Last week, the Eleventh Circuit issued an opinion holding that a Relator bringing an FCA claim premised on an AKS violation – at least when relating to lease arrangements – must show that the financial arrangements were not at fair market value. See Bingham v. HCA, Inc., Case No. 1:13-cv-23671 (11th Cir. 2019). Significantly, this ruling provides that proving fair market value (or lack thereof) is not a burden imposed solely on defendants as part of a safe harbor defense, but is instead an essential element to establishing the existence of remuneration in the first instance. In the same opinion, the court also held that a Relator cannot rely upon information gleaned in discovery to satisfy Rule 9(b)’s pleading requirements.
On November 16, the Supreme Court agreed to resolve a percolating circuit split on an issue of critical importance under the FCA: are relators in non-intervened cases entitled to invoke the FCA’s alternate 10 year statute of limitations? The grant of certiorari in Cochise Consultancy, Inc. v. United States ex rel. Hunt, 887 F.3d 1081 (11th Cir. 2018) makes it the third Supreme Court case in recent years addressing the False Claims Act’s limitations periods. (more…)
In Carrel v. AIDS Healthcare Foundation, No. 17-13185 (August 7, 2018) the Eleventh Circuit affirmed summary judgment for the defendant on Anti-Kickback Statute-based FCA claims, holding that incentives to employees for referring patients for its services were covered by the employee safe harbor to the Anti-Kickback Statute, and that these payments in particular served the congressional intent of the Ryan White Act to provide AIDS patients with ease of access to services. The Court also upheld the prior dismissal of all other allegations for a lack of particularity, noting that the only instances that relators alleged with particularity were actually covered “services” under the Ryan White Act and that they would not “infer fraud from instances of lawful conduct.” (more…)
Earlier this month, in U.S. ex rel. Polukoff v. St. Mark’s Hospital et al., No. 17-4014 (Jul. 9, 2018), the Tenth Circuit reversed a lower court’s dismissal of FCA claims, holding that “[i]t is possible for a medical judgment to be ‘false or fraudulent’” under the FCA. As previously reported here, the relator had alleged that a cardiologist performed and billed Medicare and Medicaid for unnecessary heart surgeries known as PFO closures. The District of Utah, in granting defendants’ motion to dismiss, had concluded that claims associated with those procedures, in which the doctor represented that the procedures were medically necessary, could not be deemed objectively false because “liability may not be premised on subjective interpretations of imprecise statutory language such as ‘medically reasonable and necessary.’”
The False Claims Act provides that a case must be brought within the later of (1) six years after the date on which the alleged violation is committed, or (2) three years after “the date when the facts material to the right of action are known or reasonably should have been known by the official of the United States with responsibility to act in the circumstance, but in no event more than 10 years after the date on which the violation is committed.” 31 U.S.C. § 3731(b). When the government has declined to intervene in an FCA action and a relator files a qui tam suit more than six years after the violation, the Fourth and Tenth Circuits have held that the relator’s suit is time-barred and the relator cannot take advantage of § 3731(b)(2)’s more generous statute of limitations. Last week, in United States ex. Rel. Hunt v. Cochise Consultancy, Inc., __ F.3d __, 2018 WL 1736788 (11th Cir. Apr. 11, 2018), the Eleventh Circuit split from the Fourth and Tenth Circuits, holding that § 3731(b)(2) “applies to an FCA claim brought by a relator even when the United States declines to intervene.” And departing from the Ninth Circuit, the Eleventh Circuit further held that because the period “begins to run when the relevant federal government official learns of the facts giving rise to the claim, when the relator learned of the fraud is immaterial for statute of limitations purposes.” (more…)
Noncompliance with ambiguous regulations often presents a weak case for an FCA suit. A growing number of courts (as discussed here and here) have held that reasonable interpretations of regulations, absent contrary guidance from the government, reflect a mens rea inconsistent with the requisite “knowing” misconduct under the FCA. However, the Eleventh Circuit recently reached a contrary conclusion, holding that defendants who articulate reasonable interpretations of ambiguous regulations can nonetheless be liable under the FCA. See United States ex rel. Phalp v. Lincare Holdings, Inc., No. 16-10532 (May 26, 2017). (more…)
In United States ex rel. Christiansen v. Everglades College, Inc., Nos. 16-10849/16-11839, — F.3d —, 2017 U.S. App. LEXIS 7842, 2017 WL 1658478 (11th Cir. May 3, 2017), the Eleventh Circuit recently determined that the United States is not required to satisfy the good-cause intervention standard in 31 U.S.C. § 3730(c)(3) when settling a qui tam action brought under the False Claims Act (“FCA”) over a relator’s objections. The Court also articulated the standard for determining when a settlement between the United States and an FCA defendant is “fair, adequate, and reasonable” under 31 U.S.C. § 3730(c)(2)(B). (more…)
As we previously reported here, DOJ is appealing its defeat in AseraCare, in which the district court concluded that “expressions of opinion, scientific judgments, or statements as to conclusions about which reasonable minds may differ cannot be false,” and that the government had marshaled nothing more than a difference of opinion between its own expert and the defense’s. On appeal to the Eleventh Circuit, DOJ is arguing forcefully for rejection of the view that disputes about medical necessity cannot serve as the basis for an FCA claim.
As we previously reported, the Supreme Court last year declined an invitation to resolve a circuit split regarding how much detail about particularized false claims must be pleaded in an FCA case in order to satisfy Rule 9(b)’s particularity requirement. A new cert petition filed this month asks the Court to take up the issue this term. Last year, in an opinion we wrote about here, the 11th Circuit affirmed in part and overruled in part the dismissal of an FCA complaint under Rule 9(b). The court held that while the relator had not pleaded, and was not required to plead facts regarding specific false claims, he had pleaded other facts that provided sufficient “indicia of reliability” with respect to his claims based on conduct allegedly occurring during his employment by the defendants. By contrast, the court held, the relator had failed to plead sufficient “indicia of reliability” that the conduct continued after his employment ended, and therefore affirmed the dismissal of the post-employment claims. It is the latter ruling with which the cert petition, filed by the relator, takes issue. The question presented in the cert petition is “[w] hether, under Rule 9(b), it is sufficient for a relator under the False Claims Act to plead “particular details of a scheme to submit false claims paired with reliable indicia that lead to a strong inference that claims were actually submitted” to the government, or whether Rule 9(b)’s particularity requirement precludes the drawing of reasonable inferences that claims were actually submitted”
In the petition considered last year, the Supreme Court requested the Solicitor General’s views. The SG’s brief, while recognizing a circuit split, encouraged the Court to deny cert, and the Court did just that. It remains to be seen whether the Solicitor General will, or will be asked to by the Court, weigh in on the petition. In any event, we will continue to monitor this case and report on important developments.
Posted by Scott Stein and Brenna Jenny
DOJ recently took the unusual step of filing an amicus brief in a private lawsuit alleging violations of the Lanham Act and various state laws, which resulted from violations of the Stark Law and the Anti-Kickback Statute (“AKS”). See Brief for the United States Supporting Appellee, Ameritox, Ltd. v. Millennium Labs., Inc., No. 14-14281 (11th Cir. Jan. 21, 2015). DOJ explained that it was filing an amicus brief to correct what it views as Millennium’s mischaracterizations of how CMS and the OIG interpret exceptions to the statutory definitions of remuneration under the Stark Law and the AKS. It emphasized the importance of a “proper interpretation” of these statutes, both because the laws independently are key mechanisms for preventing fraud and abuse, and because they serve as predicates for FCA liability.
By way of background, Ameritox filed suit against a competing clinical laboratory, Millennium, in April 2011, alleging that Millennium violated both the Stark Law and the AKS by providing free point-of-care testing cups (“POCT cups”) to physicians. POCT cups contain embedded immunoassay testing strips, which allow physicians to test urine samples and receive drug test results within minutes. Millennium entered into so-called “cup agreements” with physicians, whereby the company provided POCT cups free of charge, in exchange for the physician contractually agreeing not to bill any insurer (private or government) for the testing and to return the cups to Millennium for laboratory testing. Failure to uphold either obligation required a physician to remit the otherwise applicable price of the cup. Millennium argued that it had not provided any remuneration because physicians certified they were not billing for the testing, and therefore they received nothing of value from the cups. Ameritox, however, alleged that physicians were removing the test strips, batch testing them at the end of the day using a chemical analysis, and then submitting bills to insurers.
In May 2014, the district court ruled that the free POCT cups were remuneration where physicians could not otherwise bill for them, and that Millennium violated the Stark Law and the AKS by providing free POCT cups in these circumstances. However, the court determined it was a question of fact whether Millennium violated the law by providing POCT cups to physicians who could bill for them but contractually opted out of the opportunity to do so, in exchange for receiving the cup at no cost. Following the trial a month later, the jury found that Millennium had in fact violated the AKS and the Stark Law.
Millennium appealed to the Eleventh Circuit, arguing that provision of the free POCT cups did not constitute remuneration under either the Stark Law or the AKS. The crux of Millennium’s defense under the Stark law was that the POCT cups fell within a statutory exception to the definition of remuneration for laboratory supplies, i.e., “[t]he provision of items, devices, or supplies that are used solely to (I) collect, transport, process or store specimens for the entity providing the item, device, or supply.” 42 U.S.C. § 1395nn(h)(1)(C)(ii); 42 C.F.R. § 411.351.
<p&ggt;DOJ pointed out that the test strips served the purposes of the physicians testing the specimens, and therefore even if the rest of the cup did transport specimens to Millennium—the entity providing the item—the POCT cups were not solely used for Millennium’s purposes. Likening the insertion of the immunoassay strips into the POCT cups to taping five-dollar bills to the inside of test cups, DOJ reiterated that under CMS’ guidance, benefits conferred on physicians that fail to meet a Stark Law exception can still be remuneration, even if the value is small and cannot be separately billed.
As to whether the POCT cups constituted remuneration under the AKS, Millennium cited recurrent OIG guidance that “free items and services that are integrally related” to the offering supplier’s services are not considered remuneration. See, e.g., OIG, Adv. Op. No. 12-10 (Aug. 23, 2012). However, DOJ averred that from the OIG’s perspective, “integrally related” means that the item is so intertwined with the underlying service that it can only be used as part of that service and as such has no independent value apart from the service. DOJ did acknowledge that the OIG has recognized the potential permissibility of incidental benefits to physicians, so long as they are narrowly linked to the provision of the services. Yet DOJ insisted that the free POCT cups in fact conferred substantial benefits distinct from Millennium’s laboratory testing services, and therefore rose to the level of remuneration.
A copy of DOJ’s amicus brief can be found here.