U.S. ex rel. Badr v. Triple Canopy, Inc., an intervened case arising out of the Fourth Circuit, has been one of the more closely-watched recent FCA cases. Previously, the Fourth Circuit held that the government’s complaint properly alleged an FCA claim and could survive Triple Canopy’s motion to dismiss. That ruling was subsequently vacated by the Supreme Court following its decision in Universal Health Services, Inc. v. U.S. ex rel. Escobar, which we covered here and here. On May 16, 2017, the Fourth Circuit issued its opinion on remand, finding that the complaint satisfied the pleading standards set forth in Escobar and re-affirming its conclusion that the complaint adequately stated an FCA claim.
After granting the relators’ petition for an interlocutory review of the district court’s rejection of the use of statistical sampling to establish FCA liability, the Fourth Circuit ultimately declined to reach that issue in its opinion recently issued in U.S. ex rel. Michaels v. Agape Senior Community, Inc. This conclusion comes as no surprise based on the comments and questions posed by the panel during the course of oral argument, as we covered here.
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.
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.
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).
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 FCA’s public disclosure bar and recent cases considering whether disclosures are sufficient to bar FCA claims.
The FCA’s public disclosure bar prevents a relator from filing a qui tam complaint based on information previously disclosed to the public, thereby dissuading parasitic lawsuits based on publicly available information. In cases considering the scope of the public disclosure bar, courts have continued to examine the issue of how or to whom information must be disseminated in order to constitute a “public disclosure,” which often has resulted in a narrowing of the public disclosure bar’s scope in a given case. Such cases marked a shift away from decisions favorable to FCA defendants toward a more nuanced and specific application of the public disclosure bar.
On October 16, 2015, Tuomey Healthcare agreed to pay more than $74 million to resolve a $237 million judgment in a long-standing FCA matter that had threatened to bankrupt the nonprofit hospital. The action, styled U.S. ex rel. Drakeford v. Tuomey Healthcare Systems, Inc., No. 05-2858 (D.S.C.), involved FCA allegations that Tuomey employed and compensated 19 part-time physicians in excess of fair market value and in a manner that varied with the volume of value of their referrals, in violation of the Stark Law. The settlement came after a July 2015 ruling from the U.S. Court of Appeals for the Fourth Circuit, which affirmed the district court’s $237 judgment against Tuomey following a jury trial in 2013.
The settlement agreement calls for Tuomey to pay $72.4 million to the United States—of which the relator will receive 25% ($18.1 million)—and an additional $2.5 million for the relator’s attorneys’ fees and costs. Payment of $32.4 million of the settlement amount is conditioned on the successful acquisition of Tuomey by Palmetto Health prior to December 31, 2015. In connection with settlement, Tuomey agreed to enter into a five-year CIA with HHS-OIG.
As we previously reported, physician compensation continues to be in the FCA crosshairs. In 2015 to date, there have been at least 12 FCA settlements involving alleged Stark Law violations, with the large majority of those being enforcement actions against hospitals like Tuomey.
On September 29, 2015, the Fourth Circuit granted a petition for interlocutory appeal that may result in the first significant appellate decision to determine whether an FCA plaintiff may rely on statistical sampling to prove liability or damages.
In U.S. ex rel. Michaels v. Agape Senior Community, Inc., relators asserted that a nursing home operator violated the FCA by submitting false claims with respect to hospice and other nursing home-related services. While not in complete agreement, the parties both asserted that the action, in which DOJ declined intervention, involved more than 10,000 patients and more than 50,000 claims. The district court concluded that relators would be required to prove the falsity of each and every claim based upon evidence relating to each particular claim.
In a welcomed move, CMS has proposed changes to the federal physician self-referral law (Stark Law) designed to improve consistency and interpretability and alleviate the number of technical violations leading to self-disclosures. This move is in stark (pun-intended) contrast to the stringent interpretation of the Stark Law by the Fourth Circuit in its decision in U.S. ex rel. Drakeford v. Tuomey Healthcare System, Inc., earlier this month. Given these sizable developments, what has changed and what are the implications for the healthcare industry? Our recent article discusses the Fourth Circuit’s opinion and what is to come for healthcare providers navigating the Stark Law.