In Fraudulent Inducement Qui Tam, DOJ Once Again Invokes Dismissal Authority

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As discussed here and here, DOJ during the last administration reinvigorated the use of its statutory authority to move to dismiss qui tam cases over a relator’s objections.  But over the past two years, DOJ’s use of this authority has once again fallen off.  However, last week, DOJ moved to dismiss a qui tam suit in the District of Maryland alleging that the defendants knowingly presented flawed studies to the Department of Health and Human Services (HHS) to induce HHS to purchase defendants’ influenza treatment for the Strategic National Stockpile (SNS).  DOJ’s motion to dismiss serves as an important reminder of the potential benefits of strategically engaging with DOJ and HHS early in the life of a qui tam case about whether dismissal is warranted.

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Supreme Court Declines to Address Application of 9(b) to the FCA

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Yesterday the Supreme Court denied cert in a trio of cases seeking clarification as to the pleading standard required in FCA cases under Rule 9(b).  The petitioners urged the Court to remedy what they characterized as a circuit split over how much detail whistleblowers and the government must supply about alleged false claims in order to survive a motion to dismiss.  As discussed further here, the Solicitor General opposed these cert petitions and argued that the circuits have “largely converged” in their application of Rule 9(b) to FCA complaints.

A variety of reasons exist for why a cert petition may fail to garner the requisite number of votes, and in declining to hear these cases, it is not clear whether the Court is convinced that there is uniformity (or at least not significant discord) among the courts of appeal on this issue.

Fourth Circuit En Banc Vacates Application of Safeco to FCA Cases

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The Fourth Circuit, evenly divided while sitting en banc, recently unwound a panel decision finding that Safeco’s “reckless disregard” standard applies to the False Claims Act (“FCA”).

In January 2022, a panel of the Fourth Circuit held, joining every other circuit to have considered the issue, that when allegations of false claims are premised on violations of ambiguous laws or regulations, the defendant’s scienter is properly assessed using the standard for “reckless disregard” established by the Supreme Court in Safeco Insurance Company of America v. Burr, 551 U.S. 47 (2007).  Under Safeco, courts ask whether a defendant’s interpretation of the ambiguous law or regulation at issue was objectively reasonable and whether authoritative guidance might have warned the defendant away from that interpretation.  As discussed here, applying Safeco, the panel affirmed the district court’s dismissal of the case.

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HHS-OIG Flags Certain Extreme Outlier Telehealth Providers as Potentially Engaging in Fraudulent Billing During the Pandemic

HHS-OIG recently issued a report assessing Medicare program integrity risks arising from telehealth services furnished during the first year of the pandemic.  Although HHS-OIG identified only 1,714 providers whose billing for telehealth services “poses a high risk to Medicare”—  a relatively small percentage of the 742,000 providers who billed for telehealth services during the relevant time period—a closer review of the report (OEI-02-20-00720) reveals that HHS-OIG focused on only the most extreme outliers.  Providers who took advantage of CMS telehealth billing flexibilities during the pandemic should consider assessing their own organizations for potential outliers based on HHS-OIG’s metrics.

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D.C. Circuit Holds Defendants Are Entitled To Offset Damages By Amounts Paid By Other Settling Defendants

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The D.C. Circuit recently issued an important opinion on an issue of first impression: under what circumstances is an FCA defendant entitled to offset damages by amounts the government or relator has received in settlement from other defendants involving the same claims. The opinion is available here.

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Ninth Circuit Construes Post-2010 Public Disclosure Bar to Include Facts Disclosed During a Patent Office Patent Prosecution

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In United States ex rel. Silbersher v. Allergan, Inc., 2022 WL 3652967 (9th Cir. Aug. 26, 2022), the Ninth Circuit ruled that the FCA public disclosure bar, as amended in 2010, encompasses information provided to the U.S. Patent & Trademark Office (“PTO”) during a patent prosecution.  Accordingly, a qui tam action premised entirely on materials obtained from PTO records is barred.

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Provider Escapes, Contractor Remains in Qui Tam Alleging Noncompliance With Bad Debt Regs

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Recently, the Seventh Circuit partially reversed a district court’s dismissal of a qui tam complaint alleging that debt collection agencies and their client hospital are liable under the FCA for the agencies’ knowing failing to comply with Medicare’s “bad debt” collection requirements.  See United States ex rel. Sibley v. University of Chicago Medical Center, No. 21-2610 (7th Cir. Aug. 11, 2022).  In reaching this decision, the court concluded that the relators had adequately pled that reasonable collection efforts are material to the government’s decision to reimburse Medicare bad debts.

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Fourth Circuit Underscores the Risk of Commission-Based Compensation Agreements with Independent Contractors

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In a recent decision, the Fourth Circuit Court of Appeals for the second time in two years held that commission-based compensation arrangements with independent contractors cannot be safe harbored and do violate the Anti-Kickback Statute and FCA.  See United States ex rel. Nicholson v. Medcom Carolinas, Inc., No. 21-1290 (4th Cir. July 21, 2022).

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