Episode 7: Proactive Compliance is Your Best Defense

Episode Transcript

CJ: Hello everybody, this is CJ Wolf with Healthicity, and welcome to another episode of Compliance Conversations. Today we have a super guest, Sean McKenna, a wonderful attorney.

Sean: Hey thank you all for inviting me to be on.

CJ: Yeah, we appreciate your time, we know you’re busy. You’re joining us from Dallas, and we’re here in Salt Lake City so hopefully our technology will work out for us today.

Sean: Hope it’s as nice there as it is here today, of course the weather can change, you know, in two hours from now.

CJ: Exactly. Now before we kind of start talking about some of these topics and questions that I have, would you just take a minute and give our listeners a quick background and bio of yourself? I know you have experience as both an attorney in government as well as now in private practice. So, would you explain just a little bit about where you’ve been and what you’ve been doing?

Sean: So, I’ve been with Greenberg Traurig as a shareholder in the Dallas office and will handle healthcare matters and other white collar issues. Before that I was will another large firm, but the first 16 years, approximately 16 years of my career I spent with the Federal government. At the beginning, I was with CMS at the regional council’s office in Dallas where I handled a variety of regulatory and administrative matters on behalf of CMS, and then about a hear and a half later I transferred up to the LIG in D.C. where I handled a lot of fraud related issues. Kind of worked on false claims act situations CIA’s, and affirmative litigations, such as exclusions and penalties, as well as other regulatory issues, and that was about three and a half years. So, in 2003 I came back to Dallas and I was an assistant US attorney in the northern district of Texas here where I handled, for 10 years, all variety of healthcare fraud cases, civil and criminally, local and nationally, regionally etc. From all types of providers as well as all types of theories, reverse false claims act, kickback, etc. After 10 years, I decided to go to private practice, and that’s where I’ve been for about three and a half years now.

CJ: Great, so you’re now defending providers from these types of allegations and cases, right?

Sean: Correct, so I represent all individual executives and healthcare providers on any matter of civil criminal administrative, or rather a kind of audit situations. I handle a variety of providers from hospitals, physician groups, physicians, business men, labs, pharmacies. You name it I’ve seen it. We also do a lot of compliance related work in internal investigations to provide clients with insight as to kind of what they need to do in order to insure and beef up their compliance programs and to try to mitigate and avoid any type of enforcement action, and I speak regularly on that as well. And CJ we spoke together last year at the HCCA compliance institute I believe.

CJ: Yep, at the enforcement institute in DC, that was wonderful. You know, I think one of the things that’s on my mind, and I think compliance officers mind. It seems like, and maybe correct me if these are not the right numbers, it seems like the vast majority of false claims act come from key tm’s and whistle blowers, first of all, is that true? And secondly, if it is, how does an organization protect themselves proactively, and maybe if you’d comment what happens after a suit is actually filed. I’m sure strategy is a little bit different at that point.

Sean: Yes, CJ, you are correct. The majority of these cases come from key tm’s or whistleblower provisions of the false claims act, and most of the big settlements you hear about reported in the media, the pharmaceutical device or large hospital groups or systems generally start from a whistleblower complaint filed in a district court, whatever jurisdiction, and for a national company that can be anywhere in the country. Ultimately what happens is a case is filed, and from there, the government has a certain period of time, the statute under the false claims act says 60 days, it typically can be a year or two, to investigate and determine if they want to intervene in the case, take it over, obviously, they can settle it, or decline it. And at that point the relator can go forward. And we’re seeing a trend in the last year or so, where years ago, if the department of justice declined to intervene in a false claims act case the relator would usually drop it, but it seems like today most relators find some sort of financial backing, either through their firm or otherwise, or joining with other firms, and continue to prosecute the case on behalf of the government, in which they are entitled to a share up to 30%. So, one of the big things when I’m talking to people, and advising clients. Is that we generally want to see a robust effective compliance program, and obviously most organizations are familiar with the LIG’s model, the seven elements originally derived from the US censusing guidelines for corporations. But one of the key aspects of that is to really have an independent compliance program charged, empowered, to investigate compliance and address them at either an audit committee, compliance committee level, or individually and take action. So ultimately what we recommend is that any complaint coming through the hotline or otherwise needs to be taken serious, needs to be addressed, and it needs to be disseminated that there was an issue or there was not an issue throughout the organization. Now obviously if there was an issue, there may not be as much urgency, but one of the big things I see in defending these types of cases on behalf of my clients is that the whistleblowers feel that for whatever reason have no other recourse but to file a case or to go to the government and they feel that the complaints have fallen on deaf ears. So, I think that’s the number one issue I usually see when the case is filed, or that we become aware of it, is that certain individual, whether disgruntled or not, and some are and some aren’t, some just feel like they are doing the right thing, have not been addressed, those concerns, and so that’s critical. And ultimately another component is doing the auditing and self-reporting, if there an issue, obviously with the changes in affordable care act in recent legislation, any Medicare/Medicaid provider has 60 days to repay an overpayment, and there is a final year that just came out that addresses that, and I think there is a 6 year look back period. But ultimately, if there is a problem, its not so much a fix it going forward mentality any more, you have to quantify it, and make the appropriate repayment, and failure to do so, in certain circumstances, can lead to a false claims act under the reverse false claims act theory, or even criminal liability.

CJ: Right

Sean: but one of the things we definitely advise clients CJ is that, if you’ve got an issue, you just can’t burry your head in the sand, you’ve got to address it. Because somebody else will address it for you.

CJ: And that’s a good point, I’ve been a compliance officer, so you get these hotline calls every week and every month, or whatever it is, and you don’t know if that’s going to be a whistle blower or not. Sometimes the information you get on your hotline, you know, it’s vague, and if it’s reported anonymously, you don’t have an opportunity to go back and ask that person “Give me some more detail”. So, can you give us some specifics, I’m sure you probably get calls from clients when they are in the middle of investigating a hotline concern, or maybe it just came up on an audit, and knowing how far to go when the complaint or allegation that came through their compliance program wasn’t specific enough. What do you do in those cases?

Sean: Well, obviously, you have to investigate them to the extent that you can. And the key here CJ is documentation. If it’s so vague that you really can’t quantify or you’ve done sufficient amount of investigation. Let’s just say, just hypothetically, that services are not being performed that are medically necessary, in one area of the hospital for instance. You know, pathology, so diagnostic testing or pathological testing is not done appropriately or through medical necessity. You know, I think it’s relatively straightforward to pull a small probe sample for a period of time, I would not do 6 years yet.

CJ: Right.

Sean: I would do a smaller sample, and take a look at them, and determine independently through the medical director or compliance officer or some other mechanism, what was done and how they were done. Is the documentation there sufficient? Does it appear that one physician is overutilizing or ordering an excessive amount of tests? Those are the types of things that I think anyone can really glean from a cursory review, and if it presents a problem then I think discussing with counsel internally “what are the next steps” is appropriate. But in that case, let’s say, a sample is done an everything appears to be okay, well I think you would document that to the file and kind of go about your way, that way in case 3 years later the department of justice or the LIG asks “hey we have a complaint regarding medically un-necessary pathology tests, what have you done?”

CJ: Right.

Sean: And you pull a bunch of files and say you’ve looked into it and we couldn’t find anything, and we didn’t think of it.

CJ: Yeah.

Sean: So, that could help defend against, you know, a knowing retention of an overpayment, but also rebuff the allegations that there is an issue. And there are certain circumstances that the department of justice, LIG, will just say thanks very much and go about their business.

CJ: Yeah.

Sean: So, your normal everyday compliance function has just saved the organization from an investigation. That’s something, I think, that is critical that compliance officers realize that they add value to the organizations. And the compliance program, when done effectively, in demonstrably so, then they add value to the company, and that’s something that, CJ, compliance officers should be talking to their board about, or their leadership.

CJ: Yeah, that’s a really good point. You know one of the things, I remember, kind of the story you just told, or the hypothetical you just mentioned, there is lack of medical necessity in a certain department for example. And we did, we would do, just like you said, kind of a probe audit, to the best that we could kind of identify based off the complaint or the concern, and then let’s say we didn’t find anything. But then you get a second complaint by somebody else, maybe a couple months later, or maybe it’s the same person, and you get some additional information. I’ve seen that happen before, and that additional information then opens up, kind of a new avenue, or it gives you more specificity to look at different types of claims or different areas. So, I think one other thing with compliance programs it’s important to keep that file like you mentioned, but also when new concerns come up, in that same general area, your referring back to say maybe there’s connecting the dots. Have you seen that happen ever? And any other comments you have on that scenario?

Sean: Right, I mean, in certain circumstances sometimes there could be a repeat complaint, and I think that has to be taken seriously. It could be from the same individual, or another individual. The process can be repeated, I don’t think you expand it from a different time frame, and ultimately if there is nothing to be had, I mean I’ve seen large organization basically publish in a quarterly newspaper, there is a compliance corner, and they say “Hey, we’ve got the following complaints, and we’ve looked at them, and we don’t see anything to it.” And obviously, that’s not going to be appropriate for everybody, but a large organization has utilized it before. In fact, I know Lockheed use to do it as well. When FBI director Comey was general council. And that way, especially if it’s anonymous, you’re getting it out there to the people. Now that may not deter every individual, but at least it gives a public accounting of what was done and why it was done and if it was an issue. But I think ultimately, if there is repeat issues then I think it probably warrants and is prudent to just eat the dive.

CJ: Yeah.

Sean: and obviously, your coding, it depends, there are two aspects, you’ve got your coding and billing from a compliance perspective. But you also have your contract compliance as well, which potentially could be even more problematic than coding. Coding sometimes is an art more than a science, but contract compliance in physician relationships and how much is being paid and if its below market value and if the contract is being adhered to in the manner it’s supposed to be. Well that’s not an art, that’s black and white.

CJ: Yeah.

Sean: I think a lot of organizations focus on the coding, auditing, quarterly, but ultimately, they leave the physician or other arrangement behind. But you’ll see now with the LIG, increasingly with CIA’s involving kick back or start cases, requiring arrangement reviews of a certain amount per year that may, the compensation may exceed a certain threshold. And from that perspective, those are costly. I’ve had a client recently undergo that process, it’s a substantial amount of money to do that. Whether you hire a law firm to do it or hire some other consultant to do it, it does take an amount of time and resources away from the organization.

CJ: Yeah, that’s a great point. Let me shift gears a little bit, some of our listeners might not be attorneys, most of them aren’t, they are kind of compliance professionals that might not have a form of legal education. What happens, and what does it tell you, when an organization has gotten a subpoena does that change kind of the ballpark that you’re in? and what’s the difference between a subpoena and a CID? And can you do much reading of the tea leaves when you get one vs the other?

Sean: In some cases, you can, and so let’s back up. Generally, the government, department of justice, is able to issue through the agencies or itself, a variety of different compulsory processes. Obviously, there is a grand jury subpoena, that instantly tells you that there is a criminal investigation, that also means there could be a parallel civil investigation as well. A CID is a specific tool under the false claims act that allows a US attorney’s office, or a deputy attorney general to compel testify, to compel interrogatories, which are written answers, or to just produce specific documents. And increasingly the CID’s are being used by the department of justice in a false claims act investigation from the civil side that can be shared with the criminal side, where as a certain context the criminal grand jury subpoena cannot be shared with the civil counter parts. But a CID is easily done from a desk of a US attorney’s office.

CJ: Okay.

Sean: So, it can be issued quickly, tailored, etc. And generally, not every time, but if you get a CID or the third-party subpoena duces tecum from the LIG or some other investigative agency like DOD, or even, you know, veteran’s affairs, it typically tells you that there is probably a whistleblower false claims act case filed somewhere.

CJ: Okay.

Sean: And that’s generally, it doesn’t necessarily mean because the attorney general, department of justice, can bring a case and investigate a false claims act case on their own, absent a whistleblower suite.

CJ: Right.

Sean: Most of the districts are buried in these types of cases, I think 700 are filed on average every year for the last several years. So most of the time they are going to be issued to providers or third party witnesses, etc. in light of the fact that the false claims act has been filed.

CJ: Gotcha.

Sean: Basically, they don’t have a lot of resources to go out and start issuing investigations on their own. Some smaller districts might, but if you’re in, for instance Philadelphia, or Boston, or san Francisco, or Dallas or la, more than likely it’s going to be a false claims act investigation, Houston as well.

CJ: Gotcha.

Sean: It depends on what jurisdiction you’re in, you know, obviously, you can read some tea leaves into what they’re looking at based on the nomenclature. But ultimately most of these are generated from a false claims act case or a whistleblower case. Now the agencies can also issue their own subpoenas, not just the subpoenas deuces tecum, which is to ask for documents. They ask, you know, they can compel testimony, OIG can compel something under a testimonial subpoena, which is akin to a civil disposition, and they generally do that when they are investigation somebody within their own administrative authorities, whether for exclusion, or for CMP’s, under the civil monetary penalties law. But, CID can compel testimony that other subpoenas can’t, and then there is also a last kind of hybrid, it’s called an AIV, or authorized investigative demand, and the criminal division can issue that under title 18, for certain federal health care offenses and that can’t be shared with the civil case. So often times an office that utilizes those, that tells me that there is a civil and criminal component as well.

CJ: Okay.

Sean: Or as, if it’s a grand jury, they are typically not going to issue a grand jury subpoena to a provider unless there is a civil case. Most times they don’t do that because it’s duplicative and repetitive.

CJ: Okay.

Sean: but you know, a CID can be shared with the criminal as well, and under the DOJ current guidance they are supposed to be talking to each other and collaborating on cases.

CJ: Exactly, I was just going to bring that up because you were talking kind of the sharing between the criminal and civil, and we know of the Yates memo, calling for that individual accountability, as well as, I think, the Yates memo, if I remember rit right, states, you know, one side can’t resolve a case without informing the other. It sounds like some of those practices are kind of going on anyway, and you’d probably know, by region, which ones already do that. But this is more of a, kind of a, more formalized guiding set of principles to have everybody in the country doing that. Have you seen, or maybe its anecdotal, but are you feeling that this individual accountability principal from the Yates memo is starting to effect things more, and you’re seeing more individuals held accountable.

Sean: Right, and definitely it has. It has made a tremendous impact in the way defense counsel and providers have to go about responding to investigations. Historically CJ, there is something called the parallel proceedings, and it just means the simultaneous handling of civil and criminal perhaps administrative cases. And healthcare is kind of the poster child for that. And since, at least the early 90’s, at least since Janet Reno kind of brought health care back to the for front in the mid 90’s. The use of parallel proceeding is required, it’s encouraged, and really some districts did it vs some didn’t do it so well. For instance, though it’s always been there, and the discretion to charge an individual vs a corporation has always been in the hands of the prosecutor. I think in the last several years the Yates memoranda in the civil division has issued a similar edict, as well as the AIG, has kind of taken out of the hands of the local prosecuting authority and making it more formulaic.

CJ: Okay

Sean: It’s kind of driven by DC. And we might see a change in that with this new administration, we may not. But if there is one change that he’s had, I think, that is something I’d look for. But it has made casing, excuse me, representing individuals and companies difficult because at what point is it a conflict of interest that separate council needs to be obtained, and also it slows the entire process down whereas before an organization could get to pay a fine or penalty under the false claims act and the release would be for the organizations officers, agents, directors etc. and now we’re seeing that the individuals are contributing to the settlement, they are not being released. So only the organization, and that comes as a shock to a lot of individuals and executives. And more importantly the LIG is now taking a look at individuals for a potential exclusion or their own administrative action.

CJ: Right

Sean: and that determination is not necessarily in conjunction with the government DOJ’s investigation so you’re left with kind of a choice. “Well, do I want to contribute money as an individual to a false claims act settlement, and then wait for the LIG to come around and determine whether they think I have any administrative liability and resolve that then, or do I want to do it all at the same time?”

CJ: Right

Sean: It just makes for a very inefficient machine because of this formulaic approach that kind of DC has pushed down on the districts. If anything, that might change, it might not, time will tell. But ultimately these cases have become much more difficult to defend and there are lots of ethical quandaries for defense council. Who pays for the council, who’s indemnifying them?

CJ: Exactly

Sean: doesn’t like that to be the case but sometimes contractually executives are indemnified. And then they have their own insurance and that adds you know instead of one lawyer trying to representing interest in everybody because there is no conflicts, then you could have five or six people jumping in.

CJ: Right

Sean: And it just creates a lot of headaches. And I’ve heard that from my former counterparts and DOJ as well, this whole process has become kind of a burden, and I think they recognize the number of settlements and the number of cases is going to go down down and slower and slower.

CJ: Yeah, you know, one of the things in the Yates memo says that in order to get cooperation credit you have to give up all the facts on who’s been involved etc. Maybe that’s been around for a while, but I wonder when compliance folks and internal in house council are doing investigations, they’re going to have to give what I understand as Upjohn warnings to employees, and will employees now be more sensitive to that and say “Oh, do I need my own council, are you investigating, are you going to give up these facts if I had some sort of involvement, do I need to protect myself because you, in house council, are representing only the organization.” Is that some of this slowing down and muddying the waters that your referring to?

Sean: Yes, that as well as the fact that just from the bureaucracy standpoint once you come to a resolution it takes much longer, not that it was ever that quick. But when you’re doing an investigation on your end to try to cooperate, even from a company perspective. You know, your long-term client could be the CEO or CFO of an organization or a company and then all of a sudden you have to tell them “I don’t represent you, I represent the organization and I’d advise you to get separate council based on what the result of the investigation or compliance review have found” I mean that’s a very difficult requirement for a lot of different attorneys. So, you’re giving these upjohns or warnings that state “we don’t represent you we represent the company” and then they say “well do I need my own lawyer” and then it becomes a dance.

CJ: Exactly.

Sean: If you think they have potential liability, I mean, then your ethically obligated to tell them to get their own council.

CJ: Yep

Sean: From the company’s perspective trying to do an investigation to get the facts.

CJ: Right

Sean: In my experience, it’s actually sad, CJ, they want facts, but they also want executives. They want cooperation not just by the company in the investigation, but also in the investigation of the others. And that just presents, who’s documents were privileged, was company council involved, what role were they acting. All these questions become really paramount when you’re talking about a parallel kind of individual executive case as well as the organization. And a lot of people, i think, are, you know, it’s new ground for a lot of people because I think a lot of people have gotten lazy over the years because it’s kind of been considered unless there is really a bad actor that has been terminated for one reason, everybody singing the same song and everybody is on the same page. But I don’t think that’s the case anymore.

CJ: Yeah, so interesting, I tell ya. It’s an interesting time to be involved in healthcare compliance and these legal issues. We’re getting a little close to the end of our time. I wanted to ask you, these are some of the things that were on my mind, but you’re dealing with clients and your dealing with issues real time, day in and day out. Are there any interesting headlines, or cases, or concepts that are really important for healthcare compliance folks and their legal counsel to know about?

Sean: Yea, there’s a couple things CJ. One of them, which as we’re continuing to watch the development of the Escobar supreme court case addressing implied certification and how it’s being interpreted by the courts. That was a very, it was a unanimous decision issued last year, but ultimately how the lower courts are interpreting it, that’s going to kind of rule the day, and I’m sure we’ll have a circuit split here in the next year or so about how materiality is to be applied when determining whether a claim is false or fraudulent is at a material false or fraudulent statement in order to get a claim paid. And there are various tests that are out there, so we’re continuing to watch that, and it is a complicated issue. Another aspect is knowing retention of overpayment. You know the case law, we know have a final rule on that. And we’re also seeing kind of cases come about when the department of justice is intervening in cases where that’s an allegation. But the interesting point is lets say the affordable care act is repealed in part or in whole, the statutory authority for that, the 60 day rule, came from the affordable care act.

CJ: Right

Sean: A lot of us are watching, what’s going to happen with this repeal and replace mantra, what’s really going to happen to certain previsions that affect federal fraud investigations.

CJ: interesting.

Sean: and finally, there is a case out here in Dallas I think a lot of individuals will find very unique, and it’s involving a hospital called Forest Park Medical Center where the government used travel act, which is a federal statute which federalizes commercial bribery statutes from the state to go after those at the hospital that ostensive didn’t do federal business, but really only did out of network commercial payers.

CJ: Okay

Sean: So, that’s kind of, it’s very unique, a lot of physicians have been indicted, in cases publicly, and were seeing a lot of individuals that are being told by council as long as you don’t take federal business you’re okay. In those states where there is not a robust state enforcement similar to the start of the kick back statute.

CJ: Right

Sean: So, you’ve got a lot of physicians getting large payments, and a lot of commercial payments, and excuse me commercial payers are being quote victimized defined benefit plan. And I guess one of the last things that I’m seeing is that we’re really seeing an extreme view of what the definition of what a kickback is in a lot of these cases, and these are mostly criminal cases, and the Forest Park is obviously a criminal case, but we’re saying any payment for marketing, or any payments to a third party which potentially a referral is made, the government is kind of taking a hard line position and looking at that under the one purpose test.

CJ: Right

Sean: that could be an illegal kick back, and you know, a lot of times there may be extraneous and contemporaneous evidence to that effect, even regardless of whether the contract complies with a stark exception or a kick back safe harbor, they’re still trying to allege criminal conduct. And I think that’s remarkable, and I think we’re going to look at those cases and see, in some instances I think the conduct so egregious it’s not going to matter to the potential jury, but sometimes I think you’re going to see some very close calls and some acquittals.

CJ: Yeah.

Sean: I think that will hopefully, the pendulum will swing back a little bit, and we can do just like the Yates memorandum an individual liability, more of a rule of reason rather just a forward mosaic approach.

CJ: Yeah, you mentioned the travel act, and I don’t know if this is something you’re aware of, but I think I remember reading something in a district in New Jersey they used the travel act as well. I don’t know if it was tied to these commercial claims, does that ring a bell?

Sean: Yeah it was, there is a case, and it’s still ongoing in New Jersey, I believe that involved an individual physician. Here in the Dallas case, it was used, really to try to get all the physicians who got certain amounts of money. And there are a couple cases, there’s one other case in California and there’s one other that escapes me, and I don’t know if four isolated cases in a year or so is a trend, but it’s definitely something to be considerate of, because it’s really involving any physicianal entity that doesn’t take Medicare or Medicaid or doesn’t think they take federal funds, but that’s another question because subsidies aren’t federal funds

CJ: Right.

Sean: But for the purposes of kick back statute if you’re saying you’re only taking commercial payers, you still have federal criminal liability under potential wire fraud mail fraud

CJ: yes.

Sean: Violation, whether enforced or not, and if the feds are going to come in and enforce what the states aren’t, I mean that’s remarkable, and I don’t know if that’s going to continue or not, but it’s about four cases going on right now.

CJ: So, that’s something for us to watch, maybe we’ll have you back and we can have you talk about some of that as those things play out. Sean, we really appreciate your time and your expertise, and want to thank you for sharing it today.

Sean: Absolutely, thank you so much CJ.

CJ: All right, and thank you all, to all our listeners. We’ll sign off here from Salt Lake City, and we’ll talk to you again in our next episode of Compliance Conversations.