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    Healthcare Fraud Enforcement in the Era of COVID-19

    Five practical effects for pharmaceutical professionals

    Healthcare Fraud Enforcement in the Era of COVID-19
    Jason Mehta, Partner, Bradley Arant Boult Cummings LLP05.05.20
    In the midst of a global pandemic, much attention and praise are rightfully being showered on healthcare and pharmaceutical providers. While the world watches with awe at the sacrifices that pharmaceutical and healthcare providers are making during this difficult time, government prosecutors too are watching—albeit for a different reason. Prosecutors across the country are increasingly focusing their energies and their sights on unscrupulous healthcare actors seeking to take advantage of the panic and confusion. Of consequence, though, is that if history is any prologue into the future, the government’s watchful eye will likely ensnare even well-meaning and well-intentioned practitioners. 

    This article details the government’s enforcement efforts to date in its efforts to root out and tackle healthcare fraud in the era of COVID-19. The article also offers a roadmap of likely inquiries and prosecutions and concludes with five practical effects for those in the pharmaceutical space, along with meaningful compliance recommendations. 

    Background Regarding Healthcare Fraud Enforcement
    As even casual observers have learned, the government has dramatically increased its efforts to tackle perceived healthcare fraud. This intensity of focus is not unique to COVID-19. In fact, over the past decade, the amount of resources and prosecutions has increased dramatically.1 The government has tackled an array of executives, practitioners, and pharmacists. And, the government has increasingly scrutinized the pharmaceutical industry—resulting in high-profile and significant settlements and fines.2 Seemingly, not a week goes by without another splashy press release announcing a multimillion-dollar settlement. 

    The scrutiny involving alleged healthcare fraud has intensified in recent weeks with the COVID-19 epidemic. This is not altogether surprising. With the government pledging to make multi-hundred billion cash infusion payments to healthcare providers, this prosecutorial focus is likely to extend and amplify as prosecutors often “follow the money.” For example, in recent weeks, the Department of Justice has sent out daily press releases announcing its focus on perceived COVID-19 fraud. These press releases note that “scammers are attempting to prey upon fears” and are engaging in a variety of scams—from selling fake at-home test kits to selling fake cures to creating fraudulent or defective surgical masks and medical supplies.3

    Recent Prosecution Efforts Related to COVID-19 Fraud
    The government has already indicted a handful of individuals for healthcare fraud schemes related to COVID-19. While these cases span the gamut, the most notable healthcare fraud case to date stemmed from New Jersey. There, the government charged an Atlanta, GA-based marketer for allegedly causing the submission of fraudulent respiratory testing claims related to COVID-19 tests.4 The government charged the marketer, Erik Santos, with a variety of crimes related to violations of the Anti-Kickback Statute, a federal law that prohibits inducements for the referral of federal healthcare program business. According to the criminal complaint, Mr. Santos sought to allegedly defraud the Medicare program by soliciting and receiving kickback payments from companies involved in clinical and diagnostic testing in exchange for steering potential COVID-19 patients to those companies. 

    The efforts in New Jersey related to this case are notable, in part, because they reflect the government’s intense scrutiny of possible fraud during a pandemic. The government’s scrutiny was so intense that the government actually recorded phone calls with the defendant—and then proudly boasted about these phone call transcripts in its press releases. In these calls, according to the government, the marketer went to lengths to describe how he viewed the pandemic as a money-making opportunity. The government’s theory of the case alleges that the marketer said, among other things, that “while there are people going through what they are going through, you can either go bankrupt or you can prosper,” and further that his other work was on hold because “everybody has been chasing the Covid dollar bird.” While making profits in and of itself is not a crime, the government nonetheless highlighted these statements to show the allegedly corrupt intentions. 

    The case in New Jersey has attracted a fair amount of attention—and rightfully so. The swiftness of the government’s actions and the efforts it went to publicize the case portend potentially ominous inquiries and prosecutions in the future. In light of these efforts, pharmaceutical practitioners would be well-served to be mindful of these trends and to implement prophylactic compliance measures now. 

    Effects of Government Scrutiny—and What to Do About It
    As many in the healthcare industry know, government scrutiny is often a question of “when,” not “if.” Given this, there are at least five practical effects likely to be felt by those in the pharmaceutical space who even tangentially touch the COVID-19 epidemic. 

    First, the government likely will be maintaining a very watchful eye of where its healthcare infusion capital is spent and how it is spent—and this scrutiny will likely continue on for several years. When Congress appropriated $130 billion to healthcare practitioners through the CARES Act to address the impact of COVID-19, it did so seemingly without many restrictions. But, given the government’s statements on healthcare fraud generally, and on misuse of taxpayer dollars on COVID-19 expenditures specifically, providers should be mindful that the government will scrutinize federal healthcare spending. And, since the government can look back up to six years in investigating potential fraud, the lookback period is quite far. Therefore, now is a good time to remember that, if you accept federal moneys through the CARES Act or federal healthcare programs, you would be well-served by being extra vigilant and mindful of prosecutors’ scrutiny. 

    Second, while many healthcare rules and regulations have been relaxed in recent weeks to allow for additional flexibility (for example, laxing the requirements for telemedicine visits or in-patient physician assessments of dialysis treatments), the government will still insist on strict compliance with certain provisions—most notably the Anti-Kickback Statute. As the case in New Jersey demonstrates, prosecutors often hang their hats on the Anti-Kickback Statute given its far reach. As such, pharmaceutical providers and others that do any business with the federal government need to carefully re-review the strict mandates of the Anti-Kickback Statute and ensure strict adherence to the broad provisions. And, while the New Jersey case might have been egregious, there are more subtle forms of kickbacks that might attract the government’s eye. For example, splitting of fees or brokering certain sales might be enough to elicit interest from the government. 

    Third, the government will likely cast a very skeptical eye on any practitioner or provider who seeks to profit from the COVID-19 epidemic. While seeking profits is not a crime, the government has already made clear that it views this as not being the time for practitioners to explicitly highlight profits over patient care and treatment. The fact that the government specifically highlighted statements from one marketer about the “Covid dollar bird” should be a foreboding marker in the sand for healthcare practitioners. The government very likely will view these explicit references to profit motives as suggestive of improper motivations. Therefore, practitioners would be well-served to avoid using any colorful language in emails and communications that might attract the government’s interest. 

    Fourth, while the government is rightfully devoting many resources to even experimental treatments, providers and pharmaceutical companies should be careful not to rush to market with unproven—and potentially ineffective—therapeutics and products. While this is axiomatic for a number of reasons, it is especially important now. Historically, the government has engaged in a “pay and chase” model where it provides payment for services and then, after the fact, attempts to recoup payments later once it identifies a problem with the service. And, so too here.  It is very likely that the government will approve many healthcare claims for even experimental treatments and services now.  But, sophisticated providers will not be surprised when the government—even years later—seeks to recoup those funds if the government subsequently deems those treatments or services as ineffective or premature. As such, while there is a race to find effective therapeutics and services for COVID-19 patients, practitioners would be well-served by acting with care for a number of reasons, not least of which is the attendant government scrutiny.

    Fifth, and finally, the government is increasingly expecting anyone in the healthcare space to have a robust compliance program to ferret out, and address, potential fraud, waste or abuse. Historically, the government seemingly appreciated that only larger or more sophisticated companies would have robust compliance measures. However, those days are gone. The government now seemingly expects anyone in the healthcare industry to have a compliance program as a prerequisite for participation in federal healthcare programs. While the government appreciates that individuals and smaller practices might have a more limited compliance program, there is seemingly an expectation that some program will be in place. Therefore, now is the time to ensure a program is in place—and that is it being used effectively. If you do not have a compliance program, a helpful starting point is to review the Justice Department’s recent April 2019 guidance on effective compliance measures.5 This roadmap lays out the Justice Department’s thinking on required elements of corporate compliance. 

    Concluding Thoughts
    It is unfortunate that, at a time of peril and pandemics, practitioners need to be mindful of the government’s intense scrutiny and focus. Nonetheless, in the world of highly regulated healthcare, this focus is likely to remain for the foreseeable future. Those practitioners that are most adept at avoiding the government’s crosshairs are the ones that will recognize this enforcement paradigm as an opportunity rather than as an obstacle. Indeed, as the adage goes, an ounce of prevention is worth a pound of cure. 

    References
    1. See “Justice Department Recovers over $3 Billion from False Claims Act Cases in Fiscal Year 2019,” available at https://www.justice.gov/opa/pr/justice-department-recovers-over-3-billion-false-claims-act-cases-fiscal-year-2019 (noting that 2019 was “the tenth consecutive year that the department’s civil health care fraud settlements and judgments have exceeded $2 billion.”)
    2. See, e.g., “Opioid Manufacturer Insys Therapeutics Agrees to Enter $225 Million Global Resolution of Criminal and Civil Investigations,” available at https://www.justice.gov/opa/pr/opioid-manufacturer-insys-therapeutics-agrees-enter-225-million-global-resolution-criminal, and “Pharmaceutical Company Targeting Elderly Victims Admits to Paying Kickbacks, Resolves Related False Claims Act Violations,” available at https://www.justice.gov/opa/pr/pharmaceutical-company-targeting-elderly-victims-admits-paying-kickbacks-resolves-related/
    3. See, e.g., “Stop COVID-19 Fraud,” available at https://www.justice.gov/usao-wdnc/stop-covid-19-fraud
    4. See “Georgia Man Arrested for Orchestrating Scheme to Defraud Health Care Benefit Programs Related to COVID-19 and Genetic Cancer Testing,” available at https://www.justice.gov/usao-nj/pr/georgia-man-arrested-orchestrating-scheme-defraud-health-care-benefit-programs-related
    5. See U.S. Department of Justice, Criminal Division, “Evaluation of Corporate Compliance Programs,” available at https://www.justice.gov/criminal-fraud/page/file/937501/download


    Jason Mehta is a former federal prosecutor who now advises individuals and companies in government investigations. His practice is largely focused on defending healthcare executives in civil and criminal inquiries. He is a partner at Bradley Arant Boult Cummings LLP in Tampa, Florida, and may be reached at jmehta@bradley.com or 813.559.5532.  

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