Ninth Circuit Reboots FCA Suit Based on Radiologist Use of Certain Computer Monitors
A panel of the Ninth Circuit recently issued a 2-1 opinion reversing, in part, a district court’s dismissal of a False Claims Act case premised on a radiology facility’s use of non-medical grade computer monitors for diagnostic readings. In reviving the case, the majority concluded that the relator sufficiently pled a false certification theory of fraud from which the court drew a “strong inference” that the radiology facility’s use of the computer monitors did not meet Medicare’s “reasonable and necessary” requirement because the allegedly technologically inferior monitors the radiologists used undermined the efficacy of their diagnostic readings. The decision is notable because the majority relied on tenuous inferences to establish falsity, as detailed by the dissent, and a watered-down materiality analysis to establish materiality.
Chiding DOJ for “Inexcusable” Delay in Deciding to Intervene, Fifth Circuit Makes Notable Determinations on Materiality and Statute of Limitations
Chastising DOJ for asking eighteen times to extend the seal period, the Fifth Circuit recently held that due to its “dilatory conduct,” DOJ could not avail itself of the FCA’s tolling provision. In the same opinion, the court held that continued reimbursement does not defeat materiality where there are “valid reasons why an agency may continue to pay claims despite allegations of fraud.”
Provider Escapes, Contractor Remains in Qui Tam Alleging Noncompliance With Bad Debt Regs
Recently, the Seventh Circuit partially reversed a district court’s dismissal of a qui tam complaint alleging that debt collection agencies and their client hospital are liable under the FCA for the agencies’ knowing failing to comply with Medicare’s “bad debt” collection requirements. See United States ex rel. Sibley v. University of Chicago Medical Center, No. 21-2610 (7th Cir. Aug. 11, 2022). In reaching this decision, the court concluded that the relators had adequately pled that reasonable collection efforts are material to the government’s decision to reimburse Medicare bad debts.
CBO Reports on Grassley Bill That Would Modify Escobar Materiality and Impose Rational Relation Test on Granston Dismissals
On July 15, 2022, the Congressional Budget Office (CBO) issued a cost estimate concerning the False Claims Amendments Act of 2021, a bill sponsored by Senator Grassley. The bill would alter the False Claims Act in three important ways. (more…)
Court Concludes Government Agencies Cannot Categorize Regulatory Violations as Material as a Matter of Law
On January 7, 2022, a district court in the Western District of Kentucky dismissed DOJ’s implied false certification theory relating to allegedly medically unnecessary genetic tests, holding that the prosecutors failed to adequately plead materiality. In so holding, the court set forth a novel test for materiality that forecloses the government’s ability to argue that certain regulations are per se material based on the government’s characterization of them as conditions of payment. Instead, plaintiffs must still plead “specific facts regarding the effect of a violation of that regulation” to survive dismissal. (more…)
Analyzing FCA Materiality Defense Outcomes Under Escobar
Since the Supreme Court in Escobar stated that continued payment by the government is “very strong evidence” that the alleged violations are not “material” under the False Claims Act (“FCA”), courts have grappled with how much weight the government’s continued payment should be accorded when assessing “materiality.” Courts have adopted varying approaches, with no obvious majority position. (more…)
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…)
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…)
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…)