Government Behavior Overtakes Conditions of Payment in FCA Actions


 

Two recent False Claims Act wins for defendants point to the new emphasis courts are placing on government reaction to alleged fraud in determining whether regulatory violations were material to payment decisions.

FCA allegations that Brookdale Senior Living submitted fraudulent home health claims missing key physician signatures and certifications were dismissed June 22, while Bristol-Myers Squibb and Sanofi-Aventis U.S. escaped allegations of improper marketing and fraudulent Medicare claims for the drug Plavix June 27.

Both sets of allegations hinged on whether the alleged regulatory violations or fraud were material to the government’s decision to pay the actual Medicare or Medicaid claims at issue. The issue of materiality gained particular prominence after the U.S. Supreme Court’s 2016 decision in Universal Health Services, Inc. v. United States ex rel. Escobar.

Justice Clarence Thomas’s opinion noted that evidence of whether compliance with a particular regulation is material to the government include whether the government pays or refuses to pay a noncompliant claim. Thomas also said that whether something is an express “condition of payment” isn’t dispositive of whether compliance with the condition is material, and can trigger FCA liability.

The courts in both the Brookdale and the Plavix litigation cited the government’s failure to deny the disputed claims despite knowledge of the allegations of fraud as evidence that the defendants’ alleged regulatory violations weren’t material, and weren’t actionable under the FCA.

Despite those rulings, attorneys Molly Knobler and Rosie Griffin with Constantine Cannon LLP in Washington told Bloomberg BNA that the Brookdale ruling “misapplies Escobar and is unlikely to gain much of a foothold in FCA judicial precedent.” Knobler and Griffin both focus their practice on representing FCA whistle-blowers.

Knobler and Griffin said the Brookdale ruling gave the condition of payment issue “short shrift,” and instead treated the government’s continued payment of Brookdale’s home health claims as dispositive in the dismissal motion, while “ignoring [the whistle-blower’s] additional evidence of government interest in enforcing the provision at issue.” Knobler and Griffin said they “are not convinced” that the Brookdale court correctly followed the materiality standard in Universal Health Services.

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