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Sharp Rise in False Claims Act Cases - Navigating the FCA Waters

Client Alert
May 5, 2023


The Department of Justice has announced that False Claims Act (FCA) settlements and judgments exceeded $2 billion in the Fiscal Year 2022 and $5.6 billion in the Fiscal Year 2021. A large portion of such settlements and judgments involve healthcare businesses such as physician practices, hospitals, and pharmacies. The number of FCA cases has increased over the past several years, and it is evident that governments on both the state and federal levels are becoming more aggressive in their use of the FCA to obtain recoveries.

The FCA, 31 U.S.C. § 3729 et seq., was enacted in 1863 during the Civil War to counteract fraud by companies selling supplies to the Union Army. War profiteers would swindle the Union Army by providing rotten food, worn-out garments, and defective weapons. Today, the FCA is one of the government's strongest anti-fraud statutes. It imposes liability on individuals and businesses that defraud and cause financial loss to the federal government. The FCA also provides the potential for rewards for whistleblowers who report such fraudulent activities.

FCA claims can also be a source of stress and complication for businesses when they find themselves to be the target of either a federal investigation or state investigation. Whenever there is government money at stake, there is a chance for an FCA claim. Among other industries, FCA investigations are commonly seen among healthcare businesses that bill state and federal healthcare programs, such as Medicare and Medicaid. Since fraud in the healthcare industry can lead to rising healthcare costs, the government is keen on cracking down on such activity.

Recently, on April 18, 2023, the United States Supreme Court heard arguments regarding the FCA’s scienter, or mental state, requirement. To prove violation of the FCA, the statute requires that a defendant “knowingly” file false claims for payment. The term “knowingly” is defined within the statute to mean a person that acts with actual knowledge, deliberate ignorance, or reckless disregard. Circuit courts are split on how to interpret and apply the knowledge element of the FCA, and based on the Supreme Court’s decision, there will be a large impact on healthcare defendants and their businesses as well as anyone who contracts with, or receives money from, a federal program. A broader interpretation of the FCA would unnecessarily target and stifle healthcare, and other businesses, for simple errors in daily operations. This goes against the intended application of the FCA, which was to prevent fraudulent activity.

Violation of the FCA can potentially lead to liability for treble damages, or three times the actual losses, so it is imperative to have the proper legal counsel as you navigate the FCA waters. Whether you are facing allegations of violating the FCA or you want to put in place safeguards to ensure your business does not face such allegations, our team and BMD is ready, willing, and able to help. Our team has experience successfully defending against FCA claims and large qui tam cases, and they would be happy to discuss any concerns you may have. Questions should be directed to Shalini Bhatia at sbhatia@bmdllc.com or 216.658.2214.

FCAHealthcare
Client Alert

President Biden Seeks to Limit Non-Compete Agreements

July 8, 2021Today, President Biden announced he would issue an Executive Order that calls on the Federal Trade Commission (FTC) to adopt rules to curtail worker non-compete agreements. Interestingly, a week ago, the FTC approved changes to its Rules of Practice to modernize and expedite the way it issues Trade Regulation Rules. If you have followed our alerts, we predicted the elimination of non-competes would probably happen. In 2016, then-Vice President Biden was a vocal opponent against non-compete agreements. He led the Obama administration’s initiative seeking to limit or eliminate non-compete agreements. In his presidential campaign, Biden promised to “work with Congress to eliminate all non-compete agreements, except the very few that are absolutely necessary to protect a narrowly defined category of trade secrets . . ..”Client Alert

New NIL Opportunities for Student-Athletes Require Diligent Review

July 8, 2021On June 28, 2021, Governor Mike DeWine signed Executive Order 2021-10D, “Establishing the Duties of Colleges and Universities as to Name, Image, and Likeness Compensation of Student-Athletes.” The Executive Order was motivated by the passage of similar name, image, and likeness (“NIL”) regulations in seventeen (17) other states; Ohio followed suit to avoid a significant competitive disadvantage in attracting student-athletes to the state.Client Alert

Tax Savings Potentially on the Chopping Block under President Biden’s American Jobs Plan and American Families Plan

June 18, 2021Recently, President Biden has proposed several tax law changes in his American Jobs Plan and American Families Plan. Outlined below, are a few of the tax savings that could be significantly changed or eliminated under Biden’s plans.Client Alert

Here are the Final Candidates for Mayor of Cleveland

June 17, 2021Earlier this year, current Cleveland Mayor, Frank Jackson, announced he would not run for re-election this fall. With no need to beat an incumbent, the Cleveland mayoral race suddenly became competitive. Thirteen individuals declared their intent to run for mayor. The City of Cleveland, however, has a difficult qualification requirement to run: 3,000 valid signatures from Cleveland residents. The deadline to file a petition to run, with the 3,000 valid signatures, had to be submitted by June 16 (yesterday).Client Alert

What Happens to a Pandemic Stimulus Payment Upon Death?

June 14, 2021On January 1, 2021, the federal government issued stimulus payments (also known as Economic Impact Payments) to American citizens – on paper. However, many of the stimulus payments were not received until several months later. Sometimes the stimulus payments did not arrive until after an individual died.
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