Volume 8 | August 2020
HHS Issues Notice on Reporting Requirement for Provider Relief Fund Recipients

On March 27, 2020, President Trump signed into the law the Coronavirus Aid, Relief, and Economic Security Act (CARES Act). The CARES Act includes a Provider Relief Fund (PRF) with more than $100 billion to reimburse eligible providers for health care-related expenses and lost revenues attributable to COVID-19. In April, Chilivis Grubman published a client alert cautioning of strict oversight of CARES Act funds. Although the U.S. Department of Health and Human Services (HHS) once described PRF funds as “no strings attached” grants, there are, indeed, many terms and conditions, such as various reporting requirements.

On July 20, 2020, HHS issued a General and Targeted Distribution Post-Payment Notice of Reporting Requirement (Reporting Notice). The Reporting Notice reminds health care providers that received at least $10,000 (in the aggregate) from the PRF of their reporting obligations. HHS noted that a reporting system will be available on October 1, 2020, but provided no additional details. HHS also indicated that detailed reporting instructions will be provided by August 17, 2020. The Reporting Notice also provides long-awaited reporting deadlines.

Reporting Deadlines (subject to change)

  • Providers must report within 45 days of the end of the calendar year 2020 on expenditures through December 31, 2020.
  • Providers that expended all PRF funds before December 31, 2020, may submit a single final report any time after October 1, 2020 – but not later than February 15, 2021.
  • Providers that expend PRF funds after December 31, 2020, must submit a second and final report no later than July 31, 2021.

Providers should review the forthcoming reporting instructions and note the reporting deadlines to ensure timely reporting. Providers should also review the terms and conditions that were accepted as a condition of receiving the funds from the PRF. In June, Chilivis Grubman attorneys presented a webinar titled CARES Act Provider Relief Fund — Ensuring Compliance and Avoiding Liability. In the webinar, we discussed the terms and conditions of the PRF and provided practical tips regarding compliance and avoiding liability. The webinar is free and can be watched on-demand here.
Georgia Statewide Business Court Begins Accepting Cases

Nearly two years after Georgia voters approved a Constitutional amendment to create a statewide business court, the business court will begin accepting filed cases on August 1, 2020.

The court was many years in the making, launched in part by the 2017 Final Report of the State of Georgia Court Reform Council. The Court Reform Council recommended the creation of a statewide business court that “would provide specialized expertise for the adjudication of complex cases, ultimately enhancing litigation of complex matters by providing judicial resources specifically tailored to such cases.” The report recognized three advantages of a dedicated business court: “certainty and predictability of outcome” because of judicial expertise in the area, complex cases can be expedited and not balanced with a broader docket (such as criminal and family court matters), and “consistent case management and lower costs, with more efficient outcomes.” After voters approved a constitutional amendment to create the court in 2018, in 2019 the Georgia General Assembly passed enabling legislation to codify the jurisdiction and create the operational statutes for the court.  

The statewide business court will have jurisdiction over business disputes with claims for at least $500,000 and disputes involving commercial real property with at least $1 million in claims.

The creation of the statewide business court does not preclude litigants from filing in state courts in Georgia nor does the statewide court’s existence preclude superior courts from creating or continuing their business courts. In certain circumstances, cases pending in superior court can be removed or transferred from superior court to the statewide business court. Cases before the statewide business court are tried by bench trial unless any of the parties requests a jury trial.    

The Honorable Walt Davis was appointed by the Governor to serve as the first state-wide business court judge. Judge Davis practiced for more than 17 years at an international law firm prior to his appointment, focusing his practice on securities litigation, shareholder disputes, and corporate governance matters.

The business court introduced a new website that provides more information about the court, its rules, and electronic filing.
Government Scrutiny of Hospice Providers Continues

On July 8, 2020, the United States Attorney’s Office for the Middle District of Florida announced that Hope Hospice agreed to pay $3.2 million to resolve a qui tam whistleblower action under the federal False Claims Act (FCA). The settlement resolved allegations that Hope Hospice knowingly submitted false claims to Medicare for hospice services for patients who were not terminally ill. The Hope Hospice settlement is the latest in a string of hospice-related settlements this year, including two settlements in March 2020—one with STG Healthcare for $1.75 million, and one with AseraCare for $1 million. Hospice-related investigations typically focus on the following areas: the compensation paid by the hospice provider to medical directors; gifts to referral sources; and admission criteria.

As for compensation paid to medical directors, hospice providers should ensure that any such compensation arrangement fits within an Anti-Kickback Statute (AKS) safe harbor. The most common safe harbor for hospice providers to avail themselves of is the personal services and management contracts safe harbor, which requires, among other things, that the arrangement be set out in writing, signed by the parties, be for a term of at least one year, and that the compensation paid to the medical director be set in advance, consistent with fair market value, and not determined in a manner that takes into account the volume or value of any federal healthcare program referrals or business.

Hospice providers should also ensure that gifts or other remuneration to referral sources do not run afoul of AKS regulations. While there is no de minimis exception to the AKS, the OIG has generally taken the position that “nominal” gifts do not cause concern under the AKS. Although the OIG has not defined “nominal” for purposes of the AKS and, therefore, any gift to a referral source or potential referral source could potentially implicate the AKS, things such as modest lunches or marketing trinkets such as pens, coffee mugs, or paper weights, are not likely to garner serious AKS scrutiny.

Finally, hospice providers should ensure that their admissions criteria satisfies the Medicare hospice eligibility requirements, which require that an individual must be certified as being “terminally ill,” meaning that the individual’s life expectancy is 6 months or less “if the illness runs its normal course."
Chilivis Grubman News
Free Webinar on September 2

On September 2 at 11:00 am EST, Chilivis Grubman attorneys Randy Dalbey and Christian Dennis will present a webinar entitled Business Beware! Preparing For and Responding to Ransomware Attacks.

Even in the midst of the COVID-19 pandemic, cyber criminals have continued to attack businesses of all types and sizes with ransomware. Ransomware attacks can be extremely costly, and as such attacks become more frequent, it is imperative that businesses know how to prepare for and respond to such an attack.

The webinar is free of charge. Please register by clicking here.

New Publication

This month, Chilivis Grubman attorney Scott Grubman published an article in the American Health Law Association's (AHLA) Health Law Connections Magazine, entitled "Reining in the Anti-Kickback Statute? Commission-Based Payments and the Relevant Decisionmaker Test."

Over the last number of years, the federal Anti-Kickback Statute (AKS) has solidified its place as one of the federal government’s most useful tools in health care fraud and abuse prosecutions, both criminal and civil. This is especially true when it comes to investigations involving entities that rely on sales representatives to market their products and services, such as pharmacies, laboratories, and home health agencies. From this enforcement landscape have arisen a number of federal court opinions discussing the scope of the AKS and what type of arrangements the statute was designed to prohibit. This article discusses the “relevant decisionmaker” test, which the Fifth Circuit created in 2004 and various other courts have considered in deciding the scope of conduct that can be punished under the AKS.

AHLA members can read Scott's article here.
Senator Grassley Proposes Legislation to Strengthen False Claims Act

On July 30, 2020, United States Senator Charles Grassley announced that he intends to introduce legislation which would strengthen the federal False Claims Act (FCA). Grassley indicated that his proposed legislation would, at least in part, specifically address the 2018 “Granston Memo,” which laid out the circumstances under which Department of Justice (DOJ) lawyers should consider dismissing whistleblower suits filed under the FCA’s qui tam provisions over the whistleblower’s (known as a “relator” under the FCA) objection.

As we discussed in more detail in a blog post in June, while the relator is typically permitted to pursue an FCA case on the government’s behalf even if the government decides to decline intervention, the FCA gives the government the right to dismiss the suit over the relator’s objections. Specifically, the FCA provides that “[t]he Government may dismiss the action notwithstanding the objections of the person initiating the action if the person has been notified by the Government of the filing of the motion and the court has provided the person with an opportunity for a hearing on the motion.” 31 U.S.C. § 3730(c)(2)(A).

On January 10, 2018, the DOJ issued the Granston Memo, which encourages DOJ attorneys to consider seeking dismissal of qui tam actions under the above-referenced provision in certain circumstances where the government declines intervention. Prior to the Granston Memo, the government sought dismissal of qui tam claims only in very rare circumstances. But, according to the DOJ, a record number of qui tam actions have been filed in recent years, but the rate of intervention in those actions has remained relatively stable; begging the question whether newly filed qui tam actions were meritorious or worth the expenditure of limited government resources. According to the DOJ, in the 30 years prior to the Granston Memo, the government used its dismissal authority only about 45 times. Since the Granston Memo, however, it has been used approximately 50 times.

In response to the Granston Memo, Senator Grassley, among others, opposed the DOJ’s dismissal authority and wrote a letter to Attorney General Bill Bar which raised concerns that the exercise thereof “could undermine the purpose of the False Claims Act by discouraging whistleblowers and dismissing serious fraud on the taxpayers.”

While Senator Grassley has not yet provided specific details as to what his proposed legislation would say, in a speech on July 30, he stated that his proposed legislation would amend the FCA so as to “provide timely, critical protections to whistleblowers working in our nation’s law enforcement agencies,” and would also require that the DOJ state its reasons for declining to pursue a whistleblower claim.

Senator Grassley has long been a strong supporter of the FCA and other whistleblower laws, and was behind the passage of a 1986 amendment to the FCA, which has led to over $62 billion in recoveries.


Get in good trouble, necessary trouble, and help redeem the soul of America

Hon. John Lewis (1940-2020)

HHS-OIG Issues Guidance on the Provision of Free COVID-19 Antibody Testing by Clinical Lab

On August 4, 2020, the Office of Inspector General for the United States Department of Health and Human Services (OIG) updated its FAQs regarding the application of OIG’s administrative enforcement authorities to arrangements directly connected to the ongoing COVID-19 public health emergency.  

By way of brief background, on April 3, 2020, the OIG announced that it would not impose administrative sanctions under its exclusion and civil monetary penalty (CMP) authorities for violations of the Anti-Kickback Statute (AKS) with respect to certain arrangements related to the COVID-19 pandemic. The details of that announcement were covered in a prior Chilivis Grubman blog post that can be accessed here.

On August 4, the OIG updated its website to answer the following frequently asked question: “Can clinical laboratories offer free COVID-19 antibody testing to Federal health care program beneficiaries who are contemporaneously receding other medically necessary blood tests during the COVID-19 public health emergency?”

The OIG began by noting that:

"Providing free laboratory testing to Federal health care program beneficiaries implicates the [AKS] because the clinical laboratory would be providing something of value for free to beneficiaries who could self-refer to the laboratory for items and services reimbursable by a Federal health care program.The proposed arrangement also implicates the Beneficiary Inducements CMP because the free COVID-19 antibody testing could reasonably influence a Medicare or State health care program beneficiary to select—or to cause his or her physician to select—the clinical laboratory for other medically necessary blood testing that is reimbursable by Medicare or a State health care program, in order to qualify for the free COVID-19 antibody testing."

The OIG went on to state, however, that because the proposed arrangement “offers the possibility of substantial public health benefits,” the OIG would not impose sanctions so long as the following safeguards were put into place:

  1. the physicians ordering the tests would not receive any payments or anything else of value from the laboratory in connection with the free antibody testing program; 
  2. the patients receiving the tests would not receive any payments or anything of value, other than the free COVID-19 antibody test, from the laboratory in connection with the free antibody testing program; 
  3. the tests would be offered only to patients receiving other medically necessary blood tests as part of a medically necessary exam or treatment; 
  4. no payor, including the patient, a commercial insurance company, or a Federal health care program, would be billed for or pay any costs in connection with the COVID-19 antibody tests; and
  5. the antibody tests are cleared or approved by the FDA or are subject to an FDA-issued Emergency Use Authorization.

Face Mask Mark-Up of $2.50 Leads to Federal Charges

On August 6, 2020, the United States Attorney’s Office for the Northern District of Georgia announced that it had charged a Georgia businessman with “hoarding and price gouging” in violation of the Defense Production Act of 1950 (DPA).  

According to the government’s press release, from early March 2020 to May 2020, the defendant Milton Ayimadu “engaged in hoarding and price gouging of more than 200,000 face masks in violation of the DPA.” Specifically, the government alleges that Ayimadu purchased more than 200,000 face masks from a foreign country for approximately $2.50 each and then re-sold them to American consumers through his website for approximately $5 each. The government’s press release goes on to allege:

"During the two months in which Ayimadu sold face masks, he engaged in over 22,000 financial transactions. While Ayimadu priced his masks in excess of prevailing market prices to maximize his profits to the detriment of consumers desperate for personal protective equipment during the COVID-19 pandemic, manufacturers of authentic N95 masks continued selling face masks for the pre-pandemic price of under $2.00 per mask."   

The DPA was signed into law in 1960, at the start of the Korean War. In relevant part, the DPA prohibits the hoarding of “designated scarce materials.” Specifically, the DPA provides:

"In order to prevent hoarding, no person shall accumulate (1) in excess of the reasonable demands of business, personal, or home consumption, or (2) for the purpose of resale at prices in excess of prevailing market prices, materials which have been designated by the President as scarce materials or materials the supply of which would be threatened by such accumulation."

Willful violations of the DPA can be punished by a fine of not more than $10,000 and imprisonment for not more than one year, or both.
In March 2020, the federal government identified 15 categories of products as “scarce materials” under the DPA, including but not limited to personal protective equipment (PPE) such as N-95 and other face masks, respirators, portable ventilators, PPE coveralls, medical gowns, face shields, and surgical gloves.
HHS-OCR Issues Fraud Alert

The HHS Office of Civil Rights (OCR), which is charged with implementing and overseeing HIPAA, recently alerted providers of a potential scam being perpetrated by postcards falsely purporting to be from OCR. These postcards were directed to the attention of the provider’s “Compliance Officer” with a sender purporting to be “Secretary of Compliance, HIPAA Compliance Division,” and referenced a “Required Security Risk Assessment.” The postcard prompts recipients to visit a URL, call, or email to take immediate action on a HIPAA Risk Assessment. The link, however, directs individuals to a non-governmental website marketing consulting services. Such a scam also could have directed the user to a link, which allowed malware to be inserted into the provider’s system.  

Providers always should verify that a communication purporting to be from OCR is from OCR by looking for the OCR address or email address on any such communication. The addresses for OCR’s Headquarters and Regional Offices are available on the OCR website and all OCR email addresses will end in @hhs.gov.  A copy of the alert and postcard may be found here
FINRA BrokerCheck: Getting Customer Complaint Expunged About to Get Pricier

On July 20, 2020, the Financial Industry Regulatory Authority (FINRA) issued Notice 20-25, which amends the FINRA rules to require the assessment of minimum fees in connection with all expungement requests. 

FINRA keeps track of broker-dealers’ and registered representatives’ disclosures and administrative information through its Central Registration Depository (CRD). The information found on CRD is provided through various required registration forms submitted by broker-dealers and regulators. For instance, registered representatives must fill out and file a Form U4 on FINRA’s CRD system in order to become registered with a new FINRA member firm. If the registered representative receives a customer complaint of $5,000 or more while still employed with the firm, the firm must update that representative’s Form U4 to reflect the disclosure of that customer complaint. 

While the CRD system is not publicly accessible, FINRA offers an online tool called BrokerCheck which allows members of the public to obtain certain, limited CRD information, including a summary of a broker’s credentials, qualifications, licenses, employment history and any disclosures involving customer complaints, disputes or civil, criminal and regulatory actions. 

Fortunately, the relevant rules allow representatives to seek expungement of a customer dispute from their CRD records by filing an arbitration claim with FINRA Dispute Resolution against his or her current or former firm, or against the customer. If the disclosure at issue is that of a customer arbitration claim, a registered representative may also make an expungement request as part of that customer arbitration proceeding. As with most arbitration claims, a filing fee is assessed against any party making an expungement request and, if the matter goes to an arbitration hearing, the parties will be charged a fee for all hearing sessions.

Under the current fee structure, parties seeking expungement must pay a filing fee based the schedule listed under the relevant FINRA rule. The schedule lists fees ranging from $50 for claims under $1,000, to $2,250 for claims over $5 million. For Non-Monetary/Not Specified claims, which include expungement requests, the schedule lists a fee of $1,575. The rules provide for a similar fee structure for hearing sessions. 

Historically, this system allowed a registered representative seeking expungement to reduce their fees by simply adding a nominal monetary claim to their expungement request. As a result, FINRA became “concerned about practices to avoid fees applicable to expungement requests…[wherein parties] often add a small monetary claim (typically, one dollar) to the expungement request to reduce the fees assessed against the associated person and qualify for an arbitration heard by a single arbitrator.” FINRA addressed these concerns in Notice 20-25, which amends the rules to require that a party seeking an expungement be assessed a minimum filing fee of $1,575 as well as a minimum hearing session fee, irrespective of whether a monetary claim is added to the expungement request. 

But there is some good news: the amended rules do not take effect until September 14, 2020, so those who make their expungement requests before that date can still avoid paying the higher fees. 
Psychiatrist and Office Manager Indicted for Selling Unapproved Drugs

On August 7, 2020, the U.S. Department of Justice (DOJ) announced the indictment of a psychiatrist and his office manager for allegedly importing and selling drugs not approved by the U.S. Food & Drug Administration (FDA). The DOJ alleges that for ten years, the psychiatrist and his office manager, who is also the psychiatrist’s wife, purchased disulfiram (used for alcohol dependence) and naltrexone (used for alcohol and opioid dependence) from Hong Kong. Although certain forms of disulfiram and naltrexone are permitted, the forms of the medications allegedly purchased and distributed by the psychiatrist were not FDA approved. The DOJ also alleges the psychiatrist falsified shipping documents by declaring the illegal medications as “plastic beads in plastic tubes” on shipment documents.

The psychiatrist and his wife were each indicted on one count of international money laundering conspiracy. The psychiatrist was also indicted on conspiracy to defraud the United States, money laundering, receiving and delivering misbranded drugs with an intent to defraud or mislead, and importing merchandise contrary to law.  

This indictment reflects the continued efforts of government agencies to investigate improper medication purchase and distribution.  Since 2015, the Drug Supply Chain Security Act has required health care providers who dispense or administer prescription drugs to purchase medication from “authorized trading partners” licensed by or registered with the state or federal government.  21 U.S.C. § 360eee-1 (d)(3). Providers may use the FDA’s database to locate and access state licensing agencies to verify authorized trading partners, which can found here.  
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