Over the last several years, we have covered a broad array of settlements, legal cases, and government investigations and enforcement actions regarding healthcare entities and the life sciences industry. One critical aspect of this increased enforcement has been the use of whistleblowers or qui tam relators.
In almost every major settlement in the last several years, a former employee of the hospital, drug company or medical device manufacturer used their inside information or knowledge of misconduct to bring a case against the company under the False Claims Act and took advantage of the opportunities offered under the whistleblower provisions.
We most recently noted that whistleblowers may even begin to use the public database that will be made available under the Sunshine Act to bring or enhance cases against current or former employers.
Consequently, a recent settlement involving Shands Healthcare may cause further concern for healthcare stakeholders regarding the involvement of whistleblowers.
According to a recent client alert from the law firm Squire Sanders, Shands Healthcare recently agreed to pay the federal government and the State of Florida $26 million to resolve allegations that the entity submitted false claims to Medicare, Medicaid and other federal health care programs.
Unique to this settlement, however, is that the relator “who initially brought the case against Shands was a consultant hired by Shands to conduct the on-site payor review that revealed the alleged fraud.” Accordingly, “this settlement proves the importance of anticipating potential whistleblowers because they can be anyone,” Squires Sanders noted.
The details of the case first came to light when the US Department of Justice (“DOJ”) announced the Shands settlement on Monday, August 19, 2013. The relator in this case was Terry L. Myers, founder and President of YPRO Corporation (“YPRO”), a nationwide health care consulting firm. According to the complaint, YPRO’s primary services include coding audits, medical necessity audits and clinical documentation improvement audits.
Shands operates a network of health care providers and contracted with YPRO to perform on-site Medicare and Commercial payor review of observation services and one-day inpatient stays at six Shands hospitals in June, 2006. “Allegedly, the audits revealed systemic serious billing, coding and compliance issues occurring on a daily basis, which resulted in overbilling to and overpayment by Medicare, Medicaid, and other federal health care programs.”
After completion of the audits and distribution of audit reports highlighting allegedly improper claims, “YPRO offered quotes to Shands for future medical necessity training and other needed coding and compliance education that YPRO could provide.” Shands elected to perform their own corrective action plan internally. The corrective action plan did address “adjustments” for the overpayment identified by the 2006 YPRO audit but YPRO never observed any action actually taken.
Myers “allegedly discussed the need for self-disclosure of overpayments with Shands but never saw any evidence of self-disclosure. Shands contracted with YPRO for an audit in 2007 to reassess the same issues. YPRO alleged that the results of the 2007 audit were significantly worse than the 2006 audit and that overbilling and overpayments increased and under-billing decreased. YPRO recommended continued monitoring and another audit which Shands declined.”
Consequently, Squires Sanders noted that these “facts highlight the necessity for compliance programs designed to anticipate and recognize potential whistleblowers and respond appropriately. The present reality is that vigilant compliance is crucial because whistleblowers can be anyone.”
This case also demonstrates an even greater implication: numerous “applicable manufacturers” under the Sunshine Act will be hiring consultants, third parties, and companies to check the accuracy and adequacy of the databases they use to collect information under the Physician Payment Sunshine Act. As a result, these consultants and companies will be the first to detect patterns that may suggest fraud or other improper payment patterns that could be lead the initiation of a False Claims Act Suit.
Moreover, in-house employees that are handling the Sunshine Act and compliance aspects will also have this sensitive information. This means that companies will have to practice close oversight and careful scrutiny over such employee’s work and access to this information.
Thus, it will be incumbent upon manufacturers to closely monitor what company’s and employees they use to review, collect and analyze Sunshine Act payment data and what employees of those third-parties are getting access to this information. It is still unclear whether knowledge or access to Sunshine Act information would be sufficient to bring a False Claims Act action or other suit against a company, however, companies cannot afford to wait around to find out what happens.