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For almost 25 years the rules that govern whether and how nursing homes and long-term care facilities qualify for Medicare and Medicaid — and in the process determine residents’ quality of care and safety — have remained largely unchanged. Medicare and Medicaid beneficiaries, who make up the majority of the 1.5 million residents in the country’s more than 15,000 long-term care facilities, have failed to reap many of the benefits of significant advances in the science and delivery of health care and from the advent of electronic recordkeeping and communications.

Addressing this critical need for modernization, Obama administration officials announced proposals on Monday, July 13th to make sweeping rules changes the White House said will “improve quality of life, enhance person-centered care and services for residents in nursing homes, improve resident safety, and bring these regulatory requirements into closer alignment with current professional standards.”

The announcement was made as the once-a-decade White House Conference on Aging convened Monday to set the agenda for meeting the diverse needs of older Americans, including those in need of long-term care. This month also marks the 50th anniversary of the Medicare and Medicaid programs, which cover almost 125 million older, disabled or low-income Americans.

The 403 pages of proposed changes — some required by the Affordable Care Act and other recent federal laws, as well as the president’s executive order directing agencies to simplify regulations and minimize the costs of compliance — contain numerous proposals that Health and Human Services Secretary Sylvia M. Burwell said “set high standards for quality and safety in nursing homes and long-term care facilities.” “When a family makes the decision for a loved one to be placed in a nursing home or long-term care facility,” the Secretary said, “they need to know that their loved one’s health and safety are priorities.”

Specific proposed rules changes, which include a section on electronic health records and measures to better involve patients or their families in care planning and the discharge process, address many of the areas in which nursing homes have been found to be deficient, by mandating rules and procedures for:

• updating nursing homes’ infection prevention and control programs;

• properly training nursing home staff in caring for residents with dementia and in preventing elder abuse and minimizing the use of antibiotic and antipsychotic drugs;

• ensuring that nursing homes take into consideration the health of residents when making decisions on the kinds and levels of staffing a facility needs to properly take care of its residents;

• developing individual care plans and hiring and training staff to provide person-centered care that take the resident’s goals and preferences into consideration;

• involving dietitians and therapy providers where appropriate in writing patient orders; and

• strengthening the rights of nursing home residents, including placing limits on when and how binding arbitration agreements may be used.

A report by the Center for Medicare Advocacy last year found that serious violations often were not penalized in a weak enforcement system that at best urges facilities to comply rather than imposing penalties for noncompliance. While there are no provisions specifically providing for enforcement, experts say the proposed measures will permit detection of violations to enable enforcement by lessening the noise. As Dr. Shari Ling, Medicare’s deputy chief medical officer, observed, “It’s a competency approach that goes beyond a game of numbers. If residents appear agitated, figure out why, get at the cause of the problem.”

Battle lines are already being drawn between the nursing home industry and patient advocates. If finalized, the proposals would cost the nursing home industry $729 million in the first year the rule is in effect and $638 million in year two, according to the CMS. “We would oppose such a large unfunded mandate, especially given the overall narrow margins of 1% to 3% that MedPAC calculates for skilled-nursing-care centers,” Dr. David Gifford, senior vice president of quality and regulatory affairs at the American Health Care Association, said in a statement.

The reactions of advocates were mixed. The Long Term Care Community Coalition, for example, was happy to see HHS takes some steps to improve the care of residents in facilities but was disappointed that the agency didn’t go farther to push for mandatory staffing minimums.

Comments on the proposed rule changes are due September 16.

Under federal law, individuals who report fraud to the government are sometimes entitled to monetary awards. If you are aware of wrongdoing and would like to know more about your rights, please click here.

A prominent feature of the Medicare fraud sweep announced last week was Medicare Part D, with 44 of the 243 indicted pharmacists, doctors and other individuals cited for prescription drug fraud. This week, two reports just released by the Health and Human Services (HHS) Office of Inspector General (OIG) take the Center for Medicare and Medicaid Services (CMS) to task for failing to stem the tide of fraud, waste and abuse in this fastest-growing component of the Medicare program.

The reports detail the nature and extent of Part D fraud — heightened billings of commonly abused opioids, questionable pharmacy billing practices and the existence of open and notorious fraud hotspots – as evidence of failed oversight, and also detail steps federal regulators should take to stop the illegal practices. As of May 2015, the OIG, an internal watchdog that evaluates HHS programs and investigates wrongdoing, had 540 pending complaints and cases involving Part D, a 134% increase over five years, according to the report.

Medicare Part D provides drug coverage for 39 million seniors and disabled people, at a cost of $121 billion in 2014. Part D is administered by health insurers under contract with the federal government, but CMS is responsible for overseeing it.

One of the OIG reports found 1,432 pharmacies with questionable billing patterns in 2014, including extremely high numbers of prescriptions per patient, substantially increased billings for a high proportion of narcotic controlled substances and multiple prescribers for commonly abused opioids per beneficiary receiving opioids. Collectively, these pharmacies wrote $2.3 billion in Part D prescriptions in 201

The report also found that prescriptions for commonly abused opioids continue to rise. Between 2006 and 2014, Medicare spending on these drugs grew to $3.9 billion from $1.5 billion, a 156 percent increase.

The report also identified a number of geographic fraud and abuse “hotspots” — Los Angeles, New York, McAllen, Texas, Miami and San Juan — where average Medicare payments per beneficiary for selected non-controlled drugs are significantly higher than national averages.

Together, these findings indicate that vulnerabilities in Part D program integrity have been allowed to flourish under CMS’s watch, leading to drug diversion, overprescribing, and other quality-of-care issues. Specifically, the OIG identified two issues at the heart of improving program oversight: (1) data collection and analysis “to proactively identify and resolve program vulnerabilities and prevent fraud, waste, and abuse before it occurs”; and (2) the need for more robust oversight “to ensure proper payments, prevent fraud, and protect beneficiaries.”

In its second report, the OIG detailed the reforms it believes Medicare needs, reforms that it said have been resisted so far. Prominent among the reform is the necessity of requiring rather than simply encouraging sponsoring health plans to report all potential fraud and abuse to CMS and its fraud monitoring contractors. Last year, the OIG found that less than half of Part D insurers voluntarily reported data on potential fraud and abuse.

The OIG also called for expanding reviews for questionable drug prescribing beyond controlled substances to other commonly abused drugs, including antipsychotic medications, respiratory drugs and those for HIV, and for restricting patients suspected of doctor shopping, seeking controlled substance prescriptions from multiple doctors.

Last year, CMS announced that it was granting itself potent new authority to expel physicians from Medicare if they are found to prescribe drugs in abusive ways. The agency also said it would compel health providers to enroll in Medicare to order medications for patients covered by Part D. The changes were supposed to take effect on June 1, but have since been delayed twice, most recently until January 1, 2016.

It seems clear that addressing Medicare Part D fraud has become a top government priority. Based on last week’s sweeps and OIG’s recommendations to CMS to increase and improve its oversight, greater enforcement appears to be in the offing.

Under federal law, individuals who report fraud to the government are sometimes entitled to monetary awards. If you are aware of wrongdoing and would like to know more about your rights, please click here.

On June 18, the Justice Department, the Department of Health and Human Services (“HHS”) and the FBI together announced a nationwide sweep led by the Medicare Fraud Strike Force that produced indictments of 243 individuals – including 46 doctors, nurses and other licensed medical professionals – on charges they participated in Medicare fraud schemes that in the aggregate represented $712 million in false Medicare billings.


“This action represents the largest criminal health-care fraud takedown in the history of the Department of Justice,” said U.S. Attorney General Loretta Lynch. Lynch said that the individuals who were charged “billed for equipment that wasn’t provided, for care that wasn’t needed, and for services that weren’t rendered.”


Indictments were handed down in 17 districts, including Medicare fraud hotbeds such as Miami and New York City. The 243 individuals indicted were charged with a variety of crimes, including conspiracy to commit healthcare fraud, violation of the anti-kickback statute, money laundering and aggravated identity theft in areas from home healthcare, psychotherapy, and physical and occupational therapy to durable medical equipment and prescription fraud.


The indictments alleged that in many cases, patient recruiters, Medicare beneficiaries and other co-conspirators were paid cash kickbacks in return for supplying beneficiary information to providers, so that the providers could then submit fraudulent bills to Medicare for services that were medically unnecessary or never performed.


More than 40 of those charged were involved in schemes that targeted Medicare’s Part D drug benefit, which was implemented in 2006 and has not been the subject of vigorous enforcement. “For us, the greatest concern looking forward is the prescription drug program,” said Gary Cantrell, a top investigator for the HHS inspector general’s office.   Part D fraud schemes often involve billing for drugs that are never dispensed or billing for narcotics and painkillers that are diverted to street sales.


Federal officials say the recent arrests were aided by increasingly sophisticated computer programs that scan billing data for potential fraud.  HHS Secretary Sylvia Burwell said that the federal government’s enforcement abilities have also been bolstered by the Affordable Care Act, which provided an additional $350 million for health care fraud prevention and enforcement efforts and helped the Justice Department hire more prosecutors and allowed the strike force to expand from two cities to nine.


Just a few examples illustrate the broad scope of frauds that the government’s investigation uncovered:


  • Four people operating companies in Louisiana and California sent talking glucose monitors to Medicare recipients whether they needed them or not and fraudently billed Medicare for over $22 million.


  • Kickbacks allegedly paid to patient recruiters and assisted living facility owners throughout the Southern District of Florida resulted in administrators in a mental health center in Miami billing Medicare almost $64 million between 2006 and 2012 for intensive mental health treatment to beneficiaries.


  • 16 defendants in Detroit, including three owners of a hospice service who allegedly paid kickbacks for referrals, were charged with participating in fraud, kickback and money laundering schemes involving approximately $122 million in false claims to Medicare for services that were medically unnecessary or never rendered, including home health care, physician visits, and psychotherapy.


  • In Brooklyn, nine people were charged in two separate criminal schemes involving physical and occupational therapy, including a $50 million physical therapy Medicare fraud scheme that was part of an earlier case and a separate $8 million physical and occupational therapy fraud scheme.


Under Federal law, individuals who report fraud to the government are sometimes entitled to monetary awards. If you are aware of wrongdoing and would like to know more about your rights, please click here.

In October 2014 a jury in Marshall, Texas returned an eye-opening damages verdict of $175 million in a non-intervened False Claims Act whistleblower suit against Dallas-based guardrail manufacturer Trinity Industries.

Eyes opened a little wider on June 9, 2015 when federal district court judge Rodney Gilstrap issued a final judgment in the case. Judge Gilstrap tripled the award under the FCA law to $525 million, added $138 million in penalties and awarded the relator, Joshua Harman, owner of a small competitor of Trinity, 30% of the total or $199 million. Harman will also collect an additional $19 million from Trinity for legal fees and expenses.

Aside from the size of the relator’s award, the case is significant because Harman, who brought the suit in 2012 alleging that Trinity failed to inform the government about design changes that resulted in multiple product failures and deaths, pursued his claims without the participation of the government, which, Judge Gilstrap wrote, “left the full burden of prosecuting” that case to Harman and his attorneys.

Harman alleged that Trinity, a leading manufacturer of guardrails in use throughout the U.S. highway system, changed the design of its rail head known as the ET-Plus sometime between 2002 and 2005. Trinity did so without telling Federal Highway Administration officials, and then sold the guardrails to states that received federal reimbursement. The result of these design changes was that the guardrails could now pierce vehicles rather than absorb their impact. The suit alleged that not only did Trinity fail to disclose those changes to the FHWA, it never tested the units according to FHWA protocols and falsely certified that the guardrails were government-approved. While the FHWA partially approved the guardrails after a 2005 crash test, it remains unclear whether Trinity used the new ET-Plus for the test.

Judge Gilstrap wrote that the plaintiffs had “introduced substantial evidence” showing that Trinity “made the decision to modify the ET-Plus, conceal such modifications, and falsely certify that the ET-Plus units had been accepted” by the highway agency.

Trinity is defending other lawsuits, including more than 20 personal-injury cases alleging the ET-Plus is defective, shareholder suits accusing Trinity of inadequate disclosures and claims that the company defrauded states and counties by making the undisclosed changes.

The announcement of a final judgment comes at the same time that federal investigators are scrutinizing the relationship between Trinity and the Federal Highway Administration, which reviews safety tests of highway devices. The FHWA’s sign-off on the ET-Plus opened up hundreds of millions of dollars in federal taxpayer money to help reimburse states for purchases of the system.

If Trinity decides to appeal, however, the Fifth Circuit Court may lend a sympathetic ear. That court issued an unusual ruling just ahead of the Marshall trial stating that it believed Trinity had a “strong” legal argument that it had not violated the False Claims Act. The company said that if, as expected, it is required to post a bond equal to the full amount of the judgment while it appeals, it will take out an unsecured loan to do so.

            Trinity Industries’ primary business is building rail cars. Its highway products subsidiary is part of its construction products business, which had $546 million in sales last year, while the company as a whole earned $709 million, on sales of nearly $6.2 billion. Its shares traded on the Nasdaq stock exchange fell 2.7 percent to $29.23 following announcement of the final judgment.

Under the FCA, individuals who report fraud to the government are sometimes entitled to monetary awards. If you are aware of wrongdoing and would like to know more about your rights, please click here.

Until last week, if you were a potential whistleblower with a claim filed under the False Claims Act (FCA) in one of several federal circuits, your claim could be precluded if another case under the same facts had ever been brought before yours and then dismissed for any reason, even a dismissal that never addressed the merits of the suit. But no longer.
On May 26, 2015 the Supreme Court unanimously held in Kellogg Brown & Root Services Inc. v. United States ex rel. Carter that a prior claim brought under the FCA does not operate as a bar to a subsequent claim if that earlier claim was dismissed for reasons unrelated to the merits. This decision represents a victory for relators, taxpayers and, as Justice Samuel Alito wrote, for the “ordinary meaning” of the statute,
Addressing the FCA’s first-to-file rule (31 U.S.C. § 3730(b)(5)), which provides that when a qui tam relator brings a case, “no person other than the Government may intervene or bring a related action based on the facts underlying the pending action,” Justice Alito rejected the First, Fifth, Ninth and D.C. Circuits’ “very peculiar” interpretation of the FCA that a “pending” claim included any claim based on the same underlying facts.
The FCA certainly bars new claims while an earlier-filed case is “pending,” Justice Alito wrote, but a case is not “pending” after it has been dismissed. Such an interpretation, he said, “does not comport with any known usage of the term ‘pending.’” Why, he asked, would Congress frustrate a possible recovery for taxpayers simply because an earlier-filed case failed “for a reason having nothing to do with the merits”, noting that “[u]nder [KBR’s] interpretation, Marbury v. Madison … is still ‘pending.’ So is the trial of Socrates.”
KBR argued that the Fourth Circuit’s ruling in the case, permitting a subsequent qui tam action to proceed even if the prior FCA case had already been dismissed, should be overturned because “pending” should be read to mean “first-filed.” In essence, KBR pushed for a ruling that any previously filed qui tam case, whatever its outcome, should protect defendants against all related future claims.
The Supreme Court summarily rejected KBR’s argument, finding that such a bar is only applicable when the prior FCA case remains pending in court. Thus, if a prior FCA case has been dismissed for any reason – including by settlement, a relator’s failure to satisfy pleading requirements, or for failure to prosecute — and is not pending at the time of a motion to dismiss on the subsequent qui tam case, the first-to-file rule does not bar the subsequent qui tam action. Ultimately, FCA defendants who settle or successfully obtain dismissal of FCA claims may have to defend subsequent qui tam actions based on the same underlying facts.
New complaints that flesh out or expand upon the allegations in a prior filed case are not uncommon, and the Supreme Court’s decision will permit the government and whistleblowers to continue to pursue defendants in such cases. Whistleblowers will nevertheless still have to demonstrate that their allegations are not based on publicly disclosed information, which includes previously filed complaints. And subsequent plaintiffs (including the government) are still subject to collateral estoppel defenses should any first-filed case with similar allegations have been dismissed on the merits.
The case also yielded another ruling, one with which defendants will be far happier. Faced with the question whether statutes of limitation are deferred in times of war, the Supreme Court held that the Wartime Suspension of Limitations Act (WSLA), a World War II-era statute that extends the amount of time the government can bring a lawsuit based on wartime fraud against the United States, is inapplicable to civil actions brought by a qui tam relator under the FCA.
The FCA’s statute of limitations provision requires that a qui tam action must be brought within six years of a violation or within three years of the date by which the United States should have known about a violation. There is a 10-year limitation against suits in any event.
In ruling that the WSLA does not apply to the FCA, which typically arises in a case brought by a private qui tam relator after the government declines to intervene and take over the case, Justice Alito wrote, “[c]onverting the WSLA from a provision that suspended the statute of limitations for criminal prosecutions into one that also suspended the time for commencing a civil action would have been a big step.”
While the Court’s ruling limited the WSLA to criminal actions, it should motivate potential FCA whistleblowers to bring claims without delay. In any event, the Court’s ruling that prior FCA claims that were not decided on the merits do not necessarily preclude subsequent suits based on the same facts is most welcome. Prior to Carter, a defendant that saw a flawed claim under the FCA dismissed could remain free from the consequences of its fraud. However, after Carter, whistleblowers may continue to pursue claims to hold fraudulent defendants accountable, even when prior whistleblowers may have failed.
Under the FCA, individuals who report fraud to the government are sometimes entitled to monetary awards. If you are aware of wrongdoing and would like to know more about your rights, please click here.

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