Eighth Circuit Holds That A Reasonable Interpretation of an Ambiguous Statute Does Not Give Rise to FCA Liability

On August 8, 2016, the Eighth Circuit affirmed the dismissal of a FCA complaint against the University of Minnesota Medical Center (“UMMC”) alleging that UMMC improperly characterized the children’s unit of its hospital as a “children’s hospital”– a term not defined in the relevant statute – in order to avoid a decrease in Medicaid reimbursements under a recent statutory amendment.  The Court held that UMMC’s lobbying efforts with the Minnesota Department of Human Services (“MDHS”) to classify itself as a “children’s hospital” under that amendment, and corresponding claims for Medicaid reimbursement, could not be characterized as “false” under the FCA.

In an effort to decrease government spending, MDHS amended the statute governing its Medicaid payment rates to reduce reimbursements for inpatient hospital services by ten percent, exempting children’s hospitals from the reduction.  This lawsuit was filed by former MDHS employee Paul Allen Olson, who claimed to have drafted that statutory amendment.  Olson alleged that UMMC violated the FCA by “falsely claiming” that it was a “children’s hospital” in order to exempt itself from the amendment’s reach.  Olson argued that the statute unambiguously precluded UMMC’s characterization of its children’s unit as a “children’s hospital.”  But the majority held that the term “children’s hospital” was ambiguous based on the term’s use in other statutes and its historical understanding, and that its children’s unit could reasonably be interpreted as a “children’s hospital.” The panel concluded that “[a] reasonable interpretation of ambiguous statutory language does not give rise to a FCA claim.”

A copy of the Eighth’s Circuit opinion in Olson v. Fairview Health Services of Minnesota, No. 15-1780 (8th Cir. 2016) is available here.