The Supreme Court recently allowed liability through the implied certification theory of the False Claims Act (FCA), which was raised and upheld in Universal Health Services, Inc. v. United States ex rel. Escobar. The decision provided for a new applicable standard and resolved the split among circuit courts on whether to recognize the theory.

In Escobar, a teenaged patient was receiving health services from a mental health facility. The patient had an adverse reaction to medication prescribed and died of a seizure. The parents later discovered United Health Services sought reimbursement from MassHealth (the Massachusetts State Medicaid Program) for mental health services provided at the facility by individuals who did not meet the standards for licensure and other requirements. The parents then filed a qui tam suit relying on the implied certification theory of liability. The District Court ruled against the parents finding the claims for reimbursement were not expressly false because the facility made no express statement regarding the service providers. United States ex. rel. Escobar v. Universal Health Services, 780 F.3d 504 (1st Cir. 2015). On appeal, the First Circuit rejected the bright line approach and determined that compliance with licensure and other MassHealth regulatory requirements were conditions of payment sufficient to support an FCA suit. United States ex. rel. Escobar v. Universal Health Services., 780 F.3d 504 (1st Cir. 2015)

The Supreme Court held that implied false certification is a proper basis for liability under the False Claims Act where (1) “the claim does not merely request payment, but also makes specific representations about the goods or services provided”, and (2) “the defendant’s failure to disclose noncompliance with material statutory, regulatory, or contractual requirements makes those representations misleading half-truths.” The Court focused on defining the FCA’s materiality standard as whether the government’s knowledge of the noncompliance “would have” affected their payment decision rather than “could have”. The Court further explained that whether an obligation was a condition of payment relates to, but is not dispositive of, materiality.

Now, after Escobar, FCA plaintiffs must overcome a more demanding materiality standard when relying on implied false certification to establish False Claims Act liability.

Special thanks to Law Clerk Joanna Lima for her assistance in preparing this blog post.

Consumers often seek online reviews of a business on platforms such as Yelp, CitySearch, Yahoo and Google Plus Pages before purchasing products or services. This includes patients seeking online reviews of a physician or other licensed professional before seeking treatment. Unfortunately, a practice known as “Astroturfing” has developed where businesses attempt to create an impression of widespread support for their services or products, where little such support exists. This practice is now occurring in the health care industry.

On December 2, 2016, New York Attorney General Eric T. Schneiderman announced a $100,000 settlement with the urgent care medical service provider MedRite, LLC, d/b/a Medrite Urgent Care (“Medrite”). According to the announcement, Medrite paid thousands of dollars to internet advertising companies and freelance writers for positive reviews on consumer opinion websites. However, Medrite never required that reviewers visit a Medrite facility or experience Medrite’s services, and Medrite never disclosed that the reviewers were paid for the review.

The announcement cites New York Executive Law §63 (12) and the General Business Law §349 and 350 which prohibit misrepresentation and deceptive acts or practices in the conduct of any business. The announcement further cites the FTC “Guidelines on the use of endorsements and testimonials in advertising” (16 CFR Part 255) which state that it is a deceptive practice to solicit endorsement support for a product or service without disclosing material connections between the endorser and the advertiser sponsor. Medrite never disclosed that the reviewers were paid by the review. Under the settlement, Medrite is prohibited from falsely saying that someone promoting its services is an independent party and it cannot pay an endorser unless the payment is disclosed.

Picture1Catholic Health Care Services of the Archdiocese of Philadelphia (CHCS) is the first business associate to be held directly liable for violations under the HIPAA rules. CHCS provided management and information technology services to six nursing homes. According to the OCR Resolution Agreement, OCR received separate notifications from each of the six nursing homes regarding a breach of unsecured electronic protected health information (ePHI) by CHCS resulting from the theft of a CHCS mobile device. The mobile device containing ePHI of 412 nursing home residents was neither encrypted nor password-protected. The settlement includes a monetary payment of $650,000 and a two-year corrective action plan.

OCR’s investigation concluded that:

  1. CHCS failed to conduct an accurate and thorough assessment of the potential risks and vulnerabilities to the confidentiality, integrity, and availability of ePHI held by CHCS; and
  2. CHCS failed to implement appropriate security measures sufficient to reduce the risks and vulnerabilities to a reasonable and appropriate level to comply with the HIPAA Security Rule.

It is important for Business Associates and subcontractors of Business Associates to understand that since enactment of the Omnibus Rule in 2013, Business Associates and their subcontractors can be held directly liable for HIPAA violations, including the failure to conduct appropriate risk assessments and the failure to adopt adequate written policies and procedures to reduce the risk of violations.

The Department of Health and Human Services, Office for Civil Rights (“OCR”), enforces the Health Insurance Portability and Accountability Act of 1996 (“HIPAA”). This includes the requirement that Covered Entities (health care providers and health plans) have Business Associate Agreements with their “Business Associates.”

“Business Associates” are persons or entities who “create, receive, maintain or transmit Protected Health Information (“PHI”) in performing services on behalf of a Covered Entity. Furthermore, a subcontractor of a Business Associate that creates, receives, maintains or transmits PHI on behalf of a Business Associate is also a “Business Associate.”

Both Covered Entities and Business Associates are directly liable for failing to have a compliant Business Associate Agreement in place. In addition, Business Associates must have Business Associate Agreements with their subcontractors who create, receive, maintain or transmit PHI on behalf of a Business Associate.

Recent cases of OCR enforcement for failure to have a required Business Associate Agreement include:

  • North Memorial Health Care of Minnesota agreed to pay $1.55 million to settle OCR charges for failing to have a Business Associate Agreement in place when a business associate’s laptop containing thousands of individuals’ PHI was lost.
  • Raleigh Orthopedic Clinic agreed to pay $750,000 and to enter into a Corrective Action Plan in settlement of OCR charges that it failed to have a Business Associate Agreement in place with its Business Associate engaged to transfer x-rays to electronic media.
  • Triple-S Management Corporation agreed to pay $3.5 million to settle OCR charges of multiple violations, including “impermissible disclosure of its beneficiaries’ PHI to an outside vendor without having a required Business Associate Agreement in place.”

To avoid multi-million dollar settlements, Covered Entities must evaluate their relationships with third parties, and Business Associates must evaluate their relationships with subcontractors, to ensure required Business Associate Agreements are in place. Covered Entities and Business Associates should consider adopting written policies and procedures regarding their Business Associates and subcontractors to demonstrate their efforts at compliance.

 

*My thanks to Farrell Fritz summer associate Joanna Lima for her assistance with this blog posting.

The Supreme Court held last week that in a federal health care fraud prosecution, the Sixth Amendment prevents the government from obtaining a pretrial freeze of assets that were untainted by the alleged crime and that defendant sought to use to pay her lawyer.

In Luis v. United States, the government alleged that the defendant had been engaged in paying kickbacks and conspiring to commit health care violations, and had fraudulently obtained close to $45 million.  The government sought a pretrial order restraining $2 million under 18 U.S.C. § 1345, which allows a restraint on property obtained as a result of health care fraud or “property of equivalent value.”  Here, however, the property the government sought to restrain was not connected with the alleged crime, and defendant sought to use those funds to hire counsel to defend her in the criminal case.

The Supreme Court held that the pretrial restraint of legitimate, untainted assets needed to retain counsel of choice violates the Sixth Amendment. Justice Breyer’s plurality opinion first emphasized that the Sixth Amendment right to counsel is “fundamental” and “guarantees a defendant the right to be represented by an otherwise qualified attorney whom that defendant can afford to hire.” The government argued that the important interests of keeping assets available for statutory penalties and compensation of victims justified the restraint.

Justice Breyer found controlling the fact that the funds at issue were untainted by the alleged crimes, so they belonged to the criminal defendant “pure and simple.” In contrast, tainted funds—assets connected to a crime—may be subject to pretrial restraint.  The Court, for example, has held that tainted funds subject to forfeiture may be restrained pretrial even if the defendant seeks to use those funds to pay a lawyer. Caplin & Drysdale v. United States, 491 U.S. 617 (1989); United States v. Monsanto, 491 U.S. 600 (1989).  A significant factor in the forfeiture cases was that title to forfeited property passes to the government at the time of the crime.  The government, however, had no present interest in the defendant’s untainted funds in the case before the Court.

While in some circumstances a party without a present interest may restrain property, here the criminal defendant sought to use the funds to hire counsel, and the Sixth Amendment right to counsel does not permit such a restraint.  Justice Breyer noted that accepting the government’s position could erode the right to counsel, as Congress may provide more statutory provisions allowing for restraint of untainted assets equivalent in value to the criminal proceeds.

The decision did not break along usual lines for the Court. The plurality opinion authored by Justice Breyer was joined by Chief Justice Roberts and Justices Ginsberg and Sotomayor.  Justice Thomas concurred in the judgment, writing that he would not engage in any balancing and would hold strictly that the Sixth Amendment does not allow a pretrial asset freeze infringing the right to counsel.  Justices Kennedy, Alito and Kagan dissented, asserting on various grounds that where the government has established probable cause to believe that it will eventually recover all of the defendant’s assets, she has no right to use them pretrial to pay for a lawyer.

In the end, the decision draws a clear Constitutional line between: (1) tainted funds, which may be subject to pretrial restraint, and (2) innocent or untainted funds needed to pay for counsel, which may not.

imagesPA8ET6EQIn our previous post [found here], we explained that, under the Privacy Rule, HIPAA covered entities (health care providers and health plans) must provide individuals and their “personal representatives” with access to the individual’s protected health information. An individual’s personal representative is determined under State law. In this post, we will define who is a “personal representative” under New York law.

Section 18(2) of the New York Public Health Law (PHL) states that, upon written request, a health care provider shall provide an opportunity, within ten days, for a patient to inspect the patient’s information concerning or relating to the examination or treatment of the patient. Upon the written request of any qualified person, a health care provider shall furnish to the qualified person, within a reasonable time, a copy of any patient information requested which the authorized person may inspect. The law provides no specific time period by which copies of medical records must be provided. However, the New York State Department of Health considers 10 to 14 days to be a reasonable time in which a practitioner should respond to such a request.

A “qualified person” under PHL§ 18(1)(g) includes:

  1. the properly identified patient;
  2. a guardian for an incapacitated person appointed under article eighty-one of the mental hygiene law;
  3. a parent of an infant or a guardian of an infant appointed under article seventeen of the Surrogate’s Court Procedure Act or other legally appointed guardian of an infant who may request access to a clinical record;
  4. a distributee of any deceased subject for whom no personal representative, as defined in the Estates, Powers and Trusts Law, has been appointed; or
  5. an attorney representing a qualified person or the subject’s estate who holds a power of attorney from the qualified person or the subject’s estate explicitly authorizing the holder to execute a written request for patient information.

PHL§ 18(1)(g) states that a qualified person shall be deemed a “personal representative of the individual” for purposes of HIPAA and its implementing regulations. Although not a “qualified person,” an agent appointed under a patient’s Health Care Proxy may also receive medical information and medical and clinical records necessary to make informed decisions regarding the patient’s health care (See PHL § 2982(3)). Presumably, the holder of a Health Care Proxy would also be a “personal representative of the individual” for purposes of HIPAA, although there is no explicit statement to that effect in PHL § 2982.

There are circumstances where a qualified person may be denied access to inspect or obtain a copy of the patient’s records. In the next post, we will explain those circumstances.

Picture1Under the Privacy Rule, HIPAA covered entities (health care providers and health plans) are required to provide individuals, upon request, with access to their protected health information (PHI) in one or more “designated record sets” maintained by or for the covered entity.

Covered entities are also required to protect the individual’s PHI from unauthorized disclosure. How must a covered entity verify the identity of the individual requesting the PHI so as to comply with the Privacy Rule without at the same time violating it?

Recent guidance from the Office of Civil Rights (OCR) is somewhat helpful.

According the guidance, the Privacy Rule requires a covered entity to take “reasonable steps” to verify the identity of an individual requesting access (citing 45 CFR 164.514(h)).  OCR confirms the Privacy Rule does not mandate the form of verification, but rather leaves the manner of verification to the professional judgment of the covered entity, provided the verification processes and measures “do not create barriers to or unreasonably delay the individual from obtaining access to her PHI”.  OCR explains that verification may be oral or in writing and states that the type of verification depends on how the individual is requesting or receiving access. For instance, a person may request access in person, by phone, by fax or e-mail, or through a web portal hosted by the covered entity.

OCR suggests that standard request forms ask for basic information about the individual to enable the covered entity to verify the individual is the subject of the information requested.  For those covered entities providing individuals with access to their PHI through web portals, the portals should be set up with appropriate authentication controls, as required by the HIPAA Security Rule (for instance password protection and required periodic password updates).

For individuals who may call requesting access to their PHI, good policy might require verification of the requestors date of birth, address, and perhaps the condition the individual was treated for.

Verifying the authority of an individual’s personal representative is determined under State law. In the next blog post, we will look at the law in New York on who is a qualified person for purposes of access to an individual’s medical records.

imagesNG7ROJJTCMS has published a Proposed Rule to clarify how physicians are to bill for services furnished “incident to” the professional services of a physician.

When a medical practice bills Medicare “incident to” for NPP services (i.e. “non-physician practitioners” such as nurses or physician assistants), the bill is rendered by the physician using the physician’s NPI number. Incident to services billed by the physician are paid at 100 percent of the fee schedule amount even though the physician did not perform the services. When the same services are billed by the NPP, the services are paid at 85 percent of the fee schedule amount. Specific requirements must be met for physicians to bill Medicare for incident to services. The services must be:

  • Furnished in a noninstitutional setting to noninstitutional patients.
  • An integral, though incidental, part of the service of a physician in the course of diagnosis or treatment of an injury or illness (understood to mean a physician has seen the patient first and initiated a plan of care being carried out by the NPP).
  • Furnished under direct supervision of a physician or other practitioner eligible to bill and directly receive Medicare payment (meaning the physician is present in the office suite).
  • Furnished by a physician, a practitioner with an incident to benefit, or auxiliary personnel.

NPP services may be billed under the physician’s NPI number when the services are part of the patient’s normal course of treatment, during which a physician performed an initial service and remains actively involved in the treatment.

The current regulations have caused confusion. The regulations state that the “physician supervising the auxiliary personnel need not be the same physician upon whose professional service the incident to service is based.” My interpretation of this is that a physician other than the physician that initiated the plan of care may supervise the NPP in the provision of services and such services will qualify as “incident to” if all other requirements are met. What remains unclear is which physician should bill for the incident to services, the supervising physician or the physician that initiated the plan of care. The proposed rule attempts to clarify that the billing physician must be the physician that supervised the services and not the physician that initially saw the patient and instituted the plan of care.

Care must be taken to ensure the supervising physician’s NPI number is used. This can be a challenge in busy medical offices where the physicians are regularly in the OR or conducting rounds.

Earlier this month, EDNY Judge Joanna Seybert examined the elements of Aggravated Identify Theft in an interesting context: a motion to unseal grand jury minutes in a health care fraud prosecution, United States v. Cwibeker

Defendants were charged with billing Medicare for fictitious or non-compensable treatments of residents of assisted living facilities.  Defendants would allegedly visit residents at the facilities, not provide Medicare-reimbursable services, and then generate a list of patients they allegedly visited.  Defendants would then use the list to submit fictitious claims to Medicare.  Significantly, defendants legally obtained the personal information from residents in the first instance; the alleged subsequent unlawful use of the information formed the basis of the criminal charges. 

Defendant Cwibeker argued that patients had consented to use of their personal information, and non-consent is an element of the Aggravated Identity Theft charge.  Thus, the grand jury minutes should be unsealed because this element was likely not disclosed.  

The Court first noted the long-established policy of maintaining secrecy of the grand jury.  The Court next looked to the Supreme Court’s three part analysis for allowing disclosure.  A party must show: (1) the material sought is needed to avoid a possible injustice; (2) the need for disclosure is greater than the need for continued secrecy; and (3) the request is structured to cover only the material needed. 

The Court denied the motion, holding that non-consent of the defendant’s purported patients for releasing the information is not an element of the Aggravated Identity Theft offense, which provides that whoever “knowingly transfers, possesses or uses, without lawful authority, a means of identification of another person,” is subject to an additional two years in prison. The Court found that consent of the victim has no bearing on “without lawful authority”  under the statute, as it is the improper use of the information that forms the offense.  The Court distinguished a Seventh Circuit case where the person whose identity was appropriated was a participant in the fraud.  In Cwibeker, the Medicare recipients whose identification was misappropriated were victims, with no knowledge of or participation in the alleged fraud. 

This case highlights again the need for vigilance concerning patients’ personal information.  Courts will hold persons who seek to profit from the improper use of such information accountable.  Providers must take all available steps to safeguard patient information, however, as those who allow such information to fall into the wrong hands will also be held accountable.

The Second Circuit yesterday rejected a Constitutional challenge to New York’s requirement that children be vaccinated to attend public school, and upheld a school’s decision to exclude from class, during a chicken pox outbreak, students with a religious exemption to the vaccination requirement. 

In Phillips v. City of New York, two Catholic parents received a religious exemption from the statutory vaccination requirement for their children. The statute provides an exemption for children of parents who have “genuine and sincere religious beliefs” against vaccination.   A state regulation provides that school officials may exclude children with an exemption from school “in the event of an outbreak … of a vaccine-preventable disease in a school.”  Plaintiffs’ children were excluded from school when a fellow student was diagnosed with chicken pox. 

Plaintiffs first argued that mandatory vaccination violates substantive due process.  The Court upheld New York’s requirement, based on the Supreme Court’s decision in Jacobson v. Commonwealth of Massachusetts, 197 U.S. 11 (1905), that school vaccination is a proper exercise of the State’s police powers.  The Second Circuit rejected the argument that an alleged growing body of scientific evidence against vaccinations altered this rule.     

The Court next addressed the exclusion of plaintiffs’ children from school during the chicken pox outbreak, which plaintiffs alleged to be an unconstitutional burden on their free exercise of religion.  The Second Circuit held that the law was neutral and of general applicability, and therefore the State need nor show a compelling government interest, even if there was an incidental burden on religion.  The Court cited the Supreme Court’s statement in Prince v. Massachusetts, 321 U.S. 158 (1944), that “[t]he right to practice religion freely does not include liberty to expose the community or the child to communicable disease or the latter to ill health or death.”  The Court determined that because the State could exclude unvaccinated children from school altogether, the more limited exclusion during a chicken pox outbreak was Constitutional. 

Another plaintiff on the appeal was not granted a religious exemption from vaccination for her children.  The District Court had adopted the Magistrate Judge’s findings that this plaintiff’s objections to vaccination were health-related and not based on genuine and sincere religious beliefs.  The Second Circuit held that this determination had not been appealed and could not therefore be addressed.