On June 16, 2016, the U.S. Supreme Court issued its much-anticipated opinion in Universal Health Services, Inc. v. United States ex rel. Escobar regarding the implied certification theory of False Claims Act (FCA) liability.  The Court’s unanimous opinion, drafted by Justice Clarence Thomas, is significant in three respects, detailed further below:  (1) the Court ruled that, in certain circumstances, the implied certification theory can be a basis for FCA liability; (2) the Court held that an express condition of payment in a statutory, regulatory or contractual requirement is relevant—but “not automatically dispositive”—in determining FCA liability; and (3) the Court clarified how the FCA’s materiality requirement should be enforced by lower courts addressing FCA suits premised on an implied false certification theory.

Continue Reading In Escobar, Supreme Court Endorses, but “Materially” Refines, Implied Certification Theory of False Claims Act Liability

Last week, the U.S. Supreme Court granted the petition for writ of certiorari in State Farm Fire and Casualty Co. v. United States ex rel. Rigsby and will consider what standard should determine when a relator’s complaint should be dismissed for violating the FCA’s seal requirement.  In Rigsby, former claims adjusters who worked with State Farm after Hurricane Katrina filed suit against the company under § 3730(b), alleging that State Farm misclassified wind damage as flood damage to shift the costs of paying those claims to the federal government.  After a jury found that State Farm falsely claimed that damages to a home in Mississippi were caused by flooding, the district court ordered State Farm to pay $758,000 in damages and awarded the relators $227,000.  State Farm appealed the verdict, citing the district court’s failure to dismiss the lawsuit despite the district court’s finding that the relators’ attorneys breached the FCA’s seal requirement by disclosing the existence of the case to the media.

Continue Reading U.S. Supreme Court to Resolve Circuit Split on FCA Seal Breaches

The U.S. Court of Appeals for the Sixth Circuit recently upheld a district court’s grant of summary judgment in favor of Abbott Laboratories in an action alleging that Abbott terminated a sales representative in retaliation for reporting a potential FCA violation. The appeals court held that the case should not proceed because the sales representative failed to show she reasonably believed an FCA violation had occurred. The holding potentially is helpful to FCA defendants facing retaliation allegations, but its precedential value may be limited because the court issued the unpublished opinion per curiam and with one judge dissenting.

Continue Reading Sixth Circuit Upholds Summary Judgment on FCA Retaliation Claim

The Railroad Retirement Board (RRB) became the first federal agency to increase FCA penalties pursuant to the Bipartisan Budget Act of 2015 (Budget Act), which was signed into law last November. The penalties announced by the RRB nearly doubled the prior penalty levels, with the minimum penalty skyrocketing from $5,500 to $10,781 and the maximum penalty from $11,000 to $21,563. As we covered here, the Budget Act amended the Federal Civil Penalties Inflation Adjustment Act of 1990 (Inflation Adjustment Act) to require federal agencies to increase civil monetary penalties imposed by the FCA as a “catch up adjustment” to compensate for inflation. The Budget Act also requires agencies to make annual adjustments to penalties in the future.

Continue Reading Agency Announces Rule Doubling FCA Penalties

On April 27, 2016, DOJ announced that Pfizer and its subsidiary Wyeth, LLC, agreed to pay $784.6 million to resolve allegations that Wyeth failed to disclose to federal and state healthcare programs discounts provided to hospitals for Proton Pump Inhibitors (PPIs), as required by its Medicaid Drug Rebate Agreement. DOJ alleged that this lack of disclosure led to states overpaying millions of dollars in reimbursements for PPIs.

Under Medicaid’s Drug Rebate Program, drug manufacturers must enter into a Medicaid Drug Rebate Agreement with HHS for their prescription drugs to be reimbursed by Medicaid. These agreements require manufacturers to pay rebates for drugs purchased by Medicaid. The amounts of the rebates are based on the Average Manufacturer Price, or the average price paid by wholesalers, and the Best Price, or the lowest price paid by any purchaser. These prices must be reported to CMS on a quarterly basis.

Continue Reading Pharma Companies Pay $784.6 Million to Settle FCA Claims

On March 31, 2016, the district court granted summary judgment for hospice provider AseraCare in a case alleging that it had submitted false claims to Medicare by certifying patients as eligible for service who did not have a prognosis of six months or less to live if their terminal illness ran its normal course. U.S. ex rel. Paradies v. AseraCare Inc., 2106 WL 1270521 (N.D. Ala. Mar. 31, 2016). In its opinion, the district court reiterated that “the submission of a false claim is the sine qua non of a False Claims Act violation,” and held a “contradiction based on clinical judgment or opinion alone cannot constitute falsity under the FCA as a matter of law.” The district court further explained that when hospice certifying physicians and medical experts “look at the very same medical records and disagree about whether the medical records support hospice eligibility, the opinion of one medical expert alone cannot prove falsity without further evidence of an objective falsehood.”

Continue Reading Failure to Establish Objective Falsity Dooms Government’s Hospice Case

The FCA continues to be the federal government’s primary civil enforcement tool for investigating allegations that healthcare providers or government contractors defrauded the federal government. In the coming weeks, we will take a closer look at recent legal developments involving the FCA. This week, we examine the requirement that the conduct alleged to have resulted in a false claim must be material to the government’s decision to pay that claim and how courts have evaluated this issue in recent cases.

FCA claims should fail when the regulations allegedly violated are immaterial to the government’s decision to pay a claim. Where the theory of FCA liability turns on compliance with statutes and regulations in the healthcare context, courts continue to distinguish between regulations that are conditions of participation in the federal healthcare program and regulations that are conditions of payment, holding only violations of the latter can underpin FCA liability. As the Sixth Circuit has explained, violations of condition of participation are best addressed through administrative sanctions, not the “extraordinary remedies” of the FCA.  See U.S. ex rel. Hobbs v. MedQuest Assocs., 711 F.3d 707 (6th Cir. 2013).

Continue Reading FCA Deeper Dive: Materiality and the Government’s Decision To Pay

The FCA continues to be the federal government’s primary civil enforcement tool for investigating allegations that healthcare providers or government contractors defrauded the federal government.  In the coming weeks, we will take a closer look at recent legal developments involving the FCA.  This week, we examine the requirement that a relator plead and prove that a defendant acted with the requisite level of knowledge to establish an FCA claim and evaluate how courts have evaluated this issue in recent cases.

Continue Reading FCA Deeper Dive: Meeting the FCA’s Intent Requirement

The FCA continues to be the federal government’s primary civil enforcement tool for investigating allegations that healthcare providers or government contractors defrauded the federal government. In the coming weeks, we will take a closer look at recent legal developments involving the FCA. This week, we examine recent court decisions considering relators’ efforts to plead and prove falsity under the FCA by relying on a worthless services theory of liability.

The Seventh Circuit’s decision in U.S. ex rel. Absher v. Momence Meadows Nursing Center, Inc., 764 F.3d 699 (7th Cir. 2014), casts significant doubt on the “worthless services” theory of FCA liability. Following the Seventh Circuit’s ruling in Momence, courts have reaffirmed the high hurdle that relators must surmount in order to plead a “worthless services” claim under the FCA.

Continue Reading FCA Deeper Dive: Worthless Services as a Theory of Falsity

Healthcare_Fraud_2015Bass, Berry & Sims is pleased to provide its annual Healthcare Fraud and Abuse Review, which highlights significant enforcement trends and legal developments, discusses recent cases and settlements affecting the healthcare industry, and provides an outlook on what lies ahead in 2016.

During the previous year, Bass, Berry & Sims attorneys have represented virtually every type of provider in the healthcare industry in civil and criminal healthcare fraud investigations and related litigation. We have incorporated this experience into our Healthcare Fraud and Abuse Review for the benefit of our clients and friends and hope that the Review will be a valuable resource for healthcare providers facing complex compliance and fraud and abuse-related issues.

The Healthcare Fraud and Abuse Review offers a concise discussion and analysis of such topics as:

  • Noteworthy Healthcare Settlements
  • Issues to Watch
  • False Claims Act Update (“FCA”)
  • Stark Law/Anti-Kickback Statute Developments
  • Pharmaceutical and Medical Device Developments

Click here to view the Review.

From the Bass, Berry & Sims Blog Network
From the Bass, Berry & Sims Blog Network

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