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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

New York, Kansas, Massachusetts, and Delaware Become the latest States to Adopt Full Practice Authority for Nurse Practitioners

May 19, 2022While the COVID-19 pandemic certainly created many obstacles and hardships, it also created many opportunities to try doing things differently. This can be seen in the instant rise of remote work opportunities, telehealth visits, and virtual meetings. Many States took the challenges of the pandemic and turned them into an opportunity to adjust the regulations governing licensed professionals, including for advanced practice registered nurses (APRNs).Client Alert, Blog Post

Explosive Growth in Pot of Gold Opportunity for Bank (and Other) Cannabis Lenders Driving Erosion of the Barriers

May 13, 2022Our original article on bank lending to the cannabis industry anticipated that the convergence of interest between banks and the cannabis industry would draw more and larger banks to the industry. Banks were awash in liquidity with limited deployment options, while bankable cannabis businesses had rapidly growing needs for more and lower cost credit. Since then, the pot of gold opportunity for banks to lend into the cannabis industry has grown exponentially due to a combination of market constraints on equity causing a dramatic shift to debt and the ever-increasing capital needs of one of the country’s fastest growing industries. At the same time, hurdles to entry of new banks are being systematically cleared as the yellow brick road to the cannabis industry’s access to the financial markets is being paved, brick by brick, by the progressively increasing number and size of banks that are now entering the market.Client Alert

2021 EEOC Charge Statistics: Retaliation & Impact of Remote Work

May 11, 2022The U.S. Equal Employment Opportunity Commission (EEOC) released its detailed information on workplace discrimination charges it received in 2021. Unsurprisingly, for the second year in a row, the total number of charges decreased as COVID-19 either shut down workplaces or disconnected employees from each other. In 2021, the agency received a total of approximately 61,000 workplace discrimination charges - the fewest in 25 years by a wide margin. For reference, the agency received over 67,000 charges in 2020, and averaged almost 90,000 charges per year over the previous 10 years.Client Alert

Ohio’s Managed Care Overhaul Delayed – New Implementation Timeline

May 4, 2022At the direction of Governor Mike DeWine, the Ohio Department of Medicaid (ODM) launched the Medicaid Managed Care Procurement process in 2019. ODM’s stated vision for the procurement was to focus on people and not just the business of managed care. This is the first structural change to Ohio’s managed care system since the Centers for Medicare & Medicaid Services' (CMS) approval of Ohio’s Medicaid program in 2005. Initially, all of the new managed care programs were supposed to be implemented starting on July 1, 2022. However, ODM Director Maureen Corcoran recently confirmed that this date will be pushed back for several managed care-related programs.Client Alert

Laboratory Specimen Collection Arrangements with Contract Hospitals - OIG Advisory Opinion 22-09

May 3, 2022On April 28, 2022, the Department of Health and Human Services, Office of Inspector General (“OIG”) published an Advisory Opinion[1] in which it evaluated a proposed arrangement where a network of clinical laboratories (the “Requestor”) would compensate hospitals (each a “Contract Hospital”) for specimen collection, processing, and handling services (“Collection Services”) for laboratory tests furnished by the Requestor (the “Proposed Arrangement”). The OIG concluded that the Proposed Arrangement would generate prohibited remuneration under the federal Anti-Kickback Statute (“AKS”) if the requisite intent were present. This is due to both the possibility that the proposed per-patient-encounter fee would be used to induce or reward referrals to Requestor and the associated risk of improperly steering patients to Requestor.
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