a day in the life of a healthcare regulatory lawyer · click here to add slide headline private...

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Private & Confidential

A Day in the Life of a Healthcare Regulatory Lawyer

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Criminal grand juries, investigative subpoenas, self-disclosures of violations, M&A and Joint Venture due diligence, “solutions” from D.C., and private industry solutions to those solutions – there’s just too much excitement in the life of a busy healthcare regulatory lawyer. Join us as we hear about some of the most provocative issues and cases crossing the desk of Raja Sekaran whose career has spanned law enforcement (the Office of Inspector General), industry (Dignity Health and HealthCare Partners), and now private practice (Nossaman LLP).

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Private & Confidential

Raja SékaranNossaman LLP

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Raja Sekaran has practiced in the healthcare industry for more than two decades. He represents healthcare delivery systems, health plans, hospitals, physicians, other providers and suppliers, and trade associations. His practice focuses on regulatory compliance, government investigations and white collar defense, Medicare and Medicaid, and revenue cycle. In addition, he advises health plans and independent practice associations on network contracting and matters pertaining to the laws of managed care, including the Knox-Keene Act in California.

As an active leader in various professional settings, Mr. Sekaran is extraordinarily well networked and respected in the legal and healthcare sectors.

Mr. Sekaran holds a B.A. with Distinction from University of California, Berkeley, J.D. with Concentration in Business Law & Regulation from Cornell Law School, and LL.M. with Distinction in Healthcare Law from Georgetown University Law Center.

Phone: (415) 398 – 3600 Email: rsekaran@nossaman.com

A Day in the Life of a Healthcare Regulatory Lawyer

OCHFNMarch 9, 2018

NOSSAMAN.COM

Nossaman by the Numbers▪ Founded in 1942

– Just celebrated our 75th anniversary

– 170+ attorneys

▪ 12+ policy, compliance, & management advisors

▪ 14 core service offerings

▪ 8 offices across the U.S.

▪ 1 goal – Collaboration to support your success

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Core Practices

▪ Corporate▪ Eminent Domain/ Valuation▪ Employment▪ Environmental/Land Use▪ Financial Services/Bankruptcy▪ Healthcare

▪ Infrastructure▪ Intellectual Property▪ Litigation▪ Public Pensions/Investments▪ Public Policy▪ Real Estate▪ Water

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Recognized by Chambers USA as a Leading California Law Firm in Healthcare

▪ Business Counseling & Transactions▪ Compliance & Risk Management▪ Knox-Keene/Licensing & Regulation ▪ Litigation & ADR▪ Medical Staff/Peer Review▪ Provider Reimbursement

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Diversity Efforts▪ Women and minority attorneys comprise nearly half of

the Firm's leadership at the firm-wide, practice group, and office levels

▪ Seventy percent of the Firm's administrative management team are women, including the Chief Operating Officer and Chief Human Resources Officer

▪ Encourage and support our attorneys serving in leadership positions within organizations dedicated to the advancement of minorities and women

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Recognition▪ Recognized by Vault as one of the Top 20 “Best Midsize

Law Firms To Work For”▪ Named to Law360’s annual list of the “100 Best Law

Firms for Female Attorneys”▪ Vault ranked Nossaman # 6 on its list of the “Best

Midsize Law Firms For Diversity”▪ Nossaman ranked in the Top 20 percent of U.S. firms in

American Lawyer’s 2016 Diversity Scorecard▪ Named to Law360’s annual list of the “100 Best Law

Firms for Minority Attorneys”

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Birth of a Healthcare PracticeOur preeminence in healthcare law began with the landmark efforts of the firm's senior healthcare lawyers, including our partner and former State Assemblyman John T. Knox, co-author of the Knox-Keene Health Care Service Plan Act of 1975 and the Moscone-Knox Professional Corporation Act.

John Knox opened the San Francisco office in 1980, after 20 years in the Legislature, and with three children in graduate school, he said, "I could no longer afford to be an honest politician – I had to go out and make some money."

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Managed Care

▪ Department of Managed Health Care– Full and limited Knox-Keene license application and

maintenance▪ Not limited to HMOs, not limited to health:

– PPOs, IPAs, TPAs– Dental, workers compensation, employee assistance

programs▪ Entity formation, licensing, compliance▪ Network Contracting

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Corporate Experience advising healthcare clients on a full range of business transactions, including: ▪ Joint ventures and formation▪ Mergers, reorganization, acquisitions, divestitures and

recapitalization of healthcare facilities▪ Development and management of healthcare facilities▪ Restructuring▪ Intellectual property protection and dispute resolution

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Ambulatory Surgery Centers▪ Particular expertise in transactions involving

ambulatory surgery centers (ASC)• Formation of joint ventures • Formation of ASC entities• Ownership of ASC entities: (JV and physician owners)• De novo developments• Management of surgery centers• Managed care contracting of surgery centers

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Regulatory▪ Serve as legal counsel to numerous hospitals

and other healthcare entities on licensing and regulatory matters before state and federal agencies, including MBC, CDPH, CMS, FTC, IRS, etc.

▪ EMTALA▪ HIPAA (OCR), Confidentiality of Medical

Information Act (CDPH), Data Privacy/Security

▪ Pharmacy: DEA investigations, 340B program

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Compliance / Fraud & Abuse▪ False Claims Act

– OIG/DOJ subpoenas– CMS self-disclosure

▪ Stark (exception requests)▪ Anti-kickback (advise, written opinions) ▪ Civil Monetary Penalty Law (gainsharing,

beneficiary inducement)▪ The Work:

– White collar defense, advice, consultations on setting reserves (i.e., contingent liabilities)

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The False Claims Act

–Submitting (or causing submission) improper claims to federal healthcare programs with reckless disregard or worse

–Pay back three times the amount paid plus up to $11,000 per claim and

–Actions under the FCA often initiated by whistleblowers who can get 15-30% of it

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False Claims Act (FCA) cases not subsiding – FY17 results

• DOJ recovered $2.4B in healthcare cases• $900M in drug and medical device cases• Majority of all FCA recoveries were in

healthcare cases• Majority of cases initiated by a FCA qui

tam relators• In all FCA cases (not just healthcare),

relators were paid ~$400M▪Stark and Anti-kickback the favorite tool

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NOSSAMAN.COM© Raja M.G. Sekaran 2015

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▪ Where have you gone, Ms. Sally Yates?She’s gone but her memo is alive and well.

▪ DOJ policy to find and prosecute culpable individuals for corporate fraud and to coordinate civil and criminal investigations

Why so much criminal treatment applied to FCA cases? THE YATES MEMO

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Yates Memo (continued):

Issued by Deputy Attorney General Sally Yates in September 2015

• Prioritizes the manner in which civil and criminal law enforcement investigations will be conducted

• Proclaims: “One of the most effective ways to combat corporate misconduct is by seeking accountability from the individuals who perpetrated the wrongdoing . . . [accountability] it deters future illegal activity, it incentivizes changes in corporate behavior . . . and it promotes the public’s confidence in our justice system.”

• Sets forth six principles governing pursuit of individuals for corporate misdeeds

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Yates Memo (continued):DOJ’s Key Steps to Implementing Yates Memorandum

▪ Corporations must provide all relevant facts relating to the individuals responsible for the misconduct in order to qualify for cooperation credit

▪ Focus on individuals from the inception of criminal or civil corporate investigation

▪ Close coordination between DOJ criminal and civil attorneys

▪ DOJ will not release culpable individuals from civil or criminal liability when resolving a matter (absent extraordinary circumstances or DOJ policy)

▪ Resolution with corporation should not occur without clear plan to resolve related individual cases

▪ Civil attorneys should focus on individuals and evaluate whether to bring suit against individual based on consideration beyond individual’s ability to pay

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▪ Pressure to accelerate timetables for internal investigations

▪ Increased pressure on Internal Audit/Legal functions to identify issues quickly

▪ Potential increase in whistleblowers as recoveries grow larger

▪ Separate counsel for individuals▪ Key question: Will DOJ accept that there is no proof

of a negative? (Individuals not culpable)

Likely Effect on Organizations

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Effect on Organizations, cont.▪ Self-evaluation, self-assessment▪ Voluntary compliance efforts▪ Consider all sources:

o Statute, regulations and manual provisionso OIG pronouncementso Case lawo Settlements and Pending Cases (e.g., in SEC disclosures)o Pending caseso Government litigation filings/argumentso Statements by prosecutors/officials

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Found a problem? Disclose it?▪ If so, to whom? OIG, DOJ, USAO?▪ CMS Self-disclosure Protocol for Stark violations –

one year into the new format:o Format literally a form. Brief and to the point.o Limits you to the last six yearso 2017 – 47 settlements, maximum of $575K, $3.9M

totalo Compare 2016 – 102 settlements, max. $1.2M,

$6.9M totalo Remains a viable option

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Incentives to Disclose Stark Violations to CMS o Lower FCA statutory damageso Limited to double damages

o 31 USC 3729(a)(2)o Jurisdictional Bar against relators for publicly disclosed

matterso 31 USC 3730(e)(4)(A)

o Self-disclosure to CMS constitutes public disclosureo U.S. ex rel. Grant v. Rush-Presbyterian/St. Luke’s Med. Ctr.,

2001 WL 40807 (N.D.Ill. Jan 16, 2001)

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Not out of the woods yet…oRelator will allege “Original Source” prior to

Public DisclosureoHow to insulate against that?

▪ Disclose first and disclose broadly enough!▪ Amphastar Pharms. Inc. v. Aventis Pharma. SA,

856 F.3d 696, 703 (9th Cir. 2017) (disclosure applies to facts disclosed, not prior allegations of fraud)

▪ “… critical mass of the underlying facts…”

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What about anti-kickback issues?

▪ DOJ / U.S. Attorney’s Office▪ OIG Self-disclosure Protocol

– Requires admission of potential violation of a criminal law▪ Reading the tea leaves – how will the government

respond? ▪ Recent experience with canceling an advisory opinion

request

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The Unhappy Saga of Dr. Fonn

▪Recent case that is a perfect storm of many FCA elements at once:

– Anti-kickback allegations / FCA claims– Stark law exposure via “family member”– Yates-style individual exposure– Yates-style criminal and civil coordination– Criminal grand jury– Civil FCA intervention– Even family law implications

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Dr. Fonn and His Fiancée

▪ Sonjay Fonn, D.O. is a neurosurgeon licensed in Missouri

▪ Deborah Seeger is an advanced practice nurse licensed in Missouri

▪ In 2008, engaged to be married, cohabit▪ Still engaged – there’s a reason, a health law reason▪ More to come on this…

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Midwest Neuro/DS Medical▪ Nov 2008, Ms. Seeger forms med device distributor,

DS Medical▪ Dec 2008, Dr. Fonn forms Midwest▪ Midwest and DS Med share space, employees, and

contractors (but RENT)▪ Feb 2009, Dr. Fonn enrolls in Medicare

– Certification: “… conditioned on the claim complying with such laws… including… anti-kickback statute and the Stark law…”

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Midwest/DS facts continued

▪ Dr. Fonn enrolls in Missouri Medicaid▪ Medicaid CMS 1500 form certification:

– “I understand… that any false claims… may be prosecuted… “▪ Dr. Fonn treats Medicare and Medicaid patients using devices

supplied by DS▪ Hospitals pay for the devices▪ Manufacturers pay commissions to DS

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A long engagement

▪ Even by Prince Charles’ standards▪ Stark definition of “immediate family member” includes “wife”▪ No common law marriage in Missouri▪ Licensed marriage = Sonjay and Deborah are as one under Stark▪ No Stark exception available for DS Med

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NOSSAMAN.COM© Raja M.G. Sekaran 2015

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False Claims Saga

▪Civil case to Criminal Case to Civil again▪U.S. ex rel. Cairns v. DS Medical et al.

– Alleges kickbacks from DS Med to Dr. F– Alleges kickbacks from manufacturers to Dr. F, Deborah

Seeger and DS Med– Alleges conspiracy among all these parties

▪Defendants file Motion to Dismiss– “In alleging fraud or mistake, a party must state with

particularity the circumstances…” FRCP 9(b)

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False Claims Saga Continues▪ Rule 9(b) Motion to Dismiss denied

– Opinion cites OIG Special Fraud Alert on Physicians-Owned Distributorships (2013):

• DS Med = physician’s nearly exclusive source• Dr. F = the only “true” physician customer• DS Med had little financial risk and startup

costs when it began; alleged profit margins of 95 percent

• Dr. F allegedly began using more spinal implants and the ones with higher commissions

• Dr. F involved in implant talks with hospitals

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Criminal Chapter Begins

▪ Grand jury convened at some point▪ Criminal indictment in September 2014

– Dr. F, Deborah Seeger, DS Med, Midwest ▪ Essentially repeats the Denial of MTD:

– DS Med = physician’s nearly exclusive source– Dr. F = the only “true” physician customer– DS Med had little financial risk and startup costs when it

began; alleged profit margins of 95 percent– Dr. F allegedly began using more spinal implants– DS Med allegedly steered to more profitable implants– Dr F maintained significant influence over hospital

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Criminal Chapter Continues

▪ Civil case stayed while criminal pending▪ Count 1 – conspiracy among all 4 parties▪ Counts 2-4 – 4 parties solicited/received kickbacks from

Manufacturers A and B▪ Forfeiture sought▪ Conspicuous consumption in indictment:

– 2009: house, pool, $230K media room– 2012: yacht– Dr. F purchases, $ traced to DS

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Criminal Chapter Continues and… Ends in a Civil Judgment

▪ Tide turns: gov’t reveals witnesses’ connection to a Texas criminal case

▪ Dr. F’s criminal case dropped Dec 2015– Insufficient facts to demonstrate intent per Raja’s discussion

with counsel in case– Court lifts stay on civil case

▪ Civil Trial Oct 2017: government wins!▪ Raja advises his own client accordingly

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Stay Connected

Raja Sekaran

rsekaran@nossaman.com

415-254-6372

www.nossaman.comwww.thehealthlawticker.com

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