Inside the FCA

Inside the FCA

Seventh Circuit Revisits Sanford-Brown, Rejects Implied Certification Claim

Posted in 7th Circuit, Implied Certification

In one of the few cases to apply the Supreme Court’s recent decision in Universal Health Services v. Escobar, the Seventh Circuit recently revisited and affirmed its prior rejection of an implied certification claim under the FCA.  Whether this is a window into how other circuit courts might implement Escobar remains to be seen.

In United States ex rel. Nelson v. Sanford-Brown, Ltd., 788 F.3d 696 (7th Cir. 2015), the relator brought several claims, one of which was an implied certification claim, alleging that Sanford-Brown College (the “College”), which receives federal subsidies, violated the FCA by maintaining recruiting and retention practices that ran afoul of Title IV.  In particular, the College entered into a Program Participation Agreement (PPA) with the federal government to receive subsidies under the Higher Education Act, and the PPA contained boilerplate language requiring the College to affirm that it would comply with Title IV’s mandates.  The relator claimed that because the College’s practices in actuality violated Title IV, its representations in the PPA, and its attendant subsidy claims, were false.

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On Remand, First Circuit Finds Violations in Escobar Were Material

Posted in 1st Circuit, Escobar, Implied Certification, Materiality

In June, the Supreme Court issued Universal Health Services, Inc. v. U.S. ex rel. Escobar, a landmark opinion in which the Supreme Court addressed the standard for pleading materiality in FCA implied certification cases.  The Supreme Court ultimately remanded the case to the First Circuit to resolve in the first instance whether the alleged violations met that standard, and last week, the First Circuit gave its answer: the violations were material.

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North District of California Misconstrues Express False Certification Liability

Posted in Express/Implied Certification, Implied Certification, N.D.C.A.

This summer, the Northern District of California issued an opinion in an intervened case that expanded the theory of express false certification to a startling degree. Ruling on a motion to dismiss, the court in U.S. ex rel. Dresser v. Qualum Corp. (No. 5:2012-cv-01745, N.D. Cal.) held that the defendants, owners and operators of a sleep clinic and a DME company, could be subject to express false certification liability for submitting CMS-1500 claim forms in which they certified their compliance “with all applicable Medicare and/or Medicaid laws, regulations, and program instructions for payment.” According to the court, this general legal certification was sufficient to support an express false certification claim because “by submitting the CMS-1500, Defendants falsely certified that they had complied with Medicare regulations, even though they were not complying with the personnel qualification requirement, and they made this certification knowingly.”

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Matt Curley Analyzes Oral Arguments in Fourth Circuit Agape Case

Posted in 4th Circuit, Statistical Sampling

In an article for Law360, Bass, Berry & Sims attorney Matt Curley provided an analysis of the oral arguments in U.S. ex rel. Michaels v. Agape Senior Community Inc., the Fourth Circuit case closely watched by False Claims Act practitioners. The Fourth Circuit agreed to consider an interlocutory appeal of the district court’s rulings in the case on both the use of statistical sampling and the reviewability of the government’s consent to the settlement of FCA claims after the government declined to intervene in a qui tam action.

As Matt concludes in his analysis:

The questions posed by the panel suggest that the most likely outcome of this interlocutory appeal will reflect a decision by the Fourth Circuit that affirms the conclusion by the district court that the government enjoys an unfettered statutory right to object to a settlement reached between a relator and a defendant in a declined qui tam action, while determining that the Fourth Circuit does not have jurisdiction to reach the question of whether the district court abused its discretion in denying the relators’ motion seeking permission to rely upon statistical sampling.

The full article, “FCA At The 4th Circ.: Contemplating 2 Key Issues,” was published by Law360 on October 27, 2016, and is available online.

Recent Settlements Demonstrate the Reach and Versatility of the FCA

Posted in Long-Term Care, Medical Necessity, Settlement

In recent years, civil enforcement efforts involving the FCA have grown significantly. Today, the FCA impacts a vast array of businesses, as it is commonly used to redress false claims for government funds involving everything from government contracts to Medicare and Medicaid to federally insured mortgages.  The versatility and reach of the FCA has enabled DOJ to use this powerful enforcement tool to recover more than $20 billion during the last five years alone.

A review of several recent FCA settlements indicates that the DOJ continues to actively pursue FCA claims for a wide range of conduct and in a wide variety of industries.

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Tenet Healthcare Settles FCA and AKS Allegations for $513 Million

Posted in Anti-Kickback Statute, Hospitals, Settlement

Texas-based hospital chain Tenet Healthcare Corporation and two of its Atlanta-area hospitals, Atlanta Medical Center and North Fulton Hospital, have agreed to pay more than $513 million to resolve civil and criminal claims related to violations of the federal False Claims Act (FCA) and Anti-Kickback Statute (AKS). Settlement of the underlying cases, which are styled U.S. ex rel. Williams v. Health Management Associates Inc., No. 3:09-cv-00130 (M.D. Ga.) and U.S. v. Atlanta Medical Center, Inc. No. 16-cr-00350 (N.D. Ga), are one of the largest FCA and AKS settlements this year.

On October 3, 2016, the United States filed a bill of information charging Atlanta Medical and North Fulton with one count of conspiracy to defraud the United States and pay and receive kickbacks and bribes. The government alleged that, from 2000 to 2013, Atlanta Medical and North Fulton paid prenatal clinics providing medical services to women (many of whom were undocumented, uninsured and indigent) for referrals for labor and delivery, postnatal, and infant services.  According to the government, business documents show that these referrals resulted in “extremely generous” Medicaid reimbursements and a profitable relationship between the hospitals and the clinics. Continue Reading

The Civil Investigative Demand: An Increasingly Aggressive Investigative Tool and Common-Sense Scope-Reduction Strategies

Posted in Civil Investigative Demands, D.M.D., W.D. Va.

Civil Investigative Demands (CIDs) are powerful pre-litigation tools the government frequently utilizes to investigate potential allegations of FCA liability. CIDs can be broad and invasive, time-consuming and expensive.  What’s a company to do upon receipt of a CID?  Is there any recourse?  Unfortunately, neither case law nor published guidance offers the recipient much in the way of a formal, timely mechanism to challenge the scope or appropriateness of a CID.  Nevertheless, there are certain practical steps one can take to reduce a CID’s scope that, in turn, will reduce disruption and expenses associated with CID compliance.

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Seventh Circuit Rejects Specific Claims Requirement for 9(b), Maintains a High Bar for Medical Necessity Allegations

Posted in 7th Circuit, Falsity, Medical Necessity, Pleading Standards, Rule 9(b)

On September 1, 2016, the U.S. Court of Appeals for the Seventh Circuit reversed the dismissal of an FCA lawsuit by the U.S. District Court for the Eastern District of Wisconsin, and in doing so, evaluated the particularity required to survive a motion to dismiss under Rule 9(b) as it relates to both a relator’s obligation to plead specific claims and the specifics of the underlying fraudulent conduct at issue.

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Fourth Circuit Interprets Meaning of “Protected Activity” Under 2010 FCA Whistleblower Amendments

Posted in 4th Circuit, Retaliation

The U.S. Court of Appeals for the Fourth Circuit recently affirmed dismissal of an FCA complaint for failure to state a claim under the FCA’s anti-retaliation provision, 31 U.S.C. § 3730(h). In U.S. ex rel. Carlson v. Dyncorp Int’l, LLC, the Fourth Circuit held that the relator failed to establish that he had engaged in protected activity, a required element for a prima facie retaliation case under the FCA.  In reaching that conclusion, the Fourth Circuit provided useful guidance on the standards used to assess whether a relator engaged in protected activity.

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Citing Escobar, Court Dismisses Complaint that Alleged Violation of Conditions of Payment

Posted in E.D.N.Y., Escobar, Implied Certification, Materiality

The United State District Court for the Eastern District of New York recently dismissed an FCA complaint for failing to plead materiality under the standard announced in Universal Health Services, Inc. v. U.S. ex rel. Escobar, the Supreme Court’s landmark FCA opinion issued in June of this year. The case, U.S. ex rel. Lee v. Northern Adult Daily Health Care Center, 13-cv-4933, 2016 WL 4703653 (E.D.N.Y. Sept. 7, 2016), becomes one of the first to substantively apply Escobar and highlights the barrier the FCA’s materiality requirement poses to FCA relators in the wake of the Supreme Court’s ruling. It also suggests ways in which courts already are divided in their interpretation of Escobar.

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