There was a noteworthy False Claims Act (FCA) settlement made public yesterday out of the Eastern District of California involving Oroville Hospital. The government accused the Hospital of submitting false claims to Medicare and Medicaid (Medi-Cal), including claims relying on false diagnosis codes. The settlement, and related qui tam (whistleblower) lawsuits, involve other allegations, including that the Hospital knowingly admitted patients when inpatient care was not medically necessary and paid kickbacks to hospitalists and emergency department physicians to induce those practitioners to admit patients that did not need admission.
According to the allegations, the financial arrangements between these providers and the Hospital violated the Anti-Kickback Statute (42 U.S.C. § 1320a-7b) and the Physician Self-Referral law, aka the Stark Law (42 U.S.C. § 1395nn). The Hospital will pay $9,518,954.41 to the federal government, $731,045.59 to California, and $331,048.38 in attorney fees to the two relators’ counsel. In addition, the Hospital will enter into a Corporate Integrity Agreement (CIA) with HHS OIG to avoid being excluded from participation in federal programs. But Oroville Hospital, while agreeing to settle these claims, did not make any admissions and continues to deny the underlying accusations.
A few brief observations:
1. Lack of Admissions in the Settlement:
I am pleased to see that the Hospital did not make any admissions in reaching the settlement. I have spoken before about the recent trend, pushed largely by the U.S. Attorney’s Office in Boston, among other places, to require admissions in False Claims Act settlements. My colleagues at Foley Hoag also
wrote a great article about this trend earlier this year. DOJ requiring admissions as a routine practice in False Claims Act settlements is unfair. Plaintiffs typically draft FCA complaints very broadly and the allegations are often sweeping. Defendants often elect to settle FCA matters for a variety of reasons, not necessarily because they are prepared to concede liability or misconduct.
2. Medical Necessity:
I typically have a problem with cases premised on alleged lack of medical necessity. The concept of medical necessity in the False Claims Act and health care fraud arena is a tricky one and there is no single definition of medical necessity. In my opinion, government enforcers should not be making allegations about medical decision making unless the conduct is blatant and crystal clear (which is exceedingly rare). Medical decisions, such as whether to admit a patient to a facility or whether to prescribe a particular medication or course of treatment, are complex, fact intensive, and largely dependent on the sound judgment of the medical provider. Medical decisions should be respected absent compelling reasons to look deeper. Much like lawyers develop expertise and professional perspectives over the course of their careers, doctors and other medical professionals do too. Blanket allegations about inpatient admissions based on a lack of medical necessity are unjust, and it would be nearly impossible to determine the true scope of any such conduct absent a patient-by-patient analysis – which the government is very unlikely to have performed. The government might attempt to rely on tools such as data analytics, sampling, and extrapolation to argue about medical necessity but those tools have their own weaknesses depending on the circumstances of a particular case. The government’s use of medical necessity in the criminal arena is even more troubling.
3. Repeat Relator:
It appears that one of the two relators (whistleblowers) has been a whistleblower on at least four other False Claims Act cases raising similar allegations. The relator appears to have made more than $11 million by filing these types of whistleblower lawsuits against hospitals – many of which had been her employer at some point before she brought the lawsuit. In one instance, the relator worked for the hospital for only three months.
- In 2008, a False Claims Act lawsuit was filed in the Southern District of Texas against Christus Health and others. The whistleblower in that action bears the same name as one of the two in the Oroville Hospital case and both cases were filed by the same plaintiff’s attorney. That lawsuit also made allegations related to allegedly unnecessary inpatient admissions. The case settled for more than $5M and a $1M payment to the relator. (The Oroville relators will personally receive about $1.6M combined from that settlement.)
- In 2012, a relator with the same name and same attorney filed a qui tam action against Renown Health and others. The relator, formerly the Director of Clinical Compliance at Renown, alleged that the defendants were billing improperly for inpatient admissions that should have been outpatient. The relator made at least $1.7M in that action.
- In 2013, a relator by the same name and represented by the same attorney brought another whistleblower action raising similar allegations. This time, the case was brought in the District of Arizona against Banner Health and others. According to the complaint, the relator worked at Banner health for no more than 3 months (October to December 2012), quit, and filed a whistleblower action the following year. The case settled for approximately $18M and the relator was paid $3.3M.
- In 2022, a relator by the same name and represented by the same counsel brought another whistleblower lawsuit, this one against New York Presbyterian, raising similar allegations. That case was ultimately dismissed although it is not readily apparent why.
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In sum, the defense bar should continue aggressively pushing back on admissions in settlements and cases premised on an alleged lack of medical necessity.
As a trial lawyer, I am confident that in the right circumstances, False Claims Act cases involving medical necessity allegations belong in front of a jury (if not dismissed outright first).
The government should carefully scrutinize whistleblowers, particularly professional ones, and take great care when wielding its tremendous enforcement power.
