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Health Co. Asks High Court To Rein In FCA Pleading Rules

Posted on March 22, 2022March 24, 2022 by Mike Bothwell

Full Article here.

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, filed Feb. 14. 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 page2image38116464 , 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 Law360 on Tuesday 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.”

Prose is represented by Bruce C. Howard of Siprut PC, and Neil M. Rosenbaum, Damon E. Dunn and Paul M. King of Funkhouser Vegosen Liebman & Dunn Ltd.

Molina is represented by Kelly Perigoe, Albert Giang, Jeffrey S. Bucholtz, Ashley C. Parrish, Quyen L. Ta, Anne M. Voigts, and Matthew V.H. Noller of King & Spalding LLP.

The case is Molina Healthcare of Illinois Inc. et al., Petitioners v. Thomas Prose, case number 21- 1145, in the U.S. Supreme Court.

Full Article here. | The Bothwell Law group does not claim ownership of this article.

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About the Bothwell Law Group:

Since 1996, the Bothwell Law Group has earned a national reputation for successful representation of whistleblowers in federal and state courts across the United States, and is one of only a handful of firms exclusively representing whistleblowers. Bothwell Law Group’s cases have resulted in the recovery of more than $400 million for the United States treasury and in the payment of millions of dollars in whistleblower rewards. Inquiries may be directed to Mike Bothwell at (770) 643‐1606, email Mike@WhistleblowerLaw.com.

Bothwell Law | Attorneys Hope For Clarity With Justices’ Interest In Fraud Claims

Posted on October 29, 2021 by Mike Bothwell

Article by Jennifer Doherty – Full Article here.

Whistleblowers and contractors have struggled for more than a decade with inconsistent standards across the country for bringing forward fraud allegations, but the U.S. Supreme Court’s recent interest in a case that appears to overcome deficiencies in previous petitions could bring clarity.

Federal appeals courts are almost evenly divided along a spectrum from more to less rigid requirements for whistleblowers to survive defendants’ early attempts to escape their claims under Federal Rule of Civil Procedure 9(b).

The varying standards have survived multiple petitions to the high court — at least one during almost every term between 2014 and 2019, and now a whistleblower’s petition arising from the hard-line Eleventh Circuit could finally elicit some answers from the justices, according to experts watching the case.

Rule 9(b) obligates the party alleging fraud to “state with particularity the circumstances constituting fraud or mistake” at the pleading stage. Since at least 2002, judges, including those within the same circuit, have interpreted “particularity” to confer different burdens on whistleblowers.

On Tuesday, the justices asked Georgia-based Bethany Hospice and Palliative Care LLC to respond to a petition from the estate of Debbie Helmly and Jolie Johnson, former employees who say the hospice paid health care providers kickbacks to refer to them terminally ill patients and then billed the government for the ill-gotten patients, many of whom were on Medicaid or Medicare.

The petition asks the high court to determine whether Rule 9(b) requires whistleblowers to present not only the particulars of an alleged fraud scheme but specific claims for payment as well — the standard currently applied in the Eleventh Circuit.

In circuits considered more favorable for whistleblowers, courts require detailed fraud allegations coupled with reliable indicators that the government was knowingly billed for goods or services that weren’t provided as promised.

“The stakes are enormous because [a Supreme Court ruling] would, in fact, give clarity that would be certainly helpful to every practitioner, but then we’d also have an idea of, ‘OK, where can we expect the law to go? And would we expect there to be some sort of statutory change after this?'” said Jacob D. Mahle, a partner at Vorys Sater Seymour and Pease LLP who represents corporate clients in False Claims Act disputes.

The Rule 9(b) petitions before the high court in recent years were mostly rejected without an explanation, even after justices requested responses to some of them.

In one case in which they showed interest in 2014, United States ex rel. Noah Nathan v. Takeda Pharmaceuticals North America Inc. et al., then-Solicitor General Donald B. Verrilli Jr. may have dissuaded them from picking up the case by stating that while some division lingered, circuits that required whistleblowers to include specific billing information with their fraud claims “may have retreated from a rigid application of that rule.”

But courts have continued to stick to precedent requiring billing details at the pleading stage. On

Wednesday, the Sixth Circuit dismissed an Ohio nurse’s appeal, stating that even though she detailed specific instances in which a health care contractor allegedly modified or “upcoded” Medicare patient assessments to overcharge the government, she failed to provide the date or amount of a single falsified claim for payment.

Jennifer Verkamp, founding partner at Morgan Verkamp LLC, said that although most circuits have started recognizing the practical limits of requiring billing details, the split is getting wider.

“The widening gulf between the circuits creates a gap in the FCA’s enforcement mechanism because in scenarios where the billing is very complex, such as in the military contracting environments or large national health care contractors, the Eleventh Circuit’s demand for actual claims can create an effective immunity for fraud,” Verkamp told Law360, echoing Verrilli’s position that requiring whistleblowers to show up with literal receipts “is unsupported by Rule 9(b) and undermines the FCA’s effectiveness as a tool to combat fraud against the United States.”

Verrilli also waved the justices off the Takeda Pharmaceuticals case, saying Nathan’s claims that the company was inducing doctors to prescribe an acid reflux medication for off-label uses, including to patients whose treatments were billed to Medicaid and Medicare, failed not just on Rule 9(b)’s specificity grounds, but also under a separate plausibility standard.

Johnson and Helmly’s case does not appear to suffer the same shortcoming as the Nathan case. Johnson petitioned the Supreme Court after the Eleventh Circuit tossed the case on particularity grounds alone.

According to Mahle, Rule 9(b) is a vital tool for the defense bar invested in preventing meritless fraud claims that have the potential to destroy reputations from advancing into resource-draining discovery.

Another active FCA appeal in the Seventh Circuit, United States and the State of Illinois ex rel. Thomas Prose v. Molina Healthcare of Illinois et al. page2image53226880 , may present a more compelling study of the bounds of Rule 9(b), Mahle said.

“Molina involves a more complicated set of issues, some of which touch upon Escobar and the reach of the FCA statute itself,” he said, referencing the high court’s unanimous 2016 ruling in Universal Health Services Inc. v. Escobar that clarified what kind of misrepresentations qualify as material in the government’s decision to pay a claim under the FCA. “It may not make its way to the Supreme Court, but I would expect its reasoning to be touted and contested in many other cases.”

A split Seventh Circuit panel in August revived the suit against Molina Healthcare, in which whistleblower Thomas Prose alleged Molina continued to bill Medicaid for skilled nursing services that he provided through his company General Medicine PC for approximately two years after their contract ended.

Prose’s case met the Seventh Circuit’s reasonable inference standard to survive Molina’s motion to dismiss under Rule 9(b), according to the panel majority, which credited him for providing “numerous details indicating when, where, how and to whom allegedly false representations were made.”

“He hardly can be blamed for not having information that exists only in Molina’s files,” Circuit Judge Diane P. Wood wrote.

However, Chief Circuit Judge Diane S. Sykes issued a strongly worded dissent, asserting her colleagues’ position broke with the circuit’s own precedent on Rule 9(b) and conflicted with the high court’s Escobar ruling. Molina went on to raise similar arguments in a petition for en banc review last month.

If Molina goes to the Supreme Court, the judges’ differing perspectives may lead justices to determine its facts are too “muddled” to serve as an appropriate vehicle for a 9(b) ruling, according to Arnold & Porter partner Craig D. Margolis.

But the Seventh Circuit’s quarrel over the rule’s nuances could also pique their interest more than the per curiam order in Johnson’s appeal, he said, pointing to the high court’s willingness to take on other FCA questions, such as materiality in Escobar.

“This has percolated pretty well, and we still have a fairly sharp split,” Margolis said.

The cases are Johnson et al. v. Bethany Hospice and Palliative Care LLC, case number 21-462, at the U.S. Supreme Court, and United States and the State of Illinois ex rel. Thomas Prose v. Molina Healthcare of Illinois et al., case number 20-2243, in the U.S. Court of Appeals for the Seventh Circuit.

–Additional reporting by Daniel Wilson and Brett Barrouquere. Editing by Jay Jackson Jr.

Full Article here.

The Bothwell Law group does not claim ownership of this article.

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Justice Department Recovers Over $2.2 Billion from False Claims Act Cases in Fiscal Year 2020

Posted on January 21, 2021 by Mike Bothwell

Below is a clip from The Justice Department, full article here: https://www.justice.gov/opa/pr/justice-department-recovers-over-22-billion-false-claims-act-cases-fiscal-year-2020

The Department of Justice obtained more than $2.2 billion in settlements and judgments from civil cases involving fraud and false claims against the government in the fiscal year ending Sept. 30, 2020, Acting Assistant Attorney General Jeffrey Bossert Clark of the Department of Justice’s Civil Division announced today. Recoveries since 1986, when Congress substantially strengthened the civil False Claims Act, now total more than $64 billion.

“Even in the face of a nationwide pandemic, the department’s dedicated employees continued to investigate and litigate cases involving fraud against the government and to ensure that citizens’ tax dollars are protected from abuse and are used for their intended purposes,” said Acting Assistant Attorney General Clark. “The continued success of the department’s False Claims Act enforcement efforts are a testament to the dedication of the civil servants who pursue these important cases as well as to the fortitude of whistleblowers who report fraud.”

Of the more than $2.2 billion in settlements and judgments recovered by the Department of Justice this past fiscal year, over $1.8 billion relates to matters that involved the health care industry, including drug and medical device manufacturers, managed care providers, hospitals, pharmacies, hospice organizations, laboratories, and physicians. The amounts included in the $1.8 billion reflect only federal losses, and, in many of these cases, the department was instrumental in recovering additional tens of millions of dollars for state Medicaid programs.

In addition to combating health care fraud, the False Claims Act serves as the government’s primary civil tool to redress false claims for federal funds and property involving a multitude of other government operations and functions. The act helps to support our military and first responders by ensuring that government contractors provide equipment that is safe, effective, and cost efficient; to safeguard American businesses and workers by promoting compliance with customs laws, trade agreements, visa requirements, and small business protections; and to protect other critical government programs ranging from the provision of disaster relief funds to nutrition benefits for needy families.

In 1986, Congress strengthened the act by increasing incentives for whistleblowers to file lawsuits alleging false claims on behalf of the government. These whistleblower, or qui tam, actions comprise a significant percentage of the False Claims Act cases that are filed. If the government prevails in a qui tam action, the whistleblower, also known as the relator, typically receives a portion of the recovery ranging between 15 and 30 percent. Whistleblowers filed 672 qui tam suits in fiscal year 2020, and this past year the department recovered over $1.6 billion in these and earlier-filed suits.

Health Care Fraud

The department’s health care fraud enforcement efforts restore funds to federal programs such as Medicare, Medicaid, and TRICARE, the health care program for service members and their families. But just as important, the department’s vigorous pursuit of health care fraud prevents billions more in losses by deterring others who might otherwise try to cheat the system for their own gain. The department investigates and resolves matters involving a wide array of health care providers, goods, and services.

The largest recoveries in the past year came from the drug industry. For example, following years of litigation and multiple unsuccessful attempts to have the government’s claims dismissed, Novartis Pharmaceuticals Corporation paid over $591 million to resolve claims that it paid kickbacks to doctors to induce them to prescribe its drugs. Novartis sales representatives, on the instruction of their managers, selected high-volume prescribers to serve as paid “speakers” to induce the prescribers to write Novartis prescriptions.

The department also continued to investigate efforts by drug manufacturers to protect high drug prices by funding the co-payments of Medicare patients. Congress included co-pay requirements in the Medicare program, in part, to serve as a check on health care costs, including the prices that pharmaceutical manufacturers can demand for their drugs. This year, two pharmaceutical manufacturers – Novartis and Gilead Sciences – paid a combined total of over $148 million to resolve claims that they illegally paid patient copays for their own drugs through purportedly independent foundations that the companies in fact treated as mere conduits for these payments. In addition, four of the purportedly independent foundations paid a total of $13 million this year to resolve liability for their involvement in the kickback schemes. In August 2020, the department sued Teva Pharmaceuticals USA, Inc. and Teva Neurosciences, Inc., alleging that they conspired with two purportedly independent foundations to illegally subsidize Medicare co-pays for the drug Copaxone.

The department continued to pursue opioid-related fraud schemes. One of the largest opioid-related recoveries this past year was from Practice Fusion, Inc., a health information technology developer that accepted kickbacks from the opioid manufacturer Purdue Pharma in exchange for implementing clinical decision support alerts in its electronic health records (EHR) software that were designed to increase prescriptions for OxyContin, and caused its users to submit false claims for federal incentive payments by misrepresenting the capabilities of its EHR software. In addition, the $145 million Practice Fusion settlement reflects that complex EHR-related fraud schemes remain a focus of the Department’s work.

Kickbacks in the healthcare industry are pernicious because of their potential to subvert medical decision-making. In addition to pursuing improper payments by drug manufacturers, the department resolved other schemes involving the willful solicitation or payment of illegal remuneration to induce the purchase of a good or service paid for by a federal health care program. For example, ResMed Corp., a durable medical equipment manufacturer, agreed to pay more than $37 million to resolve allegations that it paid kickbacks to suppliers, sleep labs, and other health care providers. The Oklahoma Center for Orthopaedic and Multi-Specialty Surgery, a specialty hospital in Oklahoma City, its part-owner and management company, an orthopedic physician group, and two physicians agreed to pay a total of over $72 million to resolve allegations that the hospital provided improper remuneration to the physician group in exchange for patient referrals. UTC Laboratories Inc. (RenRX) agreed to pay $41.6 million, and its three principals agreed to pay $1 million, to resolve allegations that they paid kickbacks in exchange for laboratory referrals for pharmacogenetic testing and for furnishing and billing for tests that were not medically necessary.

In addition to these recoveries, in March 2020, the department filed a complaint against medical device manufacturer SpineFrontier, Inc., its Chief Executive Officer, Dr. Kingsley Chin, and certain related entities and individuals, alleging that they paid kickbacks to spine surgeons in the form of sham “consulting” agreements to induce use of SpineFrontier surgical devices.

As in years past, the department also resolved a number of matters in which providers billed federal health care programs for medically unnecessary services or services not rendered as billed. For example, Universal Health Services paid $117 million to resolve allegations that its inpatient psychiatric hospitals and residential psychiatric and behavioral treatment facilities knowingly submitted false claims for inpatient behavioral health services that were not reasonable or medically necessary and/or failed to provide adequate and appropriate services to its patients. Additionally, Logan Laboratories, Inc., pain clinic Tampa Pain Relief Centers, Inc., and two of their former executives agreed to pay a total of $41 million to resolve allegations that they automatically ordered both presumptive and definitive urine drug tests for all patients at every visit, without any individualized determination that either test was medically necessary for the particular patients for whom the tests were ordered.

The department also pursued health care frauds arising under government contracts, as in the case of its $1.85 million settlement with Veterans Administration contractor Sterling Medical Associates for allegedly failing to offer timely appointments to veterans and falsifying wait times at Minnesota outpatient clinics.

Recoveries in Whistleblower Suits

Of the $2.2 billion in settlements and judgments reported by the government in fiscal year 2020, over $1.6 billion arose from lawsuits filed under the qui tam provisions of the False Claims Act. During the same period, the government paid out $309 million to the individuals who exposed fraud and false claims by filing these actions.

The number of lawsuits filed under the qui tam provisions of the Act has grown significantly since 1986, with 672 qui tam suits filed this past year – an average of nearly 13 new cases every week.

“Whistleblowers with insider information are critical to identifying and pursuing new and evolving fraud schemes that might otherwise remain undetected,” said Acting Assistant Attorney General Clark. “These individuals often make substantial sacrifices to bring these schemes to light, and our efforts to protect taxpayer funds continue to benefit from their actions.”

In 1986, Senator Charles Grassley and Representative Howard Berman led the successful efforts in Congress to amend the False Claims Act to, among other things, encourage whistleblowers to come forward with allegations of fraud. In 2009 and 2010, further improvements were made to the False Claims Act and its whistleblower provisions.

The Bothwell Law group does not claim ownership of this article.

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What Is the Criminal False Claims Act and What Does It Mean?

Posted on May 2, 2016June 5, 2017 by Mike Bothwell

The Criminal False Claims Act (FCA) provides that the U.S. government can take civil action to recover civil penalties and damages for false claims and payments. A basic definition of the FCA is that it is a crime for anyone to submit a false claim to the government, or to cause someone else to submit a false claim to the government, either to get money from the government or to avoid having to pay money to the government.

The “qui tam” provisions of the FCA allow anyone with evidence of fraud against government contracts or programs to bring legal action against the wrongdoer on the U.S. government’s behalf. When a qui tam action has been filed, the government has the right to join in the suit as a party (this is called “intervening”). Sometimes, the government decides not to intervene; in those situations, the person or entity who brought the claim forward initially can still decide to pursue it alone.

Note that although the qui tam provisions allow anyone with evidence to file suit, if someone else has already filed a qui tam action on the same evidence, you will be barred from bringing a lawsuit.

What Are the Elements of the FCA?

The elements of the FCA are fairly straightforward. In order for the government to prove a violation of the act, evidence must show that:

The defendant made, presented, or caused to be presented, a false claim to the government for payment or approval; or
The defendant made, presented, or caused to be presented, a false document, statement or another record to facilitate the payment of a false claim; or
The defendant conspired with others in getting the government to make payment on such a false claim or statement; and
The defendant knew that the claim or document was false or fraudulent; or
The defendant knowingly submitted the false or fraudulent claim or document knowing it was wrong or acted with reckless disregard of the claim’s truth or falsity.

It is important to note that FCA violations are often found to have occurred even if the government did not suffer any financial loss. If you are considering filing a False Claims Act suit, the best way to determine whether you’ve got a valid case to pursue is to talk with an experience attorney.

Examples of some of the more common FCA claims include:

Contract violations: These come up frequently in the areas of defense contract work and construction. This type of fraud can happen when work is a company bills for work that never occurred. Or, a company uses substandard materials – especially if they are substituted for specified materials. Or, a company receives a contract kickback.
Healthcare fraud: Fraud in Medicare, Medicaid, and other federal healthcare programs are generally proven relatively easily when an FCA violation is alleged. A few examples of cases that fall under this umbrella include a provider that charges for services that were never provided, charging for more expensive services than what were provided, providing substandard care, kickbacks, and off-label prescription drug marketing.

What Constitutes “Knowing” Under the FCA?

Anyone can be held liable in an FCA action for submitting, or causing to be submitted, a false or fraudulent claim, or a document or statement supporting a false or fraudulent claim as long as it is shown they had either actual knowledge that the claim, document or statement was false or fraudulent; or in deliberate ignorance of the claim’s, document’s or statement’s truth or falsity.

The FCA offers three different definitions of “knowing,” as follows:

Actual knowledge
Acting in deliberate ignorance (looking the other way)
Acting in reckless disregard

The first definition is straightforward. However, the second and third are open to some interpretation by the courts based on the evidence of the case. Again, it’s best to have an experienced FCA attorney review your case. This will ensure you’re on the right track before you move forward.

What Damages and Penalties Do Violations of the FCA Carry?

The FCA carries steep penalties for violations, including an award of three times the amount of its loss, plus penalties of $5,500 – $11,000 per false claim/false document used. There’s a provision that says someone who self-reports under certain conditions may be liable for a lesser amount; however, in no case less than double the amount of the government’s loss.

To learn more about whistleblower defense and the criminal False Claims Act, call 770.643.1606 today.