District Court Determines That CMS Requirements That Have Not Been Established Through Rulemaking Cannot Be Enforced in a False Claims Act Case
In a landmark decision that could have significance for any False Claims Act case in the Medicare context, the Eastern District of Pennsylvania recently held that Medicare reimbursement criteria must be established through notice-and-comment rulemaking if they are to be the basis of a viable FCA suit. Polansky v. Executive Health Resources, Inc., No. 12-4239, 2019 WL 5790061 (E.D. Pa. Nov. 5, 2019). Because the relator was relying on a reimbursement policy that was found solely in a CMS manual, the Eastern District held that the relator’s claims failed “as a matter of law.”
District Court Vacates 2014 Medicare Advantage Overpayment Rule and Curtails Potential Avenues for DOJ to Pursue False Claims Act Damages
On September 7, 2018, the United States District Court for the District of Columbia vacated CMS’s 2014 Final Overpayment Rule,[1] applicable to the Medicare Advantage program, granting summary judgment to UnitedHealthcare that the Final Rule violated the Medicare statute, was inconsistent with the Affordable Care Act (ACA) and the False Claims Act (FCA), and violated the Administrative Procedures Act (APA). In broad strokes, the District Court confronted two statutory issues. The first centered on the undisputed fact that the Final Rule did not account for known errors in the data (from traditional Medicare) used to calculate payments to Medicare Advantage plans. The court found that this failure violates the statutory mandate of “actuarial equivalence” because, although “payments for care under traditional Medicare and Medicare Advantage are both set annually based on costs from unaudited traditional Medicare records,” the Final Rule “systematically devalues payments to Medicare Advantage insurers by measuring ‘overpayments’ based on audited patient records.” As a result, the court concluded that the Final Rule “establishes a system where ‘actuarial equivalence’ cannot be achieved.” On the same basis, the court found that the Final Rule violates the statutory requirement to use the “same methodology” in calculating expenditures in traditional Medicare and determining payments to Medicare Advantage plans. The Final Rule “fails to recognize a crucial data mismatch and, without correction, it fails to satisfy [the Medicare statute].” (more…)
D. Minn. upholds qui tam complaint against ICD manufacturer Guidant
Posted by Sean Griffin and Kristin Graham Koehler
On March 14, 2012, Judge Donovan W. Frank of the United States District Court for the District of Minnesota upheld a relator’s complaint against Guidant Corporation (“Guidant”) based on its manufacture of certain implantable cardiac devices (“ICDs”), which had been sold to the Department of Veterans Affairs and/or reimbursed by Medicare. The relator, James Allen, alleged that Guidant had made false statements and failed to disclose known safety concerns in its post-approval reports to the Food and Drug Administration. Allen, a patient who had received one of Guidant’s ICDs, claimed that his allegations were based on his personal experience and certain adverse event reports he had reviewed. However, the safety and disclosure allegations in question had also been litigated both in prior, multi-district products liability litigation and in an earlier criminal adulteration proceeding.
After the government moved to intervene, Guidant moved to dismiss the relator’s complaint. The district court first rejected the argument that the government’s complaint in partial intervention was sufficient to supersede Allen’s complaint in its entirety. The district court also rejected the argument that the earlier litigation and related news coverage deprived the court of jurisdiction under the pre-FERA version of the FCA because it found the relator’s personal experience with Guidant’s products qualified him as an original source. Finally, the court found that Rule 9(b) had been satisfied because Relator had provided, inter alia, the names of Guidant employees allegedly involved in the purported false statements as well as the particulars of five allegedly defective devices.
While the court ultimately refused to dismiss this FCA case entirely, it did dismiss the relator’s claims for unjust enrichment and payment by mistake. Citing authority from courts in the First, Second, Eighth and D.C. Circuits, Judge Donovan ruled that qui tam relators lack standing to bring common law claims on behalf of the government.