Reply Briefs in Continuum Litigation Continue Debate Over Nature of an “Obligation” Under FCA

^{Posted by Scott Stein and Brenna Jenny}

The parties in a closely watched reverse false claims case, United States v. Continuum Health Partners, continued their dispute over when an “obligation” to repay the government arises under the FCA’s reverse false claim provision. (For previous coverage, see here, here, and here). Continuum’s reply brief in support of its motion to dismiss focuses on the government’s assertion that a “potential” overpayment creates an obligation to repay sufficient to trigger the FCA.

Continuum’s reply brief points out an inconsistency between the government’s legislative history arguments and the text of the statute as enacted. In its opposition brief, the government frequently cited a Senate Report of an earlier version of the bill that became the Fraud Enforcement and Recovery Act (“FERA”). The Report states, as the government quoted in its brief, that the term “obligation” for FERA purposes “includes fixed and contingent duties.” However, as Continuum points out, while the text of the bill that was the subject of the Senate Report defined an obligation as “a fixed duty, or a contingent duty arising from…,” the text of FERA, as enacted, does not contain any reference to contingent duties. Rather, the FCA as amended by FERA defines “obligation” as “an established duty, whether or not fixed, arising from….” 31 U.S.C. § 3729(b)(3). Under Continuum’s interpretation, this alteration deliberately narrowed the scope of statutory “obligations” by eliminating contingent duties. Even an “inadequate review of potential overpayments” still equates to only a contingent duty or a potential liability, rather than an established duty to repay.

Continuum also attacks one of the central premises in the government’s opposition brief, namely that the definition of an identified overpayment in the Part C/Part D context—as set forth in the 2014 CMS Medicare Advantage and Part D Plan Sponsor final rule (“MA/Part D Final Rule”)—should apply to this case. Two years earlier, CMS proposed a distinct rule that would have applied to Medicare Part A and Part B providers, but the agency has not yet finalized this rule. Continuum emphasizes the government’s failure to justify its assumption that the policy judgments generating the overpayment regulations in the MA/Part D Final Rule would lead to the same interpretation in the Part A/Part B context, or even in the Medicaid context, which is one step further removed from the purview of the MA/Part D Final Rule.

Finally, Continuum contests the government’s interpretation of the term “avoid an obligation” as being satisfied by one who “refrains from an obligation to pay money to the government.” Continuum criticizes the government’s further reliance on the Senate Report for the un-enacted version of FERA, which stated that the reverse false claims provision is violated “once an overpayment is knowingly and improperly retained, without notice to the Government about the overpayment.” Continuum maintains that an obligation can only be avoided through affirmative action by the defendants. Because the government alleges only that Continuum failed to act by promptly repaying the government, i.e., through inaction, Continuum argues that the reverse false claims provision is not implicated.

A copy of the reply brief can be found here. A decision on Continuum’s motion to dismiss is expected in early 2015.