Inside the FCA

Inside the FCA

Eighth Circuit Affirms Dismissal of FCA Claims Related to Ambiguous Regulation

Posted in 8th Circuit, Knowledge/Scienter, Materiality

On August 12, 2016, the U.S. Court of Appeals for the Eighth Circuit affirmed summary judgment with respect to FCA claims asserted against an anesthesia practice based on the theory that the practice’s physicians billed Medicare for anesthesia services without being present in the operating room during the patients’ “emergence” from anesthesia.   In U.S. ex rel. Donegan v. Anesthesia Associates of Kansas City, PC, the Eight Circuit concluded that the relator failed to establish that the practice acted with the requisite knowledge because the practice’s interpretation of the billing regulation at issue was “objectively reasonable.”

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SC Hospital Pays $17 Million to Resolve FCA Claims of Improper Physician Employment Relationships

Posted in Hospitals, Physicians, Stark Law

On July 28, 2016, the Department of Justice announced a $17 million settlement in the matter of United States ex rel. Hammett v. Lexington County Health Services District, Case No. 3:14-cv-03653 (D. S.C.).1 The lawsuit resolved allegations that Lexington County Health Services District, Inc. d/b/a Lexington Medical Center (“LMC”) in West Columbia, SC violated the Stark Law and False Claims Act by acquiring physician practices or employing twenty-eight (28) physicians on terms that were in excess of fair market value and on terms that were not commercially reasonable.

The case was filed on September 15, 2014, and DOJ declined to intervene on September 16, 2015. Relator then continued with the case, resulting in the recently announced settlement.  As part of the settlement, LMC also entered into a Corporate Integrity Agreement with the Department of Health and Human Services-Office of the Inspector General.

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Escobar Forestalls Government’s Allegations in Intervened Case

Posted in Implied Certification

On July 18, 2016, the United States District Court for the Northern District of California issued one of the first post-Escobar decisions addressing a motion to dismiss FCA allegations on grounds that the complaint did not satisfy Rule 9(b)’s pleading standard.  In the intervened case, the United States alleged that diagnostic sleep studies were performed in locations that violated federal law and/or were performed by technicians who were not licensed or certified.  The United States proceeded on multiple FCA theories (including factual falsity, express false certification, fraud in the inducement, and implied false certification).

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Seventh Circuit Sidesteps Escobar; Boots FCA Claims for Lack of Knowledge

Posted in 7th Circuit, False Certification, Knowledge/Scienter

The Seventh Circuit’s rejection of the implied certification theory of liability gave rise, in part, to the circuit split resolved by the Supreme Court’s opinion in Escobar.  In its first FCA decision since the Supreme Court’s opinion – U.S. ex rel. Sheet Metal Workers International Association v. Horning Investments, LLC, the Seventh Circuit sidestepped the question of whether the relator’s allegations that a government contractor’s certification of compliance with the Davis-Bacon Act amounted to an implied false certification sufficient to give rise to FCA liability.  Rather than tackle the implications of Escobar, the Seventh Circuit affirmed entry of summary judgment in favor of the contractor, explaining that the defendant’s conduct amounted to certifying compliance with an ambiguous statutory obligation and, therefore, did not constitute a “knowing” violation of the FCA.

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Court Rejects Relator’s Use of Statistical Sampling

Posted in Falsity, N.D. Tex., Statistical Sampling

The United States District Court for the Northern District of Texas recently released a noteworthy FCA opinion, one that includes a key ruling on the use of statistical sampling and extrapolation. In United States v. Vista Hospice Care, Inc., No. 3:07-CV-00604-M, 2016 WL 3449833 (N.D. Tex. June 20, 2016), the relator brought claims alleging, among other things, that the defendant violated the False Claims Act by certifying patients as eligible for hospice, when the patients were not terminally ill or their records lacked documentation supporting the requisite six-month life expectancy prognosis.  In deciding a motion to strike and a motion for summary judgment, the district court issued two very favorable defense rulings.

Statistical Sampling/Extrapolation

The relator relied on the expert testimony of a hospice physician, who reviewed 291 patient files and concluded that a large portion of the patients were not eligible for hospice for at least some of the days. An expert statistician, in turn, extrapolated from the physician’s testimony to conclude that defendants had submitted false claims on approximately 12,000 patients.

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Associate Attorney General Sheds Light on the DOJ’s Application of Individual Liability and Corporate Cooperation Credit in FCA cases

Posted in Yates Memo

Since September 2015, United States Deputy Attorney General Sally Yates’s Memorandum (Yates Memo) has been the topic of intense discussion within the legal community, generating a wide range of views on its impact on FCA investigations and litigation. Acting Associate Attorney General Bill Baer recently delivered remarks at the ABA’s 11th National Institute on Civil False Claims Act and Qui Tam Enforcement, which addressed the Yates Memo and some of the questions it has generated.

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

Posted in Implied Certification, Materiality, United States Supreme Court

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.

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

Posted in 5th Circuit, Seal Requirement

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.

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Sixth Circuit Upholds Summary Judgment on FCA Retaliation Claim

Posted in 6th Circuit, Anti-Kickback Statute, Relators

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 violations. 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.

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Agency Announces Rule Doubling FCA Penalties

Posted in Damages, Penalties

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.

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