“ THE STATE ENFORCERS ARE COMING”

1. “THE STATE ENFORCERS ARE COMING” Presented by: GEORGE B. BREEN, ESQ Epstein Becker & Green, P.C. 1227 25TH Street, NW, Suite 700 Washington, D.C. (202) 861-1823 GBreen@ebglaw.com AHLA ANNUAL MEETING JUNE 30 – JULY 2, 2008

2. Introduction to the State Healthcare Fraud Enforcement Landscape: The Deficit Reduction Act and State False Claims Laws

3. Current State False Claims Act Landscape MT NH WI NY MA MI RI New York NJ NV Chicago IN IL DE VA CA DC TN OK AR NM GA LA TX FL HI

4. State False Claims Act Landscape: Health Care Fraud Only NH WI MI GA TX LA

5. Impact of the Deficit Reduction Act of 2005 • Signed into law on February 8, 2006 • Effective Date: January 1, 2007 • Incentivizes States to enact a qualifying State False Claims Act • Under the DRA, States that enact a qualifying State False Claims Act can be entitled to receive 10% of the Federal Government’s share of any recovery resulting from a State action against a Medicaid provider brought under that State’s SFCA

6. Impact of the Deficit Reduction Act of 2005 What must a State Statute contain in order to be entitled to the potential 10% increased payment? • Establish liability for false or fraudulent claims described in the False Claims Act with respect to any expenditure related to State Medicaid Plans • Contain provisions at least as effective in rewarding and facilitating qui tam actions as those in the False Claims Act • Contain requirement for filing under seal for sixty (60) days • Contain civil penalty provisions not less than the amount authorized under the False Claims Act

7. MN IA PA OH CT CO KS MD NC SC MS State False Claims Acts on the Horizon

8. Impact of the Deficit Reduction Act of 2005 Congress has tasked the OIG to determine whether a State has adopted a False Claims Act meeting these requirements.

9. NY MA NV IL VA TN TX HI OIG Approved State False Claims Acts

10. Impact of the Deficit Reduction Act of 2005 OIG will look at: • Liability for false or fraudulent claims. OIG will look at whether the State Act provides liability for • Knowingly presenting or causing to be presented a false or fraudulent claim for payment or approval of the Medicaid program • Knowingly making, using or causing to be made or used a false record or statement to get a fraudulent claim paid • Conspiring to defraud the Medicaid program by getting a false or fraudulent claim paid • Knowingly using, concealing or making a false record to conceal or avoid an obligation to pay the Medicaid program

11. Impact of the Deficit Reduction Act of 2005 • Qui Tam Provisions • State law must contain a provision authorizing a person to bring a civil action for a violation of the State False Claims Act on behalf of the person and the State • State law must contain a provision requiring a copy of the Complaint and a written disclosure of material evidence to be served on the State Attorney General • State law must allow for the Relator to proceed with the action if the State elects not to intervene • State law must provide a Relator with a share of proceeds of the action • At least 15% if the State proceeds, or at least 25% if the Relator proceeds • Statute of Limitations • Not shorter than six (6) years after the violation is committed

12. State False Claims Act Landscape: Qui Tam States MT NH WI NY MA MI IL RI NV NJ IN DE VA CA TN OK NM GA TX LA FL HI

13. State False Claims Act Landscape: Non-Qui Tam States MO AR

14. Impact of the Deficit Reduction Act of 2005 • Seal Provisions • State law must contain a requirement for filing an action under seal for sixty (60) days

15. Impact of the Deficit Reduction Act of 2005 • Civil Penalty Provisions • State law must contain a civil penalty not less than the amount of the civil penalty offered under the False Claims Act and at least triple damages (or double damages in incidences of timely self disclosure and full cooperation) • Civil penalties should be in the amount of at least $5,000 or $10,000 per false claim

16. State False Claims Act Landscape 2009? MT MN NH WI NY MA MI CT IA RI PA New York NV OH NJ Chicago IN IL CO DE VA CA KS MD DC NC TN OK NM AR SC GA MS TX LA FL HI

17. KEY LEGISLATIVE DEVELOPMENTS WITH POTENTIAL IMPACT ON STATE FALSE CLAIMS ACTS

18. The False Claims Act Corrections Act Of 2007 • Reported out of Senate Judiciary Committee on April 3, 2008 S.2041 • House Bill HR 4854 • Key “Corrections”: • Presentment: Eliminates requirement that claims must be presented to officer or employee of federal government • Funds Subject to the FCA: Extends liability to claims for money not necessarily “vested” in federal government • Damages: Damages become the “amount of money or property paid or approved” as a result of violation (versus actual damages) • Public Disclosure Bar: Narrows application of “public disclosure bar” and eliminates defendant’s ability to form this defense • Government-Employee Relators: Expands ability of government employees to act as relators • Statute of Limitations: Expands statute of limitations to uniform ten years • Retaliation: Enhances whistleblower retaliation provisions to “government contracts” and “agents” • Applicability: To any pending or future FCA case

19. RECENT CASE LAW WITH POTENTIAL IMPACT ON STATE FALSE CLAIMS ACTS

20. S.2041 Dispenses with the Presentment Requirement • Proposed bill eliminates requirement that claim must be presented to an officer or employee of the federal government • Thus, liability can attach to any request or demand for money or property that is either presented to an officer or employee of the federal government or to a contractor, grantee, or other recipient if the government provides, has provided, or will provide any portion of the money or property requested • In sum, submission of a false claim to recipients of government funds — even without proof that claim is later submitted to government — could trigger FCA liability

21. Circuits Were Split On Whether (a)(2) Requires Presentment: • Yes:United States ex rel. Totten v. Bombardier, 80 F.3d 488 (D.C. Cir. 2004) (because Amtrak is not a Government agency, presentment requirement not met) • No:United States ex rel. Sanders v. Allison Engine Co., Inc., 471 F.3d 610 (6th Cir. 2006) (subcontractor that submitted false record to prime contractor liable under (a)(2) even absent evidence of presentment to Government) • Supreme Court heard oral argument in Allison on Feb. 26, 2008, to resolve split

22. Allison Engine Allison Engine Co., Inc. v. United States ex rel. Sanders, 471 F.3d 610 (6th Cir. 2006), cert. granted, 128 S.Ct. 491 (2008) Writing for a unanimous court, Justice Alito wrote “’contrary to the decision of the Court of Appeals [i.e., the Sixth Circuit] below, we hold that it is insufficient for a plaintiff asserting a § 3729(a)(2) claim to show merely that [t]he false statement use… result[ed] in obtaining or getting obtainment or approval of the claim,’ 471 F.3d 610, 621 (C.A. 6th 2006) or that ‘government money was used to pay the false or fraudulent claim,’ Id., at 622. Instead, a plaintiff asserting a § 3729(a)(2) claim must prove that the defendant intended that the false record or statement to be material to the Government’s decision to pay or approve the false claim. Similarly, a plaintiff asserting a claim under § 3729(a)(3) must show that the conspirators agreed to make use of the false record or statement to achieve this end.” Allison Engine, 2008 WL 2329722 *3

23. Allison Engine After Allison Engine, is an actionable false claim only one that is subject to actual and specific payment by the United States? • It is not enough merely to show “government money” was used to pay an alleged false claim

24. HOT TOPICS AND AREAS OF ENFORCEMENT FOCUS

25. ENFORCEMENT TRENDSCurrent Statistics OIG-HHS State Medicaid Fraud Control Units Annual Report Fiscal Year 2007: • In FY 2007, HHS awarded MFCU’s more than $169 million in Federal Grant funds • Since inception of grant program, $2.1 billion awarded

26. ENFORCEMENT TRENDSCurrent Statistics • The 50 MFCU’s obtained 1,205 convictions • The MFCU’s claimed total recoveries of more than $1.1 billion in court ordered restitution, fines, civil settlements, and penalties • 805 of the 3,308 exclusions of individuals and entities from participation in Medicare, Medicaid and other Federal health care programs were based on MFCU referrals

27. ENFORCEMENT TRENDSCases Pursued • Billing under different Medicaid provider number • Diversion of controlled substances • Billing for DME not ordered by treating M.D. • Embezzlement of patient funds • Billing for unnecessary services, services not provided or services not appropriate authorized

28. ENFORCEMENT TRENDSNY State Office of the Inspector General WorkPlan FY 2008-2009 • IG says must recover $215 million in overpayments in 2008 • Staff of 750 • Data Mining

29. ENFORCEMENT TRENDSNY State Office of the Inspector General WorkPlan FY 2008-2009 Examples of Areas of Focus: • Ambulatory Surgery Centers  • Documentation justifying procedure in ASC  • DME  • Authorization, delivery and payment review  • Home Health  • Review of Medicare Dual-Eligibles  • Documentation, authorization and payment review  • Personnel review  

30. ENFORCEMENT TRENDSNY State Office of the Inspector General WorkPlan FY 2008-2009 Examples of Areas of Focus: • Hospitals  • Upcoding  • Ambulatory Surgery Services  • Credit Balances  • Physician Compensation  • Disproportionate Share Payments   •   Managed Care  • Ineligible Enrollees ( dead, incarcerated and out of state individuals)  • Quality of Care  • Capitation payments when enrollee in SNF or institution  • Prior to date of birth payments / enrollees with no encounter during year 1 

31. ENFORCEMENT TRENDSNY State Office of the Inspector General WorkPlan FY 2008-2009 Examples of Areas of Focus:  • Participation in PERM Project  • Reviewing claims for ffs providers to determine national payment error rate for Medicaid program  • Initiation of state based Corporate Integrity Agreements

32. ENFORCEMENT TRENDSRecent Cases Pursued • Billing for services not rendered • Billing for unnecessary services or products • Upcoding • Unbundling • Services provided by unqualified staff • Quality of care cases • Billing non-emergency ambulance trips for ambulatory clients • Providing or accepting kickbacks to influence patient’s choice of provider • Prescribing and billing excessive non-therapeutic levels of narcotics • Inflating cost reports