False Claims Act: an Expanding Reach in 2015

Decisions from SCOTUS and other Courts in 2014 WILL have an effect on your hospital in 2015.

Three cases involving the False Claims Act (FCA) against healthcare providers in 2014 should be at the top of your watch list for 2015, even if you have never had to defend an accusation leveled at your hospital or clinic or practice before now, because these three cases may indeed open your front door to the government. Those cases involve three topics that bear at least peripheral attention: the statute of limitations for FCA cases, Overpayment Theory, and the Lost Value of Logic.

Upcoming Supreme Court Decision on FCA Statue of Limitations

The 10-year look-back period for FCA cases could be expanded.

The 10-year look-back period for FCA cases could be expanded.

On January 13, 2015, the U.S. Supreme Court heard oral argument in Kellogg Brown & Root Services, Inc. v. United States ex rel. Carter, a qui tam action addressing several issues: (1) whether the Wartime Suspension of Limitations Act (WSLA) applies to civil FCA cases and, if so, whether the WSLA applies to cases brought by qui tam relators; (2) whether the phrase in the WSLA, “[w]hen the United States is at war,” is only triggered by a formal declaration of war; and (3) whether the FCA’s first-to-file bar functions as a “one-case-at-a-time” rule, allowing a series of related FCA claims so long as no prior claim is pending at the time of filing.

Preliminary indications are that the Court may side with the defendant about the limitations issue, but the first-to-file issue is more difficult to predict:

The ultimate outcome here is not easy to see. There seems to be a great deal of interest in reversing the court of appeals on the limitations point, so we can expect the Court’s disposition, at a minimum, to reject the idea that the reference to offenses in the WSLA tolls actions under the False Claim Act.

It’s a little harder to read what the Justices are thinking about the first-to-file point, largely because it seems unnecessary to a decision if [the defendant] already has prevailed on the limitations point.

— from the argument analysis on the SCOTUS blog

Whatever the Court’s decision in Carter, it will be significant for several reasons. If government agencies are allowed to apply the WSLA to civil FCA cases, this will extend the time available to bring an FCA suit well beyond the FCA’s current 10-year statute of limitations. As for the first-to-file bar issue, this could be especially significant for larger companies operating in the health care, financial services, and government contracts industries, since those companies often face multiple related qui tam whistle-blower lawsuits. A decision in favor of the defendant, however, would enable more early dismissals of such related qui tam actions.

Overpayment Theory: When did you “know” of an overpayment?

Does an employee's suspicion of an erroneous bill start the clock for FCA violations?

Does an employee’s suspicion of an erroneous bill start the clock for FCA violations?

DOJ intervened for the first time ever in an 2014 FCA action based on a provider’s failure to return an alleged Medicaid overpayment [U.S. ex rel. Kane v. Continuum Health Partners, Inc., 1:11-cv-02325 (S.D.N.Y. 2014)]. The Affordable Care Act requires the report and return of any federal health-care program overpayment by the later of 60 days after the overpayment is “identified” or the date the corresponding cost report is due, if applicable. [42 U.S.C. § 1320a-7k(d)] If not repaid within the allotted time, the overpayment becomes an “obligation,” the knowing avoidance of which triggers liability under the FCA. [31 U.S.C. § 3729(a)(1)(G)]

In Kane, a whistleblower filed an FCA action under seal in 2011, 60 days after emailing his managers a spreadsheet naming 900 allegedly erroneous claims. Continuum evidently investigated these alleged overpayments, and repaid all 900 claims, but the entire process took much longer than a year, finishing up in early 2013. Nevertheless, DOJ intervened in the whistleblower’s FCA suit in 2014, since the process took much longer than 60 days, counting from the day the whistleblower first emailed his spreadsheet to management. Continuum has filed a motion to dismiss, arguing that the whistleblower’s email is not sufficient by itself to “identify” overpayments and trigger the 60-day window, because the company first had to investigate and corroborate his allegations. The government has responded that Continuum’s interpretation of when overpayments are “identified” would allow companies to retain overpayments indefinitely, as long as they have not been confirmed. The motion to dismiss is pending, and the court’s ruling is expected in 2015.

Logic notwithstanding, a Judge decides otherwise

The Judge is obviously NOT a Trekkie.

The Judge is obviously NOT a Trekkie.

A recent decision out of the Eleventh Circuit could make the defense of FCA allegations against healthcare providers more difficult. In United States v. AseraCare Inc., No. 2:12-CV-245-KOB, 2014 U.S. Dist. LEXIS 167970 (N.D. Ala. Dec. 4, 2014), the Northern District of Alabama declined to follow a recent district court decision out of the Northern District of Illinois which found, under very similar facts, that a simple difference of opinion between healthcare providers was insufficient to support a FCA claim. U.S. ex rel. Geschrey v. Generations Healthcare, LLC, 922 F. Supp. 2d 695, 695 (N.D. Ill. 2012). Instead, and while acknowledging that the standard in Geschrey was appealing and logical, the AseraCare court allowed the government’s claims to proceed despite the requirement under the FCA that the government prove objective falsehood with respect to the claims at issue. U.S. ex rel. Parato v. Unadilla Health Care Ctr., Inc., 787 F. Supp. 2d 1329, 1339 (M.D. Ga. 2011) (quoting U.S. ex rel. Roby v. Boeing Co., 100 F. Supp. 2d 619, 625 (S.D. Ohio 2000)).

By denying AseraCare’s motion, ruling that the mere difference of opinion between the medical director and the government’s expert does indeed provide the basis for the government’s otherwise dubious claims to proceed, the court has enabled government agencies and their contractors to ignore the use of logical standards, and thereby significantly increased the hardship imposed on providers by such dubious FCA actions, especially in cases where the only evidence is a difference of clinical opinion.

Difference of Opinion Implications

If this kind of thinking withstands judicial review, virtually every claim you file is a wholly viable target for an FCA action, regardless of any standard you choose, since someone else can be shown to have a different opinion, using a different standard.

If this kind of thinking withstands judicial review and reversal, virtually every claim you file is a wholly viable target for an FCA action, regardless of any standard you choose, since someone else can always be shown to have a different opinion, using a different standard.

This last decision, allowing government agencies and their contractors to use an obvious difference of opinion as the basis of evidentiary support to indicate an intent to defraud the government is highly disturbing. While we have long known that all the bureaucrats’ claims about the pursuit of the quality of healthcare are mere lip-service, meant as political cover for the admittedly necessary cuts in the cost of providing said care, we have had faith in the assumption that logic would win more often than not. And this assumption was previously borne out by the 75%+ overturn rate for RAC denials seen at the Administrative Law Judges level of appeal. Now however, we might need to adjust our expectations, at least as concerns a later level of appeal, in Federal Court, or at least in the Eleventh Circuit Court, the court of Judge Karon Owen Bowdre.

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