In a unanimous opinion, the United States Supreme Court (“Court”) recently held that the False Claims Act’s (“FCA”) scienter requirement refers to a defendant’s knowledge and subjective beliefs, rather than what a hypothetical reasonable person could have known or believed.  As supported by the text of the FCA itself and by its common‑law roots, the Court explained that the “focus is what a defendant thought when submitting a claim—not what a defendant may have thought after submitting it.”  Consequently, the Court vacated the holding of the Seventh Circuit and remanded the matter for further proceedings consistent with the Court’s opinion.  Because the Seventh Circuit had affirmed a Federal district court’s grant of the defendants’ motions for summary judgment, the Court’s opinion effectively revives the FCA claim against the defendants.

We previously wrote about the United States Department of Justice’s (“DOJ”) Civil Cyber-Fraud Initiative (“CCFI”), which “aims to hold accountable entities or individuals that put U.S. information or systems at risk by knowingly providing deficient cybersecurity products or services, knowingly misrepresenting their cybersecurity practices or protocols, or knowingly violating obligations to monitor and report cybersecurity incidents and breaches.”  In that post, we summarized DOJ’s first two False Claims Act (“FCA”) resolutions pursuant to the CCFI, which amounted to more than $9 million in recoveries.

In an important decision limiting the reach of the Federal Anti-Kickback Statute (42 U.S.C. 1320a-7b(b)) (“AKS”) and its application to violations of the False Claims Act (31 U.S.C. 3729, et seq.) (“FCA”), the U.S. Court of Appeals for the Sixth Circuit (“Sixth Circuit”) recently contended that, “[w]hile the word remuneration may be broad, it customarily requires a payment or transfer of some kind,” and mandated “but-for” causation standard for determining whether claims paid by Federal health care programs were tainted by an AKS violation such that they violated the FCA.  See U.S. ex rel. Martin et al. v. Hathaway, et al., Case No. 22-1463, at 11 (6th Cir.) (appeal from 1:19-cv-00915, ECF Doc. No. 108 (W.D. Mich.)) (emphasis added).

In recent years, there have been only a handful of corporate integrity agreements (“CIAs”) and integrity agreements (“IAs”) that have included a “conditional exclusion release” of the Office of the Inspector General for the United States Department of Health and Human Services’ (“HHS-OIG”) permissive exclusion authority under 42 U.S.C. § 1320a-7(b)(7) (“Permissive Exclusion Authority”).[1]  Inclusion of a conditional exclusion release is atypical, as HHS-OIG’s historical practice has been to provide an outright release of its Permissive Exclusion Authority in exchange for a CIA or IA.  It appears, based on an IA executed last month and the other recent CIAs and IAs, that a trend may be emerging.

Specifically, in December 2022, HHS-OIG entered into an IA with a Georgia-based physician, Aarti D. Pandya, M.D., and his practice, Aarti D. Pandya, M.D. P.C. (collectively, “Dr. Pandya”).  In atypical fashion, however, HHS-OIG required the IA to be for five years (as opposed to three years) and held Dr. Pandya to a conditional exclusion release contingent upon Dr. Pandya’s satisfactory completion of the IA (as opposed to outright providing a release of its Permissive Exclusion Authority).  This IA signals to the industry that HHS-OIG is not bound by precedent and that, perhaps, a belt and suspenders approach to resolving conduct allegedly violating the False Claims Act (“FCA”) may be emerging as HHS-OIG’s new norm.

On July 20, 2022, the Office of Inspector General for the Department of Health and Human Services (“OIG”) issued a special fraud alert (“Alert”) advising “practitioners to exercise caution when entering into arrangements with purported telemedicine companies.” The Alert is only one of four such “special fraud alerts” that the OIG has issued in the past decade and it illustrates the importance of OIG’s statements.

OIG Flags Seven Characteristics of Telehealth Fraud

In the Alert, OIG cautions that certain companies that purport to provide telehealth, telemedicine, or telemarketing services (collectively, “Telemedicine Companies”) have carried out fraudulent schemes by: (i) aggressively recruiting physicians and non-physician practitioners (collectively, “Providers”) and (ii) paying kickbacks to such Providers in exchange for the ordering of unnecessary items or services, including durable medical equipment, genetic testing, and other prescription items. According to OIG, the fraudulent schemes have varied in design and operation and involved a variety of individuals, Providers, and health care vendors, including call centers, staffing companies, and marketers.

Contingency management (CM) is a form of intervention treatment program that incentivizes patients with substance use disorders to observe certain conditions—such as non-use of drugs or alcohol confirmed via urine drug screening or breathalyzer test, or even drug therapy adherence—in exchange for something of monetary value.  Adherence is often tracked and confirmed by those that provide the incentive payment through digital health technologies—including apps that can be downloaded to the patient’s smart phone or that are already downloaded to a smart phone provided to the patient as part of a CM program.  While many contend that CM is an effective, evidence-based treatment, certain legal barriers limit, and often prevent, its widespread adoption and use.  When there is the potential for patients to receive items and services payable by Federal health care programs (FHCPs), CM incentives are subject to scrutiny under the Federal anti-kickback statute (AKS) and the Beneficiary Inducements CMP.  A recent advisory opinion issued by the United States Department of Health and Human Services (HHS), Office of Inspector General (OIG), approved a digital health company’s offer to provide cash equivalents to patients participating in a CM program.  This favorable result continues to demonstrate OIG’s flexibility notwithstanding regulatory precedent or guidance appearing to the contrary.

On January 11, 2022, the Office of Inspector General (OIG) for the Department of Health and Human Services (HHS) issued, without an opportunity for public notice and comment,[1] a Final Rule, amending its internal process for accepting and issuing advisory opinions.  87 Fed. Reg. 1367 (Jan. 11, 2022)

As discussed in a prior blog post, in May of this year, the Department of Justice (DOJ), through its Fraud Section and in conjunction with the Center for Program Integrity, Centers for Medicare & Medicaid Services (CPI/CMS), began prosecuting defendants who were alleged to have perpetrated a variety of COVID-19-related scams on federal healthcare programs.  On September 17, 2021, the DOJ’s Health Care Fraud Unit, in coordination with its Health Care Fraud and Appalachian Regional Prescription Opioid Strike Force, the Department of Health and Human Services Office of Inspector General (HHS-OIG), the Federal Bureau of Investigation (FBI) and the Drug Enforcement Agency (DEA), announced a new wave of enforcement actions against 138 individuals, including 42 licensed medical professionals, alleged to have participated in health care schemes that resulted in $1.4 billion in alleged losses.

Over the past few weeks, we have covered recent updates to the False Claims Act (“FCA”), first discussing the recent recension of the “Brand Memo” and the resulting restoration of the Department of Justice’s willingness to use sub-regulatory guidance to bring FCA enforcement actions. In our second post, we outlined S.B. 2428’s proposal to shift the burden of proving materiality to defendants, provide for discovery reimbursement, address deference standards in motions to dismiss brought by the government in qui tam complaints, and extend whistleblower anti-retaliation protections. In this final post of our three-part series, we close out our discussion of the FCA with a review of a recent Seventh Circuit decision endorsing the use of an “objective reasonableness” defense in litigation brought under the FCA. We also highlight other recent court activity affecting enforcement of the FCA.