False Claims Act -- Investigative Tools of the Trade

When the government initiates an FCA investigation, it is critically important that the target company promptly begin investigating the facts and circumstances that gave rise to the inquiry. This is not only so that the company can respond to government requests for information and documents, but also, and perhaps more important, to assess the strengths and weaknesses of the case and to best strategize its defense.

There are several investigative tools a company should typically utilize in response to an FCA investigation involving allegations of violations relating to the provision of services under federal healthcare programs.  These include (1) collecting and reviewing relevant documents, (2) interviewing current and former employees, (3) conducting a clinical review of the treatments or patients at issue, and (4) analyzing available data.  The first three of these tools have long been considered best practices.  In the age of big data and larger, consolidated providers, the fourth is becoming an invaluable tool, both for accurate case assessment and for substantive use in discussions with the government about the conduct at issue.

Document Review

The vast majority of FCA investigations are initiated by the government’s issuance of a Civil Investigative Demand (CID) requesting the production of documents the government considers relevant to its investigation.¹  Often the requests are very broad, and, depending on the size of the organization and the scope of the alleged conduct, responding can be an extremely onerous and an expensive ordeal.  Typically, the target company will expend significant time and resources identifying and collecting potentially relevant documents and reviewing them to determine which are responsive to the government’s request.

Of course, providing all of the documents the government asks for is critically important.  The target company, typically utilizing outside counsel,² must conduct a thorough analysis of all potential locations of responsive documents and labor in good faith to make a full and complete production.  The last thing a company would want is to materially fail to respond wholly to the government’s requests, which could result in motions practice and, of greater concern, turn a civil matter into a criminal prosecution for obstruction of justice.

In addition to the obvious importance of providing the government all of the documents it has requested, a thorough document collection and review also allows the target company to understand the facts surrounding the issue or practice under investigation and assess whether those facts pose a legitimate legal concern for the organization.  It should go without saying that the government will review the documents the target company produces to determine whether they support FCA liability.  As it is producing its documents to the government, the company must also undertake a detailed factual analysis of the documents to understand its potential liability and exposure.  Only with a firm handle on the facts and documents can a company be armed to engage substantively with the government about any alleged FCA issues and to understand how best to structure a defense with the facts at hand.  

A prime example is the knowledge element of an FCA claim.³  In a medical reasonableness and necessity case, for instance, the government cannot prove a claim by simply pointing to treatment it contends was excessive or unnecessary.  Instead, it must establish a causal link between some fraudulent scheme to provide unnecessary or excessive treatment and actual claims that were submitted as a result of the scheme.⁴  E-mails and, more recently, text messages are fertile ground for the government in this respect.  In an excessive treatment case, for example, the government will be looking for communications among corporate employees evidencing a plan, scheme, or intent to provide services to increase revenues, rather than as a result of patient need.  The target company needs to locate all such communications and try to gain an understanding of the context in which they were sent, so that it will be armed to address these communications, and what they mean for the government’s FCA theory, when the government engages substantively.  A thorough document review by the company is critical to that end.

Interviews

Conducting interviews is another integral component of a company’s response to an FCA investigation.  At the outset, when responding to the government’s requests for documents and information, counsel for the company must identify potential document custodians and interview them to understand where documents are kept in the ordinary course of business and how best to preserve and harvest them for review and production to the government.  Given the often-tight deadlines within which a company is expected to respond to a CID,⁵ these interviews should typically occur as soon as possible after receipt. 

In addition to assisting with the preservation and collection of potentially relevant documents, interviewing potential witnesses is also essential to help the company gain a better substantive understanding of the facts at issue.  Counsel should, of course, interview relevant current and former employees to understand the corporate culture and practices and, critically, whether the employees will stand by the care they delivered or can explain the actions under scrutiny.⁶  The timing of these interviews will vary depending on the circumstances.  While a company may understandably be anxious to learn as much as it can as early as possible, it typically helps to have reviewed at least some documents before engaging in interviews of current employees, if the timing allows, as the documents will shed light on the important topics to cover in the interviews.  Often, these interviews will provide key insights into whether there are problematic activities occurring and whether the company should have legitimate concerns about FCA exposure. 

While the company is producing documents in response to a CID or other request, the government will likely be contacting any number of potential witnesses — most often former employees — to help it assess whether FCA violations have occurred.  Typically, the government is working with a relator who has had a negative experience with the company, and it will be looking for other former employees who support (or perhaps contradict) that negative view.  In some circumstances, a company might be able to proactively identify former employees the government is likely to contact and reach out to them prior to government contact with them.  The company and its counsel should weigh the propriety of such contact, and if they decide to make it, it is critically important that it not be perceived as trying to influence the testimony of the witness, which could raise criminal implications, such as obstruction of justice. 

Often the company will learn that former employees have been contacted by the government after the fact.  Counsel for the company should interview any such former employee who is willing to talk to learn what questions the government asked and what information was conveyed to the government in response.  Sometimes the witnesses provide favorable testimony; sometimes not, but either way the company needs to know what information was shared with the government.  Only with that knowledge can the company reliably assess its case, understand the government’s likely view of the facts and begin to structure its defense strategy.   

Clinical Review

The number of FCA cases in which the government questions the medical reasonableness and necessity of a given procedure or service has steadily increased in recent years.  While the propriety of FCA claims based on subjective opinions of medical reasonableness and necessity is still a somewhat open question in federal courts,⁷ the government has pursued these claims with a fervor as of late, often securing large settlements before the legal viability of the claims can be addressed by the courts.⁸

In an FCA case alleging that unreasonable or unnecessary treatment was provided as part of a scheme to defraud federal payors, the government cannot prevail without expert medical analysis pointing to clinical problems with the claims submitted.⁹  To that end, the government will inevitably bring in one or more experts to review the claims at issue and provide a clinical opinion of the care provided.  The results of this review are often shared with the target company prior to the government’s intervention decision in an effort to invoke or further settlement negotiations, and if talks prove unsuccessful, they will certainly form part of the basis for the government’s decision as to whether it joins/intervenes in the case. 

It is absolutely critical for the target company to conduct its own clinical review of its claims, so it can be armed and ready to stand behind the care it has provided or to acknowledge errors or shortcomings, thereby gaining credibility in its negotiations with the government.  Some companies choose to have their own clinicians review their claims, at least during pre-intervention negotiations, but once the government intervenes, bringing in a third party for clinical review is considered a best practice.  After all, it would not take much for the government to challenge the credibility of clinicians whose paychecks come from the company defending the conduct at issue.

To be sure, a number of courts have dismissed FCA claims based solely on allegations of unreasonable or unnecessary care, finding as a matter of law that the government cannot prove the objective falsity required by the FCA when there is a subjective difference of medical opinion at the root of the matter.¹⁰  Whether this becomes the law of the land remains to be seen, but if a company is not successful in securing a dismissal on these grounds, it must be prepared to submit credible evidence validating the care that was provided.  In fact, this is one of the most basic building blocks of an FCA defense in a reasonableness and necessity case.

Data Analysis

Analyzing data is becoming an ever-increasing necessity in FCA cases and investigations.  The Department of Justice (DOJ), the Department of Health and Human Services’ Office of Inspector General (OIG), and the Centers for Medicare & Medicaid Services (CMS), along with its Recovery Audit Contractors (RACs) and Zone Program Integrity Contractors (ZPICs),¹¹ among others, are utilizing data analyses to identify outliers and investigate potential fraud.  Target companies are beginning to see the importance of data analyses, too.  These analyses can assist a company (or its outside counsel) in better understanding what is at issue, preparing to interact with the government to discuss possible settlements, and building its defense if litigation ensues.  In short, data is becoming a key tool for companies facing FCA investigations and litigation. 

Data and big data are terms that are quickly becoming ubiquitous.¹²  Before a company can use big data (or even small data), it needs to know what data it has.  Data can be described in two primary forms: structured or unstructured.  These forms are described in the table below.

For the purposes of this section, only structured data will be discussed, as unstructured data include the emails, internal memos, interviews and other work papers that would be part of the document review discussed above.  These unstructured materials provide valuable information, but do so in a less structured manner.

Structured data can take two forms: public or proprietary.  These forms are described in the table below.

In healthcare, public structured data and proprietary structured data can take many different forms.  Below are some of the types of data that are available in each of these categories.

In each investigation, the company, its outside counsel, and its outside data analytics consultant should consider what questions and issues are at hand and what data sources could be used to most appropriately investigate and answer those questions.  Often multiple data sources are needed to gather a robust understanding.  Generally, there are two tasks that can be completed using structured data: determining practice patterns and benchmarking.

Determining a provider’s practice pattern is often integral to an investigation.  The first step in the process involves clearly identifying the providers that are at issue.  The second step is identifying the time period at issue.  With these understandings, then one can begin to identify the data sets that would be useful.  Typically, this can be accomplished with public claims data as well as proprietary data (e.g., billing, claims).  In some instances, it can be useful to triangulate between billing or claims data and data sets that help one understand disease states (e.g., prevalence, incidence, etc.) such as the Medical Expenditures Panel Survey.¹⁴    

In benchmarking exercises, a company can understand how its organization’s operations compare with the operations of other companies.  It is important to identify the most appropriate comparators when conducting an exercise of this sort.  To define peer groups, one may consider geographic location, teaching status, facility size, percentage of patients for a specific payor, and the like.  Each of these items may affect how an organization operates and may affect its practice pattern, which would then affect the benchmarking.  For example, a long term acute care hospital that treats a small percentage of Medicare beneficiaries may have a focus on treating young patients with specific injuries.  This facility may not have well-established protocols for treating elderly patients, which may explain different practice patterns that raise questions without that context.

It is also important to understand and investigate potential confounding factors.  If an investigating agency is myopically focused on an issue while it’s determining whether to intervene in an FCA case, then it is incumbent upon the company to understand what other issues may have influenced the one issue being investigated.  In some situations, there are plausible explanations that argue against a fraudulent scheme having occurred.  For example, patient length of stay and readmissions are interrelated.  Analyses have shown that as a facility reduces its patient readmissions, patients’ length of stay often increases.

Ultimately, structured data can be used to determine if an alleged action occurred and to best understand the issue.  Once those goals have been accomplished, structured data is a useful tool when interacting with the government during settlement negotiations.  With structured data, one can build robust exposure analyses to provide for substantive arguments when negotiating with the investigating agency.

Conclusion

FCA investigations are commonplace in today’s healthcare world, and it does not appear that this is going to change anytime soon.  When the government comes knocking, it is critically important that the target company understands what investigatory tools it has at its disposal and how best to utilize those tools to navigate the investigation and reach a favorable resolution.  The foregoing should not be seen as an exhaustive list of actions available to a company under investigation, as facts and circumstances will almost always differ, but this article provides a general overview of some best practices in this space.    

1.  31 U.S.C. § 3733 authorizes the government to serve a CID on any person or entity it believes may possess information relevant to an FCA investigation.  CIDs may call for the recipient to produce documents, answer interrogatories, or give oral testimony.
2.  Some companies may choose to handle an FCA investigation in-house, but given the time and resources an investigation typically requires, coupled with the day-to-day obligations of their in-house counsel, most companies will engage outside counsel to handle FCA investigations and resulting litigation.
3.  Broken down to the most basic level, the elements of an FCA claim include (1) a claim, (2) falsity, (3) materiality, and (4) knowledge.  Unlike typical fraud claims, the FCA defines “knowingly” as including actual knowledge, deliberate ignorance, or reckless disregard.  31 U.S.C. § 3729(b)(1).  Specific intent to defraud is not required.
4.  See, e.g., U.S. ex rel. Ibanez v. Bristol-Meyers Squibb Co., 874 F.3d 905 (6th Cir. 2017) (dismissing relators’ complaint because they failed to create a causal connection between a fraudulent scheme and the submission of an actual false claim).
5.  31 U.S.C. § 3733 requires the production of documents requested by a CID within 20 days.  However, the government typically agrees to extensions, and often documents are produced on a rolling basis over an extended period.
6.  Appropriate Upjohn warnings are critical here.  For more information about Upjohn warnings, see https://www.americanbar.org/publications/aba_health_esource/2015-2016/august/mirandawarnings.html.
7.  Compare U.S. ex rel. Paradies v. AseraCare, Inc., 2016 WL 1270521 (N.D. Ala. Mar. 31, 2016) (“The court finds that contradiction based on clinical judgment or opinion alone cannot constitute falsity under the FCA as a matter of law”); with U.S. ex rel. Hayward v. SavaSeniorCare, Inc., 2016 WL 5395949 (M.D. Tenn. Sept. 27, 2016) (denying a motion to dismiss based on the argument that a difference in clinical judgment could not form the basis of an FCA claim as a matter of law).
8.  Perhaps the most prominent example is Life Care Centers of America Inc., which paid $145 million in 2016 to resolve FCA allegations relating to the provision of medically unnecessary rehabilitation therapy services.  See https://www.justice.gov/opa/pr/life-care-centers-america-inc-agrees-pay-145-million-resolve-false-claims-act-allegations.
9.  Other types of FCA claims — for instance, those based on upcoding or worthless services — necessarily involve clinical review, as well, but this article focuses on claims for unreasonable or unnecessary treatment.
10.  See, e.g., AseraCare, supra (granting summary judgment); U.S. ex rel. Wall v. Vista Hospice Care, Inc., 2016 WL 3449833 (N.D. Tex. June 20, 2016) (granting summary judgment because “an FCA claim about the exercise of [clinical] judgment must be predicated on the presence of an objectively verifiable fact at odds with the exercise of that judgment, not a matter of questioning subjective clinical analysis.”).
11.  RACs investigate potential overpayments made to providers and correct these overpayments when appropriate.  RACs are paid by Medicare on a contingency basis.  ZPICs investigate fraud, waste, and abuse; are not paid on a contingency basis; and have a broad latitude in requesting documents related to an audit.
12.  Data and big data are synonymous in that both contain information about a given situation and house this data in a structured format.  Big data is simply a voluminous amount of data.
13.  Medicare implemented a rating program whereby certain provider types receive a Star rating between one and five stars.  This is meant to inform the buyer of the provider’s or plan’s relative quality.
14.  The Medical Expenditure Panel Survey (MEPS), sponsored by the Agency for Healthcare Research and Quality, is a set of large-scale surveys of families and individuals, their medical providers (doctors, hospitals, pharmacies, etc.), and employers across the United States. MEPS, which began in 1996, “collects data on the specific health services that Americans use, how frequently they use them, the cost of these services, and how they are paid for, as well as data on the cost, scope, and breadth of health insurance held by and available to U.S. workers.”  See https://www.ahrq.gov/cpi/about/otherwebsites/meps.ahrq.gov/index.html.