statute (“AKS”).

In good news for the entity that requested the opinion, a United States corporate affiliate of a pharmaceutical manufacturer of the drug at issue (the “Requestor”), the OIG stated that it would not impose administrative sanctions for either program, despite the potential to generate prohibited remuneration under the AKS.  Although the advisory opinion is only applicable to the specific programs at issue and can be relied upon only by the Requestor, there are some potential considerations that could be applied more broadly to other arrangements.Continue Reading OIG Issues Favorable Opinion on Drug Assistance Programs

On June 17, 2024, the Department of Health and Human Services Office of Inspector General (OIG) issued an advisory opinion, approving a plan to provide assistance with travel, lodging, meals, and other associated expenses for qualifying patients receiving a gene therapy product.

OIG determined that it would exercise its enforcement discretion by declining to impose administrative sanctions on gene therapy product manufacturer under the Federal Anti-kickback Statute (AKS), despite finding that the arrangement would generate prohibited remuneration if the requisite intent were present. Additionally, OIG found that the arrangement satisfies the “Promote Access to Care” Exception to the Beneficiary Inducements Civil Monetary Penalties law.Continue Reading OIG Approves Travel and Lodging Assistance for Patients Receiving Gene Therapy

On April 8, 2024, the Department of Health and Human Services Office of Inspector General (OIG) issued Advisory Opinion No. 24-02, involving independent charity patient assistance programs (PAPs) associated with 12 specific diseases (the Disease Funds) operated by the Requestor. Each Disease Fund has a single donor–a pharmaceutical manufacturer that manufactures or markets a drug to treat the disease state associated with the fund.

Although the arrangement generates remuneration prohibited under the federal Anti-Kickback Statute (AKS) if the requisite intent were present, the OIG determined it would not impose sanctions on the Requestor. In exercising its enforcement discretion, the OIG acknowledged the public policy benefits of independent charity PAPs while highlighting the importance of a charity’s independence from pharmaceutical manufacturer influence. Additionally, the arrangement does not implicate the federal Beneficiary Inducements Civil Monetary Penalties (CMP) law.

The OIG set an effective period for the opinion that expires January 1, 2027 due to upcoming reductions in Medicare Part D cost sharing associated with the Inflation Reduction Act. The reduction in beneficiary out-of-pocket expenses could ease demand for PAP subsidies and alter the OIG’s assessment of the benefits and risks of the arrangement.Continue Reading OIG Exercises Discretion in Independent Charity Patient Assistance Program

The Department of Justice (DOJ) reported that its False Claims Act (FCA) recoveries for civil cases raked in approximately $2.7 billion for fiscal year 2023, representing a $450 million jump from 2022 recoveries.  Of the $2.7 billion recovered by the DOJ for 2023, approximately $1.8 billion (67%) came from the health care sector.

The real headline, however, may be the record-setting number of new FCA cases initiated in 2023 ­–– 500 initiated by the government and 712 initiated by private relators, for a total 1,212 new cases, over 250 more than the next-highest year (2022). Previous trends aside, this signals busy times ahead for the FCA.Continue Reading DOJ Announces $2.7 Billion in FCA Recoveries and Enforcement Priorities

The Department of Health and Human Services Office of Inspector General (OIG) kicked off the new year with four new advisory opinions covering retiring physicians, preferred hospital organization discounts for Medigap patients, and gift cards for the referral of potential physician practice customers of a non-clinical consulting company. While OIG published the favorable opinions last week, it issued them on December 28, 2023 to cap off a busy 2023 season.

Two opinions, Opinion 23-13 and Opinion 23-14, are substantially similar to each other and to two other opinions  issued earlier in the year (Opinion 23-09 and Opinion 23-10). All four opinions approve the use of discounts by a preferred hospital organization (PHO) within a “preferred hospital” network as part of Medicare Supplemental Health Insurance (Medigap) policies.

Specifically, the opinions approved of an insurance company contracting with the PHO to provide discounts on the otherwise-applicable Medicare inpatient deductibles for its policyholders and, in turn, the insurer providing a premium credit of $100 off the next renewal premium to those policyholders who used a network hospital for an inpatient stay. This flurry of PHO Medigap discount opinions likely reflects the fact that an OIG advisory opinion is binding only on its requestor, leading different PHOs to seek approval for the same proposal.

The other two opinions include Opinion 23-12, a favorable review of a one-time, voluntary redemption offer to physician partners reaching age 67 to have their partnership units repurchased by a partnership over a 2-year period, contingent upon the physician partners’ agreement to retire from the practice of medicine,  and Opinion 23-15, a favorable review of a consulting company’s gift card offer to physician practices for the referral of potential new customers.Continue Reading OIG Publishes First Advisory Opinions of the Year

On October 26, 2023, the Department of Justice (“DOJ”) announced that a Miami federal grand jury returned an indictment charging a Medicare Advantage Organization’s (“MAO”) former director of Medicare risk adjustment analytics with six counts of criminal fraud. DOJ alleged that the MAO received more than $53 million in overpayments from the Centers for Medicare & Medicaid Services (“CMS”) due to false diagnoses submitted on reimbursement claims for beneficiaries enrolled in the MAO’s plans.

What’s perhaps most notable about this matter is that DOJ declined to prosecute the MAO because of the MAO’s significant and timely self-disclosure, cooperation, and remediation efforts, in addition to the MAO’s agreement to repay CMS the full amount of the estimated overpayments.Continue Reading No Criminal Charges for Cooperative Medicare Advantage Organization

On September 28, 2023, the Office of Inspector General of the Department of Health and Human Services (OIG) issued Advisory Opinion 23-06, involving a proposed services arrangement between a pathology laboratory (the Requestor) and third-party referring pathology laboratories. 

The OIG determined that, if the requisite intent were present, the proposed purchase of the technical component of anatomic pathology services from certain laboratories would generate prohibited remuneration under the federal Anti-Kickback Statute (AKS). In doing so, the OIG highlighted the proposal’s lack of commercial reasonableness and reaffirmed its longstanding suspicion over arrangements that “carve out” federal health care program business.Continue Reading OIG Issues Unfavorable Advisory Opinion Concerning Pathology Lab’s Proposed Purchased Services Arrangements

In an advisory opinion released on October 13, the Department of Health and Human Services (HHS) Office of Inspector General (OIG) approved a plan by a muti-specialty practice to pay its employed physicians bonuses related to outpatient procedures performed by those physicians at ambulatory surgical centers (ASCs) operated by the physician practice entity requesting the opinion (the Requestor).

According to the facts as presented by the Requestor, the practice employs a group of physicians across a range of specialties. The Requestor also operates two ASCs as corporate divisions of the practice’s legal entity and not as subsidiaries or affiliates. The Requestor plans to pay each employed physician who performs a procedure at either of the ASCs a quarterly bonus equal to 30% of the net profits generated by the facility fees that are directly attributed to that physician’s procedures performed at the ASCs during the preceding quarter.

Notably, there is no indication in the request that the bonus payments would be based solely on the professional component of services personally performed by the physicians; the measurement of profit per physician would be expected to include the technical component of the procedures.Continue Reading OIG Permits Multi-Specialty Practice to Pay Doctors Bonuses for Outpatient Procedures

The Department of Health and Human Services’ Office of Inspector General (“OIG”) issued an unfavorable advisory opinion (the “Opinion”) last Friday in which it refused to bless a proposed arrangement involving an intraoperative neuromonitoring (“IONM”) company (the “Requestor”) and various surgeons who perform procedures for which IONM is used, desiring to form a physician-owned entity (“Newco”) that would arrange to provide both the technical and professional components of IONM services (the “Proposed Arrangement”).

The Proposed Arrangement would essentially create a “turn-key” entity owned by the surgeons (the “Surgeon Owners”) that would subcontract to the Requestor and its affiliated physician practice (the “Practice”) “virtually all of the day-to-day requirements of an IONM business.” The Surgeon Owners would be responsible for forming Newco, preparing Newco’s internal governance documents, and determining the methodology for distribution of Newco’s profits amongst themselves. However, the Surgeon Owners would be passive investors, with limited involvement in Newco’s day-to-day operations.Continue Reading OIG Issues Unfavorable Advisory Opinion, Upholding Longstanding Contractual Joint Venture Concerns

The Department of Health and Human Services Office of the Inspector General (OIG) has released an advisory opinion permitting a technology company to charge health care providers “per booking” fees to participate in its online provider directory and to allow the same providers to bid on advertising that appears as specialized search results or banner ads within its digital “marketplace.” This is the second time that the OIG has opined on this particular arrangement, having approved an earlier, although slightly different, version of the arrangement by the same company in Advisory Opinion 19-04, which was issued in 2019.

In the most recent opinion, the OIG determined that, although the arrangement might violate the Federal Anti-Kickback Statute (AKS) and the Beneficiary Inducement Civil Monetary Penalty (CMP) law, the office would not enforce those statutes against the company because the nature of the revised fees and search functionality presents a sufficiently low risk of fraud and abuse. Important to the OIG’s decision was the requestor’s certification that the fees do not exceed fair market value of the requesting company’s services to providers related to its marketplace nor do they take into account the user’s insurance status or the volume or value of referrals to the providers.

The OIG’s opinion letter protects only the current arrangement described to it by the requestor, and the agency declined to opine on any continuing contracts under an older version of the program.Continue Reading OIG again approves online health directory’s use of appointment and advertising fees

On April 24, 2023, the Department of Health and Human Services’ Office of Inspector General (“OIG”) issued a modification to advisory opinion 20-04, from July 2020, where the OIG opined favorably on the proposal to purchase or receive donations of unpaid medical debt owed by qualifying patients from certain types of health care providers, including hospitals, and then forgive that debt.  Now, the OIG has been asked to modify certain conditions related to the public disclosure of hospitals’ donation or sale of medical debt. The requestor of the modification is a charitable organization that locates, buys, and forgives individual patents’ medical debt.Continue Reading OIG Approves Charity’s Modifications to Plan to Purchase and Forgive Medical Debt

On March 24, 2023, the Department of Health and Human Services’ Office of Inspector General (“OIG”) issued an advisory opinion in response to a proposal by a laboratory test kit company to provide prepaid gift cards to individuals, including federal health care program beneficiaries, to encourage use of its colorectal cancer screening test. The company specifically requested the opinion to determine whether the proposed gift card arrangement would constitute grounds for sanctions under federal Anti-Kickback Statute (“AKS”) and other sections of the Social Security Act. The OIG concluded that while proposed arrangement would generate prohibited remuneration under the AKS if the requisite intent were present, it would not impose administrative sanctions if the company implemented the gift card arrangement.

The company’s parent entity manufactures a non-invasive colorectal cancer screening test that has been approved by the U.S. Food and Drug Administration. The screening test is covered by Medicare Part B every three years for beneficiaries aged 45 and older, if the beneficiary meets certain criteria. It may be ordered for a patient only by a health care provider with prescribing authority. After an order is placed, the company ships its sample collection kit directly to a patient’s home. The patient then collects a stool sample and ships it back to the company in a prepaid, preaddressed package. The sample is subsequently analyzed by a laboratory for presence of colorectal cancer or other indicators of disease.Continue Reading OIG approves lab company’s gift card proposal for colorectal cancer screening kits

On February 28, 2023, the Department of Health and Human Services’ Office of Inspector General (“OIG”) issued a favorable advisory opinion regarding an arrangement through which a pharmaceutical company provides free enzyme replacement therapy (“ERT”) medication to patients who satisfy certain eligibility requirements where the patients’ insurer is delayed in making a coverage determination.

The OIG noted that, although the arrangement would generate prohibited remuneration under the federal Anti-Kickback Statute (“AKS”) if conducted with the requisite intent, it would not impose administrative sanctions. Further, the OIG opined that the arrangement would not generate prohibited remuneration under the beneficiary inducement prohibition (“Beneficiary Inducement CMP”).Continue Reading OIG allows drug company to provide free medication during coverage determination delay