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In the latest chapter of Bloom Affliction Administration Quarterly Roundup, we appraise key administration trends in the bloom affliction industry that we accept empiric over the accomplished few months. In this issue, we abode on the applied applications of contempo advice from the US Department of Justice (DOJ), a contempo draft to DOJ’s accomplishment to use the federal Apocryphal Claims Act (FCA) to advance Medicare Advantage reimbursement, connected administration efforts at the accompaniment and federal akin to action the opioid crisis, and abeyant changes to the Stark Law and Anti-Kickback Statute. We additionally abide our advertisement on how the lower courts accept interpreted the battleground Escobar case.

This year has apparent cogent changes in the FCA administration landscape. As appear in beforehand Quarterly Roundup editions, the declared January 2018 Granston Memorandum directs DOJ balloon attorneys to added actively accede absolution meritless FCA cases brought by whistleblowers. Specifically, the Granston Memorandum highlights that balloon attorneys should accede the FCA’s adjournment provision, 31 USC § 3730(c)(2)(A), an “important tool” to “advance the government’s interests, bottle bound resources, and abstain adverse precedent.”[1] Two contempo cases absitively afterwards the Granston Memorandum’s absolution authenticate an arising breach over what the government charge prove to accreditation dismissal. 

Valid Purpose Test

In United States et al. v. Academy Mortgage Corporation, the relator, an advocate at Academy Mortgage Corporation, claimed that the actor defrauded the government by falsely certifying loans for government insurance.[2] The relator’s antecedent complaint bound the declared delinquency to a one-year aeon at the annex breadth the relator worked, and the government beneath to intervene. Afterwards the relator filed an adapted complaint, the government confused to aish beneath the FCA’s adjournment provision, arguing—as directed in the Granston Memorandum—that the accusation would cesspool government assets and was not justified beneath a cost-benefit analysis.

In response, the relator claimed that the government bootless to accommodated the US Cloister of Appeals for the Ninth Circuit’s burden-shifting access for adjudicating the adjournment of an FCA action as set alternating in United States ex rel. Sequoia Orange Aggregation v. Baird-Neece Packing Corporatio. Sequoia requires that the government aboriginal analyze “a accurate government purpose and authenticate a rational affiliation amid the adjournment and that purpose.”[3] Afterwards the government establishes this element, “the accountability accouterment to the relator to authenticate that the adjournment is fraudulent, approximate and capricious, or illegal.”[4] The relator argued that the government did not conduct a acceptable cost-benefit assay to amuse its accountability beneath Sequoia. In particular, the relator claimed that the government bootless to advisedly appraise the abeyant gain from the lawsuit.

The cloister agreed with the relator and denied the motion to dismiss. Citation Sequoia, the cloister explained that the government bootless “to conduct a minimally able investigation” because it alone advised 1.5 years of the declared misconduct, alike admitting the allegations in the adapted complaint spanned a aeon of six years.[5] The cloister additionally acclaimed that alike if the government had met the aboriginal aspect of the burden-shifting approach, the relator had met her accountability by assuming that the government’s abortion to absolutely investigate the affirmation resulted in the motion to aish actuality “fraudulent, approximate and capricious, or illegal.” The government’s abode of the commune court’s accommodation is awaiting afore the Ninth Circuit.[6]

The Government’s “Unfettered Right” to Dismiss

In United States ex rel. Maldonado v. Ball Homes, the relator sued beneath the FCA, alleging that the defendants took allotment in a counterfeit arrangement that circuitous appointment biased abstracts to access loans issued by the Federal Housing Administration.[7] The government beneath to arbitrate and, several months later, filed a motion to dismiss.

The Maldonado cloister acclaimed that “courts accept developed two differing standards for evaluating government requests to aish qui tam actions,” citation to Sequoia and Abrupt v. United States, 318 F.3d 250, 252 (D.C. Cir. 2003).[8] The cloister explained that while Sequoia requires the government to appearance a accurate government purpose that is rationally accompanying to dismissal, Abrupt captivated that the government has an “unfettered right” to aish a qui tam action.[9] In acceding the government’s motion, the cloister acclaimed the ambit breach about whether the government has an able adapted to aish qui tam cases or whether it charge aboriginal appearance annual to do so. The cloister took the above stance, captivation that the government “has around able acumen to aish a qui tam action” and absolved the complaint.[10]

Practice Note: Although the Granston Memorandum encourages prosecutors to use the FCA’s adjournment provision, there is an arising breach over what the government charge prove to accreditation dismissal. FCA defendants blame for adjournment pursuant to the Granston Memorandum should buck in apperception the admeasurement of the government’s adjournment ascendancy in the applicative jurisdiction.  

[1] DOJ Bartering Action Branch, Artifice Division, Factors for Evaluating Adjournment Pursuant to 31 U.S.C. § 3170(c)(2)(A) (Jan. 10, 2018).

[2] 3:16-cv-02120, 2018 WL 3208157, (N.D. Cal. June 29, 2018).

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[3] Id. at *2.

[4] Id.

[5] Id. at *3.

[6] United States v. Acad. Mortg. Corp., No. 18-1640.

[7] No. CV 5: 17-379-DCR, 2018 WL 3213614 (E.D. Ky. June 29, 2018).

[8] Id. at *3.

[9] Id.

[10] Id.

In a cogent accommodation for Medicare Advantage insurers, the US Commune Cloister for the Commune of Columbia alone a 2014 Medicare Overpayment Aphorism beforehand this month. UnitedHealthcare Ins. Co. et al. v. Azar et al., No. 1:16-cv-00157 (D.D.C. Sept. 7, 2018). Beneath the Medicare statute, “actuarial equivalence” is adapted amid CMS payments for bloom affliction advantage beneath Medicare Advantage affairs and CMS payments beneath acceptable Medicare. UnitedHealthcare challenged the 2014 Overpayment Aphorism on a cardinal of grounds, including that it (1) abandoned the approved actuarial adequation requirement, constant in payments to Medicare Advantage insurers that were not agnate to payments beneath acceptable Medicare, and (2) break resulted in the artifice of a apathy accepted beneath the FCA for Medicare Advantage insurers with annual to assimilation of overpayments.

The cloister sided with UnitedHeathcare, award that the 2014 aphorism attenuated payments to Medicare Advantage insurers and accustomed a arrangement breadth “actuarial equivalence” cannot be achieved. The Cloister explained:

The cloister additionally agreed that from an administration standpoint, the Overpayment Aphorism break apparent Medicare Advantage insurers to FCA accountability based on a lower accepted of affidavit than the FCA requires. The aphorism provided that a Medicare Advantage insurer would be accounted to accept articular an overpayment that bare to be repaid back the insurer determined, or should accept bent through the exercise of reasonable diligence, that it accustomed an overpayment. The cloister captivated that “reasonable diligence” is a apathy standard, and as such is inconsistent with the FCA’s minimum brainy accompaniment of “reckless disregard.” The cloister empiric that CMS has “no aldermanic ascendancy to administer added acrimonious standards to appoint FCA after-effects through regulation.”

Following a cord of speeches and announcements in backward 2017 and aboriginal 2018, the DOJ has remained alive in accomplishments to action the opioid crisis. In August 2018, the DOJ accomplished a settlement-in-principle with Insys Therapeutics in an FCA clothing over the company’s business of Subsys, a sub-lingual aerosol anatomy of fentanyl.[11] Insys will pay at atomic $150 actor and up to $75 actor added based on “contingent events” to achieve the claims. The adjustment appears to accept helped Insys abstain abiding action and company-ending liability.In adverse to the abundant Insys settlement, the DOJ confused the US Commune Cloister for the Commune of Massachusetts to dismiss 

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FCA clothing targeting OxyContin architect Purdue Pharma and several of the drug’s distributors.[12] The DOJ asserted that all of the claims in the case were acquired from attainable sources, triggering the FCA’s attainable acknowledgment bar. This action was constant with the Granston Memorandum, which guides DOJ to access use of its ascendancy to aish FCA cases.

Reflecting a connected focus on federal enforcement, the DOJ intervened in accession set of cases adjoin Reckitt Benckiser and Indivior involving their commitment arrangement for the biologic Suboxone.[13] Although the companies marketed their sub-lingual Suboxone blur as actuality beneath attainable to aberration and safer than tablets, the complaint declared that abounding patients booty the biologic in disconnected doses, abrogation extra portions attainable to children.

The DOJ has additionally apprenticed cases adjoin individuals that it alleges are amenable for abnormal opioid business and distribution. For example, the Insys adjustment does not affect bent affairs adjoin 15 above Insys admiral for their captivation in the declared scheme. Indeed, on the aforementioned day that the DOJ appear the settlement, a above commune sales manager, Jeffrey Pearlman, pled accusable in the US Commune Cloister for the Commune of Connecticut to cabal to bamboozle the United States. In August 2018, in the US Commune Cloister for the Commune of Ohio, the DOJ approved its first-ever abstinent adjustment to bar two doctors from prescribing medications afterwards an assay appear that they foolishly and unnecessarily broadcast painkillers and added drugs.

State and bounded lawsuits involving opioids accept additionally connected apace. The DOJ’s Insys settlement, for instance, does not dness accompaniment civilian artifice and customer aegis claims adjoin the aggregation in the aforementioned action, including a cardinal of claims beneath accompaniment apocryphal claims acts. In addition, a cardinal of added states and municipalities accept apprenticed their own apparel adjoin opioid manufacturers and distributors. This includes New York and Oregon, whose accompaniment attorneys accepted accept appear lawsuits adjoin Purdue Pharma.[14]

[11] N. Raymond and A. Thibault, Insys to pay $150 actor to achieve U.S. opioid kickback probe, Reuters (Aug. 8, 2018), https://www.reuters.com/article/us-insys-opioids/insys-to-pay-150-million-to-settle-doj-probe-into-sales-practices-idUSKBN1KT1G5.

[12] J. Overly, DOJ Urges Toss Of FCA Clothing Targeting Opioid Sellers, Law360, (Aug. 23, 2018), https://www.law360.com/articles/1076065/doj-urges-toss-of-fca-suit-targeting-opioid-sellers.

[13] N. Raymond, U.S. joins lawsuits adjoin Indivior, Reckitt over biologic Suboxone, Reuters, (Aug. 8, 2018), https://www.reuters.com/article/us-indivior-lawsuit/u-s-joins-lawsuits-against-indivior-reckitt-over-drug-suboxone-idUSKBN1KT2NW.

[14] Press Release, New York Accompaniment Office of the Attorney General, Attorney Accepted Underwood And Governor Cuomo Announce Clothing Adjoin Purdue Pharma For Widespread Artifice And Deception In Business Of Opioid Products (Aug. 14, 2018), https://ag.ny.gov/press-release/attorney-general-underwood-and-governor-cuomo-announce-suit-against-purdue-pharma; Press Release, Oregon Department of Justice, Attorney Accepted Rosenblum Sues Purdue Pharma, Maker of OxyContin, (Sept. 13, 2018), https://www.doj.state.or.us/media-home/news-media-releases/attorney-general-rosenblum-sues-purdue-pharma-maker-of-oxycontin/.

As we appear in beforehand Quarterly Roundup reports, lower courts abide to battle with the accepted battleground accommodation in United Bloom Services, Inc. v. United States ex rel. Escobar, 136 S. Ct. 1989 (2016). While best of the case law developing in this breadth has focused on the Supreme Cloister of the United States’ reinvigorated achievement standard, accession aspect of the Escobar accommodation is an capital apparatus for FCA defendants: the two-part assay articulate by the Supreme Cloister for annual of adumbrated acceptance theory.

Implied Certification’s Two-Part Test

In Escobar, the Supreme Cloister captivated that the adumbrated acceptance access can be a base for accountability “at atomic breadth two altitude are satisfied: first, the affirmation does not alone appeal payment, but additionally makes specific representations about the appurtenances or casework provided; and second, the defendant’s abortion to accede contravention with actual statutory, regulatory, or acknowledged accoutrement makes those representations cryptic half-truths.”[15]

Among a cardinal of added courts, the US Cloister of Appeals for the Ninth Ambit has captivated that both altitude categorical by the Supreme Cloister charge be annoyed for an adumbrated acceptance affirmation to proceed. United States ex rel. Campie v. Gilead Sciences, Inc., 862 F.3d 890, 901 (9th Cir. 2017).[16] This is important, in part, because some claims do not amuse the aboriginal prong, inasmuch as the allegedly apocryphal claims may accommodate no representation about the appurtenances or casework provided. But a added contempo three-judge console of the Ninth Ambit bidding skepticism about the Escobar two-part test. United States ex rel. Rose v. Stephens Institute, No. 17-15111, 2018 WL 4038194 (9th Cir. Aug. 24, 2018). The Rose cloister questioned whether the two altitude articulate by the Supreme Cloister were “the alone way to authorize accountability beneath an adumbrated apocryphal acceptance theory.”[17] The cloister declared that it was accountable by above-mentioned three-judge console decisions such as Gilead, however, and cautiously assured “that Relators charge amuse Escobar’s two altitude to prove falsity, unless and until our court, en banc, interprets Escobar differently.”[18]

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Materiality

The Ninth Circuit’s accommodation in Rose additionally addressed the affair of materiality, an aspect of any FCA claim, although its assay did not hew to Escobar’s “rigorous” and “demanding” achievement standard. The Supreme Cloister in Escobar captivated that whether the government altitude acquittal on acquiescence with a adjustment or arrangement appellation is accordant to the catechism of materiality, but not dispositive; the cloister instead focused heavily on what the government absolutely would accept done (or did) with annual to acquittal or defalcation of claims had it accepted of the declared noncompliance. Rose circuitous allegations that an art academy bootless to chase an allurement advantage ban that it had apprenticed to chase in adjustment to accept federal funds. The Rose cloister begin the affirmation of achievement acceptable to survive arbitrary judgment, advertence that above conditioning acquittal on acquiescence with the “bonus ban” at issue, “[t]here is affirmation . . . that the [government] did affliction about violations of the [bonus] ban and did not acquiesce schools artlessly to abide actionable the ban while accepting Title IV funds.”[19] That affirmation included the consequence of the declared corruption and the actuality that the government had historically taken some action adjoin schools begin to accept abandoned the ban, including by assessing fines and acute one academy to accord $16 actor in federal funds.[20]

However, as Judge Smith’s bone on the achievement affair notes, “caring is not abundant to accomplish [noncompliance] actual beneath the Escobar standard.”[21] The bone went on to admonish that the console gave too abundant weight to the government’s accepted affair apropos compliance, acrimony Escobar’s admonition that the FCA is not advised to corruption “garden-variety breaches of arrangement or authoritative violations.”[22] The bone emphasized the abridgement of affirmation apropos how the government would accede to the specific violations declared in that accurate case had it accepted of them, which is ultimately the affection of the “materiality” inquiry.[23] It added appropriate that the majority relied too heavily aloft acquiescence as a action of payment—which Escobar captivated is not dispositive—and in accomplishing so, bootless to administer Escobar’s “rigorous” and “demanding” achievement standard.[24]

We will accept to delay and see what happens if the Ninth Ambit has break to abode the Rose panel’s analysis of Escobar’s two-part assay and achievement accepted en banc. The abode for rehearing en banc, if one is filed, is due October 9, 2018.

Latest Updates

In our Q1 affair of the Quarterly Roundup, we appear that in United States ex rel. Ruckh v. Salus Rehabilitation, LLC, et al., No. 8:11-cv-1303-T-23 (M.D. Fl. Jan. 11, 2018), the commune cloister chaotic a $350 actor board verdict, award that the relator did not accommodated the Escobar achievement standard. The relator appealed, and the case is currently awaiting in the US Cloister of Appeals for the 11th Circuit. On July 20, 2018, the DOJ filed an amicus abrupt in abutment of the appellant-relator, arguing that the commune cloister had “fundamentally misunderstood” the Escobar decision’s altercation of back violations are actual to the government’s acquittal decision. We will abide to clue this case and the 11th Circuit’s access to materiality  post-Escobar.

In Q2, we appear on the US Cloister of Appeals for the Sixth Circuit’s accommodation in United States ex rel. Prather v. Brookdale Senior Living Communities, Inc., 892 F.3d 822 (6th Cir. 2018). Over a active dissent, the console captivated that the relator had declared achievement acceptable to survive a motion to dismiss. On August 23, 2018, the Sixth Ambit issued an adjustment abnegation the defendant’s bid to rehear the suit, abrogation in abode the panel’s 2–1 decision.

Practice Note: Practitioners arresting FCA cases and investigations should pay aing absorption to the evolving interpretations of Escobar. If the acknowledged access avant-garde by the government or the relator is “implied certification,” do the allegations or affirmation amuse the two-part test? Moreover, are the allegations or affirmation of achievement acceptable to canyon muster? Buck in apperception that the closing catechism is not bound to adumbrated acceptance FCA claims; achievement is a all-important aspect of any FCA claim.

[15] 579 U.S. __, 136 S. Ct. 1989 (2016).

[16] As appear in our countdown issue, Gilead’s abode for certiorari is currently awaiting in the Supreme Court. As we aftermost reported, the Supreme Cloister arrive the adviser accepted to book a abrupt cogent the angle of the United States. As of the date of this publication, there has been no new action in the case, and the adviser accepted has not filed a brief.

[17] Id. at *4.

[18] Id.

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[19] Id. at 8.

[20] Id. at 7–8.

[21] Id. at 11 (Smith, J., dissenting).

[22] 136 S. Ct. at 2003.

[23] Id. at 11-12 (Smith, J., dissenting).

[24] Id. at 12.

As allotment of the accomplishment to about-face to value-based care, HHS afresh appear a “Regulatory Sprint to Accommodating Care,” led by Deputy Secretary of HHS Eric Hargan.[25] This action aims to abode authoritative accouterments to affliction allocation in advocacy of the government’s absorption in advantageous for affection over quantity. The action could aftereffect in abundant changes to two laws that accomplish cogent action in the bloom affliction space: the Stark Law and the Anti-Kickback Statute (AKS).

The Stark Law

The physician self-referral law, frequently referred to as the Stark Law, contains a two-part prohibition: (1) a physician may not accomplish a barometer to an article for appointed bloom casework (DHS) if the physician (or an actual ancestors member) has a banking accord with that entity, unless an barring applies, and (2) the article may not abide a affirmation to Medicare for DHS furnished pursuant to a banned referral. Violations of the law may aftereffect in non-payment penalties, exclusions and overpayment acquittance obligations.

As providers move appear accomplishing of value-based affliction models, the Stark Law has accurate to be a authoritative impediment. For example, the Stark Law’s affirmation that physician advantage accommodated assertive standards—e.g., it charge be constant with fair bazaar amount and not booty into annual barometer aggregate or amount of referrals—may appear into complete battle with value-based structures, decidedly breadth these standards are ailing authentic and do not accede the abeyant for acquittal models that adjust physician incentives with affliction patterns. Because the Stark Law is structured as a austere accountability statute and is abounding with circuitous and cryptic requirements with poorly-defined standards, abounding FCA cases predicated on Stark claims, about anemic or unsupported, accept survived motions to aish and entered the analysis appearance of litigation.

Anti-Kickback Statute

The AKS is a bent statute that prohibits offering, paying, soliciting or accepting annihilation of amount in barter for, or to abet a being to accomplish referrals for, items and casework that are payable by a federal bloom affliction program. The AKS additionally extends to inducements or rewards to purchase, lease, adjustment or adjust for, or acclaim purchasing, leasing or acclimation any casework or items that may be covered by a federal bloom affliction program. Value-based acquittal models may accuse the AKS because those models about seek to adjust physician banking incentives with assertive convenance patterns, constant in advantage that ability not accommodate to archetypal fair bazaar amount models or contrarily alter with the physician’s referrals to a accurate entity.

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Potential Changes on the Border

Seeking reforms to the Stark Law and the AKS has been a antecedence for abounding bloom affliction stakeholders for several years. Contempo developments advance that allusive changes to applicative regulations could assuredly be on the horizon.

In June 2018, CMS issued a appeal for advice (RFI) gluttonous ascribe from the attainable on how the Stark Law frustrates efforts to apparatus value-based affliction models.[26] CMS approved ascribe on how the Stark Law affects atypical banking arrange and the annual of complete exceptions to these arrangements. CMS additionally solicited comments on some of the best axiological attempt for Stark Law compliance, including the concepts of “fair bazaar value,” “commercial reasonableness,” and “takes into annual the aggregate or amount of referrals.”

In August 2018, the OIG appear an RFI gluttonous agnate ascribe on the AKS.[27] The OIG requested advice on a ambit of topics, including arrange amid parties that participate in another acquittal models or added atypical banking arrange advised to advance affliction allocation and value, how to accept “value” as a concept, the capability of complete artifice and corruption waivers, and specific issues apropos to cybersecurity and telehealth services.[28]

The Stark Law and AKS RFIs appear on the heels of contempo comments from above Secretaries of HHS Kathleen Sebelius and Tommy Thompson that call the Stark Law and AKS as “remnant[s] of the fee-for-service world” that “harm the actual patients they are declared to assure by black added complete patient-centered, accommodating care.”[29] CMS’s efforts additionally chase the Senate Finance Committee’s 2015 inquiries that resulted in advertisement of the white cardboard entitled, Why Stark, Why Now? Suggestions to Improve the Stark Law to Encourage Innovative Acquittal Models. In the white paper, the Committee assured that “[t]he Stark law was created to abode a accident in an [fee-for-service] acquittal model,” and “[t]he banking incentives that activate overutilization apropos in an [fee-for-service] acquittal archetypal are abundantly or absolutely alone in another acquittal models.” In particular, the Senate Finance Committee acclaimed that bloom affliction companies appearance the Stark Law’s austere accountability accepted and ample penalties as a albatross to accomplishing of another acquittal reforms.

Impact of Stark Law and AKS Reform on FCA Litigation

The Stark Law and AKS are about acclimated as the base for qui tam lawsuits. For example, the Stark Law is a austere accountability statute with an complete prohibition on DHS referrals if the physician has a banking relationship, unless an barring applies. Therefore, courts about appearance Stark Law exceptions as acknowledging defenses that a qui tam actor charge appeal and prove. The applied aftereffect of this framework is that Stark Law-based FCA apparel about survive motions to dismiss, acceptance plaintiffs to accompany discovery. Such was the case for the actor hospital in United States ex rel. Bingham v. BayCare Bloom Systems, breadth a relator’s ambiguous Stark Law access and anemic facts survived a motion to aish alone to be absolved on arbitrary judgment. Like abounding qui tam defendants adverse Stark Law-based FCA litigation, BayCare Bloom was affected to abide time-consuming and big-ticket analysis and motions convenance to ultimately allocate with a case that was bottomless by the evidence.

If Stark Law reforms aftereffect in “bright line” advice about the law’s exceptions, this could prove accessible for defendants aggravating to defeat anemic cases from proceeding to cher litigation. For example, if the reforms aftereffect in specific advice on how to authenticate fair bazaar value, demography into annual the aggregate or amount of referrals, or bartering reasonableness, an FCA actor may be able to authenticate that acquittal arrange per se abatement into an barring beforehand in the litigation, conceivably alike at the motion to aish stage.

Practice Note: Attorneys apery bloom affliction providers should pay aing absorption to any changes in the Stark Law or the AKS. Such changes could affect the aegis of accomplishments predicated on declared violations of the Stark Law, the AKS or both. We will abide to adviser developments in this area.

[25]See 83 Fed. Reg. 29,524 (June 25, 2018).

[26] id.

[27] See 83 Fed. Reg. 43,607 (Aug. 27, 2018).

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[28] The OIG additionally solicited acknowledgment on the almsman attraction prohibition in the Civilian Money Penalties Law, which authorizes the artifice of civilian money penalties for advantageous or alms any accomplishment to a Medicare or Medicaid almsman that the offeror knows or should apperceive is acceptable to access the beneficiary’s alternative of a accurate provider or supplier of Medicare or Medicaid payable items. This prohibition is additionally active by abounding value-based affliction models.

[29] K. Sebelius & T. Thompson, Overcoming health-care challenges by affective from aggregate to value, The Hill (July 17, 2018), https://thehill.com/opinion/healthcare/397433-overcoming-health-care-challenges-by-moving-from-volume-to-value.

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