The Sixth Circuit recently became the first appellate court to consider and reject FCA liability based on a healthcare provider’s alleged false attestation of compliance with the Health Information Technology for Economic and Clinical Health Act (HITECH) Act’s meaningful use objectives. U.S. ex rel. Sheldon v. Kettering Health Network, 2016 WL 861399 (6th Cir. March 7, 2016). The HITECH Act was designed to encourage the adoption of Electronic Health Record (EHR) technology by healthcare providers through the creation of incentive payments for eligible providers. As a condition of receiving those incentive payments, the HITECH Act requires healthcare providers to meet meaningful use objectives and compliance measures concerning the adoption of EHR technology.
FCA Deeper Dive: Pleading and Proving Falsity under the FCA
By Molly Ruberg on
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 the requirement that a relator plead and prove falsity to establish an FCA claim and evaluate the different theories of falsity that have emerged during the last several years.
Use of Statistical Sampling to Establish Falsity
Following last year’s landmark ruling in U.S. ex rel. Martin v. LifeCare Centers of America, Inc., 2014 U.S. Dist. LEXIS 142657 (E.D. Tenn. Sept. 29, 2014), statistical sampling has become an increasingly important issue in FCA cases. This year, decisions by the district court in U.S. ex rel. Paradies v. AseraCare, Inc., 2015 WL 8486874 (N.D. Ala. Nov. 3, 2015), reiterated this fact. AseraCare faced allegations that it falsely billed the government for hospice patients that failed to satisfy requirements that patients be terminally ill and have a life expectancy of six months or less. Anticipating lengthy trial testimony concerning the statistical sample of 233 claims, the district court bifurcated the trial for the FCA’s falsity element from trial for all other elements. In arriving at its novel decision, the district court rejected the government’s objections that bifurcation would result in juror confusion and duplicative evidence.
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FCA Deeper Dive: Rule 9(b) and the Pleading of the Alleged Fraud Scheme
By Bass, Berry & Sims on
Posted in 7th Circuit, Rule 9(b)
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 the level of specificity required of a relator under Rule 9(b) in pleading the alleged FCA fraud scheme.
While analyzing the circumstances of fraud is necessarily a case-by-case analysis, courts have applied decidedly different approaches to examining certain components of a fraudulent scheme, including the “who” and “when” requirements.
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No Time to Relax: Sixth Circuit Reviews Rule 9(b) Standard in FCA Case for First Time in Nearly Five Years
By John Eason on
Posted in 6th Circuit, Rule 9(b)
For the first time since August 2011, the Sixth Circuit examined the standard for pleading False Claims Act (FCA) violations with particularity under Federal Rule of Civil Procedure 9(b)—in particular, when the requirement that a relator plead an actual false claim submitted to the government can be “relaxed,” if at all. The case, U.S. ex rel. Eberhard v. Physicians Choice Laboratory Services, LLC (PCLS), No. 15-5691 (6th Cir. Feb. 23, 2016), involved allegations that PCLS, a medical testing services provider, submitted false claims to Medicare and Medicaid as a result of a purported scheme by PCLS to pay kickbacks—in the form of a commission on sales of PCLS products and services—to an independent sales force to induce them to solicit the referral of samples to PCLS for testing, in violation of the Anti-Kickback Statute. The relator, a former sales employee of PCLS, appealed the district court’s dismissal of his complaint for failure to plead any actual false claims submitted to the government with particularity under Rule 9(b), arguing that the district court should have applied a “relaxed” Rule 9(b) standard because of the relator’s purported “personal knowledge” of the false claims.
In affirming the district court’s ruling, the Sixth Circuit explained at the outset that unlike “some circuits hold[ing] that it is sufficient for a plaintiff to allege particular details of a scheme to submit false claims paired with reliable indicia that lead to a strong inference that claims were actually submitted, we have joined the Fourth, Eighth, and Eleventh Circuits in requiring ‘representative samples’ of the alleged fraudulent conduct.” Solely based on the relator’s failure to plead any false claims submitted in connection with the alleged kickback scheme, the Sixth Circuit ruled that the relator could not meet the pleading requirements of Rule 9(b).
FCA Implications of the CMS Final Rule on Overpayments
By Bass, Berry & Sims on
Posted in Reverse False Claims
On February 11, 2016, the Centers for Medicare & Medicaid Services (CMS) published a final rule on the reporting and return of overpayments within 60 days, an obligation commonly known as the “60-day rule.” The final CMS rule, which relates to Medicare Part A and Part B only, eases some of the requirements for healthcare providers and suppliers compared to what CMS originally proposed four years ago. Given that the failure to timely report an overpayment can lead to False Claims Act (FCA) exposure, the final rule has significant FCA implications for healthcare providers.
Under the “reverse false claim” provision of the FCA, 31 U.S.C. § 3729(a)(1)(G), liability can exist when a provider or supplier “knowingly conceals or knowingly and improperly avoids or decreases an obligation to pay or transmit money or property to the Government.” An “obligation” includes the retention of any overpayment. The Affordable Care Act explicitly states that the 60-day rule is an “obligation” for purposes of the FCA.
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FCA Deeper Dive: Rule 9(b) and the Pleading of Actual Claims Under a Relaxed Standard
By Bass, Berry & Sims on
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 that have required a relator only to plead a reliable indicia of the submission of false claims to satisfy Rule 9(b).
Relators in a pair of cases from the Middle District of Florida succeeded in satisfying Rule 9(b) under a relaxed pleading standard. In U.S. ex rel. Space Coast Medical Associates, LLP, 94 F. Supp. 3d 1250 (M.D. Fla. Feb. 6, 2015), the district court held relators had pleaded “sufficient indicia of reliability that claims were submitted” by alleging “particularized knowledge of the Defendants’ billing process and of alleged fraudulent bills,” as well as “individual Medicare patients who received treatment.”
FCA Issues to Watch: Appellate Consideration of Statistical Sampling
By Matt Curley on
There are a number of key issues that will drive the government’s enforcement efforts in the coming year and that will have a significant impact on how healthcare fraud matters are pursued by relators asserting FCA claims and are defended on behalf of healthcare providers. In the previous weeks, we have examined these issues in greater depth and why healthcare providers should keep a close eye on these issues. This week, we examine the Fourth Circuit’s upcoming appellate consideration of the use of statistical sampling to establish falsity under the FCA.
In 2014, the district court’s opinion in U.S. ex rel. Martin v. Life Care Centers of America rejected a motion to exclude the government’s expert testimony regarding the intended use of statistical sampling to establish liability over an extrapolated universe of claims. Since that time, a number of other district courts have considered the issue of whether such evidence may be used to establish liability by either the government or relators. See U.S. ex rel. Paradies v. Aseracare, Inc., 2014 U.S. Dist. LEXIS 167970 (N.D. Ala. Dec. 4, 2014) (denying motion for summary judgment and noting that “[t]he Government has statistical evidence regarding all of the Government’s universe of 2,181 claims. Statistical evidence is evidence.”); U.S. ex rel. Guardiola v. Renown Health, 2015 WL 5123375 (D. Nev. Sept. 1, 2015) (issuing discovery ruling regarding the underlying data universe relevant to relator’s use of statistical sampling); U.S. ex rel. Ruckh v. Genoa Healthcare, LLC, 2015 WL 1926417 (M.D. Fla. Apr. 28, 2015) (granting relator’s motion to admit expert testimony based on statistical sampling that had not been undertaken by relator as of the date of the motion).
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DOJ’s “Fairyland Damages” Calculation Rejected in Prevailing Wage Rate False Claims Act Case
By Richard Arnholt on
Posted in 6th Circuit, Government Contracts
In a February 4, 2016, decision, United States ex rel. Wall v. Circle C. Construction, LLC, the Sixth Circuit summarily rejected the government’s assertion that the measure of damages in a False Claims Act (FCA) suit involving a violation of prevailing wage rate requirements was the total amount paid for the work. The Sixth Circuit’s rejection of the “total contract value” theory of damages in the prevailing wage rate context is a welcome development for FCA defendants who are faced with increasingly creative damages theories asserted by the government and the relator’s bar.
Circle C’s Army Contract
For a case that involved a relatively minor non-compliance with the prevailing wage rate requirements applicable to federal construction contracts, the Circle C. Construction case has a long history. Circle C entered into a contract to construct warehouses at the U.S. Army base at Fort Campbell, located in Kentucky and Tennessee. Pursuant to the Davis-Bacon Act, Circle C was required to pay electrical workers at least $19.19 per hour, plus a fringe benefit rate of $3.94 per hour. Circle C was also required to submit certified payroll for itself and its subcontractors.
Practical Tips to Prevent Whistleblowers
By Matt Curley on
Matt Curley was interviewed by Becker’s Hospital Review in connection with an article dated February 10, 2016, about how healthcare providers can take practical steps to reduce the risk of employees and third parties pursuing whistleblower lawsuits when they encounter potential compliance issues. The comments below expand upon that interview.
Healthcare providers receiving reimbursement from government payers know there is a significant risk of encountering whistleblowers under the False Claims Act. Last year, there were more than 600 new whistleblower lawsuits filed under the False Claims Act. And, during the previous five years, there have been nearly 3400 new False Claims Act lawsuits filed by whistleblowers.
Whistleblowers received nearly $600 million in FY 2015 year as their share of the proceeds of False Claims Act judgments and settlements. That amount brought total recoveries during the previous five years to nearly $2.5 billion.
With the often times protracted, expensive, and disruptive government investigations that can follow the filing of a whistleblower lawsuit under the False Claim Act, practical measures that can reduce the possibility of whistleblower activity are certainly worth consideration.
FCA Deeper Dive: Rule 9(b) and the Pleading of Actual Claims
By Bass, Berry & Sims on
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 requiring relators to plead actual claims to satisfy the requirements of Rule 9(b) in order to avoid dismissal.
In the past, the First Circuit has shifted between requiring the identification of a specific false claim and applying a more flexible standard. Compare U.S. ex rel. Karvelas v. Melrose-Wakefield Hosp., 360 F.3d 220, 232 (1st Cir. 2004) (applying strict standard) abrogated on other grounds, Allison Engine Co. v. U.S. ex rel. Sanders, 553 U.S. 662 (2008), with U.S. ex rel. Duxbury v. Ortho Biotech Prods., L.P., 579 F.3d 13, 29 (1st Cir. 2009) (applying flexible standard). Last year, the First Circuit explained its approach as requiring “relators to connect allegations of fraud to particular false claims for payment, rather than a fraudulent scheme in the abstract.”
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