In U.S. ex rel. Poehling v. UnitedHealth Group, Inc., the U.S. District Court for the Central District of California partially granted UnitedHealth’s motion to dismiss the government’s FCA claims, which were based on the allegation that UnitedHealth’s attestations as to the truth and accuracy of the risk adjustment data submitted were false because the district court found that the government had failed to plead the attestations were material to the payment decision, as required by the Supreme Court’s decision in Escobar. The district court declined to dismiss the remaining claims, including an FCA claim added by the government after its complaint in the similar Swoben case was dismissed (which we discussed here), which alleged a violation of the reverse false claims provisions due to failure to delete invalid diagnosis codes without reference to the attestation. The district court did grant the government leave to amend, with the second amended complaint to be filed by February 26, 2018.
Bass, Berry & Sims and the Tennessee Hospital Association recently sponsored the Nashville Healthcare Fraud Conference, a full-day seminar offering insight into fraud and abuse enforcement issues within the healthcare industry. Panel discussions were focused on providing practical tips and takeaways for preparing for, responding to and resolving a healthcare fraud investigation. A variety of topics were covered including:
- Healthcare Fraud Year in Review: Where Do We Go From Here?
- Effectively Handling Employment Decisions Involving Whistleblowers
- What Every Compliance Officer Wishes the Legal Department Knew
- Mine Your Own Data: The Role of Data in Dealing with Healthcare Fraud Issues
- Revisiting Parallel Proceedings in Healthcare Fraud Cases
- Keynote Presentation: A View from the U.S. Attorneys
- Data Privacy Concerns and the Rising Occurrence of Audits
- Addressing Fraud & Abuse Issues in Healthcare Transactions
- In-House Counsel Perspective
- Getting Your Healthcare Fraud Case Resolved – An Interactive Case Study
Keynote remarks were offered by the U.S. Attorneys for the Middle, Eastern and Western Districts of Tennessee. The 2017 Nashville HCF Conference Brochure and the HCF Seminar 2017_Final PowerPoint are both available online.
After years of investigation and litigation, and on the eve of a highly anticipated trial, the government abandoned its FCA case against ManorCare, the nation’s second-largest operator of skilled nursing homes and assisted living centers. In a joint motion filed on November 8, 2017, the government announced that it would move for dismissal with prejudice of U.S. ex rel. Ribik v. HCR ManorCare Inc., No. 1:09-cv-00013 (E.D. Va.). The move marks an unexpected victory for ManorCare and a significant defeat for the government, which was seeking to recover over $500 million in damages and fines in the case.
In a recent opinion, the Seventh Circuit joined its sister circuits in holding that under the FCA, a defendant’s conduct must proximately cause injury to the government in order to incur liability for that injury. United States v. Luce, No. 16-4093, 2017 WL 4768864 (7th Cir. Oct. 23, 2017). This decision resolves a circuit split that arose in 1992 when the Seventh Circuit parted company with the Third Circuit—the only other circuit at that time to have addressed the issue. At that time, the Seventh Circuit held that the FCA required only a “but-for” standard of causation, meaning that a defendant could be held liable under the FCA even if the Government’s loss was not caused directly by the defendant’s conduct so long as the government would not have suffered the loss if not for the defendant’s conduct. In addition to the Third Circuit, the other circuits that have since addressed this issue—the Fifth, D.C., and Tenth Circuits—have held that the higher standard of “proximate causation” applies to FCA cases. Continue Reading Seventh Circuit Resolves Circuit Split on Causation in FCA Cases
Recently, in United States ex. rel. Ibanez v. Bristol-Meyers Squibb Co., No. 16-3154 (Oct. 27, 2017), the Sixth Circuit Court of Appeals affirmed a decision by the U.S. District Court for the Southern District of Ohio to dismiss an FCA complaint brought by two relators on behalf of the government, finding that the complaint lacked the particularity required under Rule 9(b) of the Federal Rules of Civil Procedure.
Former Employees Accused Company of Improperly Promoting Medication
The qui tam action was brought by two former employees of Bristol-Meyers Squibb Co., who alleged that the company, along with co-defendant Otsuka America Pharmaceutical, Inc., had engaged in a scheme to encourage healthcare providers to prescribe the antipsychotic drug Abilify for certain unapproved or “off-label” uses and that some of the resulting prescriptions were paid for by government programs.
The U.S. Court of Appeals for the Sixth Circuit recently heard oral argument in connection with a decision by the U.S. District Court for the Eastern District of Tennessee that primarily raised two FCA questions:
- Did the relator’s amended complaint satisfy the FCA’s first-to-file rule?
- Did the amended complaint adequately plead fraud under Rule 9(b) of the Federal Rules of Civil Procedure? U.S. ex rel. Armes v. Garman, 2016 WL 3562062 (E.D. Tenn. June 24, 2016).
The U.S. Court of Appeals for the Fifth Circuit vacated a $663 million judgment, concluding that the Supreme Court’s opinion in Escobar doomed the plaintiff’s FCA claims on the issue of materiality.
FCA Allegations: Highway Guardrail Systems Had Unapproved Design Modifications
Trinity Industries, a manufacturer of highway guardrail systems, faced FCA allegations brought by a former competitor based on the theory that federally subsidized purchases of Trinity’s guardrail systems resulted in false claims as a result of unapproved design modifications. Prior to the filing of the relator’s qui tam lawsuit, the relator met extensively with Federal Highway Administration (FHWA) officials during which he presented his allegations regarding the design modifications and his assertions that those modifications rendered Trinity’s guardrail systems ineligible for federal reimbursement. FHWA met separately with Trinity to discuss the relator’s allegations. Following those meetings, FHWA confirmed that state purchases of the Trinity guardrail system were eligible for federal reimbursement notwithstanding the design modifications.
The U.S. District Court for the Central District of California recently dismissed a complaint-in-intervention filed by the U.S. Department of Justice (DOJ) in U.S. ex rel. Swoben v. Secure Horizons. As previously reported, in this significant test case, DOJ filed its complaint on May 1, 2017, as to the UnitedHealth Group parties (collectively, UnitedHealth), marking the first time that DOJ joined a whistleblower suit alleging FCA violations regarding Medicare Advantage. The complaint alleged that the “risk adjustment” payments, which account for the severity of patient conditions as compared to an average Medicare fee-for-service beneficiary, were boosted by ignoring questionable diagnoses.
On August 18, 2017, the U.S. Court of Appeals for the Sixth Circuit reversed the denial of a FCA defendant’s request for attorney’s fees and expenses under the Equal Access to Justice Act (EAJA) and held the government accountable for an unreasonable damages demand.
In U.S. ex. rel. Wall v. Circle C Construction, LLC, a subcontractor for the defendant, Circle C Construction, failed to pay $9,900 in wages for electrical work performed in the construction of warehouses. The subcontractor’s paid wages thus failed to meet the requirements of the Davis-Bacon Act. As a result, Circle C Construction’s subsequent statements of compliance with federal regulations, including the Davis-Bacon Act, were false.
The FCA provides protections for whistleblowers in connection with their whistleblowing activities. To establish that an employer retaliated against an employee in violation of 31 U.S.C. § 3730(h), an employee must demonstrate that:
- The employee engaged in protected activity.
- The employer knew that the employee was engaged in protected activity.
- As a result of the above, the employee was discriminated against.
Definition of FCA Retaliation “Protected Activity”
Prior to 2009, “protected activity” was defined as employee conduct “in furtherance of an action under this section, including investigation for, initiation of, testimony for, or assistance in an action filed or to be filed under this section.”