In this post, we summarize noteworthy False Claims Act (FCA) decisions so far from 2023.
Hannah Webber is an associate in the Litigation & Dispute Resolution Practice Group. She focuses on representing clients in healthcare-related litigation and investigations, as well as in other business disputes. She represents healthcare providers in litigation under the False Claims Act, internal compliance investigations, and investigations by the Department of Justice, United States Attorneys’ Offices, and the Office of Inspector General of the Department of Health and Human Services.
False Claims Act Fundamentals: Damages
Having previously examined the falsity, materiality, and scienter elements of the False Claims Act (FCA) in our FCA Fundamentals series, we now turn to what damages can arise from violations of the False Claims Act. The False Claims Act imposes liability for each false claim. If the alleged scheme is broad, pervasive, or spans an extended period, this can result in many individual false claims and significant damages and penalties. It is essential for defendants to scope damages and consider potential exposure throughout a False Claims Act case, which often requires an expert consultant.
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False Claims Act Decisions to Know from Q1 2022
There have been several significant rulings on various provisions of the False Claims Act (FCA) in the first quarter of this year, which we highlight in this post.
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2021 Recap: Hospitals’ Significant False Claims Act Settlements
Each year, the Department of Justice (DOJ) recovers millions of dollars through False Claims Act (FCA) settlements, and 2021 was no exception. Some of the most sizeable or otherwise noteworthy settlements from 2021 were with hospitals and health systems. We’ve summarized a few below.
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Trio of False Claims Act Retaliation Rulings from September
The False Claims Act (FCA) prohibits employers from retaliating against whistleblowers who report FCA violations. 31 U.S.C. § 3730(h). To plead a claim under this anti-retaliation provision of the FCA, an employee must show the following three elements:
- The employee engaged in protected activity.
- The employer knew the employee engaged in protected activity.
- The employer took an adverse action against the employee as a result of the employee’s protected activity.
Courts state and apply these basic elements slightly differently, and this post examines three rulings from district courts across different circuits at the end of last month.
Vaughn v. Harris County Hospital District
On September 29, the District Court for the Southern District of Texas adopted the memorandum and recommendation of the magistrate judge denying the motion to dismiss a former employee’s retaliation claim, holding he satisfied his pleading requirements.…
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Relator Cannot Maintain Dismissed Qui Tam Action Under Seal, District Court Rules
The United States District Court for the Northern District of Alabama recently ordered that a relator’s qui tam lawsuit must be unsealed upon the case’s voluntary dismissal, denying the relator’s request to maintain the action under seal post-dismissal. This ruling in U.S. ex rel. Meythaler v. Encompass Health Corporation serves as an important reminder that public access to court records is vitally important and that whistleblowers’ allegations and identities will almost certainly be made public, even where the case is dismissed without litigation.
FCA Complaint Filed Under Seal
The relator, a physician formerly employed by the defendant, filed suit under the False Claims Act (FCA) against an inpatient rehabilitation facility operator and the CEOs of two of its Alabama facilities. The complaint alleged numerous schemes, including allegations that the defendants sought reimbursement for treatment of patients who were not eligible for rehabilitation benefits, delayed discharges and other orders to increase reimbursement, and made improper referrals to a home health agency. Per the FCA’s procedural requirements, 31 U.S.C. § 3730(b)(2), the relator filed his complaint under seal, giving the government a statutory period of at least 60 days to investigate the allegations and determine whether to intervene in the case.
The government declined to intervene in the action last fall. The relator then filed a notice of voluntary dismissal with prejudice, to which the government later consented. The relator also filed a motion asking the court to maintain the action under seal even after the case was dismissed to prevent the defendants from learning that the relator had filed a qui tam action against them. The government took no position on the relator’s motion.…
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DOJ Brings COVID-19-Related Fraud Charges Against Tech Company President
Earlier this month the Northern District of California unsealed a criminal complaint filed against the president of a medical technology company, charging him with one count of conspiracy to commit healthcare fraud and one count of securities fraud. This case is one of the Department of Justice’s (DOJ) first notable healthcare fraud prosecutions related to the COVID-19 pandemic and is the government’s first COVID-19-related prosecution for securities fraud.
Arrayit Corporation, a California-based medical technology company providing allergy testing, purported to use a “microarray technology,” which the company likened to the headline-making Theranos nanotainer technology, to test finger-prick drops of blood placed on a paper card and mailed to Arrayit’s laboratory. Defendant and company President Mark Schena describes himself as the “Father of Microarray Technology,” and Arrayit touted through social media that its microarray testing can use a drop of blood 250,000 times smaller than that used by Theranos.…
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DOJ Announces 2019 FCA Recovery, Majority Came from Healthcare Industry
The Department of Justice (DOJ) announced this month that it obtained over $3 billion in settlements and judgments from civil fraud and false claims cases during the fiscal year ending September 30, 2019 (FY 2019). Of this total recovery, the vast majority—$2.6 billion—arose from matters related to different sectors of the healthcare industry. DOJ noted that 2019 was the tenth consecutive year that recoveries from civil healthcare fraud cases have exceeded $2 billion, indicating that the government’s enforcement efforts remain focused on allegations of fraud in the healthcare sector.
Large Recoveries Related to Drug Manufacturers & EHR
Within the healthcare industry, the government reported significant recoveries against pharmaceutical manufacturers. Insys Therapeutics paid $195 million to resolve civil False Claims Act (FCA) allegations that it paid kickbacks to induce healthcare providers to inappropriately prescribe its fentanyl product, Subsys, to their patients. This civil settlement was part of a larger global resolution of civil and criminal allegations, with Insys agreeing to pay a total of $225 million. Reckitt Benckiser Group agreed to pay $1.4 billion to resolve criminal and civil allegations related to the marketing of the addition treatment drug Suboxone, a buprenorphine product. The global resolution included a $500 million civil settlement with the federal government.…
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Tennessee Nursing Home Chain Reaches “Largest Worthless Services Resolution in Tennessee’s History”
Government Settles with Several Entities, Individuals
Last week, Vanguard Healthcare and related entities reached a settlement with the Department of Justice (DOJ) for the stated amount of more than $18 million to settle allegations related to billing worthless services to Medicare and Medicaid programs from 2010 to 2015. The settlement also includes a resolution of claims against two individuals—Vanguard’s majority owner and CEO and its and former director of operations—consistent with the DOJ’s ongoing policy of focusing on individual liability (as discussed here). The CEO and director of operations will pay $212,500 and $37,500, respectively, of the total settlement sum. In its press release, the DOJ called this the “largest worthless services resolution in Tennessee history.”
The United States and the state of Tennessee sued the nursing home chain in September 2016, after the Vanguard entities had filed Chapter 11 bankruptcy proceedings. In the complaint and in claims filed in the bankruptcy cases, the government alleged damages in excess of $56 million. The primary allegations were that Vanguard and its subsidiaries billed Medicare and TennCare for “non-existent, grossly substandard, and/or worthless nursing home services[.]” The alleged inadequate care included staffing and supply shortages, a lack of infection control, failure to administer medications as prescribed, failure to care for wounds as ordered, lack of adequate pain management, and overuse of psychotropic medications and physical restraints, among other quality of care allegations. The government also alleged that Vanguard submitted Pre-Admission Evaluations and Preadmission Screening and Resident Reviews (certifications that TennCare uses to determine a patient’s Medicaid eligibility and required level of care) with forged physician or nurse signatures.…
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DOJ Intervenes in Another Medicare Advantage Risk Adjustment FCA Suit
On December 11, 2018, the United States announced that it has elected to intervene in a False Claims Act (FCA) lawsuit filed against Sutter Health and its affiliated entity Palo Alto Medical Foundation (PAMF) alleging that the defendants defrauded the Medicare Advantage program by submitting false patient information to the government. The whistleblower, a former employee of PAMF, alleges that Sutter “has taken and continues to take hundreds of millions of dollars in inflated capitation payments” by submitting “risk adjustment data Sutter knows to be inaccurate, incomplete or false.”
Medicare Advantage Plans
Medicare Advantage, formally known as Medicare Part C, allows private insurance companies, acting as “Medicare Advantage Organizations (MAOs),” to offer insurance plans and administer Medicare benefits. MAOs contract with healthcare providers such as Sutter to provide Medicare services to the plans’ enrollees. Instead of receiving reimbursement on a traditional fee-for-service basis, MAOs provide benefits under a capitated payment system, whereby government reimbursement is based on each individual beneficiary’s risk adjustment data.…
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