U.S. ex rel. Fisher v. IASIS Healthcare LLC — Nov. 2016 (Summary)

FALSE CLAIMS ACT AND ANTI-KICKBACK STATUTE

U.S. ex rel. Fisher v. IASIS Healthcare LLC
No. CV-15-00872-PHX-JJT (D. Ariz. Nov. 9, 2016)

The U.S. District Court for the District of Arizona granted in part and denied in part defendants’ motion to dismiss potential Anti-Kickback Statute (“AKS”) and False Claims Act (“FCA”) violations allegedly perpetrated by the defendant by offering preferential payments for services, failing to perform mandated medical necessity and utilization reviews, and improperly credentialing providers.

The lawsuit’s bringers, called “relators,” claimed that the defendant hospital management company and its wholly-owned subsidiary, a managed care organization (“MCO”), submitted claims with “reckless disregard or willful indifference as to whether or not the care was medically necessary” and also created preferential programs where providers routinely bypassed authorization processes that were designed to verify the medical necessity of services before providers rendered care.  The preferential programs stratified providers into “Gold” or “Platinum” status, which conferred the privilege of bypassing standard prior authorization review and other processes.  This, relators argued, led the defendants to approve claims without evaluating them for “necessity, consistency, or prior authorization requirements,” all of which the defendants implicitly certified compliance with when submitting claims.  The relators also asserted that the utilization and appeal processes did not take into account medical necessity or cost effectiveness, and that providers in the MCO network were improperly credentialed or not credentialed at all.  The court held that the relators’ claims, because of the specific examples and details they provided about the alleged fraud, survived a motion to dismiss as to the FCA claims.

The defendants asserted, and the court agreed, that the relators failed to demonstrate how remuneration to providers was based on referrals in violation of the federal AKS.  The defendant, as an MCO, received capitation payments rather than payments based on the volume of patients referred.  Defendants thus argued that they could not be found liable under the AKS, which prohibits claims that offer payment for “recommending purchasing, leasing, or ordering any good, facility, service, or item.”  The relators alleged that the MCO permitted more treatment to be performed than was necessary, which would affect how future capitation payments were made.  The court disagreed, opining that it was “speculative” as to whether this increased treatment would result in increased governmental costs.  The court also dismissed as “speculative” the allegation that the defendant’s preferential programs exposed it to risk for loss that the government would insure if it exceeded six percent.  Finally, the court also considered the relators’ claims that the defendants conspired to commit fraud.  The court held that the relators’ failure to adduce evidence tending to suggest an explicit, conspiratorial agreement among the defendants required dismissal of those claims.

The relators alleged corollary violations of the federal FCA under both the express and implied false certification theories.  The court determined that the waivers of prior authorization and utilization review, the deficient credentialing processes, the appeal practices that did not account for medical necessity or cost effectiveness, the lack of written policies, procedures, and processes, and the preferential status programs for providers all constituted infractions upon which FCA liability could attach.

The defendant reported patient encounter data as part of its regular compliance certification process to CMS.  The court found that while the encounter data was not, itself, a “claim” for purposes of the FCA, its eventual use in determining future capitation payments to the defendant was sufficient to survive the defendants’ motion to dismiss.  The court concluded that the encounter data required the defendants to aver compliance with a myriad of federal laws, regulations, and policies; the failure to thoroughly examine the medical necessity of services rendered under the claims and, as such, their submission to the government therefore constituted an express false certification violation of the FCA.  The court also determined that the defendants’ waiver of prior authorization for their preferred status providers while simultaneously attesting to the accuracy of their encounter data also amounted to an implied false certification violation of the FCA.

Following the mandates of the Escobar Supreme Court case, the court also examined the materiality of the allegations.  Because the defendant MCO had obligations to “recommend, direct, coordinate, and organize the furnishing of services to [its] enrollees[,]” the court held that the failure to comply constituted grounds upon which the government could have refused payment if it had been aware of such noncompliance; this is an essential element in the materiality determination.  The court ultimately held that the certifications of compliance were material to the defendants’ ability to receive payment from the government.  As such, the court denied the defendants’ motion to dismiss the FCA claims with respect to materiality.