Decision addresses unclear fraud regulations

Health care entities that face prosecution over regulatory and statutory mandates that often are unclear or ambiguous can take hope in a recent decision by the Eleventh Circuit Court of Appeals, says False Claims Act expert John Boese, of Fried Frank in Washington.

Two weeks ago, a panel of the Eleventh Circuit reversed the convictions of two former employees indicted for filing allegedly false Medicare cost reports. The court held that the regulations at issue were unclear and that the government failed to prove that the defendants knowingly relied on an unreasonable interpretation of those regulations, Boese reports.

The decision could have "a very broad effect" on civil and criminal fraud cases in health care, according to Boese. The convictions were highly publicized examples of cases in which the prosecution relied on "extremely complex regulations whose interpretation was subject to legitimate dispute," he explains. "This decision may significantly limit such prosecutions in the future.

"This case provides an important affirmation that, in cases where the truth or falsity of a statement depends on a legal interpretation of a regulation, the government cannot simply show that its interpretation is preferable," he adds. "The government must prove the defendant’s interpretation is unreasonably wrong."

According to Boese, many courts, particularly in the civil fraud area, have been willing to allow the government to proceed with fraud cases based on "clearly ambiguous regulations." He notes that two appellate courts have taken that approach in civil False Claims Act cases.

In one case, the Ninth Circuit reversed the dismissal of a qui tam False Claims Act case where the lower court held that the disputed claims could not be false because the defendants relied on a reasonable interpretation of an ambiguous regulation. The Eighth Circuit recently cited that case in another case involving ambiguous Medicare regulations (Minnesota Association of Nurse Anesthetists v. Allina Health System).