Yesterday, the Supreme Court issued a unanimous decision holding that the scienter element of the False Claims Act (“FCA”) is met if a defendant subjectively knew his or her claims were false and submitted them anyway. See United States ex rel. Schutte v. SuperValu Inc. and United States ex rel. Proctor v. Safeway. The Court’s ruling was narrow and avoided the more challenging—and common—issues raised during oral argument (which we previously discussed here).Continue Reading Supreme Court Clarifies that Subjective (Not Objective) Knowledge of Falsity of Claim Dictates False Claims Act Liability
Arguments were heard in the case of United States ex rel. Polansky v. Executive Health Resources, Inc., No. 21-1052 to determine whether and on what statutory grounds, the government, after initially declining to intervene, may subsequently intervene and dismiss a qui-tam False Claims Act (“FCA”) suit. The Court’s decision will resolve a dispute regarding the balance of power between an individual whistleblower and the Department of Justice (“DOJ”).Continue Reading SCOTUS to Decide Whether the Government has the Authority to Dismiss an FCA Suit After Initially Declining to Intervene and, if so, on What Grounds
The Centers for Medicare and Medicaid Services (“CMS”) has issued a proposed rule which would amend the existing regulations for reporting and returning identified overpayments (the “Proposed Rule”). Specifically, with respect to the meaning of “identification” of overpayment, CMS proposes to eliminate the “reasonable diligence” (or traditional negligence) standard and replace it with the False Claims Act’s (“FCA’s”) standard of “knowing” and “knowingly” (i.e., reckless disregard or deliberate ignorance of a potential overpayment).Continue Reading CMS Proposes to Amend Overpayment Rule, Remove Potential Overpayment and False Claims Act Liability for Mere Negligence
The United States’ recent False Claims Act (“FCA”) prosecution in United States v. Prometheus Group, et al., is a reminder that the government will use the FCA to target medical device manufacturers for off-label use of medical devices, even where healthcare providers have decided the use is safe and effective. In Prometheus Group, the government alleges that the defendant medical device manufacturer trained providers to re-use disposable rectal probes against U.S. Food and Drug Administration (“FDA”) recommendations, causing the providers to submit false claims for payment to Medicare for the services mis-using the probes. The complaint alleges that Prometheus put vulnerable Medicare patients at risk to gain a marketing advantage by reducing overhead costs associated with its systems. The message to medical device manufacturers is clear: even without submitting claims to the government themselves, manufacturers can face FCA liability for suggesting providers use their devices in any way the FDA has not approved (and in this case, warned against).Continue Reading The Government Seeks FCA Liability for Off-Label Use of Medical Devices
The Eighth Circuit Court of Appeals recently tossed a $5.5 million jury verdict finding that a physician violated the False Claims Act (“FCA”) by submitting claims for items and services ordered subsequent to a violation of the Federal health care program anti-kickback statute (“AKS”). According to the appellate court, the trial court’s jury instruction “brushed aside causation” and “misinterpreted” a 2010 amendment to the AKS.Continue Reading Eighth Circuit: In False Claims Act Cases Based On Kickback Violations, the Kickback Violation Must Be the “But For” Cause of the Items and Services Subject to the Claim
On June 21, 2022 the Supreme Court granted certiorari in Polansky v. Exec. Health Res., 17 F.4th 376 (3d Cir. 2021), allowing the Court to review the Department of Justice’s (“DOJ”) authority to dismiss qui tam suits brought under the False Claims Act (“FCA”), over objections by the relators. The case invites the high Court to decide two key issues: (1) whether the DOJ has the authority to dismiss qui tam suits where it declined to intervene, and (2) what standard of review applies to such requests for dismissal. Continue Reading Supreme Court To Review DOJ’s Authority to Dismiss Qui Tam FCA Suits Over Objections From Relators
A major California-based health care system, Sutter Health, and several of its medical practice foundation affiliates have agreed to pay a total of $90 million to settle allegations that they violated the False Claims Act (“FCA”) by knowingly submitting inaccurate information about the health status of beneficiaries enrolled in Sutter Health’s contracted Medicare Advantage (“MA”) Plans. The Sutter Health settlement is the largest FCA settlement ever paid by a health care provider for alleged MA fraud.
Continue Reading Sutter Health Settles Medicare Fraud Case For $90 Million: The Largest Settlement For Medicare Advantage Fraud
The Coronavirus Aid, Relief, and Economic Security (CARES) Act provided trillions in economic relief in response to the COVID-19 pandemic, including hundreds of billions of dollars in aid for the healthcare industry. Regulators in the healthcare industry have also adjusted regulations and procedures in response to the changing landscape caused by the pandemic. While the CARES Act and regulatory changes provide much-needed help, accepting funds and navigating the regulatory changes can add many legal pitfalls to an already cluttered regulatory scheme. As the government prepares to prosecute fraud and abuse by recipients of CARES Act funds, healthcare entities—the top payors of government enforcement and qui tam dollars—should take care to avoid claims of misconduct under the CARES Act.
Continue Reading Tips for the Unwary: Precautions Against Liability for Healthcare Businesses Receiving CARES Act Funds
The “Granston Memo” has proven to be a boon again in 2019 for False Claims Act (“FCA”) defendants. In a January 15, 2019 Sheppard Mullin FCA Defense Blog article, we highlighted a growing movement by the Department of Justice (“DOJ”) to utilize its dismissal power on meritless and burdensome qui tam FCA cases following an internal policy memorandum issued in early 2018, now dubbed the “Granston Memo.” The Granston Memo encouraged DOJ attorneys to seek dismissal of such cases where it served one or more important policy objectives. The DOJ has met with almost uniform success in its continued focus on this effort: since the Memo issued, the DOJ has sought dismissal in 36 cases and been unsuccessful only twice.
Continue Reading The Granston Memo in 2019: Recent Cases Highlight the Granston Memo’s Effectiveness as a Tool to Dismiss False Claims Act Cases
In a highly anticipated opinion in the AseraCare case, issued on September 9, 2019, the Eleventh Circuit Court of Appeals affirmed the district court’s holding that “a clinical judgment of terminal illness warranting hospice benefits under Medicare cannot be deemed false, for the purposes of the False Claims Act, when there is only a reasonable disagreement between medical experts as to the accuracy of their conclusion, with no other evidence to prove the falsity of the assessment.” U.S. v. AseraCare, Inc., No. 16-13004, at *3 (Sept. 9, 2019 11th Cir.) (“Op.”). Although the Court remanded the case to the district court to consider any such “other evidence” the Government might identify in the record, it also made clear that such evidence would need to “link” to specific claims submitted for payment, creating a substantial practical impediment to the Government’s ability to prove falsity in this and similar cases. See Op. at 56.
Continue Reading The Eleventh Circuit Remands AseraCare, But Affirms High Hurdle for Proving Falsity
On July 31, 2019, the U.S. Court of Appeals for the Eleventh Circuit affirmed a lower court’s decision to grant summary judgment to hospital operator HCA and dismiss relator Thomas Bingham’s allegations. Bingham v. HCA (S.D. Fla. July 31, 2019) (“Op.”). In a well-reasoned opinion, the Court affirmed several key holdings:
- There is no “remuneration”, for Federal health care program anti-kickback statute (“AKS”) purposes, unless a benefit is conferred for less than fair market value. In other words, as long as compensation to or from a referral source is consistent with fair market value, the AKS is not implicated.
- With respect to the Stark Law, showing that a space lease arrangement effectuates an “indirect compensation arrangement” between a hospital and a referring physician requires a showing that the space, rental rates, or benefits under the lease correlate with the volume of the physician’s referrals to the hospital.
- It may be appropriate for a court to strike allegations from an amended False Claims Act complaint if they are based on information uncovered by a relator during discovery.
These holdings should be welcomed by defendants of alleged AKS, Stark Law, and False Claims Act violations.
Continue Reading Eleventh Circuit Affirms Key Kickback Statute, Stark Law, and False Claims Act Principles in Dismissing Allegations Against HCA