Wifredo A. Ferrer, United States Attorney for the Southern District of Florida, John V. Gillies, Special Agent in Charge, Federal Bureau of Investigation (FBI), Miami Field Office, and Christopher B. Dennis, Special Agent in Charge, U.S. Department of Health and Human Services, Office of Inspector General (HHS-OIG), announced that thirty-two (32) South Florida residents were charged for their alleged roles in various schemes to defraud Medicare. The charges in South Florida are part of a nationwide takedown by Medicare Fraud Strike Force operations in nine districts that led to charges against 111 defendants for their alleged participation in Medicare fraud schemes involving more than $225 million in false billing. Medicare Fraud Strike Force operations throughout the country were modeled after the Miami strike force, which was the first in the nation.

U.S. Attorney Wifredo Ferrer stated, “This operation confirms that there is no safe harbor for Medicare fraudsters and that we will aggressively pursue all types of schemes and all types of offenders. This week, we arrested dozens of South Florida residents, including doctors, nurses, therapists, patient recruiters, money launderers, and others who chose to steal precious health care dollars. We also prosecuted a variety of fraud schemes involving community mental health fraud, home health care fraud, infusion fraud, Part D prescription fraud, durable medical equipment fraud, and even schemes against the Federal Employee Health Benefit Program. This week’s operation demonstrates that we will fight the battle against health care fraud on all fronts and will prosecute each link in the fraud chain and each emergent fraud scheme.”

“With this takedown, we have identified and shut down large-scale fraud schemes operating throughout the country. We have safeguarded precious taxpayer dollars. And we have helped to protect our nation’s most essential health care programs, Medicare and Medicaid,” said Attorney General Holder. “As today’s arrests prove, we are waging an aggressive fight against health care fraud.”

“People who defraud Medicare and private insurance companies indirectly increase the cost of health care for everyone,” said FBI Special Agent in Charge John V. Gillies. “The FBI is committed to rooting out health care fraud and reclaiming money improperly paid by government-sponsored programs and private insurers. The strike force gives us the necessary prosecutorial support to attack this multi-billion-dollar crime problem.”

“Today’s indictments and arrests mark a continuation of operations to flush out health care fraud in South Florida,” said Christopher Dennis, the Miami Region’s Special Agent in Charge for the Office of Inspector General of the Department of Health & Human Services. “The actions we have taken today are part of a coordinated sweep in our battle against the scourge of Medicare and Medicaid fraud.”

The Indictments announced today as part of the nationwide Medicare Fraud Strike Force operations include:

United States v. Jose Nunez, M.D., et al.

Twenty-one Miami-area residents, including two doctors, six nurses, 11 patient recruiters, and two employees, were arrested and charged for their alleged participation in a $25 million home health care Medicare fraud scheme. Jose Nunez, M.D., Francisco Gonzalez, M.D., Eneida Fry, L.P.N, Jorge Pineiro, R.N., Maritza Vidal, R.N., a/k/a “Maritza Casas,” Ignacio Angulo, L.P.N., Farah Maria-Perez, R.N., Luisa Morciego, R.N., Odalys Alvarez-Medina, Lesder Casanova, Oscar Martinez, Richard Diaz, Beatriz Torres-Cruz, Juana Rivas, Jose Ros, Fidel Castro, Barbara Gonzalez, Vicente Guerra, Raul Alvarez, Lisandra Alonso and Licet Diaz, were indicted on February 10, 2011 on various health care fraud charges, including conspiracy to commit health care fraud, making false statements, and soliciting kickbacks.

The indictment alleges that ABC Home Health, Inc. (ABC) and Florida Home Health Care Providers, Inc. (Florida Home Health) referred Medicare beneficiaries to Drs. Nunez and Gonzalez for medically unnecessary home health care. The doctors would sign prescriptions for therapy and home health services, and then received illegal kickback payments from the owners and operators of ABC and Florida Home Health. In addition, the doctors would receive Medicare payments for home health care services, including office visits and diagnostics tests. The indictment further alleges that Eneida Fry, L.P.N, Jorge Pineiro, R.N., Maritza Vidal, R.N., Ignacio Angulo, L.P.N., Farah Maria-Perez, R.N., Odalys Alvarez-Medina, Lesder Casanova, Oscar Martinez, Richard Diaz, Beatriz Torres-Cruz, Juana Rivas, Jose Ros, Fidel Castro, Barbara Gonzalez, Vicente Guerra, Raul Alvarez, and Lisandra Alonso would receive kickbacks and bribes for recruiting Medicare beneficiaries to be referred for home health services through doctors working with ABC and Florida Home Health. Finally, the indictment alleges that Licet Diaz distributed kickback payments to patient recruiters on behalf of the owners of ABC and Florida Home Health. This case is being prosecuted by Trial Attorney Joseph S. Beemsterboer of the Criminal Division’s Fraud Section.

United States v. Emilio Bezanilla

Emilio Bezanilla was charged with seven counts of laundering the proceeds of health care fraud and two counts of structuring transactions to avoid currency transaction reporting requirements. The indictment alleges that Bezanilla laundered thousands of dollars for five companies that engaged in health care fraud: Mercy Medical Supply, Inc., JHH Group, Inc., Yani’s Pharmacy, Inc., and La Numero 1 Farmacia Discount Corp. The indictment also alleges that Bezanilla structured the withdrawal of cash in denominations under $10,000 to avoid the requirement that banks report large cash withdrawals. This case being prosecuted by Assistant U.S. Attorney H. Ron Davidson.

United States v. Victor Ramon Castillo

Victor Ramon Castillo was charged with five counts of health care fraud, in connection with Vida Group Services, Inc., in Miami, Florida. The indictment alleges that Castillo incorporated Vida Group, submitted an application to Blue Cross on behalf of Vida Group, opened a bank account, and submitted approximately $1,118,854 in fraudulent claims to Blue Cross, of which Blue Cross paid $298,038. The indictment alleges that many of the fraudulent claims were for Federal employees receiving health benefits under the Federal Employees Health Benefits Program. This case is being prosecuted by Assistant U.S. Attorney Robert Luck.

United States v. Francisco Enrique Chavez

Francisco Enrique Chavez was charged with six counts of health care fraud and three counts of aggravated identity theft in connection with his scheme to defraud the Medicare program of $11.3 million by submitting fraudulent claims for DME through World Class Medical Services, Corp., located in Miami, Florida. The indictment alleges that Chavez stole Unique Physician Identification Numbers from doctors and used those numbers to generate fraudulent claims for DME. This case is being prosecuted by DOJ Trial Attorney Sara Hall.

United States v. Maikel Villega Gorrin

Maikel Villega Gorrin is charged with five counts of health care fraud in connection with JVZ Medical Equipment, Corp., located in Hialeah, Florida. The indictment alleges that Gorrin became a signatory on JVZ’s corporate bank account, registered as president of the company, and submitted approximately $926,134 in fraudulent claims to Medicare for DME on behalf of JVZ. This case is being prosecuted by Assistant U.S. Attorney Christopher Clark.

United States v. Yordany Nunez

Yordany Nunez was charged with six counts of health care fraud in connection with Med Kendall Corp., located in Miami, Florida. The indictment alleges that Nunez became the president of Med Kendall, submitted Part B and Part D Medicare applications on behalf of the company, submitted approximately $204,212 in fraudulent claims for Part B DME and $296,596 in fraudulent Part D claims for prescription drugs. This case is being prosecuted by Assistant U.S. Attorney H. Ron Davidson.

United States v. Juan Fernando Ramos

Juan Fernando Ramos was charged with one count of conspiring to commit health care fraud and thirteen counts of health care fraud in connection with P&E Medical Services, Inc., and JRD Express Services, Inc., both located in Miami, Florida. The indictment alleges that Ramos and his co-conspirators, Jose Raul Diaz and Pedro Frometa, caused the submission of approximately $4,550,391 in fraudulent Medicare claims for DME, and received payment of approximately $718,412. Finally, the indictment alleges that Ramos personally received the proceeds of the fraud. This case is being prosecuted by Assistant U.S. Attorney Robert Luck.

United States v. John Ruarte

John Ruarte was charged with six counts of health care fraud in connection with First Class Health Solutions, Inc., located in Dania Beach, Florida. The indictment alleges that Ruarte completed a Medicare application on behalf of First Class Medical Solutions, controlled a corporate bank account, and submitted approximately $1,603,536 in fraudulent Medicare claims for DME. This case is being prosecuted by Assistant U.S. Attorney H. Ron Davidson.

United States v. Tomas Solis

Tomas Solis was charged with six counts of health care fraud in connection with Ortho-America Medical Equipment, Co., Inc. (Ortho), located in Florida. The indictment alleges that Solas became the president of Ortho, maintained a Medicare provider number and bank account for Ortho, and submitted approximately $6,510,499 of fraudulent DME claims on behalf of the company. This case is being prosecuted by Assistant U.S. Attorney H. Ron Davidson.

United States v. Marta Martinez

Marta Martinez was charged with one count of conspiracy to commit health care fraud, two counts of health care fraud, and one count of conspiracy to pay health care kickbacks. The indictment alleges that, in 2005 and 2006, Martinez arranged for Medicare beneficiaries to serve as purported patients at A’s Medical Center Inc. and that she arranged for these patients to be paid. The indictment further alleges that A’s submitted more than $4 million in false claims for purported treatment of its patients, including those supplied by Martinez, based on which claims Medicare paid A’s approximately $1.1 million. This case is being prosecuted by Assistant U.S. Attorney Marc Osborne.

United States v. Armando Santos

Armando Santos was charged with one count of conspiracy to commit health care fraud, four counts of health care fraud, and two counts of making false statements related to health care matters. The indictment alleges that Santos, a Registered Nurse, caused a local home health agency to submit $230,315 in false claims to Medicare, and thereby caused Medicare to issue $152,664 in payments to the home health agency. The indictment further alleges that Santos and his conspirators caused the payment of kickbacks and bribes to Medicare beneficiaries in exchange for using their Medicare numbers as the bases of home health claims. The indictment also alleges that Santos signed patient assessment forms in which he falsely certified that home health services were medically necessary, and signed “Weekly Visit / Time Record Forms”in which he falsely stated that he was providing home health services to two separate Medicare beneficiaries at the same time. This case is being prosecuted by Assistant U.S. Attorney Daniel Bernstein.

United States v. Yamili Rivero-Hernandez

Yamili Rivero-Hernandez was charged with three counts of health care fraud and one count of making false statements related to health care matters. The indictment alleges that Rivero-Hernandez, a Registered Nurse, caused a local home health agency to submit $317,789 in false claims to Medicare for home health services that were not rendered or that were medically unnecessary. As a result of these false claims, Medicare paid the local home health agency $208,177. According to the indictment, Rivero-Hernandez falsified “Weekly Visit / Time Record” sheets, indicating that she provided skilled nursing services to Medicare beneficiaries two times per day, seven days per week. In fact, however, she did not provide skilled nursing services with such frequency. Rivero-Hernandez allegedly also falsified paperwork in which she stated that she injected a Medicare beneficiary with insulin, when in fact, she did not do so. This case is being prosecuted by Assistant U.S. Attorney Daniel Bernstein.

In addition to the cases being announced today, this past Tuesday, February 15, 2010, twenty individuals, including three doctors, were charged for their alleged participation in a fraud scheme involving approximately $200 million in Medicare billing for purported mental health services. The 38-count indictment alleges that the defendants worked with and for American Therapeutic Corporation (ATC) and Medlink Professional Management Group Inc. According to court documents, the defendants participated in a scheme to defraud Medicare by submitting false claims for mental health services administered at ATC facilities that were medically unnecessary or not provided at all. The indictment alleges that patients for the purported services were obtained through the payment of cash kickbacks to patient brokers and owners and operators of halfway houses and assisted living facilities (ALFs), in exchange for delivering the patients to ATC facilities. Various defendants allegedly participated in an extensive and complicated money laundering scheme to provide the cash for kickback payments. The criminal cases are being prosecuted by Trial Attorneys Jennifer L. Saulino, Maria Gonzalez Calvet and Joseph S. Beemsterboer of the Criminal Division’s Fraud Section. The related civil action is being prosecuted by Vanessa I. Reed and Carolyn B. Tapie of the Civil Division and Assistant U.S. Attorney Ted L. Radway of the Southern District of Florida.

The cases announced today are being prosecuted and investigated by Strike Force teams comprised of attorneys from the Fraud Section in the Justice Department’s Criminal Division and from the U.S. Attorney Office for the Southern District of Florida. Other offices participating in today’s coordinated health care fraud takedown include the Eastern District of Michigan, the Eastern District of New York, the Middle District of Florida, the Southern District of Texas, the Central District of California, the Middle District of Louisiana; the Northern District of Illinois, and the Northern District of Texas; and agents from the FBI, HHS-OIG, and state Medicaid Fraud Control Units.

#####

Joseph P. Griffith, Jr.
SC Qui Tam Attorney
SC Health Care Fraud Defense Lawyer
SC Whistleblower Law Firm
SC Medicare-Medicaid Fraud Attorney
SC White Collar Criminal Fraud Lawyer
Joe Griffith Law Firm, LLC
7 State Street
Charleston, South Carolina 29401
(843) 225-5563

http://www.joegriffith.com

The recently passed Patient Protection and Affordable Care Act of 2010, Pub. L. No. 111-148, 124 Stat. 119 (2010), and the Healthcare and Education Reconciliation Act of 2010, Pub. L. No. 111-152, 124 Stat. 1029 (2010) (the “Act”), enacted sweeping changes to health care, including important anti-fraud measures that will significantly boost the federal government’s prosecution of civil fraud cases. 

The False Claims Act, 31 U.S.C. §§ 3729-3733 (“FCA”), is a powerful weapon used by the DOJ and private whistleblowers to civilly prosecute those who perpetrate frauds upon the United States through false and fraudulent claims for payment.  The FCA provides for treble damages and civil monetary penalties to be awarded to the federal government, and the qui tam plaintiff, often called a “relator,” may recover up to 30% of the award, plus statutory attorney’s fees. 

The FCA was amended by the Act to make it easier for whistleblowers to bring qui tam suits on behalf of the federal government by lowering the “public disclosure” standard.  Prior to the Act, a qui tam plaintiff who was not an original source was jurisdictionally barred from bringing an FCA suit if the fraudulent conduct of the defendant had been previously disclosed in the public domain through the media, federal, state or local reports, audits and investigations, or criminal, civil and administrative hearings and proceedings.  See Graham County Soil & Water Conservation Dist. v. United States ex rel. Wilson, 130 S.Ct. 1396 (2010) (upholding the dismissal of FCA claim for lack of jurisdiction based on prior public disclosure of fraud in county audit reports).

Under the amendments of the Act, public disclosures under the FCA are now more limited and only include: a federal criminal, civil and administrative hearing in which the government or its agent is a party; congressional, Government Accounting Office or other federal report, hearing, audit or investigation; or the news media.  See 31 U.S.C. § 3730(e)(4)(A).  This means that state and local audits, reports, investigations and hearings, as well as litigation between private parties, can now be used as the sole source of information for an FCA suit for defrauding the federal government. 

The Act also changed the jurisdictional nature of the public disclosure provisions.  Before the new law was enacted, a violation of the public disclosure requirements of the FCA was a jurisdictional defect which could be raised by a party at any time or sua sponte by the court.  Under the Act, a qui tam complaint which violates the public disclosure provision can be dismissed pursuant to a Rule 12(b)(6) motion, unless such dismissal is “opposed by the Government.”  Id.

The Act also amended the “original source” provisions of the FCA.  Prior to the Act, when there was a previous public disclosure, a relator had to qualify as an original source of the previously disclosed information in order to bring an FCA suit.  This meant that a relator had to have “direct and independent knowledge” of the information on which the fraud allegations were based and had voluntarily provided the information to the Government before filing an FCA action which was based on the information.  Now, under the Act, the “direct and independent knowledge” requirement has been eliminated, and an original source is an individual who voluntarily discloses the frauds to the government prior to a public disclosure or “has knowledge that is independent of and materially adds to the publicly disclosed allegations or transactions.” 31 U.S.C. § 3730(e)(4)(B).  Thus, as long as the relator has information about the government frauds which are independent of publicly disclosed information, even if the relator did not have “direct” information usually derived from personally witnessing the fraudulent conduct, an FCA suit may proceed. 

The limiting of the public disclosure provisions and the broadening of the original source provisions of the FCA will surely lead to an increase in the filing of qui tam lawsuits.  While the change in the jurisdictional aspect of the public disclosure provisions ostensibly helps qui tam relators, it remains to be seen whether or not the government will develop a policy towards or against FCA suits in which Rule 12(b)(6) motions have been filed based upon prior public disclosures.

The Act amended the Medicare enforcement statute to specifically make Anti-Kickback Statute (“AKS”) violations subject to the civil enforcement provisions of the FCA.  42 U.S.C. § 1320a-7b(j).  This amendment was in response to a line of qui tam cases which have held that kickbacks involving federal health care programs were not covered by the FCA under an implied certification theory.  In an implied certification case, the relator alleges liability of the defendant based upon the very act of submitting a claim for reimbursement because the defendant has impliedly certified compliance with governing federal rules that were a precondition to payment.  Several courts had held that no FCA liability could attach under an implied certification theory involving kickbacks because neither the AKS statute nor regulation expressly stated that compliance was a precondition to Medicare or Medicaid payments.  See United States ex rel. Hutcheson v. Blackstone Med., Inc., No. 06-11771-WGY, 2010 WL 938361 (D. Mass. Mar. 12, 2010).  With this new legislation, implied certification FCA cases will likely become more prevalent.

The Act further expanded the scope of “reverse false claims” under the FCA with respect to the retention of Medicare and Medicaid overpayments.  In the 2009 Fraud Enforcement and Recovery Act (“FERA”), Congress eliminated the requirement of an affirmative false statement to the government for liability to attach in reverse false claims cases.  See 31 U.S.C. §  3729(a)(1)(G) (liability for a person who “knowingly makes, uses, or causes to be made or used, a false record or statement material to an obligation to pay or transmit money or property to the Government, or knowingly conceals or knowingly and improperly avoids or decreases an obligation to pay or transmit money or property to the Government”).   The Act amended the Social Security Act to provide that Medicare and Medicaid overpayments become an actionable “obligation” under the FCA when the deadline for repayment expires.  Such overpayments must be reported and returned to the federal government within 60 days of the later of the date the overpayment was identified or the date a corresponding cost report is due.  

Finally, the Act creates potential FCA liability for private exchange insurers.  The Act establishes private insurer “Exchanges” to provide individuals with options for the purchase of health insurance.  If the private insurer’s exchange plans include any federal funding, then the payments made by, through, or in connection with the plan are subject to the FCA.  However, the effective date of this provision is January 1, 2014, so there will be a significant delay in its implementation. 

Joseph P. Griffith, Jr.
SC Qui Tam Attorney
SC Securities Fraud Lawyer
SC Whistleblower Law Firm
SC Medicare-Medicaid Fraud Attorney
SC White Collar Criminal Fraud Lawyer
Joe Griffith Law Firm, LLC
7 State Street
Charleston, South Carolina 29401
(843) 225-5563

http://www.joegriffith.com

(Updated August 2010 an incorporating passage of 
Pub. L. No. 111-203, 124 Stat. 1376)

§ 3729. False claims

(a) Liability for certain acts.

(1) In general. Subject to paragraph (2), any person who–

(A) knowingly presents, or causes to be presented, a false or fraudulent claim for payment or approval;

(B) knowingly makes, uses, or causes to be made or used, a false record or statement material to a false or fraudulent claim;

(C) conspires to commit a violation of subparagraph (A), (B), (D), (E), (F), or (G);

(D) has possession, custody, or control of property or money used, or to be used, by the Government and knowingly delivers, or causes to be delivered, less than all of that money or property;

(E) is authorized to make or deliver a document certifying receipt of property used, or to be used, by the Government and, intending to defraud the Government, makes or delivers the receipt without completely knowing that the information on the receipt is true;

(F) knowingly buys, or receives as a pledge of an obligation or debt, public property from an officer or employee of the Government, or a member of the Armed Forces, who lawfully may not sell or pledge property; or

(G) knowingly makes, uses, or causes to be made or used, a false record or statement material to an obligation to pay or transmit money or property to the Government, or knowingly conceals or knowingly and improperly avoids or decreases an obligation to pay or transmit money or property to the Government,

is liable to the United States Government for a civil penalty of not less than $ 5,000 and not more than $ 10,000, as adjusted by the Federal Civil Penalties Inflation Adjustment Act of 1990 (28 U.S.C. 2461 note; Public Law 104-410), plus 3 times the amount of damages which the Government sustains because of the act of that person.

(2) Reduced damages. If the court finds that–

(A) the person committing the violation of this subsection furnished officials of the United States responsible for investigating false claims violations with all information known to such person about the violation within 30 days after the date on which the defendant first obtained the information;

(B) such person fully cooperated with any Government investigation of such violation; and

(C) at the time such person furnished the United States with the information about the violation, no criminal prosecution, civil action, or administrative action had commenced under this title with respect to such violation, and the person did not have actual knowledge of the existence of an investigation into such violation,

the court may assess not less than 2 times the amount of damages which the Government sustains because of the act of that person.

(3) Costs of civil actions. A person violating this subsection shall also be liable to the United States Government for the costs of a civil action brought to recover any such penalty or damages.

(b) Definitions. For purposes of this section–

(1) the terms “knowing” and “knowingly”–

(A) mean that a person, with respect to information–

(i) has actual knowledge of the information;

(ii) acts in deliberate ignorance of the truth or falsity of the information; or

(iii) acts in reckless disregard of the truth or falsity of the information; and

(B) require no proof of specific intent to defraud;

(2) the term “claim”–

(A) means any request or demand, whether under a contract or otherwise, for money or property and whether or not the United States has title to the money or property, that–

(i) is presented to an officer, employee, or agent of the United States; or

(ii) is made to a contractor, grantee, or other recipient, if the money or property is to be spent or used on the Government’s behalf or to advance a Government program or interest, and if the United States Government–

(I) provides or has provided any portion of the money or property requested or demanded; or

(II) will reimburse such contractor, grantee, or other recipient for any portion of the money or property which is requested or demanded; and

(B) does not include requests or demands for money or property that the Government has paid to an individual as compensation for Federal employment or as an income subsidy with no restrictions on that individual’s use of the money or property;

(3) the term “obligation” means an established duty, whether or not fixed, arising from an express or implied contractual, grantor-grantee, or licensor-licensee relationship, from a fee-based or similar relationship, from statute or regulation, or from the retention of any overpayment; and

(4) the term “material” means having a natural tendency to influence, or be capable of influencing, the payment or receipt of money or property.

(c) Exemption from disclosure. Any information furnished pursuant to subsection (a)(2) shall be exempt from disclosure under section 552 of title 5.

(d) Exclusion. This section does not apply to claims, records, or statements made under the Internal Revenue Code of 1986 [26 USCS §§ 1 et seq.].

(e) [Redesignated]

HISTORY:

(Sept. 13, 1982, P.L. 97-258, § 1, 96 Stat. 978; Oct. 27, 1986, P.L. 99-562, § 2, 100 Stat. 3153; July 5, 1994, P.L. 103-272, § 4(f)(1)(O), 108 Stat. 1362.)

(As amended May 20, 2009, P.L. 111-21, § 4(a), 123 Stat. 1621.)

§ 3730. Civil actions for false claims

(a) Responsibilities of the Attorney General. The Attorney General diligently shall investigate a violation under section 3729. If the Attorney General finds that a person has violated or is violating section 3729, the Attorney General may bring a civil action under this section against the person.

(b) Actions by private persons.

(1) A person may bring a civil action for a violation of section 3729 for the person and for the United States Government. The action shall be brought in the name of the Government. The action may be dismissed only if the court and the Attorney General give written consent to the dismissal and their reasons for consenting.

(2) A copy of the complaint and written disclosure of substantially all material evidence and information the person possesses shall be served on the Government pursuant to Rule 4(d)(4) of the Federal Rules of Civil Procedure. The complaint shall be filed in camera, shall remain under seal for at least 60 days, and shall not be served on the defendant until the court so orders. The Government may elect to intervene and proceed with the action within 60 days after it receives both the complaint and the material evidence and information.

(3) The Government may, for good cause shown, move the court for extensions of the time during which the complaint remains under seal under paragraph (2). Any such motions may be supported by affidavits or other submissions in camera. The defendant shall not be required to respond to any complaint filed under this section until 20 days after the complaint is unsealed and served upon the defendant pursuant to Rule 4 of the Federal Rules of Civil Procedure.

(4) Before the expiration of the 60-day period or any extensions obtained under paragraph (3), the Government shall–

(A) proceed with the action, in which case the action shall be conducted by the Government; or

(B) notify the court that it declines to take over the action, in which case the person bringing the action shall have the right to conduct the action.

(5) When a person brings an action under this subsection, no person other than the Government may intervene or bring a related action based on the facts underlying the pending action.

(c) Rights of the parties to qui tam actions.

(1) If the Government proceeds with the action, it shall have the primary responsibility for prosecuting the action, and shall not be bound by an act of the person bringing the action. Such person shall have the right to continue as a party to the action, subject to the limitations set forth in paragraph (2).

(2) (A) The Government may dismiss the action notwithstanding the objections of the person initiating the action if the person has been notified by the Government of the filing of the motion and the court has provided the person with an opportunity for a hearing on the motion.

(B) The Government may settle the action with the defendant notwithstanding the objections of the person initiating the action if the court determines, after a hearing, that the proposed settlement is fair, adequate, and reasonable under all the circumstances. Upon a showing of good cause, such hearing may be held in camera.

(C) Upon a showing by the Government that unrestricted participation during the course of the litigation by the person initiating the action would interfere with or unduly delay the Government’s prosecution of the case, or would be repetitious, irrelevant, or for purposes of harassment, the court may, in its discretion, impose limitations on the person’s participation, such as–

(i) limiting the number of witnesses the person may call;

(ii) limiting the length of the testimony of such witnesses;

(iii) limiting the person’s cross-examination of witnesses; or

(iv) otherwise limiting the participation by the person in the litigation.

(D) Upon a showing by the defendant that unrestricted participation during the course of the litigation by the person initiating the action would be for purposes of harassment or would cause the defendant undue burden or unnecessary expense, the court may limit the participation by the person in the litigation.

(3) If the Government elects not to proceed with the action, the person who initiated the action shall have the right to conduct the action. If the Government so requests, it shall be served with copies of all pleadings filed in the action and shall be supplied with copies of all deposition transcripts (at the Government’s expense). When a person proceeds with the action, the court, without limiting the status and rights of the person initiating the action, may nevertheless permit the Government to intervene at a later date upon a showing of good cause.

(4) Whether or not the Government proceeds with the action, upon a showing by the Government that certain actions of discovery by the person initiating the action would interfere with the Government’s investigation or prosecution of a criminal or civil matter arising out of the same facts, the court may stay such discovery for a period of not more than 60 days. Such a showing shall be conducted in camera. The court may extend the 60-day period upon a further showing in camera that the Government has pursued the criminal or civil investigation or proceedings with reasonable diligence and any proposed discovery in the civil action will interfere with the ongoing criminal or civil investigation or proceedings.

(5) Notwithstanding subsection (b), the Government may elect to pursue its claim through any alternate remedy available to the Government, including any administrative proceeding to determine a civil money penalty. If any such alternate remedy is pursued in another proceeding, the person initiating the action shall have the same rights in such proceeding as such person would have had if the action had continued under this section. Any finding of fact or conclusion of law made in such other proceeding that has become final shall be conclusive on all parties to an action under this section. For purposes of the preceding sentence, a finding or conclusion is final if it has been finally determined on appeal to the appropriate court of the United States, if all time for filing such an appeal with respect to the finding or conclusion has expired, or if the finding or conclusion is not subject to judicial review.

(d) Award to qui tam plaintiff.

(1) If the Government proceeds with an action brought by a person under subsection (b), such person shall, subject to the second sentence of this paragraph, receive at least 15 percent but not more than 25 percent of the proceeds of the action or settlement of the claim, depending upon the extent to which the person substantially contributed to the prosecution of the action. Where the action is one which the court finds to be based primarily on disclosures of specific information (other than information provided by the person bringing the action) relating to allegations or transactions in a criminal, civil, or administrative hearing, in a congressional, administrative, or Government [General] Accounting Office report, hearing, audit, or investigation, or from the news media, the court may award such sums as it considers appropriate, but in no case more than 10 percent of the proceeds, taking into account the significance of the information and the role of the person bringing the action in advancing the case to litigation. Any payment to a person under the first or second sentence of this paragraph shall be made from the proceeds. Any such person shall also receive an amount for reasonable expenses which the court finds to have been necessarily incurred, plus reasonable attorneys’ fees and costs. All such expenses, fees, and costs shall be awarded against the defendant.

(2) If the Government does not proceed with an action under this section, the person bringing the action or settling the claim shall receive an amount which the court decides is reasonable for collecting the civil penalty and damages. The amount shall be not less than 25 percent and not more than 30 percent of the proceeds of the action or settlement and shall be paid out of such proceeds. Such person shall also receive an amount for reasonable expenses which the court finds to have been necessarily incurred, plus reasonable attorneys’ fees and costs. All such expenses, fees, and costs shall be awarded against the defendant.

(3) Whether or not the Government proceeds with the action, if the court finds that the action was brought by a person who planned and initiated the violation of section 3729 upon which the action was brought, then the court may, to the extent the court considers appropriate, reduce the share of the proceeds of the action which the person would otherwise receive under paragraph (1) or (2) of this subsection, taking into account the role of that person in advancing the case to litigation and any relevant circumstances pertaining to the violation. If the person bringing the action is convicted of criminal conduct arising from his or her role in the violation of section 3729, that person shall be dismissed from the civil action and shall not receive any share of the proceeds of the action. Such dismissal shall not prejudice the right of the United States to continue the action, represented by the Department of Justice.

(4) If the Government does not proceed with the action and the person bringing the action conducts the action, the court may award to the defendant its reasonable attorneys’ fees and expenses if the defendant prevails in the action and the court finds that the claim of the person bringing the action was clearly frivolous, clearly vexatious, or brought primarily for purposes of harassment.

(e) Certain actions barred.

(1) No court shall have jurisdiction over an action brought by a former or present member of the armed forces under subsection (b) of this section against a member of the armed forces arising out of such person’s service in the armed forces.

(2) (A) No court shall have jurisdiction over an action brought under subsection (b) against a Member of Congress, a member of the judiciary, or a senior executive branch official if the action is based on evidence or information known to the Government when the action was brought.

(B) For purposes of this paragraph, “senior executive branch official” means any officer or employee listed in paragraphs (1) through (8) of section 101(f) of the Ethics in Government Act of 1978 (5 U.S.C. App.).

(3) In no event may a person bring an action under subsection (b) which is based upon allegations or transactions which are the subject of a civil suit or an administrative civil money penalty proceeding in which the Government is already a party.

(4) (A) The court shall dismiss an action or claim under this section, unless opposed by the Government, if substantially the same allegations or transactions as alleged in the action or claim were publicly disclosed-

(i) in a Federal criminal, civil, or administrative hearing in which the Government or its agent is a party;

(ii) in a congressional, Government Accountability Office, or other Federal report, hearing, audit, or investigation; or

(iii) from the news media,

unless the action is brought by the Attorney General or the person bringing the action is an original source of the information.

(B) For purposes of this paragraph, “original source” means an individual who either (i) prior to a public disclosure under subsection (e)(4)(a), has voluntarily disclosed to the Government the information on which allegations or transactions in a claim are based, or (2) who has knowledge that is independent of and materially adds to the publicly disclosed allegations or transactions, and who has voluntarily provided the information to the Government before filing an action under this section.’”

(f) Government not liable for certain expenses. The Government is not liable for expenses which a person incurs in bringing an action under this section.

(g) Fees and expenses to prevailing defendant. In civil actions brought under this section by the United States, the provisions of section 2412(d) of title 28 shall apply.

(h) Relief from retaliatory actions.

HISTORY:

(Sept. 13, 1982, P.L. 97-258, § 1, 96 Stat. 978; Oct. 27, 1986, P.L. 99-562, §§ 3, 4, 100 Stat. 3154, 3157; Nov. 19, 1988, P.L. 100-700, § 9, 102 Stat. 4638; May 4, 1990, P.L. 101-280, § 10(a), 104 Stat. 162; July 5, 1994, P.L. 103-272, § 4(f)(1)(P), 108 Stat. 1362.)

(As amended May 20, 2009, P.L. 111-21, § 4(d), 123 Stat. 1624.)

(As amended March 23, 2010, P.L. 111-148, § 10104.)

§ 3731. False claims procedure

(a) A subpena [subpoena] requiring the attendance of a witness at a trial or hearing conducted under section 3730 of this title may be served at any place in the United States.

(b) A civil action under section 3730 may not be brought–

(1) more than 6 years after the date on which the violation of section 3729 is committed, or

(2) more than 3 years after the date when facts material to the right of action are known or reasonably should have been known by the official of the United States charged with responsibility to act in the circumstances, but in no event more than 10 years after the date on which the violation is committed, whichever occurs last.

(c) If the Government elects to intervene and proceed with an action brought under 3730(b), the Government may file its own complaint or amend the complaint of a person who has brought an action under section 3730(b) to clarify or add detail to the claims in which the Government is intervening and to add any additional claims with respect to which the Government contends it is entitled to relief. For statute of limitations purposes, any such Government pleading shall relate back to the filing date of the complaint of the person who originally brought the action, to the extent that the claim of the Government arises out of the conduct, transactions, or occurrences set forth, or attempted to be set forth, in the prior complaint of that person.

(d) In any action brought under section 3730 the United States shall be required to prove all essential elements of the cause of action, including damages, by a preponderance of the evidence.

(e) Notwithstanding any other provision of law, the Federal Rules of Criminal Procedure, or the Federal Rules of Evidence, a final judgment rendered in favor of the United States in any criminal proceeding charging fraud or false statements, whether upon a verdict after trial or upon a plea of guilty or nolo contendere, shall estop the defendant from denying the essential elements of the offense in any action which involves the same transaction as in the criminal proceeding and which is brought under subsection (a) or (b) of section 3730.

HISTORY:

(Sept. 13, 1982, P.L. 97-258, § 1, 96 Stat. 979; Oct. 27, 1986, P.L. 99-562, § 5, 100 Stat. 3158.)

(As amended May 20, 2009, P.L. 111-21, § 4(b), 123 Stat. 1623.)

§ 3732. False claims jurisdiction

(a) Actions under section 3730. Any action under section 3730 may be brought in any judicial district in which the defendant or, in the case of multiple defendants, any one defendant can be found, resides, transacts business, or in which any act proscribed by section 3729 occurred. A summons as required by the Federal Rules of Civil Procedure shall be issued by the appropriate district court and served at any place within or outside the United States.

(b) Claims under State law. The district courts shall have jurisdiction over any action brought under the laws of any State for the recovery of funds paid by a State or local government if the action arises from the same transaction or occurrence as an action brought under section 3730.

(c) Service on State or local authorities. With respect to any State or local government that is named as a co-plaintiff with the United States in an action brought under subsection (b), a seal on the action ordered by the court under section 3730(b) shall not preclude the Government or the person bringing the action from serving the complaint, any other pleadings, or the written disclosure of substantially all material evidence and information possessed by the person bringing the action on the law enforcement authorities that are authorized under the law of that State or local government to investigate and prosecute such actions on behalf of such governments, except that such seal applies to the law enforcement authorities so served to the same extent as the seal applies to other parties in the action.

HISTORY:

(Added Oct. 27, 1986, P.L. 99-562, § 6(a), 100 Stat. 3158.)

(As amended May 20, 2009, P.L. 111-21, § 4(e), 123 Stat. 1625.)

§ 3733. Civil investigative demands

(a) In general.

(1) Issuance and service. Whenever the Attorney General, or a designee (for purposes of this section), has reason to believe that any person may be in possession, custody, or control of any documentary material or information relevant to a false claims law investigation, the Attorney General, or a designee, may, before commencing a civil proceeding under section 3730(a) or other false claims law, or making an election under section 3730(b), issue in writing and cause to be served upon such person, a civil investigative demand requiring such person–

(A) to produce such documentary material for inspection and copying,

(B) to answer in writing written interrogatories with respect to such documentary material or information,

(C) to give oral testimony concerning such documentary material or information, or

(D) to furnish any combination of such material, answers, or testimony.

The Attorney General may delegate the authority to issue civil investigative demands under this subsection. Whenever a civil investigative demand is an express demand for any product of discovery, the Attorney General, the Deputy Attorney General, or an Assistant Attorney General shall cause to be served, in any manner authorized by this section, a copy of such demand upon the person from whom the discovery was obtained and shall notify the person to whom such demand is issued of the date on which such copy was served. Any information obtained by the Attorney General or a designee of the Attorney General under this section may be shared with any qui tam relator if the Attorney General or designee determine it is necessary as part of any false claims act investigation.

(2) Contents and deadlines.

(A) Each civil investigative demand issued under paragraph (1) shall state the nature of the conduct constituting the alleged violation of a false claims law which is under investigation, and the applicable provision of law alleged to be violated.

(B) If such demand is for the production of documentary material, the demand shall–

(i) describe each class of documentary material to be produced with such definiteness and certainty as to permit such material to be fairly identified;

(ii) prescribe a return date for each such class which will provide a reasonable period of time within which the material so demanded may be assembled and made available for inspection and copying; and

(iii) identify the false claims law investigator to whom such material shall be made available.

(C) If such demand is for answers to written interrogatories, the demand shall–

(i) set forth with specificity the written interrogatories to be answered;

(ii) prescribe dates at which time answers to written interrogatories shall be submitted; and

(iii) identify the false claims law investigator to whom such answers shall be submitted.

(D) If such demand is for the giving of oral testimony, the demand shall–

(i) prescribe a date, time, and place at which oral testimony shall be commenced;

(ii) identify a false claims law investigator who shall conduct the examination and the custodian to whom the transcript of such examination shall be submitted;

(iii) specify that such attendance and testimony are necessary to the conduct of the investigation;

(iv) notify the person receiving the demand of the right to be accompanied by an attorney and any other representative; and

(v) describe the general purpose for which the demand is being issued and the general nature of the testimony, including the primary areas of inquiry, which will be taken pursuant to the demand.

(E) Any civil investigative demand issued under this section which is an express demand for any product of discovery shall not be returned or returnable until 20 days after a copy of such demand has been served upon the person from whom the discovery was obtained.

(F) The date prescribed for the commencement of oral testimony pursuant to a civil investigative demand issued under this section shall be a date which is not less than seven days after the date on which demand is received, unless the Attorney General or an Assistant Attorney General designated by the Attorney General determines that exceptional circumstances are present which warrant the commencement of such testimony within a lesser period of time.

(G) The Attorney General shall not authorize the issuance under this section of more than one civil investigative demand for oral testimony by the same person unless the person requests otherwise or unless the Attorney General, after investigation, notifies that person in writing that an additional demand for oral testimony is necessary.

(b) Protected material or information.

(1) In general. A civil investigative demand issued under subsection (a) may not require the production of any documentary material, the submission of any answers to written interrogatories, or the giving of any oral testimony if such material, answers, or testimony would be protected from disclosure under–

(A) the standards applicable to subpoenas or subpoenas duces tecum issued by a court of the United States to aid in a grand jury investigation; or

(B) the standards applicable to discovery requests under the Federal Rules of Civil Procedure, to the extent that the application of such standards to any such demand is appropriate and consistent with the provisions and purposes of this section.

(2) Effect on other orders, rules, and laws. Any such demand which is an express demand for any product of discovery supersedes any inconsistent order, rule, or provision of law (other than this section) preventing or restraining disclosure of such product of discovery to any person. Disclosure of any product of discovery pursuant to any such express demand does not constitute a waiver of any right or privilege which the person making such disclosure may be entitled to invoke to resist discovery of trial preparation materials.

(c) Service; jurisdiction.

(1) By whom served. Any civil investigative demand issued under subsection (a) may be served by a false claims law investigator, or by a United States marshal or a deputy marshal, at any place within the territorial jurisdiction of any court of the United States.

(2) Service in foreign countries. Any such demand or any petition filed under subsection (j) may be served upon any person who is not found within the territorial jurisdiction of any court of the United States in such manner as the Federal Rules of Civil Procedure prescribe for service in a foreign country. To the extent that the courts of the United States can assert jurisdiction over any such person consistent with due process, the United States District Court for the District of Columbia shall have the same jurisdiction to take any action respecting compliance with this section by any such person that such court would have if such person were personally within the jurisdiction of such court.

(d) Service upon legal entities and natural persons.

(1) Legal entities. Service of any civil investigative demand issued under subsection (a) or of any petition filed under subsection (j) may be made upon a partnership, corporation, association, or other legal entity by–

(A) delivering an executed copy of such demand or petition to any partner, executive officer, managing agent, or general agent of the partnership, corporation, association, or entity, or to any agent authorized by appointment or by law to receive service of process on behalf of such partnership, corporation, association, or entity;

(B) delivering an executed copy of such demand or petition to the principal office or place of business of the partnership, corporation, association, or entity; or

(C) depositing an executed copy of such demand or petition in the United States mails by registered or certified mail, with a return receipt requested, addressed to such partnership, corporation, association, or entity at its principal office or place of business.

(2) Natural persons. Service of any such demand or petition may be made upon any natural person by–

(A) delivering an executed copy of such demand or petition to the person; or

(B) depositing an executed copy of such demand or petition in the United States mails by registered or certified mail, with a return receipt requested, addressed to the person at the person’s residence or principal office or place of business.

(e) Proof of service. A verified return by the individual serving any civil investigative demand issued under subsection (a) or any petition filed under subsection (j) setting forth the manner of such service shall be proof of such service. In the case of service by registered or certified mail, such return shall be accompanied by the return post office receipt of delivery of such demand.

(f) Documentary material.

(1) Sworn certificates. The production of documentary material in response to a civil investigative demand served under this section shall be made under a sworn certificate, in such form as the demand designates, by–

(A) in the case of a natural person, the person to whom the demand is directed, or

(B) in the case of a person other than a natural person, a person having knowledge of the facts and circumstances relating to such production and authorized to act on behalf of such person.

The certificate shall state that all of the documentary material required by the demand and in the possession, custody, or control of the person to whom the demand is directed has been produced and made available to the false claims law investigator identified in the demand.

(2) Production of materials. Any person upon whom any civil investigative demand for the production of documentary material has been served under this section shall make such material available for inspection and copying to the false claims law investigator identified in such demand at the principal place of business of such person, or at such other place as the false claims law investigator and the person thereafter may agree and prescribe in writing, or as the court may direct under subsection (j)(1). Such material shall be made so available on the return date specified in such demand, or on such later date as the false claims law investigator may prescribe in writing. Such person may, upon written agreement between the person and the false claims law investigator, substitute copies for originals of all or any part of such material.

(g) Interrogatories. Each interrogatory in a civil investigative demand served under this section shall be answered separately and fully in writing under oath and shall be submitted under a sworn certificate, in such form as the demand designates, by–

(1) in the case of a natural person, the person to whom the demand is directed, or

(2) in the case of a person other than a natural person, the person or persons responsible for answering each interrogatory.

If any interrogatory is objected to, the reasons for the objection shall be stated in the certificate instead of an answer. The certificate shall state that all information required by the demand and in the possession, custody, control, or knowledge of the person to whom the demand is directed has been submitted. To the extent that any information is not furnished, the information shall be identified and reasons set forth with particularity regarding the reasons why the information was not furnished.

(h) Oral examinations.

(1) Procedures. The examination of any person pursuant to a civil investigative demand for oral testimony served under this section shall be taken before an officer authorized to administer oaths and affirmations by the laws of the United States or of the place where the examination is held. The officer before whom the testimony is to be taken shall put the witness on oath or affirmation and shall, personally or by someone acting under the direction of the officer and in the officer’s presence, record the testimony of the witness. The testimony shall be taken stenographically and shall be transcribed. When the testimony is fully transcribed, the officer before whom the testimony is taken shall promptly transmit a copy of the transcript of the testimony to the custodian. This subsection shall not preclude the taking of testimony by any means authorized by, and in a manner consistent with, the Federal Rules of Civil Procedure.

(2) Persons present. The false claims law investigator conducting the examination shall exclude from the place where the examination is held all persons except the person giving the testimony, the attorney for and any other representative of the person giving the testimony, the attorney for the Government, any person who may be agreed upon by the attorney for the Government and the person giving the testimony, the officer before whom the testimony is to be taken, and any stenographer taking such testimony.

(3) Where testimony taken. The oral testimony of any person taken pursuant to a civil investigative demand served under this section shall be taken in the judicial district of the United States within which such person resides, is found, or transacts business, or in such other place as may be agreed upon by the false claims law investigator conducting the examination and such person.

(4) Transcript of testimony. When the testimony is fully transcribed, the false claims law investigator or the officer before whom the testimony is taken shall afford the witness, who may be accompanied by counsel, a reasonable opportunity to examine and read the transcript, unless such examination and reading are waived by the witness. Any changes in form or substance which the witness desires to make shall be entered and identified upon the transcript by the officer or the false claims law investigator, with a statement of the reasons given by the witness for making such changes. The transcript shall then be signed by the witness, unless the witness in writing waives the signing, is ill, cannot be found, or refuses to sign. If the transcript is not signed by the witness within 30 days after being afforded a reasonable opportunity to examine it, the officer or the false claims law investigator shall sign it and state on the record the fact of the waiver, illness, absence of the witness, or the refusal to sign, together with the reasons, if any, given therefor.

(5) Certification and delivery to custodian. The officer before whom the testimony is taken shall certify on the transcript that the witness was sworn by the officer and that the transcript is a true record of the testimony given by the witness, and the officer or false claims law investigator shall promptly deliver the transcript, or send the transcript by registered or certified mail, to the custodian.

(6) Furnishing or inspection of transcript by witness. Upon payment of reasonable charges therefor, the false claims law investigator shall furnish a copy of the transcript to the witness only, except that the Attorney General, the Deputy Attorney General, or an Assistant Attorney General may, for good cause, limit such witness to inspection of the official transcript of the witness’ testimony.

(7) Conduct of oral testimony.

(A) Any person compelled to appear for oral testimony under a civil investigative demand issued under subsection (a) may be accompanied, represented, and advised by counsel. Counsel may advise such person, in confidence, with respect to any question asked of such person. Such person or counsel may object on the record to any question, in whole or in part, and shall briefly state for the record the reason for the objection. An objection may be made, received, and entered upon the record when it is claimed that such person is entitled to refuse to answer the question on the grounds of any constitutional or other legal right or privilege, including the privilege against self-incrimination. Such person may not otherwise object to or refuse to answer any question, and may not directly or through counsel otherwise interrupt the oral examination. If such person refuses to answer any question, a petition may be filed in the district court of the United States under subsection (j)(1) for an order compelling such person to answer such question.

(B) If such person refuses to answer any question on the grounds of the privilege against self-incrimination, the testimony of such person may be compelled in accordance with the provisions of part V of title 18 [18 USCS §§ 6001 et seq.].

(8) Witness fees and allowances. Any person appearing for oral testimony under a civil investigative demand issued under subsection (a) shall be entitled to the same fees and allowances which are paid to witnesses in the district courts of the United States.

(i) Custodians of documents, answers, and transcripts.

(1) Designation. The Attorney General shall designate a false claims law investigator to serve as custodian of documentary material, answers to interrogatories, and transcripts of oral testimony received under this section, and shall designate such additional false claims law investigators as the Attorney General determines from time to time to be necessary to serve as deputies to the custodian.

(2) Responsibility for materials; disclosure.

(A) A false claims law investigator who receives any documentary material, answers to interrogatories, or transcripts of oral testimony under this section shall transmit them to the custodian. The custodian shall take physical possession of such material, answers, or transcripts and shall be responsible for the use made of them and for the return of documentary material under paragraph (4).

(B) The custodian may cause the preparation of such copies of such documentary material, answers to interrogatories, or transcripts of oral testimony as may be required for official use by any false claims law investigator, or other officer or employee of the Department of Justice. Such material, answers, and transcripts may be used by any such authorized false claims law investigator or other officer or employee in connection with the taking of oral testimony under this section.

(C) Except as otherwise provided in this subsection, no documentary material, answers to interrogatories, or transcripts of oral testimony, or copies thereof, while in the possession of the custodian, shall be available for examination by any individual other than a false claims law investigator or other officer or employee of the Department of Justice authorized under subparagraph (B). The prohibition in the preceding sentence on the availability of material, answers, or transcripts shall not apply if consent is given by the person who produced such material, answers, or transcripts, or, in the case of any product of discovery produced pursuant to an express demand for such material, consent is given by the person from whom the discovery was obtained. Nothing in this subparagraph is intended to prevent disclosure to the Congress, including any committee or subcommittee of the Congress, or to any other agency of the United States for use by such agency in furtherance of its statutory responsibilities.

(D) While in the possession of the custodian and under such reasonable terms and conditions as the Attorney General shall prescribe–

(i) documentary material and answers to interrogatories shall be available for examination by the person who produced such material or answers, or by a representative of that person authorized by that person to examine such material and answers; and

(ii) transcripts of oral testimony shall be available for examination by the person who produced such testimony, or by a representative of that person authorized by that person to examine such transcripts.

(3) Use of material, answers, or transcripts in other proceedings. Whenever any attorney of the Department of Justice has been designated to appear before any court, grand jury, or Federal agency in any case or proceeding, the custodian of any documentary material, answers to interrogatories, or transcripts of oral testimony received under this section may deliver to such attorney such material, answers, or transcripts for official use in connection with any such case or proceeding as such attorney determines to be required. Upon the completion of any such case or proceeding, such attorney shall return to the custodian any such material, answers, or transcripts so delivered which have not passed into the control of such court, grand jury, or agency through introduction into the record of such case or proceeding.

(4) Conditions for return of material. If any documentary material has been produced by any person in the course of any false claims law investigation pursuant to a civil investigative demand under this section, and–

(A) any case or proceeding before the court or grand jury arising out of such investigation, or any proceeding before any Federal agency involving such material, has been completed, or

(B) no case or proceeding in which such material may be used has been commenced within a reasonable time after completion of the examination and analysis of all documentary material and other information assembled in the course of such investigation,

the custodian shall, upon written request of the person who produced such material, return to such person any such material (other than copies furnished to the false claims law investigator under subsection (f)(2) or made for the Department of Justice under paragraph (2)(B)) which has not passed into the control of any court, grand jury, or agency through introduction into the record of such case or proceeding.

(5) Appointment of successor custodians. In the event of the death, disability, or separation from service in the Department of Justice of the custodian of any documentary material, answers to interrogatories, or transcripts of oral testimony produced pursuant to a civil investigative demand under this section, or in the event of the official relief of such custodian from responsibility for the custody and control of such material, answers, or transcripts, the Attorney General shall promptly–

(A) designate another false claims law investigator to serve as custodian of such material, answers, or transcripts, and

(B) transmit in writing to the person who produced such material, answers, or testimony notice of the identity and address of the successor so designated.

Any person who is designated to be a successor under this paragraph shall have, with regard to such material, answers, or transcripts, the same duties and responsibilities as were imposed by this section upon that person’s predecessor in office, except that the successor shall not be held responsible for any default or dereliction which occurred before that designation.

(j) Judicial proceedings.

(1) Petition for enforcement. Whenever any person fails to comply with any civil investigative demand issued under subsection (a), or whenever satisfactory copying or reproduction of any material requested in such demand cannot be done and such person refuses to surrender such material, the Attorney General may file, in the district court of the United States for any judicial district in which such person resides, is found, or transacts business, and serve upon such person a petition for an order of such court for the enforcement of the civil investigative demand.

(2) Petition to modify or set aside demand.

(A) Any person who has received a civil investigative demand issued under subsection (a) may file, in the district court of the United States for the judicial district within which such person resides, is found, or transacts business, and serve upon the false claims law investigator identified in such demand a petition for an order of the court to modify or set aside such demand. In the case of a petition addressed to an express demand for any product of discovery, a petition to modify or set aside such demand may be brought only in the district court of the United States for the judicial district in which the proceeding in which such discovery was obtained is or was last pending. Any petition under this subparagraph must be filed–

(i) within 20 days after the date of service of the civil investigative demand, or at any time before the return date specified in the demand, whichever date is earlier, or

(ii) within such longer period as may be prescribed in writing by any false claims law investigator identified in the demand.

(B) The petition shall specify each ground upon which the petitioner relies in seeking relief under subparagraph (A), and may be based upon any failure of the demand to comply with the provisions of this section or upon any constitutional or other legal right or privilege of such person. During the pendency of the petition in the court, the court may stay, as it deems proper, the running of the time allowed for compliance with the demand, in whole or in part, except that the person filing the petition shall comply with any portions of the demand not sought to be modified or set aside.

(3) Petition to modify or set aside demand for product of discovery.

(A) In the case of any civil investigative demand issued under subsection (a) which is an express demand for any product of discovery, the person from whom such discovery was obtained may file, in the district court of the United States for the judicial district in which the proceeding in which such discovery was obtained is or was last pending, and serve upon any false claims law investigator identified in the demand and upon the recipient of the demand, a petition for an order of such court to modify or set aside those portions of the demand requiring production of any such product of discovery. Any petition under this subparagraph must be filed–

(i) within 20 days after the date of service of the civil investigative demand, or at any time before the return date specified in the demand, whichever date is earlier, or

(ii) within such longer period as may be prescribed in writing by any false claims law investigator identified in the demand.

(B) The petition shall specify each ground upon which the petitioner relies in seeking relief under subparagraph (A), and may be based upon any failure of the portions of the demand from which relief is sought to comply with the provisions of this section, or upon any constitutional or other legal right or privilege of the petitioner. During the pendency of the petition, the court may stay, as it deems proper, compliance with the demand and the running of the time allowed for compliance with the demand.

(4) Petition to require performance by custodian of duties. At any time during which any custodian is in custody or control of any documentary material or answers to interrogatories produced, or transcripts of oral testimony given, by any person in compliance with any civil investigative demand issued under subsection (a), such person, and in the case of an express demand for any product of discovery, the person from whom such discovery was obtained, may file, in the district court of the United States for the judicial district within which the office of such custodian is situated, and serve upon such custodian, a petition for an order of such court to require the performance by the custodian of any duty imposed upon the custodian by this section.

(5) Jurisdiction. Whenever any petition is filed in any district court of the United States under this subsection, such court shall have jurisdiction to hear and determine the matter so presented, and to enter such order or orders as may be required to carry out the provisions of this section. Any final order so entered shall be subject to appeal under section 1291 of title 28. Any disobedience of any final order entered under this section by any court shall be punished as a contempt of the court.

(6) Applicability of Federal Rules of Civil Procedure. The Federal Rules of Civil Procedure shall apply to any petition under this subsection, to the extent that such rules are not inconsistent with the provisions of this section.

(k) Disclosure exemption. Any documentary material, answers to written interrogatories, or oral testimony provided under any civil investigative demand issued under subsection (a) shall be exempt from disclosure under section 552 of title 5.

(l) Definitions. For purposes of this section–

(1) the term “false claims law” means–

(A) this section and sections 3729 through 3732; and

(B) any Act of Congress enacted after the date of the enactment of this section [enacted Oct. 27, 1986] which prohibits, or makes available to the United States in any court of the United States any civil remedy with respect to, any false claim against, bribery of, or corruption of any officer or employee of the United States;

(2) the term “false claims law investigation” means any inquiry conducted by any false claims law investigator for the purpose of ascertaining whether any person is or has been engaged in any violation of a false claims law;

(3) the term “false claims law investigator” means any attorney or investigator employed by the Department of Justice who is charged with the duty of enforcing or carrying into effect any false claims law, or any officer or employee of the United States acting under the direction and supervision of such attorney or investigator in connection with a false claims law investigation;

(4) the term “person” means any natural person, partnership, corporation, association, or other legal entity, including any State or political subdivision of a State;

(5) the term “documentary material” includes the original or any copy of any book, record, report, memorandum, paper, communication, tabulation, chart, or other document, or data compilations stored in or accessible through computer or other information retrieval systems, together with instructions and all other materials necessary to use or interpret such data compilations, and any product of discovery;

(6) the term “custodian” means the custodian, or any deputy custodian, designated by the Attorney General under subsection (i)(1);

(7) the term “product of discovery” includes–

(A) the original or duplicate of any deposition, interrogatory, document, thing, result of the inspection of land or other property, examination, or admission, which is obtained by any method of discovery in any judicial or administrative proceeding of an adversarial nature;

(B) any digest, analysis, selection, compilation, or derivation of any item listed in subparagraph (A); and

(C) any index or other manner of access to any item listed in subparagraph (A); and

(8) the term “official use” means any use that is consistent with the law, and the regulations and policies of the Department of Justice, including use in connection with internal Department of Justice memoranda and reports; communications between the Department of Justice and a Federal, State, or local government agency, or a contractor of a Federal, State, or local government agency, undertaken in furtherance of a Department of Justice investigation or prosecution of a case; interviews of any qui tam relator or other witness; oral examinations; depositions; preparation for and response to civil discovery requests; introduction into the record of a case or proceeding; applications, motions, memoranda and briefs submitted to a court or other tribunal; and communications with Government investigators, auditors, consultants and experts, the counsel of other parties, arbitrators and mediators, concerning an investigation, case or proceeding.

HISTORY:

(Added Oct. 27, 1986, P.L. 99-562, § 6(a), 100 Stat. 3159.)
(As amended May 20, 2009, P.L. 111-21, § 4(c), 123 Stat. 1623.)

Recent DOJ Hospice Fraud Medicare-Medicaid Enforcement Cases

The DOJ and U.S. Attorney’s Offices have recently been stepping up their enforcement and prosecution of hospice fraud cases. A summary of recent hospice fraud prosecutions involving Medicare and/or Medicaid fraud is set forth below:

In November 2009, Kaiser Foundation Hospitals – Kaiser Sunnyside Medical Center, Kaiser Foundation Health Plan of the Northwest and Northwest Permanente P.C., Physicians & Surgeons (collectively, “Kaiser”), agreed to pay $1.83 million to settle FCA claims concerning the hospice’s Medicare billing practices between 2000 and 2004. The government contended that the Oregon hospice failed to have the necessary written certifications of terminal illness from both the hospice director and the beneficiary’s primary physician prior to billing Medicare. To be eligible for Medicare benefits for hospice care, the patient must be eligible for Medicare Part A and be terminally ill. 42 C.F.R. § 418.20. Terminal illness is established when “the individual has a medical prognosis that his or her life expectancy is 6 months or less if the illness runs its normal course.” 42 C.F.R. § 418.3; 42 U.S.C. § 1395x(d)(d)(3). The patient’s physician and the medical director of the hospice must certify in writing that the patient is “terminally ill.” 42 U.S.C. § 1395f(a)(7); 42 C.F.R. § 418.20. After a patient’s initial certification, Medicare provides for two ninety-day benefit periods followed by an unlimited number of sixty-day benefit periods. 42 U.S.C. § 1395d(a)(4). At the end of each ninety- or sixty-day period, the patient can be re-certified only if at that time he or she has less than six months to live if the illness runs its normal course. 42 U.S.C. § 1395f(a)(7)(A). The written certification and re-certifications must be maintained in the patient’s medical records. 42 C.F.R. § 418.23. A written plan of care must be established for each patient setting forth the types of hospice care services the patient is scheduled to receive, 42 U.S.C. § 1395f(a)(7)(B), and the hospice care has to be provided in accordance with such plan of care. 42 U.S.C. § 1395f(a)(7)(C); 42 C.F.R. § 418.56. Clinical records for each hospice patient must be maintained by the hospice, including plan of care, assessments, clinical notes, signed notice of election, patient responses to medication and therapy, physician certifications and re-certifications, outcome data, advance directives and physician orders. 42 C.F.R. § 418.104. Medicare requires that prior to a hospice billing for a beneficiary’s care, the hospice must have both of these certifications to show that hospice care is medically necessary. DOJ press release is at http://www.justice.gov/usao/or/PressReleases/2009/20091112_Kaiser.html.

In 2008, S-Hospice Group, Inc. d/b/a Home Hospice of North Texas, and its principal owners, Andrew P. Milligan and Neil F. Livingston, settled an FCA claim for $500,000 regarding allegations of fraudulently billing Medicare regarding hospice services. the U.S. alleged Home Hospice: (1) was paid for claims for unallowable hospice items and services; (2) misrepresented to Medicare the medical conditions of patients to ensure such patients would be or continue to be patients; (3) misrepresented to physicians the medical conditions of patients to ensure they would certify or continue to certify that patients were appropriate for admission; and (4) misrepresented the purpose of and coverage criteria of Medicare’s hospice benefit to ensure patients were or continued to be admitted for hospice care. The defendants cooperated with the government during its investigation, and, due to their demonstrated financial problems, the amount of the settlement was substantially reduced and they were allowed to make settlement payments over a several-year time period. The defendants also entered into a five-year Corporate Integrity Agreement with OIG to ensure compliance with applicable Medicare hospice statutes and regulations.

In 2006, Odyssey Healthcare, Inc., a national hospice provider based in Dallas, Texas, paid $12.9 million to settle a qui tam suit for false claims under the FCA. The hospice fraud allegations were generally that Odyssey billed Medicare for providing hospice care to patients when they were not terminally ill and thus ineligible for Medicare hospice benefits. The Medicare hospice regulations, at 42 C.F.R. § 418.200, require that hospice services must be reasonable and necessary for the palliation and management of the terminal illness as well as related conditions. The patient must elect hospice care in accordance with 42 C.F.R. § 418.24. A plan of care must be established for the hospice patient and periodically reviewed by the attending physician, the medical director, and the interdisciplinary group of the hospice program as set forth in 42 C.F.R. § 418.56. The plan of care must be established before hospice care is provided. The services provided must be consistent with the plan of care. A certification that the patient is terminally ill must be completed as set forth in section 42 C.F.R. § 418.22. A Corporate Integrity Agreement was also a part of the settlement. The hospice fraud relator, a former regional vice president of Odyssey, received about $2.3 million for her qui tam suit against the defendant. United States ex rel. JoAnne Russell v. Odyssey Healthcare, Inc., Civil Action No. 2:03-cv-00865-AEG (E.D.Wis.).The Department of Justice press release is found at http://www.justice.gov/usao/txn/PressRel08/hospice_settlement_pr.html.

In 2005, Faith Hospice, Inc., settled claims regarding an FCA action for almost $600,000. The hospice fraud allegations were generally that Faith Hospice billed Medicare for providing hospice care to patients more than half of whom were not terminally ill and thus not eligible for hospice Medicare and Medicaid benefits. See Dep’t. of Health and Human Servs. and Dep’t of Justice, Health Care Fraud and Abuse Program Annual Report for Fiscal Year 2006 22 (2007).

In 2000, Michigan osteopath Donald S. Dreyfuss, who earlier pleaded guilty to several health care fraud charges, including violation of the AKS, 42 U.S.C. § 1320a-7b(b)(1)(B), for receiving illegal kickbacks from a hospice for recommending the hospice to the staff of the osteopath’s nursing home staff, settled civil FCA claims for $2 million. The defendant was sentenced in the criminal case to two years of home confinement and five years probation, and ordered to pay a criminal fine of $213,030.80 and restitution in the amount of $522,225.00. In addition to the kickbacks, the defendant knowingly billed Medicare and Medicaid for providing physician services to nursing home patients when he had never actually provided such services, the services were not medically necessary, or the complexity of the services was exaggerated. The government also alleged that, in connection with a hospice, Dr. Dreyfuss knowingly certified that patients were eligible for Medicare or Medicaid services when, in fact, they were not. United States v. Dreyfuss, Criminal No. 2:98-cr-80617-JCO (E.D.Mich.). The Department of Justice press release is found at http://www.justice.gov/opa/pr/2000/December/712civ.htm.

Hospice fraud is a growing problem in South Carolina and throughout the United States. South Carolina hospice patients, hospice employees, and their SC lawyers and attorneys, should be familiar with the basics of the hospice care industry, hospice eligibility under the Medicare and Medicaid programs, and typical hospice fraud schemes. Hospice organizations should take steps to ensure full compliance with Medicare/Medicaid hospice billing requirements to avoid hospice fraud allegations and FCA litigation.

© 2010 Joseph P. Griffith, Jr.

Contact the Joe Griffith Law Firm immediately to discuss your legal rights.

Joseph P. Griffith, Jr.
SC Qui Tam-Whistleblower Attorney
SC Medicare-Medicaid Fraud Lawyer
SC Defense Contractor Fraud Law Firm
SC Hospice Fraud Lawyer
Joe Griffith Law Firm, LLC
7 State Street
Charleston, South Carolina 29401
(843) 225-5563
http://www.joegriffith.com

South Carolina Attorney Joe Griffith is a former SC federal prosecutor who handles qui tam, whistleblower, False Claims Act, Medicare Fraud, Medicaid Fraud, and general fraud cases in South Carolina and the United States. As a former federal prosecutor who has litigated nearly 30 federal court trials, top-rated attorney Joseph P. Griffith, Jr. focuses the great majority of his practice on federal White Collar Criminal defense. He has handled a wide range of White Collar Criminal cases, with particular emphasis on antitrust crimes, bank fraud, corporate fraud, environmental crimes, false claims act/government fraud, health care fraud, mail/wire fraud, securities/stock fraud and tax fraud crimes. Joseph P. Griffith, Jr. has received Martindale-Hubbell’s highest AV rating, has received AVVO’s highest 10/10 rating, is a member of the Bar Register of Pre-eminent Lawyers, has been chosen a South Carolina Super Lawyer, and has been chosen one of the Best Lawyers in America. He has the experience to adroitly guide you or your company through the difficult process of a White Collar criminal investigation, or False Claims Act litigation and, if necessary, forcefully litigate your case in the event of a prosecution.

© 2010 Joseph P. Griffith, Jr.

While most hospice health care organizations provide appropriate and ethical treatment for their hospice patients, because hospice eligibility under Medicare and Medicaid involves clinical judgments which may result in the payments of large sums of money from the federal government, there are tremendous opportunities for fraudulent practices and false billing claims by unscrupulous hospice care providers. As recent federal hospice fraud enforcement actions have demonstrated, the number of health care companies and individuals who are willing to try to defraud the Medicare and Medicaid hospice benefits programs is on the rise.

A recent example of hospice fraud involving a South Carolina hospice is Southern Care, Inc., a hospice company that in 2009 paid $24.7 million to settle an FCA case. The defendant operated hospices in 14 other states, too, including Alabama, Georgia, Indiana, Iowa, Kansas, Louisiana, Michigan, Mississippi, Missouri, Ohio, Pennsylvania, Texas, Virginia and Wisconsin. The alleged frauds were that patients were not eligible for hospice, to wit, were not terminally ill, lack of documentation of terminal illnesses, and that the company marketed to potential patients with the promise of free medications, supplies, and the provision of home health aides. Southern Care also entered into a 5-year Corporate Integrity Agreement with the OIG as part of the settlement. The qui tam relators received almost $5 million.

Understanding the Consequences of Hospice Fraud and Whistleblower Actions

U.S. and South Carolina consumers, including hospice patients and their family members, and health care employees who are employed in the hospice industry, as well as their SC lawyers and attorneys, should familiarize themselves with the basics of the hospice care industry, hospice eligibility under the Medicare and Medicaid programs, and hospice fraud schemes that have developed across the country. Consumers need to protect themselves from unethical hospice providers, and hospice employees need to guard against knowingly or unwittingly participating in health care fraud against the federal government because they may subject themselves to administrative sanctions, including lengthy exclusions from working in an organization which receives federal funds, enormous civil monetary penalties and fines, and criminal sanctions, including incarceration. When a hospice employee discovers fraudulent conduct involving Medicare or Medicaid billings or claims, the employee should not participate in such behavior, and it is imperative that the unlawful conduct be reported to law enforcement and/or regulatory authorities. Not only does reporting such fraudulent Medicare or Medicaid practices shield the hospice employee from exposure to the foregoing administrative, civil and criminal sanctions, but hospice fraud whistleblowers may benefit financially under the reward provisions of the federal False Claims Act, 31 U.S.C. §§ 3729-3732, by bringing false claims suits, also known as qui tam or whistleblower suits, against their employers on behalf of the United States.

Types of Hospice Care Services

Hospice care is a type of health care service for patients who are terminally ill. Hospices also provide support services for the families of terminally ill patients. This care includes physical care and counseling. Hospice care is normally provided by a public agency or private company approved by Medicare and Medicaid. Hospice care is available for all age groups, including children, adults, and the elderly who are in the final stages of life. The purpose of hospice is to provide care for the terminally ill patient and his or her family and not to cure the terminal illness.

If a patient qualifies for hospice care, the patient can receive medical and support services, including nursing care, medical social services, doctor services, counseling, homemaker services, and other types of services. The hospice patient will have a team of doctors, nurses, home health aides, social workers, counselors and trained volunteers to help the patient and his or her family members cope with the symptoms and consequences of the terminal illness. While many hospice patients and their families can receive hospice care in the comfort of their home, if the hospice patient’s condition deteriorates, the patient can be transferred to a hospice facility, hospital, or nursing home to receive hospice care.

Hospice Care Statistics

The number of days that a patient receives hospice care is often referenced as the “length of stay” or “length of service.” The length of service is dependent on a number of different factors, including but not limited to, the type and stage of the disease, the quality of and access to health care providers before the hospice referral, and the timing of the hospice referral. In 2008, the median length of stay for hospice patients was about 21 days, the average length of stay was about 69 days, almost 35% of hospice patients died or were discharged within 7 days of the hospice referral, and only about 12% of hospice patients survived longer than 180 days.

Most hospice care patients receive hospice care in private homes (40%). Other locations where hospice services are provided are nursing homes (22%), residential facilities (6%), hospice inpatient facilities (21%), and acute care hospitals (10%). Hospice patients are generally the elderly, and hospice age group percentages are 34 years or less (1%), 35 – 64 years (16%), 65 – 74 years (16%), 75 – 84 years (29%), and over 85 years (38%). As for the terminal illness resulting in a hospice referral, cancer is the diagnosis for almost 40% of hospice patients, followed by debility unspecified (15%), heart disease (12%), dementia (11%), lung disease (8%), stroke (4%) and kidney disease (3%). Medicare pays the great majority of hospice care expenses (84%), followed by private insurance (8%), Medicaid (5%), charity care (1%) and self pay (1%).

As of 2008, there were approximately 4,700 locations which were providing hospice care in the United States, which represented about a 50% increase over ten years. There were about 3,700 companies and organizations which were providing hospice services in the United States. About half of the hospice care providers in the United States are for-profit organizations, and about half are non-profit organizations.

General Overview of the Medicare and Medicaid Programs

In 1965, Congress established the Medicare Program to provide health insurance for the elderly and disabled. Payments from the Medicare Program arise from the Medicare Trust fund, which is funded by government contributions and through payroll deductions from American workers. The Centers for Medicare and Medicaid Services (CMS), previously known as the Health Care Financing Administration (HCFA), is the federal agency within the United States Department of Health and Human Services (HHS) that administers the Medicare program and works in partnership with state governments to administer Medicaid.

In 2007, CMS reorganized its ten geography-based field offices to a Consortia structure based on the agency’s key lines of business: Medicare health plans, Medicare financial management, Medicare fee for service operations, Medicaid and children’s health, survey & certification and quality improvement. The CMS consortia consist of the following:

• Consortium for Medicare Health Plans Operations
• Consortium for Financial Management and Fee for Service Operations
• Consortium for Medicaid and Children’s Health Operations
• Consortium for Quality Improvement and Survey & Certification Operations

Each consortium is led by a Consortium Administrator (CA) who serves as the CMS’s national focal point in the field for their business line. Each CA is responsible for consistent implementation of CMS programs, policy and guidance across all ten regions for matters pertaining to their business line. In addition to responsibility for a business line, each CA also serves as the Agency’s senior management official for two or three Regional Offices (ROs), representing the CMS Administrator in external matters and overseeing administrative operations.

Much of the daily administration and operation of the Medicare Program is managed through private insurance companies that contract with the Government. These private insurance companies, sometimes called “Medicare Carriers” or “Fiscal Intermediaries,” are charged with and responsible for accepting Medicare claims, determining coverage, and making payments from the Medicare Trust Fund. These carriers, including Palmetto Government Benefits Administrators (hereinafter “PGBA”), a division of Blue Cross and Blue Shield of South Carolina, operate pursuant to 42 U.S.C. §§ 1395h and 1395u and rely on the good faith and truthful representations of health care providers when processing claims.

Over the past forty years, the Medicare Program has enabled the elderly and disabled to obtain necessary medical services from medical providers throughout the United States. Critical to the success of the Medicare Program is the fundamental concept that health care providers accurately and honestly submit claims and bills to the Medicare Trust Fund only for those medical treatments or services that are legitimate, reasonable and medically necessary, in full compliance with all laws, regulations, rules, and conditions of participation, and, further, that medical providers not take advantage of their elderly and disabled patients.

The Medicaid Program is available only to certain low-income individuals and families who must meet eligibility requirements set forth by federal and state law. Each state sets its own guidelines regarding eligibility and services. Although administered by individual states, the Medicaid Program is funded primarily by the federal government. Medicaid does not pay money to patients; rather, it sends payments directly to the patient’s health care providers. Like Medicare, the Medicaid Program depends on health care providers to accurately and honestly submit claims and bills to program administrators only for those medical treatments or services that are legitimate, reasonable and medically necessary, in full compliance with all laws, regulations, rules, and conditions of participation, and, further, that medical providers not take advantage of their indigent patients.

Medicare & Medicaid Hospice Laws Which Affect SC Hospices

Hospice fraud occurs when hospice organizations, by and through their employees, agents and owners, knowingly violate the terms and conditions of the applicable Medicare and Medicaid hospice statutes, regulations, rules and conditions of participation. In order to be able to recognize hospice fraud, hospices, hospice patients, hospice employees and their attorneys and lawyers must know the Medicare laws and requirements relating to hospice care benefits.
Medicare’s two main sources of authorization for hospice benefits are found in the Social Security Act and the U.S. Code of Federal Regulations. The statutory provisions are primarily found at 42 U.S.C. §§ 1395d, 1395e, 1395f(a)(7), 1395x(d)(d), and 1395y, and the regulatory provisions are found at 42 C.F.R. Part 418.

To be eligible for Medicare benefits for hospice care, the patient must be eligible for Medicare Part A and be terminally ill. 42 C.F.R. § 418.20. Terminal illness is established when “the individual has a medical prognosis that his or her life expectancy is 6 months or less if the illness runs its normal course.” 42 C.F.R. § 418.3; 42 U.S.C. § 1395x(d)(d)(3). The patient’s physician and the medical director of the hospice must certify in writing that the patient is “terminally ill.” 42 U.S.C. § 1395f(a)(7); 42 C.F.R. § 418.20. After a patient’s initial certification, Medicare provides for two ninety-day benefit periods followed by an unlimited number of sixty-day benefit periods. 42 U.S.C. § 1395d(a)(4). At the end of each ninety- or sixty-day period, the patient can be re-certified only if at that time he or she has less than six months to live if the illness runs its normal course. 42 U.S.C. § 1395f(a)(7)(A). The written certification and re-certifications must be maintained in the patient’s medical records. 42 C.F.R. § 418.23. A written plan of care must be established for each patient setting forth the types of hospice care services the patient is scheduled to receive, 42 U.S.C. § 1395f(a)(7)(B), and the hospice care has to be provided in accordance with such plan of care. 42 U.S.C. § 1395f(a)(7)(C); 42 C.F.R. § 418.56. Clinical records for each hospice patient must be maintained by the hospice, including plan of care, assessments, clinical notes, signed notice of election, patient responses to medication and therapy, physician certifications and re-certifications, outcome data, advance directives and physician orders. 42 C.F.R. § 418.104.

The hospice must obtain a written notice of election from the patient to elect to receive Medicare hospice benefits. 42 C.F.R. § 418.24. Importantly, once a patient has elected to receive hospice care benefits, the patient waives Medicare benefits for curative treatment for the terminal disease upon which is the admitting diagnosis. 42 C.F.R. § 418.24(d).

The hospice must designate an Interdisciplinary Group (IDG) or groups composed of individuals who work together to meet the physical, medical, psychosocial, emotional, and spiritual needs of the hospice patients and families facing terminal illness and bereavement. 42 C.F.R. § 418.56. The IDG members must provide the care and services offered by the hospice, and the group, in its entirety, must supervise the care and services. A registered nurse that is a member of the IDG must be designated to provide coordination of care and to ensure continuous assessment of each patient’s and family’s needs and implementation of the interdisciplinary plan of care. The interdisciplinary group must include, but is not limited to, the following qualified and competent professionals: (i) A doctor of medicine or osteopathy (who is an employee or under contract with the hospice); (ii) A registered nurse; (iii) A social worker; and, (iv) A pastoral or other counselor. 42 C.F.R. § 418.56.

The Medicare hospice regulations, at 42 C.F.R. § 418.200, summarize the requirements for hospice coverage in pertinent part as follows:
To be covered, hospice services must meet the following requirements. They must be reasonable and necessary for the palliation and management of the terminal illness as well as related conditions. The individual must elect hospice care in accordance with §418.24. A plan of care must be established and periodically reviewed by the attending physician, the medical director, and the interdisciplinary group of the hospice program as set forth in §418.56. That plan of care must be established before hospice care is provided. The services provided must be consistent with the plan of care. A certification that the individual is terminally ill must be completed as set forth in section §418.22.

The Social Security Act, at 42 U.S.C. § 1395y(a), limits Medicare hospice benefits, providing in pertinent part as follows:
“Notwithstanding any other provision of this title, no payment may be made under part A or part B for any expenses incurred for items or services-… (C) in the case of hospice care, which are not reasonable and necessary for the palliation or management of terminal illness….” 42 C.F.R. § 418.50 (hospice care must be “reasonable and necessary for the palliation and management of terminal illness”). Palliative care is defined in the regulations as “patient and family-centered care that optimizes quality of life by anticipating, preventing, and treating suffering. Palliative care throughout the continuum of illness involves addressing physical, intellectual, emotional, social, and spiritual needs and to facilitate patient autonomy, access to information, and choice.” 42 C.F.R. § 418.3.

Medicare pays hospice agencies a daily rate for each day a beneficiary is enrolled in the hospice benefit and receives hospice care. The daily payments are made regardless of the amount of services furnished on a given day and are intended to cover costs that the hospice incurs in furnishing services identified in the patient’s plan of care. There are four levels of payments which are made based on the amount of care required to meet beneficiary and family needs. 42 C.F.R. § 418.302; CMS Hospice Fact Sheet, November 2009. These four levels, and the corresponding 2010 daily rates, are as follows: routine home care ($142.91); continuous home care ($834.10); inpatient respite care ($147.83); and, general inpatient care ($635.74).

The aggregate annual cap per patient in 2009 was $23,014.50. This cap is determined by adjusting the original hospice patient cap of $6,500, set in 1984, by the Consumer Price Index. See CMS Internet-Only Manual 100-04, chapter 11, section 80.2; 42 U.S.C. § 1395f(i); 42 C.F.R. § 418.309. The Medicare Claims Processing Manual, at Chapter 11 – Processing Hospice Claims, in Section 80.2, entitled “Cap on Overall Hospice Reimbursement,” provides in pertinent part as follows: “Any payments in excess of the cap must be refunded by the hospice.”

Hospice patients are responsible for Medicare co-insurance payments for drugs and respite care, and the hospice may charge the patient for these co-insurance payments. However, the co-insurance payments for drugs are limited to the lesser of $5 or 5% of the cost of the drugs to the hospice, and the co-insurance payments for respite care are generally 5% of the payment made by Medicare for such services. 42 C.F.R. § 418.400.

The Medicare and Medicaid programs require institutional health care providers, including hospice organizations, to file an enrollment application in order to qualify to receive the programs’ benefits. As part of these enrollment applications, the hospice providers certify that they will comply with Medicare and Medicaid laws, regulations, and program instructions, and further certify that they understand that payment of a claim by Medicare and Medicaid is conditioned upon the claim and underlying transaction complying with such program laws and requirements. The Medicare Enrollment Application which hospice providers must execute, Form CMS-855A, states in part as follows: “I agree to abide by the Medicare laws, regulations and program instructions that apply to this provider. The Medicare laws, regulations, and program instructions are available through the Medicare contractor. I understand that payment of a claim by Medicare is conditioned upon the claim and the underlying transaction complying with such laws, regulations, and program instructions (including, but not limited to, the Federal AKS and Stark laws), and on the provider’s compliance with all applicable conditions of participation in Medicare.”

Hospices are generally required to bill Medicare on a monthly basis. See the Medicare Claims Processing Manual, at Chapter 11 – Processing Hospice Claims, in Section 90 – Frequency of Billing. Hospices generally file their hospice Medicare claims with their Fiscal Intermediary or Medicare Carrier pursuant to the CMS Claims Manual Form CMS 1450 (sometime also called a Form UB-04 or Form UB-92), either in paper or electronic form. These claim forms contain representations and certifications which state in pertinent part that: (1) misrepresentations or falsifications of essential information may serve as the basis for civil monetary penalties and criminal convictions; (2) submission of the claim constitutes certification that the billing information is true, accurate and complete; (3) the submitter did not knowingly or recklessly disregard or misrepresent or conceal material facts; (4) all required physician certifications and re-certifications are on file; (5) all required patient signatures are on file; and, (6) for Medicaid purposes, the submitter understands that because payment and satisfaction of this claim will be from Federal and State funds, any false statements, documents, or concealment of a material fact are subject to prosecution under applicable Federal or State Laws.

Hospices must also file with CMS an annual cost and data report of Medicare payments received. 42 U.S.C. § 1395f(i)(3); 42 U.S.C. § 1395x(d)(d)(4). The annual hospice cost and data reports, Form CMS 1984-99, contain representations and certifications which state in pertinent part that: (1) misrepresentations or falsifications of information contained in the cost report may be punishable by criminal, civil and administrative actions, including fines and/or imprisonment; (2) if any services identified in the report were the product of a direct or indirect kickback or were otherwise illegal, then criminal, civil and administrative actions may result, including fines and/or imprisonment; (3) the report is a true, correct and complete statement prepared from the books and records of the provider in accordance with applicable instructions, except as noted; and, (4) the signing officer is familiar with the laws and regulations regarding the provision of health care services and that the services identified in this cost report were provided in compliance with such laws and regulations.

Hospice Anti-Fraud Enforcement Statutes

There are a number of federal criminal, civil and administrative enforcement provisions set forth in the Medicare statutes which are aimed at preventing fraudulent conduct, including hospice fraud, and which help maintain program integrity and compliance. Some of the more prominent enforcement provisions of the Medicare statutes include the following: 42 U.S.C. § 1320a-7b (Criminal fraud and anti-kickback penalties); 42 U.S.C. § 1320a-7a and 42 U.S.C. § 1320a-8 (Civil monetary penalties for fraud); 42 U.S.C. § 1320a-7 (Administrative exclusions from participation in Medicare/Medicaid programs for fraud); 42 U.S.C. § 1320a-4 (Administrative subpoena power for the Comptroller General).

Other criminal enforcement provisions which are used to combat Medicare and Medicaid fraud, including hospice fraud, include the following: 18 U.S.C. § 1347 (General health care fraud criminal statute); 21 U.S.C. §§ 353, 333 (Prescription Drug Marketing Act); 18 U.S.C. § 669 (Theft or Embezzlement in Connection with Health Care); 18 U.S.C. § 1035 (False statements relating to Health Care); 18 U.S.C. § 2 (Aiding and Abetting); 18 U.S.C. § 3 (Accessory after the Fact); 18 U.S.C. § 4 (Misprision of a Felony); 18 U.S.C. § 286 (Conspiracy to defraud the Government with respect to Claims); 18 U.S.C. § 287 (False, Fictitious or Fraudulent Claims); 18 U.S.C. § 371 (Criminal Conspiracy); 18 U.S.C. § 1001 (False Statements); 18 U.S.C. § 1341 (Mail Fraud); 18 U.S.C. § 1343 (Wire Fraud); 18 U.S.C. § 1956 (Money Laundering); 18 U.S.C. § 1957 (Money Laundering); and, 18 U.S.C. § 1964 (Racketeer Influenced and Corrupt Organizations (“RICO”)).

The Federal False Claims Act (FCA)

Hospice fraud whistleblowers may benefit financially under the reward provisions of the federal False Claims Act, 31 U.S.C. §§ 3729-3732, by bringing false claims suits, also known as qui tam or whistleblower suits, against their employers on behalf of the United States. The plaintiff in a hospice fraud whistleblower suit is also known as a relator. The most common FCA provisions upon which hospice fraud qui tam or whistleblower relators rely are found in 31 U.S.C. § 3729: (A) knowingly presents, or causes to be presented, a false or fraudulent claim for payment or approval; (B) knowingly makes, uses, or causes to be made or used, a false record or statement material to a false or fraudulent claim; (C) conspires to commit a violation of subparagraph (A), (B), (D), (E), (F), or (G);…, and, (G) knowingly makes, uses, or causes to be made or used, a false record or statement material to an obligation to pay or transmit money or property to the Government, or knowingly conceals or knowingly and improperly avoids or decreases an obligation to pay or transmit money or property to the Government…. There is no requirement to prove specific intent to defraud. Rather, it is only necessary to prove actual knowledge of the false claims, false statements, or false records, or the defendant’s deliberate indifference or reckless disregard of the truth or falsity of the information. 31 U.S.C. § 3729(b).

The FCA anti-retaliation provision protects the hospice whistleblower from retaliation from the hospice when the employee (or a contractor) “is discharged, demoted, suspended, threatened, harassed, or in any other manner discriminated against in the terms and conditions of employment” for taking action to try to stop the fraudulent activity. 31 U.S.C. § 3730(h). A hospice employee’s relief includes reinstatement, 2 times the amount of back pay, interest on the back pay, and compensation for any special damages sustained as a result of the discrimination or retaliation, including litigation costs and reasonable attorneys’ fees.

A SC hospice fraud FCA whistleblower would initially file a disclosure statement, complaint and supporting documents with the U.S. Attorney’s Office in Columbia, South Carolina, and the US Attorney General. After the disclosures are filed, a federal court complaint can be filed. The SC division where the frauds occurred, the relator’s residence, and the defendant residence, will determine which division the case will be assigned. There are eleven federal court divisions in South Carolina. Once the case has been filed, the government has 60 days to decide whether or not to intervene. During this time, federal government investigators located in South Carolina will investigate the claims. If the case involved Medicaid, SC Medicaid fraud unit investigators will likely become involved as well. If the government intervenes in the case, the U.S. Attorney for South Carolina is usually the lead attorney. If the government does not intervene, the relator’s SC attorney will prosecute the case. In South Carolina, expect a qui tam case to take one to two years to get to trial.

Tips on Recognizing Hospice Fraud Schemes

The HHS Office of Inspector General (OIG) has issued Special Fraud Alerts for fraudulent and abusive practices of hospices. U.S. and South Carolina hospices, patients, hospice employees and whistleblowers, their attorneys and lawyers, should be familiar with these hospice fraud practices. Tips on recognizing hospice frauds in South Carolina and the U.S. are:

• A hospice offering free goods or goods at below market value to induce a nursing home to refer patients to the hospice.
• False representations in a hospice’s Medicare/Medicaid enrollment form.
• A hospice paying “room and board” payments to the nursing home in amounts in excess of what the nursing home would have received directly from Medicaid had the patient not been enrolled in the hospice.
• False statements in a hospice’s claim form (CMS Forms 1450, UB-04 or UB-92).
• A hospice falsely billing for services that were not reasonable or necessary for the palliation of the symptoms of a terminally ill patient.
• A hospice paying amounts to the nursing home for “additional” services that Medicaid considered included in its room and board payment to the hospice.
• A hospice paying above fair market value for “additional” non-core services which Medicaid does not consider to be included in its room and board payments to the nursing home.
• A hospice referring patients to a nursing home to induce the nursing home to refer its patients to the hospice.
•A hospice providing free (or below fair market value) care to nursing home patients, for whom the nursing home is receiving Medicare payment under the skilled nursing facility benefit, with the expectation that after the patient exhausts the skilled nursing facility benefit, the patient will receive hospice services from that hospice.
• A hospice providing staff at its expense to the nursing home to perform duties that otherwise would be performed by the nursing home.
• Incomplete or no written Plan of Care was established or reviewed at specific intervals.
• Plan of Care did not include an assessment of needs.
• Fraudulent statements in a hospice’s cost report to the government.
• Notice of Election was not obtained or was fraudulently obtained.
• RN supervisory visits were not made for home health aide services.
• Certification or Re-certification of terminal illness was not obtained or was fraudulently obtained.
• No Plan of care was included for bereavement services.
• Fraudulent billing for upcoded levels of hospice care.
• Hospice did not conduct a self-assessment of quality and care provided.
• Clinical records were not maintained for every patient.
• Interdisciplinary group did not review and update the plan of care for each patient.

Conclusion

Hospice fraud is a growing problem in South Carolina and throughout the United States. South Carolina hospice patients, hospice employees, and their SC lawyers and attorneys, should be familiar with the basics of the hospice care industry, hospice eligibility under the Medicare and Medicaid programs, and typical hospice fraud schemes. Hospice organizations should take steps to ensure full compliance with Medicare/Medicaid hospice billing requirements to avoid hospice fraud allegations and FCA litigation.

© 2010 Joseph P. Griffith, Jr.

Contact the Joe Griffith Law Firm immediately to discuss your legal rights.

Joseph P. Griffith, Jr.
SC Qui Tam-Whistleblower Attorney
SC Medicare-Medicaid Fraud Lawyer
SC Defense Contractor Fraud Law Firm
SC Hospice Fraud Lawyer
Joe Griffith Law Firm, LLC
7 State Street
Charleston, South Carolina 29401
(843) 225-5563
http://www.joegriffith.com

South Carolina Attorney Joe Griffith is a former SC federal prosecutor who handles qui tam, whistleblower, False Claims Act, Medicare Fraud, Medicaid Fraud, and general fraud cases in South Carolina and the United States. As a former federal prosecutor who has litigated nearly 30 federal court trials, top-rated attorney Joseph P. Griffith, Jr. focuses the great majority of his practice on federal White Collar Criminal defense. He has handled a wide range of White Collar Criminal cases, with particular emphasis on antitrust crimes, bank fraud, corporate fraud, environmental crimes, false claims act/government fraud, health care fraud, mail/wire fraud, securities/stock fraud and tax fraud crimes. Joseph P. Griffith, Jr. has received Martindale-Hubbell’s highest AV rating, has received AVVO’s highest 10/10 rating, is a member of the Bar Register of Pre-eminent Lawyers, has been chosen a South Carolina Super Lawyer, and has been chosen one of the Best Lawyers in America. He has the experience to adroitly guide you or your company through the difficult process of a White Collar criminal investigation, or False Claims Act litigation and, if necessary, forcefully litigate your case in the event of a prosecution.

© 2010 Joseph P. Griffith, Jr.