Medicare Advantage Program Enforcement: Increased Publicity May Lead to Increased Scrutiny

Merle M. DeLancey Jr. and Lyndsay A. Gorton

Merle DelanceyLyndsay A. GortonOn May 19, 2015, the chairman of the Senate Judiciary Committee, Senator Charles E. Grassley (R-IA), requested information from United States Attorney General Loretta Lynch and Andrew M. Slavitt, Acting Administrator for Centers for Medicare and Medicaid Services (CMS) regarding how the agencies are working together and separately to prevent Medicare Advantage fraud. Senator Grassley’s letters rely on April 2015 investigative findings issued by the Center for Public Integrity for his assertion that there is “an increasing number of lawsuits against insurance companies” for Medicare Advantage fraud, and the Government Accountability Office’s (GAO) 2015 Annual Report, which suggests that CMS “could save billions of dollars by improving the accuracy of its payments to Medicare Advantage programs. . . .” To ensure that CMS has the appropriate “safeguards” in place to prevent fraud, Senator Grassley requested answers to the following questions by June 3, 2015:

  1. What steps has the Department of Justice (DOJ) taken, and is currently taking, to ensure that insurance companies are not fraudulently altering risk scores?
  2. Is DOJ working in conjunction with CMS to investigate risk score fraud? If not, why not?
  3. In the past five years, how many Medicare Advantage risk score fraud investigations has DOJ conducted? Of the investigations, how many have resulted in criminal and/or civil sanction?

Senator Grassley’s letters were sent only weeks after CMS issued its 2016 Rate Announcement and Call Letter on April 6, 2015. After accepting and reviewing comments on its Advance Notice and Draft Call Letter, which estimated a 0.95 percent decrease in revenue for plan providers, the April 6 announcement estimated a 3.25 percent increase in revenue based on finalized 2016 rates. Neither the Attorney General nor CMS has responded to Senator Grassley’s requests. Continue reading “Medicare Advantage Program Enforcement: Increased Publicity May Lead to Increased Scrutiny”

The Supreme Court Issues Landmark Ruling That Limits When a False Claims Act Case May Be Filed

David M. Nadler

David M. NadlerLast week the U.S. Supreme Court answered two critical questions regarding when a case may be filed under the False Claims Act (FCA). Kellogg Brown & Root Serv., Inc., et al. v. U.S. ex rel. Carter, No. 12-1497 (May 26, 2015). In KBR, the Court unanimously held that the Wartime Suspension of Limitations Act (WSLA) applies only to criminal fraud cases, and thus does not suspend the civil FCA’s statute of limitations. The Court also held that the FCA’s first-to-file bar only applies while previously-filed related claims are undecided and still active on the court’s docket. Once a case is dismissed or settled, however, it is no longer a “pending action” and a second case alleging the same misconduct can be filed.

The KBR case found itself at the High Court after a long and arduous procedural history. The relator, Carter, worked for KBR in Iraq as a water purification unit operator. He filed a qui tam complaint (Carter I), alleging that KBR had fraudulently billed the government for water purification services that were not performed or not performed properly. The district court dismissed Carter I without prejudice due to an earlier-filed pending qui tam suit (Thorpe) which alleged similar claims. Carter appealed, and while his appeal was pending the Thorpe suit was dismissed. Carter immediately filed a new qui tam complaint (Carter II), which the district court dismissed without prejudice because Carter I was still pending. Finally, Carter dismissed his Carter I appeal and filed his third complaint—the complaint at issue in this case—Carter III, more than six years after the alleged fraud. The district court dismissed Carter III with prejudice due to another earlier-filed pending case, noting that all but one of Carter’s claims were untimely filed given the FCA’s six-year statute of limitations. Continue reading “The Supreme Court Issues Landmark Ruling That Limits When a False Claims Act Case May Be Filed”

Responding to a Warrant—What to Do if Your Company Is Subject to a Fraud Investigation

Merle M. DeLancey Jr., Steven J. Roman, and Philip E. Beshara

Merle DelanceySteven J. RomanPhilip E. BesharaThis is the scenario: you are an executive or manager at a government contractor. It’s Friday morning. You are hoping to leave early and get a jump on the weekend. Then, the receptionist buzzes you and says, “There are men and women out here wearing FBI windbreakers and they want to execute a search warrant.” You wonder, “Can I tell the agents they cannot come in?” Your company does not have in-house counsel. You can call your attorney, but his or her office is across town and the FBI agents say they are not going to wait. “What should I do?”

This may sound like an unlikely scenario, but such government investigations happen all of the time around the country and are rarely expected. In recent years, prosecutors and agents from the Department of Justice (DOJ) and Inspector General Offices have brought charges of procurement fraud and corruption against over 100 defendants, including officers and employees of companies of all sizes. In September 2014, DOJ’s Criminal Division announced that it would be “stepping up” its investigation and prosecution of criminal violations of the False Claims Act, using a team of senior federal prosecutors dedicated exclusively to procurement fraud. DOJ’s announcement cited the use of search warrants as one of the significant investigative tools at prosecutors’ disposal. In addition to their increased exposure to law enforcement authorities, small businesses should expect greater scrutiny of their contracting dollars, an initiative that has received bipartisan support in Congress. In March, the House Small Business Committee approved a measure calling for a sweeping examination into abuses in small business contracting, and the Small Business Administration recently proposed a rule for harsher penalties relating to small business subcontracting limitations. Continue reading “Responding to a Warrant—What to Do if Your Company Is Subject to a Fraud Investigation”

New Notice of Proposed Rulemaking to Update Department of Labor’s Sex Discrimination Guidelines

Deborah P. Kelly and Lyndsay A. Gorton

Deborah P. KellyLyndsay A. GortonIn the past 35 years, many laws have been passed to promote equality and reflect changes in the workplace, including the Pregnancy Discrimination Act (1978), the Family Medical Leave Act (1993), and the Lilly Ledbetter Fair Pay Act (2009); yet the Department of Labor’s Sex Discrimination Guidelines have not been substantively changed since 1970. In an attempt to resolve this inconsistency, on January 28, 2015, the Department of Labor Office of Federal Contract Compliance Programs (OFCCP) issued a Notice of Proposed Rulemaking (NPRM) to better align the sex discrimination standards under Executive Order 11246 (Executive Order) with current interpretations of existing Title VII principles and the OFCCP’s interpretation of the Executive Order. The NPRM proposes regulations that attempt to “outline the sex-discriminatory practices that contractors must identify and eliminate, and clarify how contractors must choose applicants for employment without regard to sex.”

The Executive Order was issued in 1965, and has been amended several times over the past 40 years, including most recently by President Obama on July 23, 2014. The purpose of the Executive Order is to:

  1. Prohibit covered government contractors and subcontractors from discriminating based on race, color, religion, sex, sexual orientation, gender identity, or national origin; and2.   Take affirmative action as required by the Secretary of Labor to ensure that contractors do not discriminate on any of these bases while candidates apply for a job and during the terms of their employment.

The Executive Order, and by extension the proposed rule, applies to businesses or organizations that hold at least one federal contract with a value over $10,000 or multiple federal contracts in a 12-month period with aggregate value over $10,000. Continue reading “New Notice of Proposed Rulemaking to Update Department of Labor’s Sex Discrimination Guidelines”

New Anti-Trafficking Regulations Finalized for Government Contractors

Merle M. DeLancey Jr., Daniel A. Broderick, and Philip E. Beshara

Merle DelanceyDaniel A. BroderickPhilip E. BesharaOn January 29, 2015, the Department of Defense, General Services Administration, and National Aeronautics and Space Administration published a final rule, effective March 2, 2015, implementing extensive new prohibitions and compliance requirements to the Federal Acquisition Regulation (FAR). The changes, mandated by President Obama’s December 2012 Executive Order (E.O. 13627) and the FY 2013 National Defense Authorization Act, raise across-the-board compliance concerns for government contractors—especially those that regularly employ foreign nationals.

New Restrictions and Requirements

The rule, amending FAR Subpart 22.17 and Contract Clause 52.222-50, will prohibit contractors and subcontractors from denying employees identity or immigration documents; using misleading or fraudulent recruitment practices; charging employees recruitment fees; using recruiters that do not comply with local labor laws of the country recruited from; and providing or arranging housing that fails to meet the host country’s housing and safety standards. The regulations also generally require contractors and subcontractors to pay for or provide transportation of foreign workers back to their home country at the end of their employment if they were brought to the work-country for the purpose of working on a U.S. Government contract or subcontract; or if the work-country is the U.S., they are not a U.S. national, and transportation is required under existing temporary worker programs or pursuant to a written agreement with the employee.

If required by law or under the contract, contractors and subcontractors must provide a written work document to employees in a language the employee understands. The rule further requires that the document contain, at minimum, details about work description, wages, the prohibition on recruitment fees, work location(s), living accommodations and associated costs, time off, round-trip transportation arrangements, grievance process, and the content of applicable trafficking laws and regulations. Continue reading “New Anti-Trafficking Regulations Finalized for Government Contractors”

SBA Proposes Anticipated Small Business Subcontracting Rule

Justin A. Chiarodo and Philip E. Beshara

Justin A. ChiarodoPhilip E. BesharaA recent proposed rule issued by the Small Business Administration (SBA) previews long-awaited changes to SBA’s regulations governing small business government contracting programs. These changes will impact both large and small government contractors alike and warrant close attention. This alert highlights key elements in the proposed rule, including major changes to subcontracting limitations for small business set-asides that first arose in the FY 2013 National Defense Authorization Act (NDAA). Given the explosive growth in enforcement for small business program violations, and draconian new penalties for such violations, all contractors should take steps to ensure they comply with the upcoming rule changes.

Changed Method for Calculating Subcontracting Limitations

The FY 2013 NDAA implemented a number of changes to small business programs in federal procurements (we recently covered these changes here). The primary reform in the NDAA—now addressed in the SBA’s proposed rule—is a significant shift in the method of limiting subcontracting under set-aside procurements. The SBA and FAR currently require prime small business concerns on set-aside contracts to incur set percentages of costs incurred under the contract based on the contract type (e.g., at least 50 percent of the personnel or manufacturing costs incurred under service and supply contracts). The challenges in monitoring this cost-based method led Congress to amend the Small Business Act. That statute now limits the percentage of the total contract price a prime awardee can subcontract out. Consistent with the statute, the proposed rule would amend 13 CFR § 125.6 to require small business primes to perform 50 percent of the total contract price for service and supply contracts, 15 percent for general construction, and 25 percent for specialty trade construction. Continue reading “SBA Proposes Anticipated Small Business Subcontracting Rule”

Guidelines for Contractors Considering Giving Gifts to Government Customers

Merle M. DeLancey Jr. and Christian N. Curran

Merle DelanceyChristian N. CurranAs the holiday season approaches, companies may consider giving gifts to their government customers. But companies should be aware of the legal limits imposed on gift giving, which could result in serious penalties if ignored. Generally, federal government employees may not solicit or accept gifts or any other thing of value from prohibited sources. See generally, 5 C.F.R. Part 2635, Standards of Ethical Conduct for Employees of the Executive Branch. A prohibited source is defined as a person or company seeking official action by, doing business with, or seeking to do business with the employee’s agency, or a person or company regulated by the employee’s agency or that has interests that may be substantially affected by the employee’s official duties.

There are exclusions under the definition of “gift” that allow for some leeway in giving. Snacks or light refreshments (e.g., coffee and doughnuts at a seminar, but not as part of a meal) are excluded from the definition of gift. Items of little intrinsic value such as greeting cards are also excluded. Further, anything that a government employee pays “market value” for is not considered a gift. Market value can have varying meanings, but generally is considered face value, what the contractor paid for it, or the open market equivalent, depending on the item. Continue reading “Guidelines for Contractors Considering Giving Gifts to Government Customers”