False Claims Act’s Materiality Requirement Bares Its Teeth


 

Requiring a False Claims Act whistle-blower to show that a regulatory violation was actually material to the government’s decision to pay a Medicare or Medicaid claim has become a make-or-break factor in FCA litigation.

A unanimous U.S. Supreme Court said in Universal Health Services that compliance with a particular rule or regulation must be material to the government’s decision to pay a claim in order for fraudulent noncompliance to trigger FCA liability. The 2016 Universal Health Services ruling put renewed focus and importance on the FCA’s materiality requirement, and its operation in FCA litigation and was recently on display in a whistle-blower lawsuit against a pair of pediatric care providers.

Pediatric Services of America Inc. and Pediatric Home Nursing Services were accused by a former billing department employee of skirting nurse documentation requirements in claims billed to Medicaid and TRICARE. The FCA claims were dismissed in a Sept. 6 ruling that shows how the Universal Health Services ruling is affecting the litigation of FCA cases in federal district courts around the country.

The U.S. District Court for the Southern District of Georgia concluded that the whistle-blower didn’t allege that the documentation violations were material to the government’s decision to pay the claims, beyond simply stating the documentation requirements were material.

Scott B. McBride, a partner at Lowenstein Sandler LLP in Roseland, N.J., told me that the Supreme Court’s materiality standard “clearly has teeth.” McBride, who represents defendants in white-collar investigations, said the materiality requirement “may indeed be the toughest hurdle for relators to overcome, as courts are holding that a plaintiff needs to allege why an implied misrepresentation was material.”

Whistle-blowers must be prepared to allege that the government considers compliance with particular regulations in determining whether particular Medicare and Medicaid claims are paid to succeed in an FCA lawsuit. Conversely, evidence that the government still pays claims despite knowing they don’t comply with a particular regulation is a strong defense for a provider contesting liability.

Read my full story on the court’s decision here.

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