Eleventh Circuit opinion creates an avenue to win criminal prosecution charging lack of medical necessity.

Difference Of Opinion Is Insufficient to Prove False Billing

Today, the Eleventh Circuit ruled in United States v. AseraCare, Inc. that a mere difference of reasonable opinion among doctors is insufficient to prove objectively false billing. Unfortunately, the opinion significantly curtails an FCA win by hospice chain AseraCare, Inc. in the trial court.

United States v. AseraCare, Inc

The underlying case began in 2008, when three former AseraCare employees, acting as qui tam relators, filed a complaint against AseraCare alleging submission of unsubstantiated hospice claims. The Government intervened and filed a complaint based on a false certification theory. The complaint alleged that AseraCare submitted documentation that falsely represented that certain Medicare recipients were terminally ill when, in the Government’s view, they were not.

In developing its case, the Government identified a universe of approximately 2,180 patients for whom AseraCare had billed Medicare for at least 364 continuous days of hospice care. The Government then had its expert focus on 223 patients of that subset. The Government’s expert determined that 123 patients from the sample pool were, in her opinion, ineligible for hospice benefits. At trial, the Government intended to extrapolate from the sample to impose further liability on AseraCare for a statistically valid set of additional claims within the broader universe of AseraCare patients.

The Government’s allegations were narrowly focused and there were no claims that AseraCare billed for phantom patients or that documentation was forged. The sole issue was the sufficiency of the clinical judgments, i.e., whether or not the patients were terminally ill.

Ultimately, the expert testimony at trial revealed a fundamental difference of professional opinion regarding whether the patients presented were “terminally ill.”

The Eleventh Circuit concurred with the trial court’s post-verdict conclusion that “physicians applying their clinical judgment about a patient’s projected life expectancy could disagree, and neither physician [would] be wrong.” The Court further held that the Government must show something more than the mere difference of reasonable opinion concerning the prognosis of a patient’s likely longevity.

The opinion further holds that the trial court judge overlooked evidence showing that the company withheld crucial information about patient health from doctors who certified hospice eligibility.

In criminal cases that go to trial where real services are provided, the issues at trial usually come down to a difference of opinion among experts. This decision makes it clear that a difference of opinion among experts is insufficient to conclude that billings are false, creating an argument for criminal defendants in cases were Government is alleging a lack of medical necessity.

The Twenty-Eighth Annual National Seminar on Federal Sentencing

Marissel Descalzo














Marissel Descalzo

Marissel Descalzo esteemed panel included David Debold (GibsonDunn), Mark Rankin (Shutts and Bowen), Jean-Jacques Cabou (Perkins Coie), and Ben Au (Durie Tangri).  The panel discussed recent changes to the Sentencing Guidelines and their implications in economic crime cases.  I discussed loss calculation in health care fraud cases and how to cut down the loss number to zero at sentencing.

Lots of DOJ settlements this month

Department Of Justice Settlements In July

July has been a busy month for the Department of Justice. The DOJ announced several large settlements this month.

  • Suboxone settlement. Reckitt Benckiser Group plc has agreed to pay $1.4 Billion to resolve criminal and civil liability for the marketing of Suboxone, an opioid drug used by recovering addicts. This is the largest settlement reached by the federal government in a case related to opioids.
  • Universal Health Services has reached a “tentative” settlement to resolve criminal, civil, and state attorneys general claims for $127 million. The alleged bad conduct is related to unusually high admission rates and long patient stays at Universal behavioral health facilities. Presumably, a corporate integrity agreement will also be required as part of the settlement.
  • A Philadelphia-area addiction treatment center has agreed to$2.85 million to end whistleblower claims that the center billed Medicaid and other federal programs for detoxification treatment for patients who did not meet the medical criteria set by the government. The center also signed a 5-year corporate integrity agreement.
  • Millcreek Community Hospital agreed to pay $2,451,000 and enter a 5-year corporate integrity agreement to resolve FCA violations, including that the Hospital billed Medicare and Medicaid for medically unnecessary inpatient rehabilitation services.

These settlements clear make that whistleblowers stand to profit handsomely from reporting bad conduct. The settlements also reinforce that anyone operating the health care industry must have a robust compliance program that monitors the conduct of the corporation.

DOJ Indicts Opiod Distributor and Executives

Alleged Improper Opioid Sales

Yesterday, a federal grand jury returned an indictment accusing Ohio- based Miami-Luken, former President Anthony Rattini, and former compliance officer James Barclay of conspiring to distribute controlled substances without a legitimate medical purpose. Also indicted were two pharmacist, Devonna Miller-West and Samuel “Randy” Ballengee, who each owned a pharmacy in West Virginia.
The Indictment alleges Miami-Luken, Rattini, and Barclay filled suspicious orders for oxycodone and hydrocodone placed by the pharmacist and “other unnamed physicians, pharmacists, and pharmacies.” That Miami-Luken, Rattini, and Barclay failed to maintain effective controls against diversion and failed to exercise due care in confirming the legitimacy of all orders by continuing to supply oxycodone and hydrocodone. Perhaps more egregious are allegations that Miami-Luken, Rattini, and Barclay continued to distribute oxycodone to physicians that were under investigation by the DEA.
This is the second case that the DOJ has brought against a drug distributor alleging improper opioid sales. In April, the government charged Rochester Drug Co-Operative, Inc, and two of its executives.
According to the Washington Post:

[I]n 2017 that DEA investigators wanted criminal charges filed against executives of the largest drug distributor in the United States, McKesson Corp., after they built a case against the firm alleging violations in nine parts of the country. But they were rebuffed by federal prosecutors and the Justice Department, which settled with the company and fined it $150 million.

The Post also noted that previously undisclosed DEA data shows that drug distributors saturated the country with 76 billion opioid doses between 2006 and 2012, far more than was previously known.

The story can be found here.

Unfortunately, Miami-Luken and Rochester could not buy their way out of criminal prosecution. It will be interesting to see if the government can tie Rattini and Barclay directly to the misconduct.

United States Supreme Court Opinion may impact Sober Home Task Force Prosecutions

Formation of Sober Home Task Force

In 2017, a combination of Federal and State law enforcement agents, prosecutors, and civilians formed the Sober Home Task Force to combat the opioid crisis in Florida. The task force allegedly set out to eradicate unscrupulous drug treatment centers and sober homes. The actions of the task force has resulted in multiple Federal and State prosecutions.

Violation Of The Patient Brokering Act

The State prosecutions are similar and mostly charge violations of the Florida Patient Brokering Act, Fla. Stat. 817.505 in connection with payments made to marketers. Some of the defendants charged in these cases had legal opinions directing how to conduct marketing in a proper and lawful matter. The State, knowing these defendants intend to assert an advice of counsel defense, has taken the position that the violation of the patient brokering act is a general intent crime. Because lack of specific knowledge is not a proper defense to a general intent crime, advice of counsel defense would not be a proper defense. The defense has argued that patient brokering act IS a specific intent crime, similar to violation of the federal Anti-Kickback Statute, and the intent required is knowing and willfully.

The State’s position tramples due process.

The issue of whether or not the patient brokering act is a general intent statute is pending with the Florida District Court of Appeals. In one case, State v. Kigar, the state filed a motion in limine to prohibit the defense, but the judge sided with the defense.  The state took an interlocutory appeal that remains pending.

Supreme Court’s Opinion – Decision on Rehaif v. United States

Last week’s Supreme Court opinion – decision in Rehaif v. United States may have resolved the issue in favor of the defendants. Rehaif came to the United States on a student visa to study, but he was academically dismissed. The university notified him that his immigration status would be terminated if he did not transfer to another school or leave the United States, neither of which he did. Rehaif went to a firing range and fired weapons. Rehaif was prosecuted for possession of a firearm by an illegal alien. At the ensuing trial, the district court instructed the jury that it need not find that Rehaif knew he was out of immigration status, and the jury convicted. The U.S. Court of Appeals for the 11th Circuit affirmed, noting substantial agreement among its fellow circuits that the term “knowingly” in 18 U.S.C. § 924(a)(2) applies to possession of the weapon, but not to the status category of the possessor.

Breyer’s majority opinion rejected that position. “In determining Congress’ intent, we start from a longstanding presumption, traceable to the common law, that Congress intends to require a defendant to possess a culpable mental state regarding ‘each of the statutory elements that criminalize otherwise innocent conduct,’” wrote Breyer. “Here we can find no convincing reason to depart from the ordinary presumption in favor of scienter [requirement of guilty mind].”
The Supreme Court opinion further noted that the mens rea element was important for both elements of the statute. As such, the “knowingly” requirement applied to the status aspect of the statute.

While Rehaif involved the hyper technical issue of immigration status, the opinion makes clear that the presumption is in favor of a mens rea argument and not against it like the State is arguing in these sober home cases. Rehaif appears to be a pathway to win against the task force’s overzealous position.

Attack on pain clinic and laboratory business continues

Complaint Against Chiropractor And Pain Management Clinics

The United States Attorney in South Carolina has intervened in a False Claims Act case against a chiropractor, his network of pain management clinics, and urine drug testing laboratories. There are three relators in the case. The three relators were previously employed at the limited liability company that owned and operated the pain management clinics as the Chief Operations Officer, Certified Medical Assistant, and Clinic Coordinator respectively.

The Complaint alleges that physicians were employed and paid by Oaktree, one of the pain management clinics owned by the chiropractor. It is further alleged that physicians performed a presumptive POC test at the clinic and ordered definitive UDT testing on urine samples that was processed by Oaktree. Eventually, the chiropractor began operating an independent clinical laboratory, Labsource. The various clinics sent the patient urine samples to Labsource for presumptive and definitive UDT testing. The Complaint alleges that the urine testing was medically unnecessary. The Complaint also alleges that the testing was “excessive” and that physicians had a standing order form for testing in place.

The Complaint further alleges that Oaktree paid physicians for referrals in violation of the Stark Law. Specifically, it is alleged that the physicians were compensated based on the volume and/or value of referrals for UDT testing. It also alleges that physicians entered into direct bill agreement with physicians and other providers in violation of the Anti-Kickback Statute. The “direct bill” agreements had providers pay a set fee for the test panels, but the providers charged the insurance companies a lot more for the tests.

This case demonstrates the conundrum that pain doctors are facing. On the one hand, there is a war on opioid use – pain doctors should be regularly testing patients that are being prescribed opioids. However, routine testing or too much testing is viewed as unnecessary.

Not guilty!

Defraud Case Of Two Companies

In September 2018, Vance Taylor was indicted for allegedly engaging in a defraud scheme Rite Aid. Taylor was charged with multiple counts of mail and wire fraud. The alleged scheme involved the two companies owned by Taylor and his partner, Larry Nuckols. The companies, Nuvision Graphics, Inc. and Superior Graphics, Inc. provided advertising services to Rite Aid. James Pilsner was Rite Aid’s Vice President of Advertising and responsible for purchasing advertising services on behalf of Rite Aid.

The Indictment alleged that Nuvision and Superior submitted false and inflated invoices to Rite Aid. The invoices were inflated to include a kickback that would be paid to Pilsner in exchange for purchasing of advertising. Pilsner would email Nuckols with a request for a kickback disguised as a request for equipment or other services. Nuckols would respond and blind copy, Taylor. Nuvision and Superior received over $45 million. Pilsner was paid over $5 million in kickbacks.

Pilsner and Nuckols pled prior to the Indictment of Taylor and agreed to cooperate against Taylor. Taylor proceeded to trial. At trial, Taylor’s defense was that he was just a bystander. Taylor did not dispute that he received emails discussing the kickbacks but argued he didn’t know about the scheme. Taylor presented no affirmative defense, instead, he focused on attacking the credibility of Pilsner and Nuckols. The jury found Taylor not guilty on all counts.

A win for justice!

DOJ Announces Publication “The Evaluation of Corporate Compliance Programs”

Evaluation of Corporate Compliance Programs

Yesterday at the Annual Ethics and Compliance Initiative Conference, Assistant Attorney General Brian A. Benczkowski delivered the keynote address to participants at the conference. During his speech, Assistant Attorney General Benczkowski announced the release of an updated version of the Department of Justice Criminal Division’s Evaluation of Corporate Compliance Programs. The updated version was created to “better harmonize the prior Fraud Section publication with other Department guidance and legal standards” said Bencskowski. He stressed that “[e]ffective compliance programs play a critical role in preventing misconduct, facilitating investigations, and informing fair resolutions.”

Guidance Details

The guidance was announced as part of DOJ’s “broader efforts in training, hiring, and enforcement” to improve corporate conduct. Bencskowski noted that the DOJ cannot use a “rigid formula” to assess the effectiveness of corporate compliance programs because criminal investigations are all different. Instead of a strict formula, the updated guidance directs prosecutors to make an individualized determination of the compliance program in each case.

The guidance document directs prosecutors to consider three fundamental questions when evaluating a compliance program: (1) is the program well-designed; (2) is the program effectively implemented; and (3) does the compliance program actually work in practice.

In determining whether the program is well-designed, the guidance discusses the “hallmarks” of well—designed programs, which include, risk assessment, company policies and procedures, training and communications, confidential reporting structure and investigation process, third-party management, and mergers and acquisitions.

In determining whether the program is effectively implemented, the guidance advises that effectively implemented programs include a commitment by senior and middle management, autonomy and resources, and incentives and disciplinary measures.

Finally, in determine whether the compliance program works, the guidance directs prosecutors to evaluate whether the program has a capacity for improvement, periodic testing and review, investigation of misconduct, and analysis and remediation of underlying misconduct.

The full guidance document can be found here.

The purpose of the guidance is to give prosecutors more direction and to incorporate the rest of DOJ’s standards. Let’s see if it works!

Indivior, Inc. Indicted for Fraudulently Marketing Opioids

Opioid Fraud Case

It has been a big week health care fraud news.

On Tuesday, a federal grand jury sitting in Virginia indicted Indivior, Inc. and Indivior PLC for engaging in a scheme to increase prescriptions of Suboxone Film, an opioid drug used in the treatment of opioid addiction.

According to the Indictment, Indivior ran an internet and telephone program, “Here to Help”, for patients addicted to opioids. Here to Help was touted as a resource for opioid addicted patients. When patients called the Here to Help hotline, the patients were referred to doctors it knew were prescribing its painkiller and other opioids “to more patients than allowed by federal law, at high doses, and in suspect circumstances.” The Indictment claims that Indivior knew the doctors in the Here to Help referral system were issuing prescriptions in a careless and clinically unwarranted manner. According to the government, Indivior executives and employees had firsthand reports and statistical information that the doctors in the referral network were careless.

Allegedly Aggressive Marketing of Suboxone Film

Suboxone Film was developed around 2007 as a patent-protected alternative to the tablet form of Suboxone. The government alleges that Indivior aggressively marketed Suboxone Film without an established basis, as having a “lower risk of child exposure” and “a less divertible/abusable formulation” than other opioid-addiction treatment drugs. Indivior made these claims in marketing materials and representations to physicians, pharmacists, and health care benefit programs throughout the country.

The government claims that Indivior’s scheme was highly successful because it was able to convert thousands of opioid-addicted patents over to Suboxone Film. Indivior continued to hold onto a high portion of the opioid-addiction treatment market until Suboxone Film became subject to generic competition.

This case confirms that the government will continue to target the opioid industry. It will also be interesting to see whether any executives are targeted.

Back to blogging after the Esformes trial

Sale of Durable Medical Equipment & Telemedicine

After two months trying the Esformes case, I come back to big news in health care fraud prosecutions.

Yesterday, the Department of Justice and various U.S. Attorneys offices announced prosecutions against 24 individuals involved in the sale and distribution of Durable Medical Equipment and Telemedicine.

“…one of the largest health care fraud schemes in U.S. history came to an end thanks to close collaboration and coordination between the FBI and partners including HHS-OIG and IRS-CI,” that was the statement yesterday by FBI Assistant Director Robert Johnson when announcing the prosecutions and law enforcement actions against telemedicine and DME companies and individuals.

The Department of Justice is touting the case as the largest health care fraud scheme involving telemedicine and durable medical equipment. The 24 individuals charged, include CEOs, COOs, and others associated with five telemedicine companies and dozens of durable medical equipment companies. The DOJ alleges the scheme involves over $1.2 billion in losses. In addition to the indictments, over 80 search warrants were executed in 17 federal districts.

The scheme allegedly involved the payment of illegal kickbacks and bribes by DME companies in exchange for the referral of Medicare beneficiaries by medical professionals working with fraudulent telemedicine companies for back, shoulder, wrist, and knee braces that are allegedly medically unnecessary. The DOJ further claims that scheme involved an international telemarketing network with call centers in the Philippines and throughout Latin American that lured the elderly and disabled. The DOJ claims the doctors were paid to prescribe DME without any patient interaction or with only a brief telephonic conversation with patients they had never met or seen. The charged individuals are accussed of using the proceeds of the scheme to purchase luxury items, such as automobiles, yachts, and real estate in the United States and abroad.

The enforcement actions were coordinated by the Health Care Fraud Unit of the Criminal Division’s Fraud Section in conjunction with its strike force, as well as the U.S. Attorney’s Offices for the Districts of South Carolina, New Jersey, and the Middle District of Florida.


I represent doctors, hospitals, skilled nursing facilities, pharmacies, and other health care providers, during government investigations and defend them in qui tam (whistle-blower) actions. I also regularly counsel companies from a variety of industries on the adoption and operation of their compliance programs and related due diligence issues.

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