Last week’s CBI Medical Device and Diagnostic Compliance Congress featured an “enforcement panel” that discussed recent trends in healthcare fraud enforcement. Three U.S. Attorneys from the Department of Justice—Benjamin Wagner of the Eastern District of California, Jacob Elberg of New Jersey, and Elizabeth Tonkin of the Eastern District of Tennessee—offered insight into their enforcement process and emerging areas of focus. Seth Lundy of King and Spalding LLP moderated the panel.
Increased Focus on Med Device
Perhaps intending to scare the medical device compliance audience (though echoing a fairly established trend), the U.S. Attorney panel stated that they are placing an increased emphasis on medical device manufacturer misconduct.
The panel mentioned a few reasons for the uptick.
According to Benjamin Wagner, there are a number of areas in the country where healthcare fraud has not been a priority until now. His department in Sacramento, for instance, is just getting through its slew of mortgage fraud cases from several years ago. As these cases are trailing off, Wagner notes, a lot of white collar prosecutors are looking for new targets. Furthermore, better coordination between the FBI, HHS, and other agencies have allowed for more streamlined enforcement. As an example, Wagner noted that the FBI has been looking into more sophisticated crime networks involving durable medical equipment false billing cases. (Just look here, here, and here for recent evidence of DOJ activity in the durable medical equipment space).
The panel agreed that prosecution of small to medium sized companies is due not only to increased resources going towards healthcare fraud, but also to how efficiently U.S. attorneys can use these resources. Prosecutors may just be more experienced now than in years past. Furthermore, Elizabeth Tonkin noted that as qui tam cases have been successfully settled, often for a lot of money, this has served to attract more whistleblower complaints to her office. Prosecutors then have an obligation to investigate every qui tam that comes through the door. Tonkin stated that while many of these allegations are very poor, others have well-documented accusations suggesting that many qui tam relators have “done their homework.”
Jacob Elberg stated that based on the cases his office and other prosecutors have seen, they “continue to have the feeling that there is more misconduct that isn't being addressed.” The medical device industry breeds a “whole range of misconduct,” he noted, including improper payments, kickbacks, and off-label activity. Elberg believes that prosecuting such behavior is important for the companies that are doing the right thing. “It’s only fair” to look at smaller companies who may be profiting by skirting some compliance rules that bigger companies have been bound to for quite some time, he notes. Sales reps, for example, shouldn't have to lose out on business to other reps who rely on kickbacks to sell their devices. He wants companies that follow the rules to know that DOJ is always interested in tips about such misconduct.
An audience member asked why the Department of Justice only seems to go after companies with deep pockets, rather than the physicians who participate in, and may potentially instigate a kickback relationship. Elberg took issue with that. He stated that his office has convicted more than 60 doctors over the last few years, many related to kickbacks in the laboratory referral setting. In fact, Elberg turned the tables a bit on companies, noting that if a doctor is refusing to do business without a kickback payment side deal, companies should proactively bring it to the attention of the DOJ.
Some physicians may be particularly insistent on bribes, noted audience members. The U.S. attorneys agreed that such physicians, as well as those that reprocess single use-devices without following FDA protocol, or that import cheaper, non-FDA approved devices, are hurting med device companies. DOJ would love that information too, the panel stated.
The panel agreed that often it takes longer to prosecute individual physicians, especially under a criminal statute. Putting someone in jail because of “medically unnecessary” procedures presents tough litigation challenges especially since these cases typically go to trial. However, Tonkin noted that HHS-OIG has the ability to assess penalties directly against physicians who are accused of kickbacks, without the physician being prosecuted separately.
Must Companies Proactively Search Out “Excessive” Use of Devices
One of the more interesting discussions from the panel focused on the Open Payments and Medicare payments release—two yearly data streams that contain vast amounts of information on provider behavior. The U.S. Attorneys believe these new tools are a good way to track outliers in prescribing behavior. Wagner stated that the DOJ’s ability to find a “needle in the haystack” is much better than it used to be. Using the data allows them to track situations where doctors are implanting medical devices of a certain type where the area’s demographics don’t seem to support that level of use.
One question device manufacturers had is whether the government would trace a doctor’s abnormal device utilization behavior back to, for example, the stent manufacturer. Would DOJ hold the medical device manufacturer liable for having so many more sales to that doctor than to other doctors?
The panel stated that more than likely the government would be going after the doctor in that situation, but only up to a certain point. Prosecutors’ chief concern is unnecessary invasive medical procedures—these both defraud the government, but more importantly put patients at risk. These cases are prosecutors’ “bread and butter,” noted Wagner. “If we find examples where we can show that people are going under the knife for reasons that are not medical justified, we are going to track that back as far as we can.”
Elberg stated that companies should already have processes in place to monitor customers for doctors who purchase and/or utilize a high number of devices—both from a business perspective and a risk-management perspective regarding off-label use. Elberg added that the government expects companies to then ask the question of whether this physician’s behavior is the result of improper sales practices, for example.
For a company to avoid liability, “it’s not going to be sufficient for [them] to say, ‘the doctor was asking for [a lot], and we’re a for profit company,’” Wagner advised.
It will be interesting to see what enforcement trends come out of 2015, especially with the second round of Medicare and Open Payments data due out in the coming months. The panel believes that despite the changes at the top of DOJ with Eric Holder stepping down, healthcare fraud will continue to be a target. Protecting the Medicare and Medicaid trust fund is a priority no matter the administration, noted the prosecutors.