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Healthcare Law News - Volume 106

Perfectly Clinically Wrong

E-Clinical Works is a company with projected 2016 revenues of over $440 million.  E-Clinical claims that it is a leading EHR vendor.  E-Clinical just agreed to pay, with several of its executives, a $155 million penalty to the federal government for claims that it falsely obtained certification for meaningful use EHR and encouraged users of its EHR software to obtain wrongful, meaningful use certification.

The details are included with a settlement agreement which extends over 5 years.  Not only does this EHR vendor agree to pay $155 million, it agrees to a corporate integrity agreement that includes a requirement that it use an independent software quality oversight organization which will operate as an overseer/watch dog of quality control and to report to the US Office of the Inspector General.  This is the first time that I have seen an integrity agreement require such terms in order to reach an already expensive settlement.

Even more unusual and interesting, is the requirement in the integrity agreement to allow EHR customers to obtain free updates of software and to give EHR customers the option to have their data transferred to a competing EHR software provider without charge.  These terms suggest that the company was facing the possibility of a very negative outcome if this matter went to trial and a possible withdrawal of any certification for use with Medicaid/Medicare.

Question – can we trust EHR companies? 

Multi-Dosing

Dr. Melgan is a Florida retina surgeon convicted by a jury of 67 counts of Medicare fraud.  The interesting things about this case are:

  • One issue is multi-dosing.  Dr. Melgan apparently not only made multiple uses of a single vial of an injectable drug, but apparently billed Medicare as if each injection was from a new dose vial.
  • Dr. Melgan’s defense of his activities sought to invoke a doctor’s “right” to use unproven, experimental procedures without the patient’s knowledge or consent.  There apparently was expert testimony that Dr. Melgan’s standard of care was deficient, and that he failed to use simple, inexpensive tests that might have avoided his billing of a procedure 15,000 times between 2008 and 2013.  Unfortunately what he billed for and what he did were admittedly different.  He justified this by indicating that since Medicare did not have a relevant billing code, he was forced to use another.
  • Also unusual in this case were that two doctors from a nearby retina and macular disease practice both testified in the case, one for the prosecution and one for the defense.
  • In addition to the criminal issues Dr. Melgan faces, a separate civil proceeding requires Dr. Melgan to repay Medicare $8.9 million, and he may have to return another $32 million.

Narrower

The Supreme Court recently entered a unanimous opinion in the Escobar case.  The case relates to the False Claims Act (FCA), a civil war era statute that is often used by the government with regard to Medicare (and sometimes Medicaid) claims.  The statute allows private individuals to bring suit if they notice a false claim that the government has not addressed.  Some such suits end up paying enormous amounts to the private whistleblower.

In the last few years, a doctrine called the implied certification theory has been considered by a number of lower courts.  Many courts have had conflicting views of whether the implied certification theory is a valid theory under the FCA.  The name of this theory comes from the idea that certain representations are “implied” in a claim submitted for payment.  Courts have examined that issue and determined whether that untrue or only partially true “implied” certification makes the claim misleading.

The court recognized the validity of the implied certification theory but then proceeded to establish limits for exposure under this theory and the FCA.  The court felt that any such implied representation must be material.  It found that a piece of information or implied representation is material only if it is outcome determinative.  The court stated that this theory should not be used to punish “garden-variety breaches.”  Scienter is a term that refers to some intent to do wrong or some knowledge of wrongdoing.  The Court decided an implied certification claim under the FCA required rigorous and demanding application of materiality and scienter requirements.  The court found that the implied certification must be of something important and applicable to the claim and not some mere unimportant technicality, and that the submitter of the claim must have some idea that there is a wrongness to the claim.

Post Escobar lower court decisions seem to indicate that judges will require that a case pleading a false certification claim must make some showing that the government likely would not have paid the claim had the government known of the non-compliant claim.  In other words, simply stating the government wouldn’t have paid the claim is not enough, the person attempting to recover for a false claim must explain why they government would not have paid the claim and why such non-compliance was material to this particular claim.

The likely outcome of Escobar on the short term will be more skirmishes at the outset of these cases for discovery and motions for summary judgment on the issue of scienter and materiality.

Maybe the VA Isn’t Crazy?

The Department of Veterans Affairs announced that it will modernize its IT systems by adopting the Genesis system currently used by the Defense Department.  This act of sanity will result in veterans’ electronic health records following them throughout his or her service and then be immediately available to the VA.

I congratulate all involved for this outbreak of intelligence.


This newsletter is edited by Paul Wallace of Jones ∙ Wallace, LLC, a member of the American Bar Association Healthcare Law Section and the American Health Lawyers Association who has been representing physicians and healthcare practices for over 25 years.  Mr. Wallace assists physicians in health practices in contract items, federal legal compliance, creation of practice entities, estate and wealth planning and similar issues.  Please feel free to call if you have any questions on this newsletter or legal matters at (812) 402-1600 or pwallace@joneswallace.com.