Life Science Compliance Update

February 03, 2017

Walgreens to Pay $50M to Settle Anti-Kickback Suit

Walgreens-store-image

Walgreen Co. (“Walgreens”) has agreed to pay $50 million to settle allegations that it gave kickbacks to government health care beneficiaries who it enrolled in its Prescription Savings Club (PCS) discount and incentives program. The government specifically alleges that Walgreens violated the Anti-Kickback Statute (AKS) and False Claims Act (FCA) by providing government beneficiaries with discounts and other monetary incentives under the PSC program, to induce them to patronize Walgreens’ pharmacies for all of their prescription drug needs. The government also alleged that Walgreens understood that permitting government beneficiaries to participate in the PSC program was a violation of the AKS, but that it nevertheless marketed the program to government beneficiaries and paid its employees bonuses for each customer they enrolled in the program, without verifying whether the customers were government beneficiaries.

Allegations Found in the Complaint

As alleged in the Complaint and set forth in the parties’ Settlement Agreement, both of which have been filed in Manhattan federal court:

Walgreens launched the PSC program in 2007. From January 2007 through December 2010, the PSC program provided members with discounts on thousands of brand-name and generic drugs, as well as a 10 percent rebate on all Walgreens’ branded products, including household products, baby-care products, most grocery items, and non-prescription medications. Walgreens intended these lower drug prices and other monetary benefits to be an inducement to its existing and potential customers to cause them to patronize Walgreens for all of their pharmacy needs. Walgreens hoped that by offering these significant benefits to its customers, it would prevent them from taking their pharmacy business to Walgreens’ competitors.

Walgreens recognized that allowing government beneficiaries to participate in the PSC program would violate the AKS. Accordingly, Walgreens consistently maintained in its published materials regarding the PSC program that government beneficiaries were ineligible to participate in the program.

Notwithstanding Walgreens’ understanding that allowing government beneficiaries to participate in the PSC program would violate the AKS, Walgreens consistently marketed the PSC program to government beneficiaries. Walgreens also incentivized its employees to enroll customers in the PSC program, regardless of whether they were government beneficiaries. For example, from May 2008 through August 2010, Walgreens paid employees anywhere from $1 to $5 for each customer they enrolled in the PSC program. Walgreens never checked whether the customers who had been enrolled were government beneficiaries.

As a result, from January 2007 through December 2010, Walgreens enrolled hundreds of thousands of government beneficiaries in the PSC program. These government beneficiaries included beneficiaries of the Medicare, Medicaid and TRICARE programs. Thereafter, from January 2011 through December 2015, while Walgreens’ internal company policy continued to preclude the enrollment of government beneficiaries in the PSC program, Walgreens continued to enroll such beneficiaries in the program.

Walgreens Accepts Responsibility

Atypical of most settlement agreements we see, Walgreens admitted, acknowledged, and accepted responsibility for a handful of actions alleged by the government, including the following:

  • During the period January 1, 2007 through December 31, 2010, Walgreens’ published materials regarding the PSC program stated that persons receiving benefits from the Medicare and Medicaid programs were not eligible to participate in the PSC program.
  • In October 2007, Walgreens identified approximately 13,000 PSC program members who it had determined were beneficiaries of the Medicare and Medicaid programs, and it removed those individuals from the PSC program. In an internal news release informing its employees of this removal, Walgreens stated that “any customer who ha[d] any type of 3rd party coverage with a Medicare or Medicaid plan was removed from the [Prescription] Savings Club database,” and that “th[is] removal was necessary to comply with State/Federal regulations.”
  • Subsequent to October 2007 and continuing through December 31, 2010, internal Walgreens documents reflect that its stated policy to exclude Medicare and Medicaid beneficiaries from the PSC program was based on, among other things, the prohibition on offering inducements to beneficiaries of government healthcare programs reflected in the federal AKS and corresponding state anti-kickback laws.
  • Notwithstanding its stated policy to exclude Medicare and Medicaid beneficiaries from the PSC program, subsequent to October 2007 and continuing through December 31, 2010, Walgreens enrolled hundreds of thousands of Medicare and Medicaid beneficiaries in the PSC program.
  • Between November 2007 and December 31, 2010, Walgreens also enrolled more than 10,000 TRICARE beneficiaries in the PSC program.
  • Prior to December 31, 2010, pharmacists at Walgreens’ stores nationwide made tens of thousands of notations in Walgreens’ internal customer database reflecting that specific Medicare, Medicaid, and TRICARE beneficiaries had been enrolled in the PSC program and were using the PSC program to purchase some of their prescription drugs.
  • At various times between November 2007 and December 31, 2010, Walgreens paid its employees a bonus of between $1 and $5 for each customer they enrolled in the PSC program. When paying these bonuses, Walgreens did not verify that the customers its employees had enrolled in the PSC program were not government beneficiaries.
  • Prior to December 31, 2010, Walgreens did not have effective mechanisms in place to block government beneficiaries from enrolling in the PSC program or to monitor adequately whether government beneficiaries had been allowed to enroll in the PSC program, to ensure compliance with its stated policy to exclude such beneficiaries from the PSC program. As a result, hundreds of thousands of government beneficiaries were enrolled in the PSC program.
  • Subsequent to December 31, 2010, and continuing through December 31, 2015, Walgreens’ internal company policy continued to preclude the enrollment of government beneficiaries in the PSC program, and Walgreens continued to enroll such beneficiaries in the program.

Under the settlement agreement, Walgreens will pay roughly $46.21 million to the United States and an additional $3.79 million to resolve numerous state law civil fraud claims. The allegations were originally brought in a qui tam suit under the False Claims Act by Marc Baker, a former Florida Walgreens pharmacy manager. Baker will receive $9.7 million for his whistleblowing efforts.

February 01, 2017

Stark Law Regulatory Changes for 2017

Stark-law-anti-kickback-doctors

The Centers for Medicare and Medicaid Services (CMS finalized) the 2017 Medicare Physician Fee Schedule (PFS) rule. This rule, which took effect on January 1, 2017, updates payment policies and rates for services furnished under the PFS. A CMS fact sheet summarizing the major components of the rule is available here. The rule included several updates to and clarifications regarding the federal physician self-referral law (or “Stark Law”).

Changes in Regulation

As reported, CMS reissued its prohibition on certain unit-based rental arrangements with referring physicians, adopted updates to the list of CPT/HCPCS codes defining certain of the Stark Law’s designated health services, and implemented a minor technical change to its instructions for submitting a request for an Stark advisory opinion.

Absent an exception, the Stark Law prohibits a physician from referring patients for certain designated health services (“DHS”), for which payment may be made under Medicare, to an “entity” with which the physician (or an immediate family member) has a “financial relationship.” Likewise, the statute prohibits the DHS-furnishing entity from filing claims with Medicare for those referred services. The Stark regulations define financial relationship as either a direct or indirect ownership or compensation arrangement between the DHS entity and the referring physician.

In the rule, CMS included a lengthy discussion of “unit-based compensation” in arrangements for the rental of office space or equipment (so-called “per-click” arrangements).  This discussion stemmed from an opinion issued by the D.C. Circuit on June 12, 2015 in Council for Urological Interests v. Burwell.

In response to the D.C. Circuit’s ruling in Council for Urological Interests, CMS reissued its ban on per-click rental charges in both office space and equipment lease arrangements. However, CMS emphasizes that it “did not propose and [is] not finalizing an absolute prohibition on rental charges based on units of service furnished” and that “[i]n general, per-unit of service rental charges for the rental of office space or equipment are permissible.” As CMS had previously stated, the per-click ban applies only “to the extent that such charges reflect services provided to patients referred by the lessor to the lessee.”

The final rule argues that “the physician self-referral statute responds to the context of the times in which it was enacted . . . [and] incorporates sufficient flexibility to adapt to changing circumstances and developments in the health care industry.” CMS reiterated its primary concerns with permitting physician lessors to charge rent to lessees for each patient referred to the leasing entity – namely, overutilization of services, patient steering, reduction in the quality of care and patient outcomes, and increased costs to the Medicare program.

Conclusion
The ban on per-click rental charges in office space and equipment lease agreements has been re-finalized by CMS. Although CMS’s clarifications and purportedly new rationales for implementing this rule may again come under fire from the health care industry, as it stands, providers should remain wary of this prohibition and ensure that all lease agreements entered into with a referral source meet the applicable requirements for the Stark exceptions for office space or equipment leases.

November 22, 2016

Tenet Healthcare to Pay $514 Million to Settle Kickback Allegations

Imgres

The Department of Justice (DOJ) recently announced a settlement with Tenet Healthcare Corporation and several subsidiaries, resolving criminal charges and civil claims relating to a scheme to defraud the United States and to pay kickbacks in exchange for patient referrals.

Criminal Charges

Two of the subsidiaries, Atlanta Medical Center Inc. and North Fulton Medical Center Inc., agreed to plead guilty to conspiracy to defraud the United States and to violate the Anti-Kickback statute by paying health care kickbacks and bribes.

Atlanta Medical Center Inc. and North Fulton Medical Center Inc. were charged in a criminal information in federal court in Atlanta with conspiracy to defraud the United States by obstructing the lawful government functions of the Department of Health and Human Services (HHS) and to violate the AKS. The information alleges that the subsidiaries paid bribes and kickbacks to the owners and operators of prenatal care clinics serving primarily undocumented Hispanic women, in return for the referral of those patients for labor and delivery medical services at Tenet hospitals. These kickbacks and bribes allegedly helped Tenet obtain more than $145 million in Medicare and Medicaid funds based on the resulting patient referrals.

Some of the pregnant women were told at the prenatal clinics that Medicaid would cover the costs associated with their childbirth and the care of their newborn only if they delivered at one of the Tenet hospitals, and in other cases were told that they were required to deliver at one of the Tenet hospitals, leaving them with the false belief that they could not select a hospital of their choice. The information alleges that as a result of these false and misleading statements and representations, many expecting mothers were forced to travel long distances from their homes to deliver their babies, placing their health and safety, and that of their babies, at risk. 

According to Special Agent in Charge Jackson,

OIG continues to emphasize investigation of improper financial relationships between health care providers. Using their positions of trust, health providers – after receiving payments from Tenet – sent expectant women specifically to Tenet hospitals. Patients were often directed to Tenet facilities miles and miles from their homes and on their journeys passed other hospitals that could have provided needed care. These women were thereby placed at increased risk during one of the most vulnerable points in their lives. HHS-OIG will continue to protect patients by exposing such illegal arrangements.

In addition to pleading guilty to the allegations in the information filed, the subsidiaries will forfeit over $145 million to the United States – the amount paid to the subsidiaries by the Medicare and Georgia Medicaid programs for services provided to patients referred as part of the scheme.

Non-Prosecution Agreement

Tenet and the subsidiaries entered into a non-prosecution agreement (NPA) with the Criminal Division’s Fraud Section and the United States Attorney’s Office of the Northern District of Georgia as to the charges in the criminal information. Under the NPA, Tenet and its subsidiaries will avoid prosecution if they, among other requirements, cooperate with the government’s ongoing investigation and work to enhance their compliance and ethics program, as well as internal controls. Tenet also agreed to retain an independent compliance monitor to address and reduce the risk of any additional violations of the AKS by any entity owned in whole, or in part, by Tenet. The NPA is for a term of three years, but may be extended for up to one year.

Civil Settlement

In the civil settlement, Tenet agrees to pay $368 million to the federal government, the state of Georgia, and the state of South Carolina to resolve claims asserted in United States ex rel. Williams v. Health Mgmt. Assocs., Tenet Healthcare, et al., a lawsuit filed under the federal and Georgia False Claims Acts by Ralph D. Williams, a whistleblower. The federal share of the settlement is $244,227,535.30, Georgia will receive $122,880,339.70, and South Carolina will recover $892,125. Mr. Williams will receive roughly $84.43 million as his whistleblower share.

According to Tenet CEO Trevor Fetter,

The conduct in this matter was unacceptable and failed to live up to our high expectations for integrity. The relationships between the four hospitals and Clinica de la Mama violated the explicit requirements of our own compliance program and were inconsistent with the strong culture of compliance we’ve worked hard to establish at Tenet. We take seriously our responsibility to operate our business in accordance with the highest ethical standards, every day and in every interaction.

While the DOJ and the parties have reached agreements, the agreements remain subject to court acceptance. Also important to note, Tenet previously sold both Georgia hospitals that were at the heart of the investigation and one of the South Carolina hospitals.

The breakdown in Tenet’s compliance program reiterates how critical it is to develop clear, comprehensive, and understandable protocols regarding referral and marketing relationships in the health care industry. It also underscores the importance of building a culture of transparency, including with legal counsel.

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