Split Seventh Circuit Panel Spars Over Escobar Interpretation
The United States Court of Appeals for the Seventh Circuit recently allowed a previously dismissed qui tam case to proceed against Molina Healthcare of Illinois (“Molina”). The suit, brought by a relator who founded Molina subcontractor GenMed, alleges that Molina fraudulently billed Illinois’ Medicaid program for skilled nursing facility (“SNF”) services that were not actually provided. The district court previously dismissed the case at the pleading stage in June 2020, finding that the relator’s complaint insufficiently alleged that Molina knew its alleged false claims were material. The Seventh Circuit, in a split decision, reversed and remanded the case for further proceedings. (more…)
Fraud Theories Fail Under Rigorous Standards for “Worthless Services” and Materiality
Earlier this week, a court in the Eastern District of Pennsylvania dismissed a declined qui tam action in which the relator, a licensed nurse, alleged that an operator of treatment facilities for disabled individuals fraudulently billed Medicare and Medicaid for substandard care and retaliated against her for investigating that fraud.
HHS Hires Four Outside Firms to Audit Provider Relief Fund Recipients
Federal records recently made available by ProPublica reveal that from late February through early April 2021, Health Resources and Services Administration (“HRSA”), the component of HHS that administers the CARES Act Provider Relief Fund, engaged multiple outside contractors for work relating to auditing and oversight of the Provider Relief Fund, with task descriptions such as “PRF audit support services,” “Audit and financial review services of HRSA Provider Relief Fund programs,” and “Program integrity support for HRSA Provider Relief Fund programs.” Amounts obligated so far for this work total more than $5.3 million. (more…)
Finding No Materiality, Court Grants Summary Judgment for Defense in Fraudulent Inducement Case
On August 12, 2021, the United States District Court for the District of Minnesota granted Boston Scientific Corporation’s (BSC) motion for summary judgment in relator Stephen Higgins’s declined qui tam, which alleged that BSC had fraudulently induced the Food and Drug Administration (FDA) to approve two types of defibrillators that the FDA later recalled. (more…)
D.C. Circuit Reinstates Parts C/D Overpayment Rule
The D.C. Circuit Court of Appeals recently overruled an earlier district court vacatur of the CMS Parts C/D Overpayment Rule, resulting in reinstatement of the rule. The decision adopted the government’s arguments in full and is likely a harbinger of renewed confidence by DOJ in pressing forward with FCA cases premised on Medicare Advantage “upcoding.”
FDA’s OPDP Studying Promotional Booths at Medical Conferences
FDA recently announced that the Office of Prescription Drug Promotion (“OPDP”) initiated a new study on pharmaceutical companies’ interactions with healthcare providers at promotional booths in medical conference exhibit halls. The study is intended to yield insights to inform OPDP policy making and review of proposed promotional materials submitted by companies seeking advisory comments. It may also generate insights that may be used by DOJ to pursue companies for potential instances of off-label promotion or making statements about safety or efficacy that could be characterized as false or misleading.
Proposed FCA Amendments Blocked from Senate Infrastructure Bill
The recently proposed amendments to the False Claims Act have stalled out for now. As discussed here and here, these bipartisan proposed amendments—led by Senator Grassley—would have made four changes to the FCA, and most notably, would have radically altered the burden of proof for establishing materiality.
But after making a sudden appearance on Friday in the Senate infrastructure bill, last night those amendments were excluded. This means that the amendments’ proponents will need to consider other vehicles, particularly “must pass” bills such as the budget resolution. The Senate is expected to consider amendments to the budget resolution later this week.
We will continue to monitor developments regarding this proposed legislation.
FCA Amendments Resurface in Senate Infrastructure Bill
As discussed further here, a bipartisan group of senators, led by Senators Grassley (R-IA), Leahy (D-VT), Wicker (R-MI), Durbin (D-IL), and Kennedy (R-LA), recently introduced proposed amendments to the False Claims Act. Those amendments have now been incorporated into the infrastructure bill currently being debated in the Senate. (more…)
Government Narrowly Avoids Invalidation of All LCDs in the Ninth Circuit
A divided panel of the Ninth Circuit recently reversed a district court decision that held that local coverage determinations (“LCDs”) are valid only when issued through a 60-day notice-and-comment rulemaking process. Agendia, Inc. v. Becerra, No. 19-56516 (9th Cir. July 16, 2021). The impact of the district court’s ruling—and a spirited dissent from the Ninth Circuit majority opinion—would have been significant for healthcare enforcement actions, including under the False Claims Act. LCDs have never gone through notice-and-comment rulemaking. A decision that all LCDs are accordingly invalid would have undermined a number of False Claims Act cases premised on the use of LCDs to apply the “reasonable and necessary” standard for Medicare reimbursement. The Ninth Circuit is the first court of appeals to weigh in on this issue, however, and others may yet reach a different conclusion.
D.C. Circuit Applies But-For Causation Standard, Weak Materiality Test to FCA Claims, While Concurrence Questions Viability of Fraudulent Inducement Theory
On July 6, 2021, the D.C. Circuit Court of Appeals affirmed in part and reversed in part a district court’s dismissal of the qui tam suit against IBM in United States ex rel. Cimino v. Int’l Bus. Machines Corp., No. 19-7139. The relator alleged that IBM and the Internal Revenue Service (“IRS”) had entered into a software license agreement, but that upon learning that the IRS was uninterested in renewing the agreement, IBM fraudulently induced the IRS to extend the contract. In particular, IBM allegedly collaborated with the auditor of the agreement, resulting in an audit finding that the IRS owed IBM $292 million for noncompliance with the contract’s terms. IBM then offered allegedly to waive that fee in exchange for the IRS renewing the agreement. The relator further alleged that once the new agreement was in place, IBM nonetheless collected $87 million of the noncompliance penalty by disguising that amount as fees for products and services that were never provided. According to the relator, this scheme yielded FCA liability in two ways: first, IBM fraudulently induced the IRS to renew the agreement; second, IBM submitted false claims by billing $87 million for unprovided products and services.