March 2012 Health Law Summaries

The following are brief summaries prepared by section volunteers of new developments in Florida health care law that may be of interest to members of the Health Law Section. The summaries are presented for general information only as a courtesy to section members and do not constitute legal advice from The Florida Bar or its Health Law Section.  

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Fraud and Abuse

The United States Court of Appeals for the Eleventh Circuit Reverses Dismissal of FCA Claim alleging Millions in Overpayments

The Eleventh Circuit held in February 2012, that the Southern District of Florida should not have dismissed a qui tam action under the False Claims Act (FCA) against Medco Health Solutions, Inc. and its subsidiaries for allegedly failing to return identified overpayments as required under a corporate integrity agreement (CIA) with the government.

Relators (previously employed by one of the defendant subsidiaries) brought a qui tam action against Medco Health, its subsidiaries and two corporate executives. The corporate defendants were subject to a CIA that one of the subsidiaries, PolyMedic Corporation, had entered into with the Office of Inspector General (OIG).  The CIA required defendants to remit to the government "overpayments" resulting from lack of documentation and duplicate and erroneous billings within 30 days of identification.  The Relators reported that defendants engaged in a scheme to conceal approximately $69 million in overpayments that under the CIA should have been remitted to the government.  Relators alleged that the defendants transferred the overpayments to unrelated patient accounts, fictitious patient accounts, or eliminated them from their records through a program called “datafix”.

Under the CIA, defendants had to submit annually a random samples of patient accounts to the OIG’s Independent Review Organization (IRO) which would initiate an audit of all patient records if it found an error rate above 5%.  Relators alleged that defendants scrubbed their audit sample to remove any evidence of overpayments to avoid triggering the IRO audit.

The district court had  dismissed the Complaint, finding Relators had not pled fraud under the courts in the Complaint with the required particularity.  The Eleventh Circuit reversed, stating that to establish a reverse false claim, a Relator must prove: (1) a false record or statement; (2) the defendant's knowledge of the falsity; (3) that the defendants made, used, or caused to be made or used a false statement or record; (4) for the purpose to conceal, avoid, or decrease an obligation to pay money to the government; and (5) the materiality of the misrepresentation.  

The Appeals Court found that Relators adequately alleged with particularity the existence of an obligation to pay the government.  The Complaint continued detailed allegations relating to the defendants’ contractual obligation to identify, report and remit excess government money in accordance with the CIA’s instructions. The Relators sufficiently alleged the certificate of compliance and audit samples were knowingly false and were submitted to the government. The Relators sufficiently showed exactly how the defendants violated the CIA, including when the violations occurred, who directed and performed the violations, how and which accounts were affected and what the defendants gained as a result.  As to materiality, the Appeals Court found that because the CIA required the defendants to provide an accurate account of any excess government property in the defendants’ possession and the Certificate of Compliance misrepresented the value of the property in the defendants’ possession, the submission of the Certificate played a material role in the concealment and avoidance of the obligation.

United States ex re. Matheny v. Medco Health Solutions, Inc., No. 10-15406 (11th Cir. Feb. 22, 2012).

Reported byKarina P. Gonzalez, Esq.

Professional Licensure

Community Pharmacy Re-permitting Required Before July 1, 2012

Section 465.018, Florida Statutes was amended in 2011, by HB 7095 to require every community pharmacy that dispenses Schedule II and Schedule III controlled substances to be re-permitted by July 1, 2012.  The change was intended to prevent felons and other nefarious individuals from owning and controlling community pharmacies.  All the owners, officers, and prescription department managers of the community pharmacy will need to submit fingerprints to the Department as part of the permitting process.  The community pharmacy must also have written policies and procedures for preventing controlled substance dispensing based upon fraudulent representations or invalid practitioner-patient relationships.  The Board of Pharmacy website includes additional information on re-permitting requirement including establishing an online Pharmacy Administrator Account, fingerprint submission and the re-permitting application.

Prescription Drug Wholesale Distributor Permit Renewals

The Florida Drugs, Devices and Cosmetics Advisory Council, that was recently moved from the Department of Health to the Department of Business and Professional Regulation (DBPR) with the regulatory responsibilities for various licensees, including in-state and out-of-state prescription drug wholesale distributors among others, in an effort to reduce the burden of annual permit renewals for prescription drug wholesale distributors that do business in Florida, has voted to recommend that the DBPR amend administrative rule 61N-1.015, Florida Administrative Code.  The rule currently requires that with each annual renewal application the permit holder prepare and submit a new Personal Information Statement (DH2125) reflecting all of the voluminous information required by statute including an affidavit that all of the information is true and correct.  The change being recommended would allow renewing permit holders whose information has not changed during the previous year to simply re-submit a copy of the DH2125 with an original affidavit incorporating the Personal Information Statement by reference and stating that the information contained therein continues to be true and correct.  Anyone representing Florida based or foreign prescription drug wholesale distributors permitted in Florida should keep an eye out for this proposed rule change.

Reported By: Allen R. Grossman and Michael L. Smith


CMS Issues Proposed Overpayment Rule

On February 16, the Centers for Medicare and Medicaid Services ("CMS") issued a proposed rule regarding mandatory return of overpayments.  Section 6402(a) of the Affordable Care Act requires a person to return a Medicare or Medicaid overpayment within 60 days after the date on which the overpayment is identified or the date any corresponding cost report is due.  The proposed rules would relate only to Medicare Part A and B overpayments.  Medicaid requirements will be proposed later.  Though the rules have not been finalized, CMS stated that, even without a final regulation, entities that bill Medicare are still subject to the statute's mandate, "and could face potential False Claims Act liability, Civil Monetary Penalties Law liability, and exclusion from Federal health care programs for failure to report and return an overpayment."  Under the proposed rule, an overpayment would be sufficiently "identified" if a person "has actual knowledge of the existence of the overpayment or acts in reckless disregard or deliberate ignorance of the existence of the overpayment."  Reports of overpayments must contain specific information set forth in the rule.

Interested parties wishing to provide input on the proposed rules must submit comments by 5 p.m. on April 16, 2012.  The full text of the proposed rule is available at this link:

Reported by:   Shannon Hartsfield Salimone
The Florida Bar
651 E. Jefferson Street
Tallahassee, FL 32399
Phone #: 850-561-5650
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