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Supreme Court Issues Major False Claims Act Decision

Client Alert
June 5, 2023

Supreme Court Rules that Liability under the False Claims Act (FCA) Depends on the BELIEF of Defendant

The Supreme Court unanimously ruled Thursday, June 1, 2023 that liability in FCA suits depends on whether defendants believed their claims were false, not whether they had made an "objectively reasonable" interpretation of law or regulation. The decision rejects the recent attempts to shift the scienter element’s knowledge standard in FCA cases, clarifying instead that an assessment of a defendant's subjective beliefs about potential wrongdoing is required. In the opinion, Justice Thomas writes “…what matters for an FCA case is whether the defendant knew the claim was false. Thus, if respondents correctly interpreted the relevant phrase and believed their claims were false, then they could have known their claims were false.”

At oral arguments, the government asked the Court to preserve the relevance of subjective intent standard. The Government argued that following the Seventh Circuit’s precedent of “objectively reasonable” interpretation would undermine enforcement and incentivize individuals to come up with crafty, post-hoc arguments for why a claim it submitted was not false. The Court agreed, and its ruling allows the government to rely on deliberate ignorance or recklessness of the defendant instead of having to prove actual knowledge.

The FCA was passed under the Lincoln administration and underwent significant strengthening through a congressional amendment in 1986. 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. Since its amendment in 1986, the Department of Justice has successfully utilized the Act to secure settlements and judgments amounting to over $70 billion, mainly in healthcare and defense contracting cases.

The FCA plays a substantial role in balancing the power between the government and industry. Along with being used to combat health care fraud, the FCA serves as the government’s primary tool to redress false claims involving a multitude of other government operations and functions. In recent years, healthcare fraud has been the leading source of the Department’s FCA settlements and judgments, as the FCA has played a critical role in combatting the opioid epidemic and the growing issues surrounding the Medicare Advantage program. 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.

FCA claims can be a source of concern and complexity for businesses when they find themselves as the subject of either a federal investigation or state investigation. Whenever there is government money at stake, there is a chance for an FCA claim. Since fraud in the healthcare industry can lead to rising healthcare costs, the government is keen on cracking down on such activity.  The unanimous ruling decidedly addresses with the FCA’s knowledge element, overturning the Seventh Circuit’s use of an "objectively reasonable" interpretation of law or regulation, and instead holding that an FCA case hinges on whether the defendant knew the claim was false.

Should you have any questions concerning the CMS Final Rule, please contact BMD President Matt Heinle at maheinle@bmdllc.com, BMD Vice President Amanda Waesch at alwaesch@bmdllc.com, or Healthcare Partner Bryan Meek at bmeek@bmdllc.com.

COVID-19Vaccine PolicyHealthcareHealth LawAmanda L. Waesch
Client Alert

Five Common Pitfalls for Employers to Watch Out for Under the Fair Labor Standards Act

March 29, 2023The Fair Labor Standards Act (FLSA) sets forth requirements for employers including, but not limited to, minimum wage, overtime pay, and recordkeeping for covered employees. These requirements are not as simple as they may appear on their face, which leads many employers to fall into compliance issues that they did not realize even existed.Client Alert

The NLRB Limits the Reach of Confidentiality and Non-Disparagement Provisions in Severance Agreements Overruling Trump-Era Policies

March 14, 2023Employers should exercise caution and closely examine the content of severance agreements to ensure compliance with a recent National Labor Relations Board (“NLRB”) decision.  On February 21, 2023, the NLRB restricted the breadth of permissible language of confidentiality and non-disparagement clauses when it issued its decision in McLaren Macomb and overruled its Trump-era decisions in Baylor University Medical Center and IGT d/b/a International Game Technology.Client Alert

Ohio Medical Board Releases New Telehealth Rules

February 23, 2023On Tuesday, February 21, 2023, the State Medical Board of Ohio released its final telehealth rules to implement Ohio’s telehealth statute (O.R.C. 4743.09) for physicians, physician assistants, dieticians, respiratory care professionals and genetic counselors. Ohio’s advanced practice registered nurses (“APRNs”) should also take note of these rules. While the Medical Board does not govern APRNs directly, those APRNs who are required to have a collaborating physician and standard care arrangement (namely nurse practitioners, certified nurse midwives, and clinical nurse specialists) are still affected by the rules. Generally, if an APRN’s collaborating physician is limited in their practice, then the APRN will also be limited.Client Alert

The End of the Public Health Emergency is (Finally) Here

February 23, 2023The COVID-19 Public Health Emergency (“PHE”) that has been in effect for over three years is finally slated to end on May 11, 2023.[1] With the end of the PHE will come many changes for healthcare providers to be aware of; however, some changes may not come until much later.Client Alert

Multi-340B Contract Pharmacy Locations on the Brink? The Third Circuit’s Ruling Gives a Hint.

February 17, 2023The 340B drug discount program requires pharmaceutical manufacturers to offer to sell their products at significant discounts to safety net providers called “covered entities.” In 1996, the Health Resources and Services Administration (HRSA) issued guidance authorizing covered entities to enter into a contract pharmacy arrangement with a single third-party contract pharmacy, to which the manufacturer would ship 340B medications but bill the covered entity. In 2010, HRSA issued revised guidance permitting covered entities to enter into an unlimited number of contract pharmacy arrangements.
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