Qui Tam Alleges Hospital Fraud Relating to Provider Relief Fund “High Impact” Payment
Earlier this month, a federal court unsealed a qui tam complaint against several New Jersey hospitals, management services organizations, and the hospitals’ Chief Executive Officer and Chief Financial Officer for allegedly refusing to return CARES Act Provider Relief Fund (“PRF”) money for which the hospitals knew they were not eligible, and for allegedly using PRF money for impermissible purposes. See United States ex rel. Singh v. Hudson Hospital OPCO, LLC, No 21-cv-19788 (D.N.J. Nov. 5, 2021). This case is noteworthy because it is one of the first unsealed qui tam complaints raising allegations about ineligibility for, and misuse of, PRF payments.
Judge Saris Green Lights FCA Claims Against PE Fund Based on Regulatory Non-Compliance of its Portfolio Company Healthcare Provider for Trial
Late last week, Judge Patti Saris (D. Mass.) issued an opinion on cross-motions for summary judgment filed by a qui tam relator and Massachusetts and a group of defendants that includes South Bay Mental Health Center (“South Bay”) and its private equity fund owner, permitting the vast majority of plaintiffs’ claims to proceed to the jury. The opinion addresses important questions of law as to each of the elements of the FCA related to claims to Medicaid for services allegedly provided in violation of various state regulatory requirements. However, the opinion is most notable for being the first to hold at the dispositive motion stage that a private equity fund and its principals can act with the requisite scienter and cause the submission of false claims, and thus be exposed directly to the treble damages and statutory penalties of the FCA as a result of conduct by a healthcare provider portfolio company. As such, we may expect it to add momentum to DOJ’s stated intent to pursue FCA claims against PE investors in the industry.
