The roller coaster ride of U.S. ex rel. Ruckh v. Genoa Healthcare, LLC continues.  In a previous post, we wrote about the staggering $348 million judgment entered following a jury verdict against a management company and skilled nursing facilities (SNFs) owned by Consulate Health Care.  The jury found the defendants committed False Claims Act (FCA) violations by artificially inflating Resource Utility Group (RUG) levels for Medicare therapy patients and falsely certifying that the SNFs had created timely and adequate patient care plans required by Medicaid.  Following the judgment, defendants filed a motion for judgment as a matter of law under Federal Rule of Civil Procedure 50(b), and as we noted here, the district court judge took the extraordinary step of overturning the judgment on materiality grounds.

In the latest turn, the Eleventh Circuit reversed the district court’s decision in part and reinstated most of the jury verdict.  While the district court, in applying Escobar’s materiality standard, had found “an entire absence of evidence” of materiality, the Eleventh Circuit reached the opposite conclusion, holding that “plain and obvious” evidence of materiality supported a jury verdict of $85 million in single damages.  The appellate court ordered the district court to enter judgment in treble that amount, plus per-claim statutory penalties under the FCA.  That comes to over $255 million.


Continue Reading Eleventh Circuit Reinstates Massive FCA Judgment in Ruckh

The Tenth Circuit recently affirmed the dismissal of a declined qui tam False Claims Act lawsuit filed against Lawrence Memorial Hospital (LMH) by a former LMH employee, reasoning that the materiality inquiry focuses on the likely reaction of the Government. In U.S. ex rel. Janssen v. Lawrence Memorial Hospital, 949 F.3d 533 (10th Cir. 2020), the relator alleged that over a period of years LMH engaged in two fraud schemes:

  1. LMH falsified patient arrival times submitted to Medicare under certain programs that tied compensation to quality-of-care metrics; and,
  2. LMH falsely certified compliance with a requirement under the Deficit Reduction Act that it educate employees with detailed information about the False Claims Act.


Continue Reading Tenth Circuit Strictly Enforces Materiality Requirement to Nix FCA Lawsuit

This is the second post of a two-part discussion of recent developments related to the materiality standard set forth by the Supreme Court in Universal Health Services v. U.S. ex rel. Escobar.  Read our previous post, which covered appellate court decisions and key decisions related to government knowledge and payment.

Courts Take Differing Approaches to the Significance of Government Intervention Decisions

In assessing the False Claims Act’s (FCA) materiality element, courts have increasingly taken divergent approaches to analyze the significance of the government’s decision about whether to intervene in a qui tam action.

In several 2019 decisions, district courts held that the government’s decision to intervene in a qui tam action was relevant – even if not dispositive – to the materiality analysis under Escobar.  In U.S. ex rel. Longo v. Wheeling Hospital, Inc., for instance, the U.S. District Court for the Northern District of West Virginia found that the government’s decision to intervene in the very qui tam action before it “strongly militate[d] in favor of materiality.”  And in U.S. ex rel. Arnstein v. Teva Pharmaceuticals USA, Inc., the U.S. District Court for the Southern District of New York explained that the government’s decision to intervene in “a factually similar case” in the same district “provide[d] strong evidence that AKS [Anti-Kickback Statute] violations were material to the Government’s payment decisions,” even though the government had not intervened in the case before the court.


Continue Reading Escobar’s “Rigorous” Materiality Standard: Recent Developments – Part Two

This is the first post of a two-part discussion of recent developments related to the materiality standard set forth by the Supreme Court in Universal Health Services, Inc. v. U.S. ex rel. Escobar.  Our second post covers government intervention decisions, the “essence of the bargain” test, and the materiality of Anti-Kickback Statute violations.

The Supreme Court’s 2016 decision in Universal Health Services, Inc. v. U.S. ex rel. Escobar continues to play a significant role in FCA litigation, particularly with respect to courts’ analyses of the FCA’s materiality element.  In Escobar, the Supreme Court described the materiality element as “rigorous” and “demanding” and set forth a number of non-exclusive considerations to guide the materiality inquiry, which primarily focus on the government’s actual conduct and its payment (or non-payment) of purportedly false claims.  In 2019, courts continued to grapple with specific applications of Escobar’s directives, with some courts appearing to apply its materiality guidance less “rigorously” than others.

Some Appellate Courts Appear to Apply Escobar Less Rigorously Than Others

As we have previously discussed, the seemingly irreconcilable decisions issued by the nation’s circuit courts about how Escobar’s non-exclusive factors should apply in particular cases led parties in at least three such cases to seek further clarity from the Supreme Court.  But last year the Supreme Court denied review in each of those three cases, perhaps signaling that – at least for now – it is content to allow the various issues raised in Escobar to continue to percolate in the lower courts.


Continue Reading Escobar’s “Rigorous” Materiality Standard: Recent Developments – Part One

The Medicare Advantage program, which allows private insurance companies to offer and administer Medicare benefits, continues to be an area of sharp scrutiny for False Claims Act (FCA) enforcement despite some significant recent setbacks in pursuing FCA liability against Medicare Advantage Plans (MA Plans or Plans).  In 2018, several district court decisions raised obstacles to the pursuit of FCA liability against MA Plans, and those decisions have continued to affect FCA enforcement efforts in the first half of 2019.  Despite those setbacks, however, the prevalence of government enforcement actions involving Medicare Advantage illustrates that it remains an area of focus for the Department of Justice (DOJ).

The Focus on Medicare Advantage

Unlike traditional fee-for-service Medicare, MA Plans are compensated on a monthly basis through a fixed payment for each member.  The amount of the monthly payment – known as a capitation payment – is determined for each payment year through a process called “risk adjustment” and is based on each individual member’s demographic information and data reflecting the member’s medical condition, as documented during the 12 months preceding the payment year.  A member’s condition and medical diagnoses must be supported by a valid medical record.


Continue Reading Medicare Advantage: Recent Developments in FCA Enforcement

In 2016, the U.S. Supreme Court handed down its decision in Universal Health Services, Inc. v. U.S. ex rel. Escobar confirming the viability of the implied false certification theory in False Claims Act (FCA) cases and mandating that claims brought pursuant to that theory satisfy “demanding” materiality and scienter requirements.  As discussed in a prior post, since Escobar, the U.S. Courts of Appeals have wrestled with analyzing and applying the materiality and scienter requirements discussed in the Supreme Court’s opinion, resulting in a number of recent petitions for writ of certiorari filed with the Supreme Court seeking clarification of the Escobar mandates.

In one of its first actions of 2019, the Supreme Court recently denied petitions in two closely-watched FCA cases, U.S. ex rel. Harman v. Trinity Industries, Inc., and Gilead Sciences Inc. v. U.S. ex rel. Campie.

$660 Million Reversal Stands in Harman

The plaintiff-relator in Harman sought review from the Supreme Court after the U.S. Court of Appeals for the Fifth Circuit reversed a $660 million jury verdict, holding that the relator failed to prove that the defendant’s alleged misrepresentations were material to government’s payment decisions.  The relator in Harman claimed that the defendant produced and sold defective highway guardrails to various states, causing them to submit fraudulent claims for reimbursement to the federal government.  However, evidence was presented that the Federal Highway Administration was aware of the alleged defects but continued to pay for the guardrails despite their non-compliance.  Relying on Escobar, the Fifth Circuit held that relator failed to overcome such “strong evidence” that the requirements at issue were not material.   The Supreme Court’s recent denial of the relator’s petition leaves intact the Fifth Circuit’s judgment and precedential opinion, providing a potential defense to FCA defendants in cases where the government was aware of certain conduct but continued to pay claims.


Continue Reading With Widening Circuit Splits and Mounting Pressure, Will 2019 See a Post-Escobar Decision from the Supreme Court?

On November 30, 2018, the Solicitor General of the United States filed an amicus curiae brief in the closely watched False Claims Act (FCA) lawsuit, Gilead Sciences Inc. v. U.S. ex rel. Campie. In what appears to be an unprecedented move, the Solicitor General stated in an amicus brief filed with the Supreme Court – without any prior indication – that the Department of Justice (DOJ) will move to dismiss the relator’s complaint if the case is remanded back to the district court because allowing the case to proceed “would impinge on agency decision making and discretion and would disserve the interests of the United States.”

Defendant Gilead Seeks Review of Ninth Circuit Decision

Two relators filed an FCA lawsuit against Gilead Sciences, Inc. in 2010 alleging that the pharmaceutical manufacturer misrepresented to the government that it obtained an active ingredient in three of its HIV drugs from specifically approved facilities. The relators also allege that Gilead provided false or inaccurate information to the Food and Drug Administration (FDA) in an attempt to gain approval to receive ingredients from an alternate facility. The relators argue that the government would not have reimbursed Gilead for the drugs at issue had it known the truth about the source of the drugs’ active ingredients.
Continue Reading DOJ Informs Supreme Court that It Will Dismiss FCA Case if Remanded to District Court

On Tuesday, November 20, 2018, Defendants-Petitioners Brookdale Senior Living Communities, Inc. et al. (Brookdale) filed a petition for a writ of certiorari with the U.S. Supreme Court asking the Court to resolve circuit splits regarding enforcement of the materiality and scienter elements of the False Claims Act (FCA) in cases involving the implied false certification theory of liability. The relator in the case, styled Brookdale Senior Living Communities, Inc. v. U.S. ex rel. Prather, is a former Brookdale utilization review nurse who alleges that Brookdale did not obtain physician signatures on home health certifications as soon as possible after the physician established a plan of care, in violation of Medicare regulations. The U.S. District Court for the Middle District of Tennessee previously dismissed the lawsuit for failure to plead falsity, but the case was revived on appeal by a divided panel of the Court of Appeals for the Sixth Circuit, which held that the relator adequately pleaded a regulatory violation. After the relator amended her complaint in light of the Supreme Court’s 2016 decision in Universal Health Services, Inc. v. U.S. ex rel. Escobar, which addressed the FCA’s materiality requirement, the district court dismissed the case for failure to plead materiality. On appeal, however, the Sixth Circuit again reversed in a 2-1 decision, finding that the relator adequately pleaded materiality and scienter.
Continue Reading Supreme Court Review Sought on FCA Materiality, Scienter Elements

Since the 2016 Supreme Court decision in Universal Services Inc. v. United States ex rel. Escobar, courts have wrestled with exactly how to apply the unanimous decision. This post highlights developments across the country in numerous substantive areas addressed in the Escobar decision. If you need a refresher on the Escobar decision, see our previous post explaining the major elements of the case.

Continue Reading No Consensus on Materiality: Courts Continue to Grapple with Escobar’s Key Holdings

On August 24, 2018, the Ninth Circuit addressed the Supreme Court’s decision in Universal Health Services, Inc. v. U.S. ex rel. Escobar, holding that Escobar sets forth the exclusive test for establishing FCA liability under the theory of implied false certification.  In that case, U.S. ex rel. Rose v. Stephens Institute, the Ninth Circuit also grappled with Escobar’s materiality requirement, providing further guidance on how the past government action factor of the materiality analysis should be applied.

Continue Reading Ninth Circuit Holds that Escobar Set Forth Exclusive Conditions for Implied Certification Liability