In a decision issued last week, the Second Circuit was faced with the novel legal theory that use of flawed artificial intelligence systems can constitute a “worthless service” for purposes of FCA liability. See Doe v. eviCore Healthcare MSI, LLC, No. 22-530-CV, 2023 WL 2249577 (2d Cir. Feb. 28, 2023). The Second Circuit affirmed the district court’s dismissal for failure to satisfy the heightened Rule 9(b) pleading standard but did not reach the merits, leaving open the question of whether such a theory is viable under the FCA.
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…)
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.
In a recent Statement of Interest, DOJ articulated a problematic, and incorrect, theory of materiality in an apparent effort to make it virtually impossible for defendants to defeat bare allegations of materiality at the motion to dismiss stage in cases that involve allegedly false claims for prescription drugs.