Recovery Audit Contractors. In a much-anticipated opinion filed on September 11, 2012, the Ninth Circuit ruled that a Medicare contractor's decision to reopen Medicare claims cannot be challenged after conclusion of an audit that resulted in a revised claim determination. The case at issue concerned inpatient rehabilitation services provided by Palomar Medical Center to a patient following hip surgery. Palomar received Medicare reimbursement for the services but a recovery audit contractor ("RAC") reopened Palomar's claim nearly two years later to determine whether the services were reasonable and necessary. Medicare regulations provide that a contractor may reopen a determination within one year for any reason or within four years for good cause. 42 C.F.R. § 405.980(b)(1)-(2). The decision on whether to reopen a claim is "final" and "not subject to appeal." 42 C.F.R. § 405.980(a)(5). The RAC concluded that the services were not covered by Medicare because they were provided in a hospital when they could have been provided in a less intensive setting. The RAC's initial determination was later affirmed at four levels of administrative review, although an administrative law judge ("AL J") granted relief to Palomar on the basis that the RAC did not have good cause for reopening the claim. The Medicare Appeals Council did not agree and reversed the AL J's decision. Palomar did not challenge the determination that the services were not reasonable and necessary, but appealed the decision on the reviewability of the reopening of the claim. The Ninth Circuit reasoned that while providers have a legitimate interest in the finality of claim determinations, the government has an interest in the integrity of the RAC program, which was designed to reduce Medicare overpayments. The court ultimately ruled in favor of a strict reading of the governing regulations, holding that a decision to reopen a claim is final and not appealable.

Home Health. In August 2012, the owner of Ronat Home Health Care Inc., a Miami home health staffing agency, pleaded guilty to one count of conspiracy to defraud the government in connection with a $60 million false billing scheme. The owner, Rodolfo Nieto, Jr., allegedly accepted kickbacks from Nany Home Health Inc., a Miami-based home health agency, in return for recruiting Medicare beneficiaries for Nany. In December 2011, three operators of Nany pleaded guilty to a conspiracy charge for participation in a scheme whereby patient files were allegedly falsified to make it appear as though the beneficiaries qualified for home health services when they did not in fact qualify. Nany also allegedly paid bribes and kickbacks to patient recruiters and staffing agencies, such as Ronat, to recruit Medicare patients and provide certifications for medically unnecessary home health services. Of the $60 million in allegedly false claims submitted to Medicare, approximately $40 million were paid. The three operators were sentenced in April 2012. They received multiyear prison terms and were ordered to pay $40 million in restitution, jointly and severally with other codefendants. Nieto was sentenced on October 23 to 37 months in prison, three years of supervised release, and $1.1 million in restitution.

Nursing Home. In August 2012, a former nursing home operator was sentenced in federal court to 20 years for submitting claims totaling more than $41 million for "worthless services" to Medicare and Medicaid and for tax fraud. George D. Houser and his wife operated two nursing homes in Georgia and purported to provide residents with a safe, clean environment, nutritional meals, and appropriate medical care. It was alleged, however, that the residents at the facilities were subjected to poor sanitary conditions, food shortages, leaking roofs, mounds of uncollected garbage, humid conditions that facilitated the growth of mold and mildew, and staffing shortages. Prosecutors argued that, due to these conditions, all of the services rendered to residents were essentially of no value. Houser was alleged to have been aware of the conditions at the two facilities and to have diverted more than $8 million in Medicare and Medicaid funding for his own personal use.

Pharmacy. On August 1, 2012, a federal district court in Florida reversed an HHS determination that Teamcare Infusion Orlando, Inc., a pharmacy that also provides durable medical equipment ("DME"), received more than $1.6 million in overpayments for claims submitted for DME. The court agreed with one of the arguments advanced by Teamcare and concluded that the amount of the overpayment was not supported by substantial evidence. A program safeguard contractor ("PSC") made the initial determination that Teamcare was responsible for more than $1.6 million in overpayments for claims submitted for DME. PSC calculated the overpayment by extrapolating data from an audit of a random sample. The overpayment determination was upheld by a Medicare qualified independent contractor, an ALJ, and the Medicare Appeals Council. The court noted, however, that the record did not include the audit performed by PSC, its initial determination, the total universe of claims reviewed, any information about the random sample, or how the data was extrapolated to arrive at the overpayment. Moreover, at each level of administrative review, the agency reviewer created a separate spreadsheet detailing the claims and beneficiaries at issue€"all representing different numbers of claims and beneficiaries. In reversing, the district court concluded that based on the record, it would be "nearly impossible" to "conduct any meaningful review."

Corporate Integrity Agreement Enforcement. In March 2012, for the first time, OIG invoked a divestiture provision in response to a violation of a CIA. In January 2010, Church Street Health Management ("CSHM"), a dental services provider, entered into a civil settlement with DOJ to resolve fraud allegations. As part of that settlement, CSHM paid $24 million in fines and penalties and entered into a five-year CIA. In February 2012, CSHM filed for bankruptcy, citing the cost of the settlement, CIA compliance, and subsequent litigation as the primary causes. In March 2012, OIG notified the company of numerous material breaches, but CSHM was unable to cure all breaches during the 30-day period allowed. In exchange for CSHM's agreement to divest one of its clinics within 90 days, OIG agreed to not commence an exclusion action.

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