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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

Senate Bill 39 Allows Up to $100 Million in Business Incentive Credits for Transformational Mixed-Use Development in the State of Ohio

April 28, 2021Ohio Governor Mike DeWine signed Senate Bill 39 on December 29, 2020, which created a new tax credit applicable to insurance premium taxes. This tax credit is designed to provide funding for a transformational mixed- use development or “TMUD” in the state of Ohio.Client Alert

Medicaid Announces Next Generation of Managed Care Organizations

April 13, 2021For the first time since 2005, the Ohio Department of Medicaid (“ODM”) made significant changes to the structure of the Medicaid program by finalizing the Medicaid Managed Care Procurement process. The Procurement process began in 2019 at the behest of Governor Mike DeWine who had a goal to make Medicaid managed care more focused on the health and well-being of individuals.Client Alert

BMD Appellate Win Clarifies Waiver of Contractual Right to Arbitrate

April 12, 2021Brennan, Manna & Diamond, LLC attorneys David M. Scott, Lucas K. Palmer, and Krista D. Warren prevailed before the United States Court of Appeals for the Sixth Circuit regarding if/when a party waives a contractual right to arbitrate. Borror Property Management, LLC v. Oro Karric North, LLC, No. 20-3146 (the “Decision”).Client Alert

Relief for Ohio Under the Federal American Rescue Plan Act

April 1, 2021On March 11, 2021, President Biden signed the American Rescue Plan Act (the “Act”) — a $1.9 trillion COVID-19 relief package — a significant portion of which will be directed to the State of Ohio to support economic recovery, as outlined below.Client Alert

Cleveland Manufacturer Violated OFAC Sanctions By Allowing Shipments To Iran - Know Your Customer and Know Their Customer

March 30, 2021UniControl, Inc., a Cleveland, Ohio manufacturer of process controls, airflow pressure switches, boiler controls and other instruments, agreed to pay the Office of Foreign Assets Control “OFAC,” the financial enforcement agency of the U.S. Treasury Department, $216,464 to settle its liabilities for violations of the Iran Sanctions Program. OFAC stated that “this enforcement action highlights the importance of identifying and assessing multiple warning signs that indicate a foreign trade partner may be re-exporting goods to a sanctioned jurisdiction.”
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