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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

Main Street Lending Program Waiting for Green Light from Congress – What We Know Now

April 17, 2020What is the Main Street Lending Program? In response to the COVID-19 pandemic, the Federal Reserve established the Main Street Lending Program (“MSLP”) to enhance support for small and mid-size business that were in good financial standing before the pandemic. There are two subcategories to the MSLP: the Main Street New Loan Facility (“MSNLF”), which applies to newly issued loans for a company, and the Main Street Expanded Loan Facility (“MSELF”), which applies to refinancing of existing loans of a company. The main focus of MSLP is to retain employees (at least 90% of a business’s employees as of February 1, 2020). It is also intended to alleviate slow cash flow stress on profitable businesses.Client Alert

Pondering Over Patient Billing: CARES Act and Provider Relief Fund Lead to More Questions

April 16, 2020On April 11, 2020, HHS, along with the Department of Labor and Department of the Treasury, issued jointly prepared FAQs regarding the FFCRA, the CARES Act, and other health coverage issues. The FFCRA was enacted on March 18, 2020 and requires group health plans and health insurance issuers to provide benefits for certain items and services related to diagnostic testing for COVID-19. Additionally, plans and issuers must provide coverage without imposing any cost-sharing requirements (deductibles, copayments, and coinsurance), prior authorization, or other medical management requirements.Client Alert

Important Update and FAQs: HHS Tweaks Guidance on The CARES Act Provider Relief Fund Terms and Conditions

April 16, 2020On April 10, 2020, many providers awoke to find electronic payment deposits from Department of Health and Human Services (HHS) in their bank accounts. This was the first round of $30 billion of payments from the HHS Provider Relief Fund as a result of the CARES Act, which was signed into law on March 27, 2020. All healthcare providers that received Medicare fee-for-service payments in 2019 should have received a payment.Client Alert

Returning to Work: Forecasting the New Normal in Business

April 16, 2020We cannot predict when businesses will reopen across the county. As we publish this Alert, dynamic business leaders are cooperating in comprehensive efforts to create safe work environments so that they can all re-engage the workforce. However, we can predict the new normal in business. Some important studies were published yesterday, and the new normal in business will be facemasks for all employees, and probably all business visitors.Client Alert

Updated Guidance on Ohio Department of Medicaid Telehealth Rules During the Covid-19 Public Health Emergency

April 15, 2020In its initial response to the COVID-19 public health emergency, the Ohio Department of Medicaid (“ODM”) issued emergency rule 5160-1-21, which dramatically expanded reimbursable telehealth services, telehealth providers, allowable technology, location of both providers and patients, and covered billing provider types. See BMD’s initial COVID-19 and Telehealth Resource Guide here. This emergency rule provides wide flexibility for patients to receive necessary healthcare services while Ohio’s Stay-At-Home Order remains in place. Regulations are continually changing in response to the public health crisis, and on April 13, 2020, ODM issued new guidance further expanding telehealth services reimbursable under Ohio’s Medicaid program.
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