Category Archives: Civil Litigation

Supreme Court Blocks Provider Challenges to Medicaid Program

On March 31, 2015, the Supreme Court issued the first of several expected decisions that will impact the healthcare industry this year, ruling that Medicaid providers have no constitutional or statutory right to challenge a state’s Medicaid reimbursement rates. In Armstrong v. Exceptional Child Center, Inc., a group of Idaho Medicaid providers had challenged the states’ reimbursement rates as violating the federal laws that govern the program, commonly known as the Medicaid Act.

Under the Medicaid Act, both the federal government and the individual states fund and administer the Medicaid program. Each state establishes the rates and other parameters within its Medicaid program, subject to overall federal approval. Each state must submit a plan outlining its Medicaid program to the Department of Health and Human Services (HHS). The Plan, among other things, is supposed to meet the Medicaid Act’s requirements that payments are sufficient to enlist enough providers so that covered care and services are available to Medicaid beneficiaries.

A group of Idaho Medicaid providers challenged Idaho’s Medicaid rates as violating this provision of the Medicaid Act. The Idaho Department of Health and Welfare had proposed rate increases which had been approved by HHS as part of the state’s overall Medicaid plan. However, the increases were never funded by the Idaho state legislature and thus never implemented. The providers filed a lawsuit seeking to impose higher Medicaid reimbursement rates on the grounds that Idaho had failed to follow its approved plan and had set reimbursement rates so low that providers were unwilling to enroll in the Medicaid program, denying Medicaid beneficiaries access to effective care.

Two lower courts had ruled in favor of the providers. However, the Supreme Court ruled that only HHS is entitled to enforce the requirements of the Medicaid Act. It is important to note that the case was purely procedural. While the Supreme Court held that Medicaid providers did not have a constitutional or statutory right to challenge a state’s Medicaid reimbursement rates, it did not rule on whether or not Idaho’s Medicaid reimbursement actually complies with the Medicaid Act requirements.

The increasing downward pressure on Medicaid reimbursement shows no signs of stopping, even as the Affordable Care Act expands Medicaid enrollment in many states. This case is a reminder that providers seeking to increase Medicaid reimbursement will need to also focus on obtaining federal and state legislative, not just judicial, solutions.

The Halifax $85 Million Lesson: Compensation Arrangements Between Hospitals and Physicians Must Be Reviewed

The Department of Justice (“DOJ”) announced another multi-million dollar settlement of alleged False Claims Act violations on March 11, 2014. Specifically, Halifax Hospital Medical Center and Halifax Staffing, Inc. agreed to settle various issues with the DOJ for $85 million in order to resolve allegations that they violated the False Claims Act (“FCA”) by submitting claims to Medicare that violated the federal prohibition on physician self-referrals, 42 USC §1395nn (the “Stark Law”). United States ex rel. Baklid-Kunz v. Halifax Hospital Medical Center, et al., No. 09-cv-1002 (M.D. Fla.).

The Stark Law and the Bona Fide Employment Exception

The Stark Law prohibits a physician from referring a patient for certain designated health services (“DHS”) to an entity in which the physician, or an immediate family member, has a financial interest, such as an ownership or investment interest in the entity or a compensation arrangement with the entity. Certain exceptions for arrangements are permitted under Stark. However, because the Stark Law is a strict liability statute, the arrangement must fit completely within the criteria of the exception in order not to violate the statute. At issue in Halifax, as explained below, is the bona fide employment exception, Continue reading

Relator’s FCA Claims Barred By Public Disclosure Bar And For Failing To Be An Original Source

On January 25, 2013, the U.S. District Court for the Eastern District of Pennsylvania dismissed with prejudice the False Claims Act (“FCA”) claims that were alleged by a qui tam relator against two drug manufacturers because the whistleblower’s allegations were substantially similar to those that had been previously publically disclosed and the relater was not an original source of information.  The court then also declined to exercise supplemental jurisdiction over the remaining state law claims.  U.S. ex rel. Schumann v. AstraZeneca Pharmaceuticals LP, No. 03-5423, 2013 WL 300745 (E.D. Penn. Jan. 25, 2013).  The same court previously dismissed identical FCS claims against Bristol-Meyers Squbb Company in an earlier opinion.  U.S. ex rel. Schumann v. AstraZeneca PLC, No. 03-5423, 2010 WL 4025904 (E.D. Penn. Oct. 13, 2010). Continue reading

Veterans On Waiver Programs Get Larger Personal Allowance

On June 18, 2012, Judge Sandra Beck of the US District Court for the Southern District of Ohio sided with a group of  Veterans Affairs (VA) pension recipients in Ledford, et al., vs. Michael B. Colbert, director, Ohio Department of Job and Family Services, Case No. 1:10-cv-706.

Judge Beck  found that the Ohio Department of Job and Family Services (ODJFS) violated federal law by not providing recipients of the Medicaid assisted living waiver a $90 Personal Needs Allowance (PNA) in the patient liability calculation of their Medicaid budget when the individual is a recipient of VA Aid and Attendance benefits. Continue reading