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Scienter is an element that the government or relator must prove to demonstrate a violation of the False Claims Act, 31 U.S.C. § 3729, et seq.  Under the False Claims Act, the required scienter, or state of mind, is “knowledge.” In other words, the False Claims Act only penalizes defendants who knowingly submitted false claims, i.e., submitted the false claim with knowledge of the claim’s falsity.

Continue Reading False Claims Act Fundamentals: Scienter

A relator is a private person or entity who files a False Claims Act (FCA) lawsuit on behalf of the United States in exchange for receiving a portion any recovery from the defendant. The FCA was enacted in 1863 in response to defense contractors defrauding the Union Army during the Civil War. But, it wasn’t until 1986, when Congress supercharged the FCA by incentivizing more private whistleblowers to file lawsuits on behalf of the government, that the FCA became the Department of Justice’s (DOJ) primary enforcement tool for combatting fraud against the government.

Continue Reading False Claims Act Fundamentals: What Is a Relator?  

For several years, courts have wrestled with the question of whether subjective clinical decisions regarding the type and amount of treatment patients may need can be false for purposes of establishing False Claims Act (FCA) liability.  The question of whether the FCA requires a showing of objective falsity has divided appellate courts in a number of recent high-profile cases.

For their part, practitioners have kept a close eye on whether the Supreme Court might bring much-needed clarity to this issue.  On February 22, the Supreme Court declined to do so, denying a petition for certiorari with respect to the Third Circuit’s opinion in U.S. ex rel. Druding v. Care Alternatives.

In Druding, the relators, who were former employees of a hospice provider, filed a qui tam action alleging that the hospice provider submitted false claims by routinely certifying patients who were not terminally ill for hospice care.  During the litigation, the relators’ expert examined the medical records of nearly 50 patients and concluded that the documentation did not support a certification of terminal illness for approximately 35% of those patients.  The hospice provider produced its own expert who testified a physician could have reasonably concluded that the patients at issue were terminally ill and needed hospice care.

Continue Reading Supreme Court Declines to Weigh in on Key Falsity Question

As 2020 draws to a close, we take a look back at a number of the most significant False Claims Act (FCA) cases of the prior 12 months.  Although no blockbuster cases emerged, such as the Supreme Court’s 2016 decision in Escobar, there were a number of noteworthy cases that will have lasting impact on future FCA litigation.  We discuss those cases briefly below.  We expect to cover these cases and much more in our Healthcare Fraud and Abuse Review, which we will release in early 2021.

Materiality

U.S. ex rel. Janssen v. Lawrence Memorial Hospital, 949 F.3d 533 (10th Cir. 2020)

Background.  In 2016, the Supreme Court held in Escobar that whether a defendant can be held liable under the FCA for violating a statute, rule, regulation, or contract provision turns, in part, on the elements of materiality and scienter, which the Court said are “rigorous” and “demanding.”  Post-Escobar, courts have grappled with specific applications of these standards, with some courts appearing to apply them less “rigorously” than others.

Allegations.  In U.S. ex rel. Janssen v. Lawrence Memorial Hospital, the relator primarily alleged that the defendant hospital falsified patient arrival times associated with certain CMS pay-for-reporting and pay-for-performance programs.  The relator introduced proof that the hospital had knowingly falsified arrival times in patient records by recording actual arrival times on patient triage sheets but then entering later times in the medical record or delaying patient registration until after the administration of some tests.

Continue Reading Key False Claims Act Cases in 2020

On June 25, the U.S. Court of Appeals for the Eighth Circuit affirmed the dismissal with prejudice of a qui tam False Claims Act (FCA) suit alleging certain physician compensation arrangements at Trinity Health violated the Anti-Kickback Statute (AKS) and Stark Law.

The relator, a former surgeon at one of Trinity’s hospitals, alleged the following:

  1. Trinity paid five of its highest-earning physicians above fair market value by compensating them in excess of 90th percentile compensation for their specialties at levels not justified by their personal productivity.
  2. The high compensation generated practice losses for Trinity absent taking into account the physicians’ downstream referrals to the health system.
  3. As a result of the physicians’ compensation methodology, they performed unnecessary surgeries to inflate their compensation.
  4. Trinity opted not to renew the relator’s contract because he complained about these allegedly-unnecessary surgeries.

Continue Reading Eighth Circuit Affirms Dismissal of Kickback Case

On May 6, the U.S. District Court for the District of South Carolina entered final judgment dismissing with prejudice a relator’s qui tam False Claims Act (FCA) suit against the defendant wholesale pharmacy. The relator, a former pharmacist who worked for the defendant, alleged that the defendant submitted false claims to government healthcare programs in connection with prescription medications dispensed for use at nursing homes and assisted living facilities. The relator alleged a scheme in which the defendant manually filled “thousands” of prescriptions with less-expensive generic medications while billing for more-expensive alternative medications stocked in its automated dispensing system.

A qui tam complaint containing similar allegations filed against Omnicare Inc. in the U.S. District Court for the District of New Jersey resulted in an $8 million settlement in 2017. In this lawsuit, however, the defendant, represented by Bass, Berry & Sims and others, obtained full dismissal with prejudice of the relator’s FCA and retaliation claims.

Continue Reading Qui Tam Complaint Against Pharmacy Dismissed for Lack of Particularity

On February 25, the U.S. District Court for the Western District of Tennessee dismissed a relator’s qui tam False Claims Act (FCA) suit alleging that the defendants had continued the “exact scheme” previously alleged in U.S. ex rel. Deming v. Jackson-Madison Cty. Gen. Hosp., et al. involving allegations of medically unnecessary cardiac testing and procedures.

The defendants in U.S. ex rel. Maur v. Cmty. Health Sys., Inc., et al., represented by Bass, Berry & Sims and others, moved to dismiss the relator’s action on two grounds.  First, the defendants argued that the FCA’s public disclosure bar prohibited the relator’s action as the lawsuit raised substantially the same allegations as those publicly disclosed in the Deming action and subsequent press releases related to that lawsuit.  Second, the defendants maintained that the relator had failed to plead any FCA claims with the requisite particularity under Federal Rule of Civil Procedure 9(b).  The district court granted the defendants’ motions and dismissed the relator’s action on both grounds.

Continue Reading Public Disclosure Bar and Pleading Deficiencies Doom Tennessee FCA Case

The Department of Justice (DOJ) recently released its report detailing the settlements and judgments obtained in 2019 from civil cases involving fraud and abuse claims.  As in years past, the substantial majority of these settlements and judgments—$2.1 billion of the $3 billion total—were the result of qui tam whistleblower lawsuits filed under the False Claims Act (FCA).

Following the government’s intervention decision, the first test for many of these qui tam lawsuits is surviving a motion to dismiss.  Because FCA suits allege fraud against the government, they must be pleaded with particularity as required by Rule 9(b) of the Federal Rules of Civil Procedure.  This post discusses recent developments to those standards from 2019.

Courts have held that to satisfy Rule 9(b), FCA complaints must include a detailed description of the alleged fraud scheme and facts to show the scheme resulted in a request for reimbursement from the government.  A failure on either account will result in dismissal.

Continue Reading Recent Developments in False Claims Act Pleading Standards

This is the second post of a two-part discussion of FCA pleading standards and discusses the pleading requirements for connecting a fraudulent scheme to the submission of false claims.  Read our previous post on the requirements for pleading the details of a fraudulent scheme.

Pleading Submission of False Claims

Most courts require FCA plaintiffs to round out their FCA pleadings with allegations that false claims were submitted to the government as a result of the alleged fraud scheme.  Some courts require plaintiffs to identify specific representative examples, while others permit the pleading of “reliable indicia” leading to a “strong inference” that claims were actually submitted.

Pleading Actual Claims  

The U.S. District Court for the District of Massachusetts recently laid out the level of detail generally expected for pleading the submission of actual false claims.  In U.S. ex rel. Wollman v. General Hospital Corporation, it held the relator made insufficient allegations of actual claims submitted as part of a fraudulent billing scheme involving overlapping surgeries when the complaint included “no dates, identification numbers, amounts, services, individuals involved, or length of time” for any of the surgeries at issue.

Continue Reading Recent Developments in FCA Pleading Standards – Part Two

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

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