Health Co. Asks High Court To Rein In FCA Pleading Rules
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Molina Health has urged the U.S. Supreme Court to rein in pleading requirements for False Claims Act whistleblowers, saying that a circuit divide has loosened standards that will become a broader cudgel for contractual and regulatory issues.
The managed care firm — accused by former contractor Thomas Prose of improperly billing the government for Medicaid services — says the high court must reverse a Seventh Circuit decision and instead conclude that Federal Rules of Civil Procedure Rule 9(b) requires whistleblower-plaintiffs like Prose to allege specific false claims that Molina may have made to the government.
The company also wants the court to rule that an omission alone doesn’t necessarily constitute a false or fraudulent claim under the FCA, according to the writ. Molina warned that inaction or an adverse ruling would further transform the FCA — meant specifically to catch fraudulent billing — into a dragnet for “fishing expeditions,” according to the writ.
“The FCA is one of the most frequently litigated statutes in the U.S. Code,” the writ argues. “Unless this court grants certiorari and holds that a request for payment that makes no specific representations cannot be treated as if it contains an implied false certification, the FCA will become precisely what this court has warned against: ‘a vehicle for punishing garden-variety breaches of contract or regulatory violations.’”
According to Prose’s 2017 lawsuit, his company GenMed ended a contract to provide Molina with care coordination services at nursing homes, but Molina kept billing Medicaid as though GenMed was providing the services. The government paid Molina a set rate per patient regardless of specific services they received, and Molina says it didn’t make fraudulent claims because it never requested payment for specific required services it did not provide.
U.S. District Judge Virginia M. Kendall dismissed the lawsuit against Molina in June 2020, finding that the allegations weren’t specific enough, but the Seventh Circuit reversed that decision last year.
The appellate court concluded in a 2-1 decision in August that Prose has plausibly argued that Molina unit Molina Healthcare of Illinois knew that services it failed to provide were a material part of its Medicaid managed care benefits contract. It also concluded that submitting a claim to the federal government carries the “implied” certification that a claimant complied with the underlying conditions of their contract, meaning an omission is tantamount to a false claim.
Chief Circuit Judge Diane S. Sykes issued a strongly worded dissent, asserting that her colleagues’ position broke with the circuit’s own precedent on Rule 9(b) and conflicted with the high court’s landmark ruling in Universal Health Services Inc. v. United States ex rel. Escobar , which rejected “implied” certification as a theory of FCA liability and found that an alleged false claim must be material to the government’s decision to pay, according to the writ. Molina raised similar arguments in a petition for en banc review last month.
The Eleventh Circuit joined five other circuits — the Third, Fifth, Ninth, Tenth and D.C. — in relaxing false claim pleading requirements, according to the writ. The First, Second, Fourth, Sixth, Eighth and Eleventh circuits have all held that plaintiffs must state particular false claims.
The split has long vexxed whistleblowers and government contractors alike.
A number of courts have also addressed the omission question, with the Fourth, Seventh, and D.C. circuits holding that omissions can constitute false or fraudulent statements, and the Third, Fifth, Ninth, and 11th circuits finding otherwise.
The divide has come before the high court several times before, periodically drawing the justices’ attention, but never winning certification. Two other petitions pending before the Supreme Court raise identical questions about specificity of claims, but the justices should take up Molina’s petition, the Fortune 500 company says, because it raises the additional question about whether an omission constitutes a falsehood.
Alternatively, the court should hold its petition pending a decision in either of those cases — Johnson et al. v. Bethany Hospice and Palliative Care LLC from the 11th Circuit and United States ex rel. Owsley v. Fazzi Assocs. Inc. out of the Sixth Circuit — if it decides to review them instead, Molina said.
Last month, the Supreme Court invited U.S. Solicitor General Elizabeth B. Prelogar to weigh in on the Bethany case, which involves a Georgia hospice company’s alleged kickback scheme.
Prose attorney Bruce C. Howard told reporters that the Seventh Circuit ruling should stand.
“We continue to believe that there’s little likelihood that the Supreme Court will grant the petition for cert,” he said. “As Molina noted, one of the issues is already subject to a pending petition. Secondly, the Seventh Circuit unanimously denied a petition for rehearing en banc. We believe they got it right.”
The case is Molina Healthcare of Illinois Inc. et al., Petitioners v. Thomas Prose, case number 21- 1145, in the U.S. Supreme Court.
The deep divide among federal circuit courts over Rule 9(b) pleading requirements underscores a critical reality for whistleblowers: the success of a qui tam action depends heavily on where your case is filed and how precisely your complaint outlines the mechanics of the fraud. Because different regions of the country enforce drastically different standards of “particularity,” choosing a highly strategic jurisdiction is paramount.
At The McCabe Law Firm, our legal team monitors these fast-moving procedural shifts in real-time to protect our clients’ cases. Although this text discusses the historical petition filed by Molina, the U.S. Supreme Court ultimately denied certiorari for this case (along with Bethany Hospice and Owsley), allowing the Seventh Circuit’s pro-whistleblower standard to stand as final law for that region. If you have firsthand knowledge of corporate or healthcare fraud, minor variations in how your allegations are drafted can mean the difference between a multi-million dollar recovery and a swift dismissal.
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If you know of a case of health care fraud, contact an experienced Health Care Fraud attorney at The McCabe Law Firm today for a private, confidential consultation.
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