Court deals further blow to FCA enforcement

But health care attorneys point to spiraling number of False Claims Act cases in lower courts

A recent decision by the District of Columbia Circuit Court of Appeals is further evidence that the courts may reign in the growing number of False Claims Act cases brought by qui tam relators and the U.S. Department of Justice that attempt to "bootstrap" other violations under the False Claims Act, according to several health care attorneys.

Even though some claims aren’t considered false under the act, relators increasingly allege that claims submitted to the government contain express or implied certifications of compliance with other laws and regulations. But attorney John Boese says the DC Circuit Court’s June 30 decision in the Siewick case adds "great weight" to similar circuit court decisions that reject this theory.

In that case, the relator claimed that the defendant knew, or should have known, that it was not entitled to payment under the False Claims Act. But the court held that "a false certification of compliance with a statute or regulation cannot serve as the basis for a qui tam action under the False Claims Act unless payment is conditioned on that certification."

Ed Rauzi, an attorney with Davis Wright Tremain in Seattle, also points to language used by the court that underscores arguments made by the Chicago-based American Hospital Association and others seeking an amendment to the False Claims Act.

"The implications of Siewick’s position are extraordinary," the DC Circuit Court asserted near the end of its decision. "On Siewick’s theory, any contracting party that misunderstands its legal entitlements and therefore fails to recover on an invoice in full would be liable under the False Claims Act — except in instances where it was unaware of the facts that led to its failure to recover in full," the court added. "This is not a prescription for fair or efficient contracting."

According to Boese of the Washington, DC-based law firm Fried Frank, the Siewick decision also undermines the decision in U.S. ex rel. Thompson v. Columbia/HCA Healthcare Corporation, where the court denied the defendants’ motions to dismiss False Claims Act claims that were based on alleged violations of the anti-kickback statute.

Steven Meagher, a health care attorney with Phillips Cohen in San Francisco, agrees that the Siewick decision flies in the face of that ruling. He explains that in Thompson, the government argued that had it known there was a kickback arrangement, it would have acted to disallow any of those services. "The DC circuit agrees that in order to be a violation of the False Claims Act you have to actually have a false claim," he asserts.

Meagher notes that the Thompson case is only a small part of the overall case against Columbia. He says the real significance of the DC Circuit decision is that it is one more indication that the courts are moving in the direction of requiring a close nexus between certification and payment. "There has to be a causal relationship between certification and payment of the claim," he says.

He says that means cases involving cost reports would be affected by this trend because the government has intervened in those cases. For example, he points to the portion of the case against Columbia that alleges it kept two sets of books, one of which was submitted to Medicare with allegedly inflated claims. "The certification on the cost report, which says the hospital complied with all applicable regulations, is central in that case," he says.

"The False Claims Act does not provide a remedy for a violation of any law or regulation." Rauzi argues. But he also warns that even as circuit courts appear to reign in the False Claims Act, the number of cases filed under the act continues to grow. "The place to watch is the trial courts because there are a lot of people coming out of the woodwork with these kinds of claims," he asserts. "That’s where I think the action is."