The Federal Government has reinforced its expanded theory of false claim liability for quality matters by settling allegations against a hospital that a physician’s lack of qualifications to perform certain surgical procedures should be considered a false claim, regardless of the patient’s outcome. As part of the settlement, the hospital defendant paid the Government $840,000 to resolve false claims allegations against it; the lawsuit remains active against the physician defendant. The Government’s position is that hospitals bear false claim exposure for failing to perform adequate credentialing and peer review.

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Last month the Centers for Medicare & Medicaid Services (CMS) published proposed rules for reporting of overpayments. These proposed rules, if adopted and strictly interpreted, could effectively create a twenty-year statute of limitations under the False Claims Act.

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February was an interesting month, with one case showing how OIG advisory opinions can be taken too far, another considering fraud under a corporate integrity agreement, and a court applying burden-shifting for the first time at the appellate level in FCA retaliation cases. Cases reviewed from February are:

• US ex rel. Boggs v. Bright Smile Family Dentistry, P.L.C. (W.D. Okla.)
• Harrington v. Aggregate Industries – Northeast Region, Inc. (C.A. 1 Mass)
• Klein, M.D. v. City of New York (S.D.N.Y.)
• Klusmeier v. Bell Constructors, Inc. (C.A. 11 Fla.)
• US ex rel. Matheny v. Medco Health Solutions, Inc. (C.A.11 Fla.)

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January, 2012, saw two different examples of the Government using the False Claims Act to bring a gun to a knife fight. In the first case the gun won the day. In the second, it backfired. Both cases were brought in the U.S. Court of Federal Claims and in both the Government was the defendant in a breach of contract action. The Government raised the FCA as a counter-claim in both actions, in one near the end of the trial. In other cases of interest, the D.C. District Court looked at estoppel as a defense to an FCA case, and the Middle District of Florida Court dealt with a reverse false claim case involving brothers trying to hide assets owed as part of a criminal plea agreement. For a more detailed discussion of each case, please read on.

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What must a successful FCA defendant show to collect attorney’s fees under the Equal Access to Justic Act?

Can an error by the government create an FCA violation by a defendant relying upon the government’s acts?

Does Vermont Agency of Natural Resources v. US ex rel. Stevens apply to FCA retaliation cases?

Can a service have some value and still be the basis for an FCA case under the “worthless services” theory?

Can a pro se Relator bring a case under the FCA?

Federal Courts around the country decided these issues in December, 2011.

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Can an incompetent, and ultimately dismissed, False Claims Act Complaint bar a future complaint under the FCA’s “first to file rule?” The Court of Appeals in Washington D.C. answered the question for the first time on November 4, 2011.

Can a settlement agreement between an employer and an employee force dismissal of the employee’s whistleblower suit? The Federal District Court in Tampa, Florida, was faced with that question in U.S. ex rel. Scott v. Cancio, and answered the question in the negative.

Does failure to comply with regulatory requirements or CDC advisories that are not conditions of payment constitute a violation of the False Claims Act? Not according to the U.S. District Court in New Jersey.

Can a qui tam whistleblower, who was also an employee, make general allegations, then flesh out her suit during discovery?

Can a whistleblower hide her identity if the government declines intervention?

Can there be a False Claims Act violation without a claim that is false?

All these questions were addressed by Federal Courts this November.

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A case based upon FOIA documents may be subject to the public disclosure bar.

A difference of scientific judgment does not create the basis for an FCA suit.

Whistleblowers who wish to dismiss their suits after the Government refuses intervention may not hide their identity from the defendants, even if the defendant is their employer.

These issues were all decided in Federal Courts this October. For detailed summaries and case cites, please see below.

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The Fraud Enforcement Recovery Act of 2009 (“FERA”) was enacted on May 20, 2009. Among other things, FERA significantly amended the False Claims Act (“FCA”) to make it easier for whistleblowers to bring claims against Medicare and Medicaid providers and other government contractors. It also created an entirely new type of “false claim,” improper retention, where none previously existed. The “improper retention” theory was further clarified in 2010 by the Patient Protection and Affordable Care Act of 2010 (PPACA), which went into effect on March 23, 2010, and required that an overpayment be reported and returned within sixty (60) days it is identified.

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The Federal District Court in the Southern District of Illinois granted summary judgment against a whistleblower, and in favor of the Defendant, in a case filed against an Effingham, Illinois urologist. The whistleblower alleged the doctor billed for services provided by his staff, under his supervision, when he was not in the building. However, the whistleblower could not find even a single instance in which it actually happened. Instead, he argued that there was a statistical possibility it might have happened. The Court stated its conclusion in no uncertain terms:

As the Seventh Circuit Court of Appeals has repeatedly stated, “summary judgment is the ‘put up or shut up’ moment in the life of a case.” In this case, Tucker has simply failed to “put up” evidence of an actual, specific false claim or statement knowingly made by Nayak in an effort to obtain payment from the United States. Now, the Court is left with no choice but to grant summary judgment for Nayak.

The Defendant was represented by David B. Honig, of Hall, Render, Killian, Heath & Lyman.

In an interesting case, a whistleblower stipulated to the Defendant’s Motion for Summary Judgment, in effect agreeing that the Court could dismiss his False Claims Act case against a hospital as unsupported by the facts. In U.S. ex rel. Camillo v. Kenneth Hall Regional Hospital, a case set in East St. Louis, the whistleblower agreed with the Hospital’s Motion arguing that, even assuming every fact the whistleblower could argue, the case had to be dismissed. The interesting part of the case was that the hospital settled the whistleblower’s separate retaliation claim. The government, which wanted to object to the stipulation and settlement, claiming it was a way of shifting money to the whistleblower, was left out in the cold when the Court granted the newly-uncontested Summary Judgment motion. The False Claims Act case was dismissed by the Court, rather than settled by the parties, leaving the government without a basis to object. The Government filed a Notice of Appeal, but soon gave up and dismissed the appeal without even filing its initial brief.

Kenneth Hall Regional Hospital was represented by David Honig, of Hall, Render, Killian, Heath & Lyman and Andrew J. Martone, of Hesse Martone.