healthcare fraud and abuse: rigorous compliance,...
TRANSCRIPT
Healthcare Fraud and Abuse: Rigorous
Compliance, Recent Settlements, Court Rulings,
and Advisory Opinions
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THURSDAY, DECEMBER 12, 2019
Presenting a live 90-minute webinar with interactive Q&A
John E. Kelly, Member, Bass Berry & Sims, Washington, D.C.
Brian D. Roark, Member, Bass Berry & Sims, Nashville, Tenn.
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Healthcare Fraud Enforcement Update2019
John E. Kelly & Brian D. RoarkDecember 12, 2019
Overview
Health Care Fraud Statistics
DOJ Pronouncements
FCA Developments
Other Notable Developments
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Health Care Fraud Statistics
7
8
HCF Statistics
1,100 1,131
1,013 924
983 975 967
1,139
-
200
400
600
800
1,000
1,200
2011 2012 2013 2014 2015 2016 2017 2018
New DOJ Criminal HCF Investigations
977
885
1,083
782 808
930 948 918
-
200
400
600
800
1,000
1,200
2011 2012 2013 2014 2015 2016 2017 2018
New DOJ Civil HCF Investigations
HHS & DOJ Health Care Fraud and Abuse Program Annual Report for 2011-2018
9
HCF Statistics
10
HCF Statistics
379
433
576
634 652
756
715
639
706
674 645
-
100
200
300
400
500
600
700
800
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Number of Qui Tam Cases Filed
Note that this is all qui tam cases, not just healthcare cases
HHS & DOJ Health Care Fraud and Abuse Program Annual Report for 2008-2018
11
Top 2019 HCF SettlementsCompany Amount Allegations
Reckitt Benckiser Group $700M Billing for medically unnecessary
services, False or misleading statements
about effectiveness of drug, Prescription
drug billing fraud
Insys Therapeutics, Inc. $195M Kickbacks, Opioid fraud, Drug billing
fraud, Promoting off-label use, Patient
Assistance Program
Walgreens Boots
Alliance, Inc.
$168M False reporting of drug reimbursement
eligibility, Medicare prescription drug fraud
Duke University $113M Medical Research Grant Fraud
Avanir Pharmaceuticals $103M Kickbacks, Promoting off-label use
Astellas Pharma US, Inc. $100M Patient Assistance Program
Greenway Health, LLC $57M Kickbacks, Meaningful Use
Misrepresentations
Jazz Pharmaceuticals $57M Patient Assistance Program
Lundbeck, LLC $53M Patient Assistance Program 12
DOJ Pronouncements
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Granston Memo
Issued January 10, 2018
Seven factors DOJ should consider when deciding whether to dismiss non-intervened qui tam actions under 31 U.S.C. 3730(c)(2)(A):
• Curbing meritless actions
• Preventing parasitic or opportunistic lawsuits
• Preventing interference with agency policies and programs
• Controlling litigation brought on behalf of federal government
• Safeguarding classified information
• Preserving governmental resources
• Addressing egregious procedural errors
Now incorporated into DOJ Policy Manual (Section 4-4.111)
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Granston Memo
Post-Granston MemoDOJ has sought dismissal of 36+ non-intervened cases
Courts have denied only two; both are on appeal
Court review of dismissals
Swift v. United States (D.C. Cir.)• US is real party in interest in FCA cases
• DOJ’s right to dismiss is essentially unfettered
Sequoia Orange v. Baird-Neece Packing Corp. (9th Cir.)
• Court must conduct limited judicial review to ensure government’s decision to dismiss is not fraudulent, arbitrary, or abuse of power
• DOJ must identify a valid purpose for dismissal and show a “rational relation” between dismissal and accomplishing that purpose
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Granston Memo
NHCA LawsuitsShell companies created to bring 11 separate lawsuits across 8 districts by NJ lawyer who scoured Medicare claims data and who founded NHCA with support of angel investor
Alleged pharmaceutical companies engaged in white-coat marketing and provided free nurse and reimbursement-support services
Theory of liability conflicted with HHS-OIG guidance that product support services (like toll-free patient-assistance line or instructions on how to store medication) do not constitute “remuneration” under AKS
DOJ moved to dismiss all 11 cases• Allowing relator to go forward would impose costs and burdens on DOJ and
waste judicial and governmental resources
• Time needed to monitor these cases would divert DOJ resources from meritorious matters
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Granston Memo
NHCA LawsuitsSeveral relators voluntarily dismissed
SMSPF v. EMD Serono Inc. (E.D. Pa.)
• Applied Sequoia Orange and found case unlikely to yield recovery that would justify costs and burdens
U.S. ex rel. Health Choice Alliance LLC v. Eli Lily (E.D. Tx.)
• Applied Swift unfettered discretion
U.S. ex rel. CIMZNHCA, LLC v. UCB, Inc. (S.D. Ill.)
• Applied Sequoia Orange
• Questioned whether DOJ had animus toward NHCA as professional relator
• Record did not support rational relationship between identified costs and dismissal
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Granston Memo
U.S. ex rel. Polansky v. Executive HealthResources, Inc., 2019 WL 5790061 (E.D. Pa. Nov.5, 2019).
Relator alleged that EHR caused client hospitals to bill patientadmissions as inpatient claims instead of outpatient
After Special Master ruled that US had to produce documentswithheld under deliberative process privilege and producedocuments for additional custodians, US moved to dismiss under3729(c)(2)(A)
Court: the Government has an interest in minimizing unnecessaryand burdensome litigation costs such as preparing CMS personnelfor depositions, monitoring litigation, filing statements of interest,and having to produce documents US considered privileged
Potential recovery is insufficient to overcome rational reasons fordismissing
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Granston Memo
U.S. ex rel. Campie v. Gilead Scis. (9th Cir.).In amicus brief requesting Supreme Court to deny cert, DOJ arguedGovernment’s continuing payment of claims should not be basis fordismissal of qui tam:
• “the government may pay claims in order to keep federal programsoperating, and to ensure compliance with the government’s own legaland contractual obligations” or it “may have investigated and found pastviolations but believe (perhaps incorrectly) that the defendant willcomply going forward.”
After cert denied, DOJ has sought dismissal under (c)(2)(A):
• The “FDA took the actions that it deemed appropriate,” and relators’case “now asks a jury to find that different action was neverthelessrequired.”
• The FCA “was never intended to allow a relator to substitute his or herown judgment for that of the government as to whether the governmentreceived the benefit of its bargain.”
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Cooperation Credit:
Section 4-4.112 of the Justice Manual
DOJ formalized and expanded guidance regarding
cooperation credit in FCA cases
Outlines three ways entities and individuals facing
FCA claims can earn credit:
Voluntary Disclosures
Cooperation
Remedial Measures
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Cooperation Credit:
Section 4-4.112 of the Justice Manual
Voluntary Disclosures “the most valuable form of cooperation”
Value depends on timeliness, completeness, extent, usefulness
Cooperation (list of 10)Identifying individuals involved or responsible for conduct
Disclosing facts from internal investigation
Assisting in determination of losses
Remedial MeasuresUndertaking thorough root cause analysis
Implementing or improving compliance program
Appropriately disciplining those responsible for misconduct
Accepting responsibility
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Cooperation Credit:
Section 4-4.112 of the Justice Manual
Credit can take the form of:
Reduced Damages Multiplier
Reduced Penalties
DOJ Assistance with Agencies & Relators
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Does Cooperating Actually Help?
Multiplier Number of FCA
CSAs
> 2.0 8
2.0 34
< 2.0 32
Mean Multiplier = 1.75
23
DOJ Criminal Division Evaluation of
Compliance Programs Updated
April 30, 2019 guidance to DOJ prosecutors
Three fundamental questions 1. Effectively designed?
2. Effectively implemented?
3. Effectively evaluated and monitored?
No rigid formula
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Evaluation of Corporate Compliance
Programs
Is the program well designed? Risk assessment
Policies and procedures
Training and communication
Confidential reporting structure and investigative process
Is the program being implemented effectively?Commitment by senior and middle management
Autonomy and resources
Incentives and disciplinary measures
Does the compliance program work in practice?Continuous improvement, periodic testing, and review
Investigation of misconduct
Analysis and remediation of any underlying misconduct
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The Role of Sub-Regulatory Guidance
January 2018 Brand Memo: Prohibited DOJ litigators from using any agency’s “guidance documents as a basis for proving violations of applicable law in [affirmative civil enforcement] matters,” with limited exceptions.
Formalized into Title 1-20.000 of Justice Manual: requires that DOJ enforcement actions “must be based on violations of applicable legal requirements, not mere noncompliance with guidance documents issued by federal agencies[.]”
Azar v. Allina Health Services (U.S.) –Medicare issuances establishing or changing “substantive legal standard” must go through notice-and-comment rulemaking
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The Role of Sub-Regulatory Guidance
“The critical question is whether the enforcement action could be brought absent the guidance document . . . . ”
“[i]f the answer is no, then the guidance document establishes a norm and, under Allina, is invalid unless issued through notice-and-comment rulemaking.”
Polansky: “[i]f a policy affects the right to, or amount of reimbursement, it is more likely to be deemed a ‘substantive legal standard.’”
27
FCA Developments
28
Escobar
U.S. ex rel. Escobar v. UHS, 136 S. Ct. 1989 (2016).
Liability in false certification case requires showing that defendant violated a statute or regulation that was “material” to payment of claims.
Materiality is “demanding” standard focused on actual effect on payment of claims
• Is particular regulation labeled a condition of payment?
• Does compliance with the particular regulation go to “essence of the bargain” between provider and Medicare?
• Does the government consistently refuse to pay claims in the “mine run of cases” based on non-compliance?
Supreme Court declined numerous opportunities in 2019 to clarify materiality standard
U.S. ex rel. Campie v. Gilead Scis., 862 F.3d 890 (9th Cir. 2018) (cert. denied Jan. 7 2019).
U.S. ex rel. Harman v. Trinity Indus., 872 F.3d 645 (5th Cir. 2017) (cert. denied Jan. 7, 2019).
U.S. ex rel. Prather v. Brookdale Sr. Liv., 892 F.3d 822 (6th Cir. 2018) (cert. denied Mar. 18, 2019).
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Escobar
Essence of the bargain?
Yes, U.S. ex rel. Strauser v. Stephen H. LaFrance Holdings, Inc., 2019 WL 1086363 (N.D. Ok. Mar. 7, 2019)
• Allegations that pharmacies overcharged Medicaid for generic drugs by steeply discounting them to cash-paying customers and not the government went to “an essential element of the bargain – price”
No, U.S. ex rel. Taylor v. Boyko, 2019 WL 2423283 (S.D. W. Va. Jun. 7, 2019)
• Former patient alleged emergency department management company violated FCA by billing for services even though its state corporate business license had been revoked.
• Revocation of the state business license was not “central” to services reimbursed by Medicare.
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Escobar
When does Government payment of claims with “knowledge” show lack of materiality?
See, e.g., U.S. ex rel. Ruckh v. CMC II LLC, No. 18-10500 (11th Cir.)
Jury verdict of $347 million
• Medicare: upcoding – billing at higher level of therapy than actually provided
• Medicare: ramping – providing more therapy during gvmt assessment periods
• Medicaid: failing to create and maintain comprehensive care plans, which was express condition of payment for Florida Medicaid claims
Court set aside verdict
• Relator did not prove that alleged false claims were material to Medicare or Medicaid
• Relator presented no evidence showing that Gvmt refused or threatened to refuse to pay claims despite the lawsuit
Oral argument before 11th Cir. took place on Nov. 20, 2019
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Escobar
Does declination weigh against materiality?
Yes, see., e.g., U.S. ex rel. Polansky v. Executive Health Resources, Inc., 2019 WL 5790061 (E.D. Pa. Nov. 5, 2019)
• Declination and Gvmt’s decision not to reject reimbursement claims despite full knowledge of Relator’s theory of alleged fraud since Relator filed complaint confirms that Defendant’s noncompliance is likely not material under the FCA
No, see e.g., U.S. ex rel. Rahimi v. Rite Aide Corp., 2019 WL 1426333 (E.D. Mich. Mar. 30, 2019)
• Cannot conflate knowledge that certain requirements were violated with knowledge of allegations of violations
• Government may have continued to pay claims for other reasons such as not wanting to adversely affect Medicaid beneficiaries who relied on Rite Aid to meet their prescription needs
• Inferring lack of materiality from non-intervention would make non-intervention dispositive of materiality analysis
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FCA Breakdown
33
Case / Entity Alleged Improper Remuneration Settlement
Amount
U.S. ex rel. Srivastava v.
Trident USA, (E.D. Pa.) (2019)
Swapping – below cost services for
Part A patients in exchange for Part
B referrals
$8.5 million
U.S. ex rel. Johnson v. Post
Acute Med. LLC (M.D. Pa.)
(2018)
Medical directorship fees $13.17 million
U.S. ex rel. Miller v. MedStar
(D. Md.) (2019)
Series of agreements with
cardiology group
$35 million
U.S. ex rel. Doe v. Aqua
Pharmaceuticals (E.D. Pa.)
(2019)
Gifts, meals, excessive speaker and
advisor fees, PAs
$3.5 million
U.S. ex rel. Hayes v. Covidien,
(N.D. Ca.) (2019)
Marketing support services to
physicians
$20 million
U.S. ex rel. Doe v. Covidien,
(C.D. Ca.) (2019)
Paying hospitals to use post-market
registry
$13 million
34
Physician Remuneration
U.S. ex rel. Hanvey v. Sutter Health (N.D. Cal.)Health system to pay $30 million to settle allegations that the hospital stacked agreements and paid a cardiovascular group above market-rate.
Additional $15.1 million based on self-reported Stark violations, including:
• Paying above FMV to referring physicians
• Leasing office space at below-market rates
• Excessive reimbursements for physician-recruitment expenses
• Double billing Medicare
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Physician Remuneration
36
Physician Remuneration
U.S. ex rel. Allison v. Southwest Orthopaedic Specialists
(“SOS”) PLLC (W.D. Okla.)
Oklahoma Center for Orthopaedic & Multispecialty Surgery: owned
by USPI (35%), Integris (20%), SOS physicians (35%), non-SOS
physicians (10%)
May 2018: DOJ announced intervention and settlement with SOS
for $670,000 for performing medically unnecessary procedures but
declined intervention on all other allegations
Relator filed amended complaint and pursued remaining claims
• Alleged that Tenet sought to unwind several of the arrangements in
advance of review by outside monitor retained as part of Tenet’s NPA
November 2019: Tenet announced $66 million settlement of
AKS/Stark violations involving how equity was offered/sold,
recruitment of physicians, space lease, anesthesiology ownership
37
Hospital Employment of Physicians
Compare: U.S ex re. Benaissa v. Trinity Health, No. 15-cv-159, 2018 WL 6843624 (Dec. 31, 2018 D.N.D.), (appeal pending).
U.S. ex rel. Beck v. St. Joseph Health System, No. 17-cv-52 (N.D. Tex.).
With:
U.S. ex rel. Longo v. Wheeling Hosp., 19-cv-192 (N.D. W. Va.).
And what to make of:
U.S. ex rel. Bookwalter v. UPMC, 2019 WL 4437732 (3rd Cir. Sep. 17, 2019).
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AKS/Stark
39
AKS/Stark
40
Physician Remuneration
U.S. ex rel. Longo v. Wheeling Hosp. (N.D. W. Va.)
41
Physician Remuneration
U.S. ex rel. Bookwalter v. UPMC, 938 F.3d 397 (3d Cir. 2019)
Allegation that hospital paid surgeon on production basis is enough to
survive MTD in Stark-based FCA complaint
Analyzed as indirect compensation arrangement and held that “varies
with” basically means correlation, so, found that compensation was
correlated with referrals because the more procedures the surgeons
performed, the more referrals the hospital received
• Suspiciously high compensation
– Compensation above 90th percentile was a “red flag”
• Compensation exceeded collections
– “Paying a worker more than he brings in is suspicious.”
• wRVUs production above industry norms
• Compensation per wRVU exceeded Medicare rates
42
Physician Remuneration
U.S. ex rel. Bookwalter v. UPMC (3d Cir.)
Concurring opinion:
• Correlation between productivity-based compensation to surgeons and referrals to inpatient hospitals is insufficient to allege that compensation “varies with” surgeon’s referrals for inpatient services
• “[S]end[s] signals to hospitals throughout the Third Circuit, and the nation, that their routine business practices are somehow shady or suspicious and could leave them vulnerable to significant litigation.”
• “I cannot see why most of the top hospitals in the country, many of whom likely employ similar compensation schemes to UPMC’s, would not be vulnerable to a Stark lawsuit that could survive a motion to dismiss and proceed to discovery.”
UPMC has filed petition for rehearing en banc43
Private Equity
U.S. ex rel. Medrano v.
Diabetic Care Rx LLC,
d/b/a Patient Care
America (S.D. Fla.)
$21M Settlement
private equity firm
Riordan, Lewis & Haden
Inc.
FCA liability based on
AKS violations
TRICARE
44
Case / Settlement Individual(s) Held Liable Penalty/Settlement
Amount
U.S. ex rel. Hanvey v. Sutter Health
(N.D. Cal.)
Cardiovascular Surgeons $506,000
U.S. v. Esformes et al. (S.D. Fla.) Nursing Home Mogul $44.2 million, 20-year
prison sentence
U.S. v. Insys Therapeutics Inc. et
al. (D. Mass.)
Pharmaceutical Executives Convicted, sentences
forthcoming in
January
U.S. ex rel. Nutter v. Khalil et al.
(C.D. Cal.)
Physician $5 million (total)
U.S. ex rel. Meyer & Cowling v.
HMA, Inc. (D.D.C.)
Hospital Chain CEO $ 3.5 million
Holding Individuals Liable
45
Individual Liability
Philip Esformes
46
Individual Liability
47
Medical Necessity
United States v. AseraCare, Inc., 938 F.3d 1278 (11th Cir. 2019).
District Court
• AseraCare improperly certified patients for hospice and maintained corporate climate that pressured staff to meet aggressive monthly quotas
• Jury found that 104 of 121 claims were false
• Following trial, district court set aside verdict and granted SJ in favor of AseraCare, ruling that DOJ cannot prove fraud based simply on a medical expert’s disagreement with AseraCare’s diagnosis of terminal illness
Focus of appeal
• When can clinical judgment be deemed false?
• Can plaintiff use disparate communications about generalized misconduct to establish that discrete claims are false?
48
Medical Necessity
United States v. AseraCare, Inc., 938 F.3d 1278 (11th Cir. 2019).
Eleventh Circuit
• Mere reasonable disagreement among clinicians is insufficient to establish falsity
• The claim cannot be false unless underlying clinical judgment does not reflect an “objective falsehood.”
– certifying physician fails to review a patient’s medical record or become familiar with the patient’s condition.
– physician did not subjectively believe that the patient was terminally ill at the time of certification.
– no reasonable physician could have concluded that the patient was terminally ill
49
Medical Necessity
United States v. AseraCare, Inc., 938 F.3d 1278
(11th Cir. 2019).
The government must tie evidence of improper
practices to specific claims at issue to establish
liability
Falsity “cannot be inferred by reference to [the
defendant’s] general corporate practices
unrelated to specific patients”
50
FCA Statute of Limitations
Cochise Consultancy, Inc. et al. v. U.S. ex rel. Hunt (U.S.)
An FCA action must be brought within either (1) six years of the
date of the alleged violation or (2) three years of the date when
facts material to the action are “known or reasonably should
have been known by the official of the United States charged
with responsibility to act in the circumstances,” whichever date is
later, but in no event more than 10 years after violation was
committed.
The tolling provision (which can extend statute of limitation up to
10 years) applies in declined cases
51
Other Notable Developments
52
Travel Act
Travel Act (18 U.S.C. § 1952)Enacted in 1961 to combat racketeering activity
Makes it illegal to travel in or use mail in interstate commerce with the intent to promote or facilitate any “unlawful activity,” which includes bribery as defined by state law
Federal prosecutors are using state bribery laws to indict physicians and providers for questionable referral arrangements
53
Travel Act
Biodiagnostic Laboratory Services (D.N.J.)
Lab executives and physicians convicted of receiving bribes in exchange for sending blood specimens in violation of NJ commercial bribery statute
Forest Park Medical Center (N.D. Tex.)
Hospital executives and physicians convicted of paying/receiving kickbacks disguised as consulting fees or marketing money in violation of TX commercial bribery statute
Takeaways
Offering inducements for patient referrals, even if only commercial or self-pay patients, could still result in criminal liability
Calls into question “carve-out arrangements” that pay remuneration for only Medicare or Medicaid business
54
Long-Term Care
6 OIG audits identified over $32 million in alleged overpayments
Key Billing Deficiencies Highlighted
Beneficiaries not homebound
Beneficiaries not in need of skilled services
Incorrect assignment of HIPPS billing codes
Inadequate documentation
But in good news: Heartland Hospice
OIG 8-2019 – CMS Could Use CERT Data to Identify High Risk HHAs
55
Opioid Enforcement
The Distribution Chain
▪ Aggressive enforcement efforts continue against entities and individuals at all levels of the distribution chain. Examples include:
• Appalachian Regional Prescription Opioid Surge Takedown in April 2019, resulting in charges against 60 individuals for roles in distributing more than 32 million pills across five states.
• Two additional takedowns in September 2019 across 7 federal districts in the Northeastern U.S. and the state of Texas.
• Filing of first-ever felony criminal charges against a distributor, Rochester Drug Co-Operative, and its executives for unlawfully distributing oxycodone and fentanyl and conspiring to defraud DEA, which resulted in entry into a consent decree and $20 million penalty.
56
The Opioid Epidemic
Treatment & Testing
The SUPPORT Act New Provider Types
Increased funding/reimbursement
Recent Settlements Eagleville Hospital
CRC Health, LLC
EKRA = a powerful tool in the enforcement toolbox.
All-payor kickback law
Penalty: Fined up to $200,000 and/or imprisoned up to 10 years
57
Advisory Opinions
19-01 – approved charitable pediatric clinic’s arrangement to waive cost-sharing amounts
19-02 – approved pharmaceutical manufacturer’s proposal to loan (on a temporary basis) a limited-functionality smartphone to indigent patients to receive adherence data from sensor embedded in antipsychotic medication
19-03 – approved medical center’s program to provide free, in-home follow-up care to patients with congestive heart failure and COPD
19-04 – approved on-line health care directory visible to beneficiaries with sponsored ads from providers who pay for click throughs
19-05 – approved proposed purchase of real estate owned in part by excluded individual if no payment from federal health care programs
58
Questions?
59
QUESTIONS
BRIAN ROARKChair, Healthcare Fraud Task Force
Bass, Berry & Sims | Nashville
P: (615) 742-7753
JOHN KELLYMember
Bass, Berry & Sims | Washington, D.C.
P: (202) 827-2953
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