In a letter released Thursday, April 16, 2020, the U.S. Attorney for the Eastern District of Pennsylvania called on area hospitals, health systems, and other providers to join the government's fight against coronavirus-related fraud. Hospitals, providers, and other health care institutions are on the front lines of the coronavirus pandemic and know first-hand the challenges in obtaining critical supplies. They also are in a unique position to identify COVID-19-related fraud, such as offers to sell non-existent or fake equipment and price gouging of supplies.
False Claims Act Relators Cannot Intervene in Criminal Proceedings that Result from Relator's Disclosure to Government, Third Circuit Rules
On October 28, 2019, the Third Circuit in United States v. Wegeler addressed an issue of first impression, holding that a False Claims Act (FCA) relator whose information resulted in a criminal prosecution cannot intervene in that prosecution to pursue a whistleblower award. The court held a relator can only get a recovery by proceeding with his FCA qui tam action. In so ruling, the Third Circuit joined the Ninth and Eleventh Circuits, which are the only other circuits to have considered this issue.
Eastern District of Pennsylvania Refuses to Keep FCA Qui Tam Complaint Under Seal to Facilitate Government's Settlement Negotiations
On October 16, 2018, the District Court for the Eastern District of Pennsylvania denied the government's requested eleventh extension of the seal in a five-year-old False Claims Act qui tam case. The court ruled that the government's desire to continue settlement negotiations with the defendant, who had been given a copy of the complaint with the court's permission, did not constitute "good cause" to extend the seal, as required by the FCA.
OIG 15-Year Exclusion for False Claims Act Violations by Lab Company and its CEO Sends Warning to FCA Defendants
On August 17, 2018, a Department of Health and Human Services ALJ affirmed HHS OIG's 15-year exclusion of BestCare Laboratory Services, Inc. and its CEO from federal health care programs pursuant to the OIG's permissive exclusion authority. The exclusion was based on BestCare's submission of false claims for mileage reimbursement which violated CMS billing restrictions and formed the basis of a qui tam False Claims Act action, culminating in a $30 million damages award.
Eastern District of Pennsylvania Forms Civil Enforcement Strike Force Adding Resources to False Claims Act Cases
On August 1, 2018, U.S. Attorney for the Eastern District of Pennsylvania William M. McSwain announced the formation of an Affirmative Civil Enforcement (â€œACEâ€) Strike Force within the U.S. Attorney's Office Civil Division. The ACE Strike Force's mission is to bring "additional firepower" to investigations and lawsuits that â€œprosecute fraud and abuse against government programs, including healthcare and procurement fraud,â€ as well as to enforce federal civil rights statutes and "combat the opioid crisis." The ACE Strike Force will initially include five Civil AUSAs and a team leader.Â
The New Tax Bill: Settlement Considerations Regarding Tax Treatment of Fines, Penalties, and Restitution
Corporations and counsel negotiating settlement agreements with the United States under the False Claims Act, or other statutes that provide for monetary damages and penalties, must be aware of the impact of the recently enacted Tax Cuts and Jobs Act on the ability to take business tax deductions for these amounts. The Act made changes to tax treatment that are effective for agreements and orders that are finalized on or after December 22, 2017.
Third Circuit Rejects FCA Claims of Medicare Part D Fraud Applying Post-Escobar Materiality Bar; Acknowledges Validity of Government Knowledge Inference Defense
Earlier this month the United States Court of Appeals for the Third Circuit ended a long-fought False Claims Act case of alleged Medicare Part D fraud, holding that a pharmacy benefit manager's limited non-compliance with pharmacy claims processing requirements was not material to Medicare's payment decisions within the meaning of the Supreme Court's Escobar decision. On November 16, 2017, in United States ex rel. Spay v. CVS Caremark Corporation,Â the Third Circuit affirmed the district court's summary judgment dismissal in its second significant post-Escobar materiality decision. Interestingly, the appellate court veered away from the district court's holding that the "government knowledge inference" defense precluded liability for the PBM and instead found that the Relator failed to demonstrate that the alleged non-compliance met the Escobar materiality threshold.
In our earlier post, we discussed the U.S. Supreme Court's implied false certification decision of Universal Health Services Inc. v. Escobar, in which the Court rejected a bright-line rule on the False Claims Act's (FCA) materiality standard and adopted a fact-specific standard that is being litigated on a case-by-case basis. We've now seen about a dozen FCA decisions on motions to dismiss or for summary judgment informed by the Court's opinion in Escobar.
Along with my Post & Schell colleagues, Matt Newcomer and Carolyn Kendall, I recently co-authored an article for Law360 that examined the U.S. Supreme Court's decision in Universal Health Services Inc. v. Escobar. We focused on the Court's rejection of a bright-line rule on the False Claims Act's materiality standard and adoption of a fact-specific standard that will need to be litigated on a case-by-case basis.
On June 10, 2016, the Third Circuit Court of Appeals upheld a 2015 decision that dismissed allegations of kickbacks in violation of the False Claims Act (FCA) against Pottstown Memorial Hospital (Pottstown). The decision, concerning physician â€œon callâ€ contracts, provides important guidance about the drafting of hospital-physician contracts in a competitive environment.
In recent weeks, corporations have pushed back against Departments of Justice (DOJ) and Health and Human Service (HHS) efforts to expand False Claims Act (FCA) remedies to conduct beyond the FCA's explicit reach. Yet a huge incentive exists for DOJ to push the FCA envelope: DOJ's recently released 2015 Civil Division fraud recoveries - totaling over $3.5 billion - establish a six-year trend of recoveries in excess of $3 billion annually.
U.S. Supreme Court to Decide the Viability of the Implied Certification Theory of False Claims Act Liability
On December 4, 2015, the U.S. Supreme Court agreed to consider a challenge to the federal government's hotly-contested and Circuit-splitting â€œimplied certificationâ€ theory of False Claims Act (FCA) liability. The implied certification theory has been a versatile and lucrative tool for whistleblowers and for the government, and a Supreme Court ruling on the viability of this prosecution theory may provide clearer boundaries and more certainty for those who do business with the government.