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June 28, 2012

28 June 2012

Supreme Court Upholds Affordable Care Act; FCA And AKS Provisions Remain Standing

The Supreme Court this morning announced that the so-called “individual mandate,” the centerpiece of the Patient Protection and Affordable Care Act (PPACA), which requires most individuals to maintain a minimum level of health insurance, is a constitutional exercise of Congress’s power to tax. Separately, the Court held that a provision of PPACA that would penalize States that elected not to participate in the expansion of the Medicaid program by withdrawing their existing federal Medicaid funding is unconstitutional. However, the Court concluded that this violation can be cured by severing this provision from the rest of the law, leaving the remainder of PPACA standing.

Thus, those False Claims Act and Anti-Kickback Statute-related amendments enacted as part of PPACA, briefly listed here, remain standing: (1) the amendment to the AKS establishing that claims “resulting from” AKS violations that are submitted to the federal healthcare programs give rise to FCA liability (PPACA § 4204(f)(1)); (2) the further AKS amendment, clarifying that knowledge of and specific intent to violate the AKS are not necessary to establish a violation (PPACA § 6402(f)(2)); (3) amendments to the FCA’s “public disclosure bar” provision that convert it from a jurisdictional bar to an affirmative defense that can be raised by a defendant in a motion to dismiss but rejected by the government, precluding judicial resolution of the issue, and significantly limiting the types of disclosures that can give rise to the defense (PPACA § 10104(j)(2)); (4) requiring recipients of “overpayments” to report and return them, and making the failure to do so the basis of a “reverse false claim” cause of action under the FCA (PPACA § 6402(a)); and (5) creating additional civil monetary penalties that may be applied to conduct that violates the FCA (PPACA §§ 6402(d)(2), 6408(a)).

The opinion is available at http://www.supremecourt.gov/opinions/11pdf/11-393c3a2.pdf

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28 June 2012

Are The Wars In Iraq and Afghanistan Tolling the Statute of Limitations for FCA Claims?

In a post titled “When is War Really Over,” the Wall Street Journal Law Blog reported on a recent Fifth Circuit decision interpreting the Wartime Suspension of Limitations Act, 18 USC 3287. That statute states in pertinent part that:

When the United States is at war or Congress has enacted a specific authorization for the use of the Armed Forces, as described in section 5(b) of the War Powers Resolution, the running of any statute of limitations applicable to any offense

  1. involving fraud or attempted fraud against the United States or any agency thereof in any manner, whether by conspiracy or not, or
  2. committed in connection with the acquisition, care, handling, custody, control or disposition of any real or personal property of the United States, or
  3. committed in connection with the negotiation, procurement, award, performance, payment for, interim financing, cancelation, or other termination or settlement, of any contract, subcontract, or purchase order which is connected with or related to the prosecution of the war or directly connected with or related to the authorized use of the Armed Forces, or with any disposition of termination inventory by any war contractor or Government agency, shall be suspended until 5 years after the termination of hostilities as proclaimed by a Presidential proclamation, with notice to Congress, or by a concurrent resolution of Congress.

The Fifth Circuit held that a formal declaration of the cessation of hostilities is required to end the tolling – something that the court held has not yet occurred with respect to the war in Iraq. The decision is troubling in light of another decision last year in which a federal district court suggested that civil False Claims Act cases – at least those in which the United States intervenes – may qualify as an “offense” under the Act.

This topic should be of interest to all FCA practitioners, as the Wartime Suspension act is not limited to any particular type of FCA claims. On its face it applies equally to FCA claims involving allegations of health care fraud or mortgage fraud as to claims involving fraud by military contractors. While the few district courts that have been asked to extend the applicability of the Wartime Suspension Act to the FCA have indicated some reluctance to do so, we can expect enterprising relators (and the United States) to press this argument in cases in which the statute of limitations is a significant issue.

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