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On April 24, 2023, the OIG formally announced that it will be modernizing its existing Compliance Program Guidance (“CPG”).

The OIG has provided a CPG for various industry subsections since 1998.  Each CPG was developed in an effort to set forth voluntary compliance standards to be utilized in identifying and preventing fraud and abuse in federal health care programs.  In September 2021, the OIG published a request for information (“RFI”), wherein OIG requested insight on how providers use CPG and what improvements could be made to provide more relevant and accessible guidance.  

Providers and other industry representatives made recommendations including, but not limited to, creating industry-specific guidance, consolidating existing CPG, enabling user-friendly access to CPG, and ensuring ongoing updates to identify the OIG’s current positions on new and emerging risks in health care.…

Continue Reading OIG announces Modernization of Compliance Program Guidance

Note: This is Part 1 in a series of blog posts on developments from the U.S. Food and Drug Administration (“FDA”) regarding its commitments set forth under the Prescription Drug Under Fee Act Reauthorization Performance Goals and Clinical Trial Diversity and Modernization mandates established by Congress under the Food and Drug Omnibus Reform Act of 2022 (FDORA), including developments on the intersection and use of digital health technology in clinical trials and clinical trial diversity.

The Food and Drug Omnibus Reform Act of 2022 (FDORA) signed by President Biden on December 29, 2022, introduced significant changes to the way in which FDA will provide oversight for clinical trials as it pertains to “Clinical Trial Diversity and Modernization.” Under FDORA, among other things, FDA is required to issue guidance on decentralized clinical trials (which is a clinical trial in which some or all trial-related activities occur at a location separate from the investigator’s location) and to provide clarification on the use of digital health technologies (DHTs) in clinical trials.

Prior to the passage of FDORA, FDA set its sights on DHTs in the Prescription Drug User Fee Act (PDUFA) VII Commitment Letter, acknowledging the increased use of DHTs in drug development and the need for appropriate internal expertise and external guidance for their use and evaluation.…

Continue Reading New Opportunities, New Challenges: FDA Elaborates on use of Digital Health in Drug and Biological Product Development

On February 16, 2023, the Federal Bar Association (FBA) kicked off its sixth annual Qui Tam Conference with its customary “Year in Review” panel, which spotlighted the key False Claims Act (FCA) decisions and developments from 2022. Consistent with the annual press release and FCA recovery statistics issued by the U.S. Department of Justice (DOJ) earlier this month, the panel made clear that despite lower recoveries, 2022 was a busy and important year for FCA enforcement.

For the fiscal year ending September 30, 2022, total FCA recoveries surpassed $2.2 billion. Although this number represented a drop of more than 50% from 2021 when FCA recoveries exceeded $5.7 billion due to several high-profile settlements, 2022 saw a record amount of FCA enforcement activity, with 948 new FCA matters initiated, and 351 settlements and judgments under the FCA: the second-highest number recorded in a single year.…

Continue Reading FCA enforcement going strong in 2022, particularly in declined health care qui tams

The Centers for Medicare & Medicaid Services (“CMS”) has proposed a new rule that, among other changes, would amend the “identified overpayment” standard in the current regulations for Medicare to align with the False Claims Act’s (“FCA”) “knowingly” standard. The proposed rule plans to remove “the exercise of reasonable diligence” language from the relevant regulations and replace that language with the “knowingly” standard from the FCA.

The regulations at issue — 42 C.F.R. § 401.305(a)(2); 42 C.F.R. § 422.326(c) and 42. C.F.R. § 423.360(c) — are supposed to implement, in part, Section 6402(a) of the Affordable Care Act (“ACA”), codified at 42 U.S.C. § 1320a-7k. This section of the ACA explains that if an overpayment under the various Medicare programs has been identified and has not been reported and returned in a set amount of time, then an enforcement action can be brought under the FCA. This section also states that the terms “knowing” and “knowingly” have the same meaning as under the FCA.

The FCA defines these terms to mean that a person has actual knowledge of information, acts in deliberate ignorance of the truth or falsity of information, or acts in reckless disregard of the truth or falsity of information; the terms do not require a specific intent to defraud. 31 U.S.C. § 3729(b)(1).…

Continue Reading CMS Proposes Amending Identified Overpayment Rules to Align with FCA Knowledge Standard

The U.S. Court of Appeals for the Eighth Circuit recently weighed in on the causation standard for False Claims Act (“FCA”) cases premised on Anti-Kickback Statute (“AKS”) violations. United States ex rel. Cairns v. D.S. Med. LLC, 42 F.4th 828 (8th Cir. 2022). The panel adopted a strict interpretation, finding that the government or whistleblowers must show a “but-for” causal relationship between kickbacks and claims for payment to establish the requisite link in the FCA liability chain, creating a circuit split on an issue that courts have struggled with for years.

The decision is notable for FCA defendants as it offers support for a defense they have long asserted, and that courts have been reluctant to condone, including an opinion from the U.S. Court of Appeals for the Third Circuit that refused to require a direct causal link between an AKS violation and a false claim.…

Continue Reading Eighth Circuit Finds “But-For” Causation Standard for AKS-Premised FCA Cases

The Department of Health and Human Services Office of Inspector General (HHS-OIG) recently published a Special Fraud Alert warning health care providers (e.g., prescribers, pharmacies, durable medical equipment providers, clinical laboratories) to steer clear of certain telemedicine arrangements and outlining seven “suspect” characteristics that may present heightened risk of fraud and abuse.

The alert coincides with a third round of criminal “telemedicine takedowns” announced by the Department of Justice (DOJ)  in the last several years, reflecting DOJ’s continued focus on identifying and dismantling fraudulent arrangements that exploit telemedicine technologies and related regulatory flexibilities in the wake of the COVID-19 pandemic.

Telemedicine technologies have created a multitude of opportunities for growth and innovation within the health care industry and are well-positioned to become an ongoing cornerstone of our health care delivery system. However, given the increased level of regulatory scrutiny of telemedicine arrangements, providers and telehealth technology companies, including drug and device manufacturers that offer telemedicine technologies (e.g., platforms, mobile applications) for prescribers and patients that facilitate virtual care,  should carefully plan and closely evaluate existing arrangements to ensure compliance with applicable state and federal laws and avoid implication amongst the recent uptick in enforcement.…

Continue Reading Telehealth Under Scrutiny: OIG Special Fraud Alert and DOJ Enforcement Highlights Suspect Characteristics Associated with High-Risk Telemedicine Arrangements

Supreme Court review of Rule 9(b)’s application in False Claims Act cases may finally be coming whether the Executive Branch likes it or not.

In January, the Supreme Court, which is considering a certiorari petition in Johnson v. Bethany Hospice and Palliative Care, LLC, asked the Solicitor General to weigh in on whether the Court should accept the case. The case presents the question of what Rule 9(b) requires in cases arising under the False Claims Act, which is an important threshold question in many False Claims Act cases resulting in significant motions practice.

As past Solicitors General have done before her, the current Solicitor General’s brief filed late on May 24 argued that the Supreme Court should not grant plenary review because there really isn’t a meaningful circuit split on the issue. The brief also argues that the case is not a good vehicle for Supreme Court review because the district court dismissed the relator’s case on the alternative ground that the relator had not adequately pleaded violations of the federal anti-kickback statute, an issue the U.S. Court of Appeals for the Eleventh Circuit did not reach on appeal.…

Continue Reading SCOTUS Review of Rule 9(b) in False Claims Act cases may be on the way

CMS recently issued updated Open Payments Frequently Asked Questions (FAQs). The FAQs are revised periodically to reflect the most up to date program requirements. This latest revision both added and removed FAQs, and also included some general edits.

The following FAQs were added: #2014, #2015, #2016, #2017, #2018, #2019, #2020, #2021 and #2022. Each new FAQ is reproduced in full below. They provide additional guidance regarding topics such as archived reporting years, salaries paid to covered recipients, reporting of device identifiers, valuing long-term device loans, debt forgiveness, and the definition of Nurse Practitioner.

Additionally, the following FAQs have been removed from the FAQ document “due to being no longer applicable, redundant with another FAQ, or of low utility” (according to CMS):…
Continue Reading CMS Issues Updated Open Payments FAQs

The Department of Health and Human Services’ Office of Inspector General (“OIG”) recently issued a favorable advisory opinion to a digital health company that offers direct monetary incentives to patients as part of a technology-enabled contingency management program for patients with substance use disorders.

Contingency management, also known as motivational incentives, is a treatment approach that utilizes tangible rewards to reinforce positive behaviors (e.g., abstinence from opioids) and to motivate and sustain behavioral health efforts (e.g., treatment adherence) in patients who suffer from substance use disorders. Because these monetary incentives are an integral part of the protocol-driven and evidenced-based program, the OIG concluded that it would not impose sanctions under the federal Anti-Kickback Statute (“AKS”) or the Beneficiary Inducements Civil Monetary Penalty (“CMP”) provision, notwithstanding the involvement of federal health care program beneficiaries, providers/suppliers, and reimbursable services.

Nevertheless, the mitigating facts that motivated the OIG’s favorable treatment of the program here—namely, the clinical nature and independence of the program—could likely trigger compliance with other federal and state regulatory frameworks.
Continue Reading OIG blesses digital health substance use disorder treatment program paid for by providers and suppliers

On March 18, 2022, the Advanced Medical Technology Association (AdvaMed) – the world’s largest trade organization representing medical technology manufacturers – announced revisions to its Code of Ethics on Interactions with Health Care Professionals (AdvaMed Code). The effective date of the revised AdvaMed Code is June 1, 2022.

The AdvaMed Code was updated to address…

In its February 14, 2022 advisory opinion the Department of Health and Human Services Office of Inspector General (OIG) allowed a Home Health Agency (HHA), that predominantly serves Medicaid eligible children, to pay the nurse certification program tuition costs for new employees seeking to work as certified nurse aides (CNAs). According to OIG, the tuition payments are permissible under the bona fide employee safe harbor.

The Anti-Kickback statute prohibits a person from knowingly and willfully offering, soliciting or receiving any remuneration, directly or indirectly, overtly or covertly, in cash or in kind, in exchange for or to induce the referral of any item or services covered by a federal health care program. However, the statute includes exemptions for certain situations, one of which involves certain payments to bona fide employees.

In this case, the OIG stated that it would not seek enforcement under the federal Anti-Kickback Statute or the Beneficiary Inducements Civil Monetary Penalty Statute as the arrangement to pay the tuition costs would not be deemed prohibited remuneration under either law. However, the advisory opinion was warranted as the tuition program had the added wrinkle of potentially being a benefit to the relatives of medically fragile children using the HHA’s services and charging those services to Medicaid.
Continue Reading OIG permits home health agency to pay nurse aide certification tuition costs

On February 23, 2022, the Federal Bar Association (FBA) kicked off its fifth annual Qui Tam Conference to highlight key areas for False Claims Act (FCA) enforcement in the coming year. The conference opened with a keynote address by Gregory E. Demske, Chief Counsel to the Inspector General, Department of Health and Human Services (HHS), Office of Inspector General (OIG). Then, a series of panels analyzed the FCA-related developments from the prior year, recent efforts by the U.S. Department of Justice (DOJ) to combat cybersecurity fraud, and some of the schemes promoting alleged telehealth fraud during the ongoing COVID-19 public health emergency. Based on the comments of government speakers, all speaking in their individual capacities, below are key takeaways of what we expect the government to prioritize in 2022:

Pandemic-related fraud and telehealth fraud are key targets

Reinforcing the DOJ’s current enforcement priorities, we expect the DOJ to continue to focus its resources and enforcement activity on where it stands to recover the most dollars swiftly: pandemic-related fraud (e.g., misuse of CARES Act relief funds) and telehealth fraud.

During his keynote address, Demske similarly acknowledged these two areas of focus and added Medicare Advantage, the opioid epidemic, and nursing homes as ongoing priorities for OIG enforcement. Notably, Demske cited OIG’s Data Analytics Group as a robust resource for the agency to identify anomalies in large data sets (e.g., outlier distributions of CARES Act provider relief funds) that may lead to targeted enforcement.

For more information about the fraud and abuse implications of CARES Act provider relief funds, as well as practical tips for navigating the evolving CARES Act regulatory environment, please check this Reed Smith client alert.
Continue Reading FBA’s 2022 Qui Tam Conference Puts Annual Spotlight on FCA Enforcement Trends and Developments

The Department of Health and Human Services’ Office of Inspector General (OIG) will be lifting its long-standing refusal to accept requests for advisory opinions if the request describes a course of action that is “the same or substantially the same” as a course of action that is either under investigation by OIG, or is the subject of a proceeding involving a governmental agency. As of February 10, 2022, a new final rule issued by the OIG will do away with that restriction and allow entities to request an advisory opinion, even if the requested course of action is the same or substantially the same as one under investigation or is the subject of a proceeding involving a governmental agency. Previously, the OIG’s policy deliberately left unsettled many fraud-and-abuse issues implicated by pending investigations or litigation.

As the final rule points out, however, seeking clarity during a pending investigation or litigation will carry risk: the mere fact that a course of action is the subject of a qui tam case or under investigation “will weigh against the issuance of a favorable advisory opinion because such circumstances generally indicate that the arrangement does not present a sufficiently low risk of fraud and abuse.”

This warning seems to assume that all investigations and litigation have equal merit, which is certainly not the case with matters initiated by self-appointed whistle-blowers under the False Claims Act, who often bring cases with very little merit. Nevertheless, the new rule provides flexibility, and provides opportunities for the OIG to provide guidance to health care companies seeking to develop business opportunities that, for example, a long-pending and/or declined qui tam case may have stymied.…

Continue Reading Pending investigations/cases no longer prevent OIG advisory opinions

In November 2020, four months after the Trump Administration issued a series of Executive Orders reiterating its policy goals on reducing the costs to consumers for prescription drugs and directing the Department of Health and Human Services, Office of Inspector General (“HHS-OIG”) to implement those policy objectives, HHS-OIG issued a Final Rule to amend certain provisions in the safe harbor regulations under the Federal Anti-Kickback Statute (“AKS”). The Final Rule included three key provisions:

  1. Elimination of discount safe harbor protection for manufacturer rebates paid directly, or indirectly through a pharmacy benefit manager (“PBM”) to Medicare Part D or Medicare Advantage plans (the “Rebate Rule”);
  2. Creation of a new safe harbor to protect point-of-sale (“POS”) price reductions paid by manufacturers to Medicare Part D plans, Medicare Advantage plans, and Medicaid managed care organizations (“MCOs”); and
  3. Creation of a new safe harbor to protect fair-market-value (FMV) service fees paid to PBMs by manufacturers.

The Final Rule imposed a January 1, 2022, effective date for the Rebate Rule. However, in January 2021, two months after issuance of the Final Rule and in connection to a lawsuit brought by the Pharmaceutical Care Management Association challenging the Rebate Rule, the Biden Administration agreed to delay the Rebate Rule’s effective date to January 1, 2023, as reflected in an Order by the United States District Court for the District of Columbia.

In the intervening time though, Congress passed the Infrastructure Investment and Jobs Act (the “Infrastructure Act”). That law, signed by President Biden on November 15, 2021, further delayed implementation of the Rebate Rule to January 2026. Thus the rule, which many thought would be eliminated as part of paying for the cost of the infrastructure bill, was still alive, if only delayed until the middle of the next presidential term.…

Continue Reading Future of discount safe harbor for prescription drugs remains uncertain

In recent years, the U.S. Department of Justice (“DOJ”) has increasingly leveraged data analytics to combat fraud. Principal Deputy Chief of DOJ’s Fraud Section, Joe Beemsterboer, described the department’s data-mining capabilities as the “foundation of how [DOJ] investigate[s] and analyze[s] cases,” and explained that digital forensics equips the department with “powerful” tools for identifying “trends,”…

It is no secret that the coronavirus pandemic has driven our daily lives digital—work, education, social gatherings, and, of course, health care. Congress and CMS responded to the public health emergency by waiving limitations on reimbursement for telehealth services rendered to Medicare patients. These waivers introduced new flexibility and vastly expanded Medicare patients’ access to…

Following the distribution of billions of relief aid to healthcare providers and amidst the guidance issued around reopening of nursing homes throughout the country, the Department of Health and Human Services (HHS) Office of Inspector General (OIG) unveiled a COVID-19 Response Strategic Plan on May 26, 2020 after updating its Workplan a few days earlier.…

The Trump Administration’s proposed fiscal year (FY) 2021 budget calls for significant cuts to federal health spending, including a 10% decrease in Department of Health and Human Services (HHS) discretionary spending in FY 2021 and a $1.6 trillion net reduction in health entitlements over the next decade.  House Budget Committee leaders have blasted the HHS provisions, and the package as a whole is unlikely to be advanced by Congress.  Nevertheless, the document reflects the Administration’s current Medicare and Medicaid priorities, some of which are administrative and could be advanced without Congress.  Furthermore, Medicare provider/supplier cost-saving recommendations could be incorporated into future budget agreements or potentially other entitlement reform efforts down the road.

Highlights of the Trump Administration’s major Medicare and Medicaid budget proposals are presented below.

Medicare Payment Policies

The Administration estimates that its proposed Medicare legislative package would result in $756 billion in Medicare Trust Fund savings over 10 years (net impact after offsets of $450 billion/10 years).  Many of the legislative recommendations have been made in previous budget proposals.  Budget provisions that would result in significant net Medicare savings include the following (net savings figures are over the 10-year period of FYs 2021-2030):  

  • Elimination of the Medicare Advantage (MA) benchmark cap and quality “double bonus” for plans in eligible counties [$1.2 billion].
  • Reform of hospital uncompensated care payments, including basing payments on a hospital’s share of charity care and non-Medicare bad debt [$87.9 billion].
  • Establishment of site neutral payments between on-campus hospital outpatient departments and physician offices for certain services (e.g., clinic visits) [$2 billion] and payment for all off-campus hospital outpatient departments under the physician fee schedule [$47.2 billion].
  • Adoption of a unified post-acute care system for skilled nursing facilities (SNFs), home health agencies, inpatient rehabilitation facilities, and long-term care hospitals (LTCHs) beginning in FY 2026, with reduced annual Medicare payment updates from FYs 2021-2025 [$101.5 billion].
  • Elimination of Medicare reimbursement for disproportionate share hospital (DSH) bad debt, with an exemption for rural hospitals [$33.6 billion].
  • Reduced Medicare payment for hospice services under the SNF routine home care level of care. [$4.5 billion].
  • An increase in the intensive care unit minimum stay threshold from three days to eight days to qualify for LTCH prospective payment system payment [$9.4 billion].
  • Expansion of the durable medical equipment (DME), prosthetics, orthotics, and supplies competitive bidding program to all geographic areas and to inhalation drugs, payment of contract suppliers based on their own bids, and elimination of the surety bid bond requirement [$7.73 billion Medicare savings, $435 million in Medicaid savings]. Separate from the bidding program, the Centers for Medicare & Medicaid Services (CMS) would be authorized to update DME rates based on retail prices through rulemaking, without using the inherent reasonableness process [$1.6 billion Medicare savings, $85 million in Medicaid savings].

Other legislative proposals are intended to promote value-based care; in some cases, these proposals also would result in cost savings.  For instance, the budget proposes the following:

  • Basing Medicare beneficiary accountable care organization assignment on a broader set of non-physician primary care providers [$80 million].
  • Consolidation of the four Medicare inpatient hospital quality programs into a single hospital quality payment program [budget neutral].
  • Implementation of hospital outpatient department and ambulatory surgical center (ASC) value-based programs, with 2% of payments linked to quality/outcomes performance. Payment would be risk adjusted based on patient diagnosis severity to promote site neutrality [budget neutral].
  • Creation of a risk-adjusted monthly Medicare Priority Care payment for providers eligible to bill for evaluation and management (E/M) services who provide ongoing primary care to beneficiaries. The payment would be funded by a 5% annual cut in valuations of non-E/M services [budget neutral].

Medicare Transparency, Quality, Coverage, and Benefits

The budget includes a series of proposals intended to increase access to price and quality information and/or clarify Medicare coverage and payment processes.  For instance, the budget would:…
Continue Reading Medicare/Medicaid Policy Provisions in Trump Administration’s FY 2021 Budget Proposal

The Departments of Health and Human Services (HHS) has just published its “annual” inflation update to civil monetary penalty amounts (CMP) in its regulations – even though those penalties were just increased for inflation in November 2019.  Under the latest update, CMPs are increased by a 1.01764 “multiplier” (that is, a 1.764% increase), applicable to …