Dr. John Pepe and Dr. Richard Sherman (“Relators”), acting as whistleblowers, brought a qui tam action against Fresenius Medical Care Holdings, Fresenius Vascular Care, Inc., and Dr. Gregg Miller (“Defendants”).  Relators’ complaint alleged that the Defendants engaged in fraudulent billing practices under the False Claims Act (“FCA”) and analogous state laws.  Last week, the United States District Court for the Eastern District of New York dismissed Relators’ case because they failed to plead their allegations with particularity as required by Federal Rule of Civil Procedure 9(b).

Continue Reading Stringent Requirements for Pleading Fraud Under Rule 9(b).

The United States District Court for the Northern District of Indiana recently dismissed a case involving allegations of fraudulent Medicaid claims and self-referrals.  The case, United States of America and State of Indiana ex rel. Bradley A. Stephens v. Nuclear Cardiology Associates (“NCA”), serves as a critical reminder of the stringent requirements for pleading fraud under the False Claims Act (FCA) and the Stark Law.

Continue Reading General Allegations Without Representative Examples Are Insufficient to Survive a Motion to Dismiss

In the world of False Claims Act (“FCA”) litigation, the recent case United States ex rel. Robert C. O’Laughlin, M.D. v. Radiation Therapy Services, P.S.C., et al. serves as an important reminder of the need for concrete evidence when asserting qui tam FCA claims.

Continue Reading The Anatomy of a Failed Qui Tam Case: Lessons from U.S v. Radiation Therapy Services

The United States District Court for the Eastern District of Michigan recently dismissed a False Claims Act (“FCA”) lawsuit brought against the City of Detroit.  The core issue in United States ex rel. Lynn v. City of Detroit revolved around Detroit’s annual certifications and assurances to comply with federal laws and regulations as a condition for receiving federal funds.  The relators argued that these certifications were false, thus constituting fraudulent claims under the FCA.

The court’s decision to grant summary judgment in favor of Detroit was based on the distinction between future promises and fraud.  The court noted that the certifications in question were forward-looking statements about future compliance, not assertions about past or present compliance.  This distinction was crucial because, under established legal principles, fraud claims must relate to misrepresentations about past or existing facts.  Future promises, on the other hand, are considered contractual and do not constitute fraud.

While some courts have recognized a “promissory fraud” exception, allowing fraud claims based on future promises if the plaintiff can prove that the defendant had no intention of complying at the time the promise was made, the Sixth Circuit has not endorsed this exception in the FCA context.  Though even if it had, the outcome here would not change.  The court explained that relators in this case failed to allege or provide evidence that the City officials who signed the certifications had no intention of complying with federal laws and regulations at the time they made the certifications.

This dismissal underscores the critical distinction between future promises and fraud, as well as the stringent requirements for invoking the promissory fraud exception.  In the end, the court’s ruling provides a clear message: future promises of compliance, without more, cannot form the basis of a fraud claim under the FCA.  

Note: Our lawyers leveraged AI in creating this blog post.  As we explore the potential of generative AI in the legal space, it is our intention and our practice to be transparent with our readers and to showcase the results we are achieving using generative AI with publicly available resources. Crowell’s AI group is comprised of lawyers and professionals across our global offices, including from Crowell & Moring International (CMI), our international public policy entity, with decades of sector-specific experience. We intend to lead by example in our own responsible use of AI, as it pertains to both the risks and benefits. Should you have questions about the use of generative AI in the legal sector or Crowell’s use of AI, please contact inovation@crowell.com. 

United States of America v. Sutter Health is exemplary of the delicate balance courts must strike when dealing with attorney-client privilege.  Here, the United States District Court for the Northern District of California denied the relator’s motion for determination as to waiver of privilege, but granted alternative relief.  

This case involves alleged violations of the False Claims Act (“FCA”) and the Anti-Kickback Statute (“AKS”) by Sutter Health (“Sutter”), and at the core of this case is the relator’s motion arguing that Sutter waived attorney-client privilege over communications related to its internal review of the fair market value and commercial reasonableness of certain financial arrangements.  Specifically, the relator contended that Sutter’s references to legal consultations in their summary judgment motion constituted a waiver of this privilege.

The court instead found that Sutter’s references were merely “background facts” and not detailed disclosures that would necessitate a waiver of privilege.  The court’s ruling also emphasized that Sutter did not assert an advice of counsel defense, which would have put the content of the legal advice directly at issue.  This distinction is crucial for legal practitioners, as it highlights the importance of how and when legal advice is referenced in litigation. 

While the court denied the motion for a wholesale waiver of privilege, it nevertheless recognized the potential unfairness to the relator if Sutter were allowed to reference its legal consultations without providing access to the underlying communications.  To address this, the court precluded Sutter from introducing any evidence at trial that its “rigorous process” of ensuring its arrangements were supported by a third-party fair market value appraisal included consultations with its legal team. 

The court’s decision in this case offers strategic insights for legal practitioners involved in FCA and AKS litigation:

  • When referencing legal consultations in litigation, it is essential to avoid detailed disclosures that could be construed as waiving attorney-client privilege.  Background references should be carefully crafted to provide necessary context without delving into the substance of legal advice.
  • Parties should be prepared for the possibility that references to legal consultations may lead to the preclusion of related evidence at trial.  This requires a strategic approach to presenting defenses and ensuring that non-privileged evidence is robust enough to support the case.

Note: Our lawyers leveraged AI in creating this blog post, including using a transcript summary created by generative AI.  As we explore the potential of generative AI in the legal space, it is our intention and our practice to be transparent with our readers and to showcase the results we are achieving using generative AI with publicly available resources.  Crowell’s AI group is comprised of lawyers and professionals across our global offices, including from Crowell & Moring International (CMI), our international public policy entity, with decades of sector-specific experience.  We intend to lead by example in our own responsible use of AI, as it pertains to both the risks and benefits.  Should you have questions about the use of generative AI in the legal sector or Crowell’s use of AI, please contact innovation@crowell.com.

In the world of legal battles, few are as complex and as fraught with procedural intricacies as qui tam actions brought under the False Claims Act (“FCA”).  The qui tam provision of the FCA allows private individuals, known as relators, to file lawsuits on behalf of the government and if successful, relators can receive a portion of the recovered damages.  A recent case, United States ex rel. John Doe v. Credit Suisse AG, offers a glimpse into the procedural labyrinth that governs these actions and underscores the delicate balance between private citizens’ rights to pursue fraud claims and the government’s overarching authority to control litigation brought on its behalf.

In this case, John Doe, a former employee of Credit Suisse, alleged that the bank continued its criminal conduct of helping U.S. taxpayers shield offshore assets even after pleading guilty to conspiracy charges in 2014.  Doe claimed that Credit Suisse’s failure to disclose this ongoing conduct allowed it to avoid paying additional penalties, thus violating the FCA’s “reverse false claims” provision.  The government moved to dismiss Doe’s action, arguing that his allegations did not state a viable claim under the FCA and that continued litigation would strain government resources and interfere with ongoing monitoring of Credit Suisse’s compliance with its plea agreement.  

The district court granted the government’s motion without holding an in-person hearing, relying instead on written submissions from both parties.  Doe appealed, arguing that the dismissal was improper because he was denied an actual “hearing” as required under the FCA.

The Fourth Circuit disagreed with Doe and affirmed the district court’s decision, holding that the “hearing” requirement can be satisfied through written submissions rather than an in-person hearing.

The Fourth Circuit’s decision underscores the flexibility courts have in interpreting the “hearing” requirement under the FCA as allowing for written submissions rather than an in-person proceeding, particularly when the government’s reasons for dismissal are clear and uncontroverted.  This interpretation aligns with the broader trend in federal litigation towards greater reliance on written briefs and submissions, which can streamline proceedings and reduce the burden on judicial resources. However, it also raises questions about the extent to which relators can effectively challenge government dismissals without the opportunity for oral argument.

The Fourth Circuit’s decision also aligns with the Supreme Court’s recent ruling in United States ex rel. Polansky v. Exec. Health Res., Inc., which emphasized the government’s broad authority to dismiss qui tam actions and the substantial deference courts must give to the government’s assessment of whether continued litigation serves the public interest.  The government’s authority to dismiss qui tam actions is a critical aspect of the FCA’s framework, ensuring that the government retains control over litigation conducted in its name and allowing it to prioritize resources and avoid cases that do not align with its enforcement strategies.

This case serves as a reminder of evolving landscape and complexities of FCA litigation.

The United States District Court for the District of Rhode Island cast a spotlight on the doctrine of implied waiver of attorney-client privilege in a recent False Claims Act (“FCA”) case.  The case, United States of America ex rel. James R. Berkley v. Ocean State, LLC, et al., Case No. 20-538-JJM-PAS (D.R.I., June 26, 2024), delves into the implications of asserting an affirmative defense in an FCA case based partly on advice of counsel.

Continue Reading Navigating the Attorney-Client Privilege Waiver Tightrope

On June 24, 2024, the Department of Health and Human Services (“HHS”) released a final rule (“Disincentives Final Rule”) establishing disincentives for certain healthcare providers that have committed information blocking. The information blocking disincentives directly impact Medicare-enrolled healthcare providers or suppliers including hospitals, critical access hospitals, MIPS-eligible clinicians, and ACOs. The Disincentives Final Rule has been submitted to the Office of the Federal Register for publication and will become effective 30 days after Federal Register publication.

Continue Reading Healthcare Providers Who Engage in Information Blocking Will Face Disincentives Described in an HHS Final Rule    

In late March 2023, Dr. Paul Koch, the former owner of a chain of Rhode Island ophthalmology practices, agreed to pay $1.1 million to the U.S. Attorney’s Office to settle false claims act allegations.  This case arose from a qui tam complaint brought by two whistleblowers alleging that over a five-year period, Koch paid kickbacks to optometrists to induce referrals for patients for cataract surgeries.  Notably, the settlement included a non-admission clause by Dr. Koch, denying liability and disputing the relators’ entitlement to attorneys’ fees, and the court entered a Stipulation of Partial Dismissal and Consent to Dismissal on Behalf of the United States shortly thereafter.

Continue Reading Settling False Claims Act Cases Involves More than Just Cutting a Check to DOJ

Executive Summary

The healthcare industry is undergoing a significant transformation, moving away from volume-based care towards value-based models that prioritize patient outcomes and cost efficiency. This issue brief delves into delta MLR contracting, a type of value-based contracting that measures and rewards improved performance based upon incremental improvements in medical loss ratio. 

Delta MLR contracting is the next chapter on the way to full risk delegation, aiming to improve medical loss ratios by reducing unnecessary utilization through innovative tech-enabled care delivery transformations and offering the potential for future revenue increases for providers who achieve improved quality and appropriately document and code clinical conditions for accurate risk adjustment.

Medical Loss Ratio (MLR) refers to the percentage of premiums payers spend on medical claims and healthcare quality improvement, as opposed to administrative costs and profits. Delta MLR contracting presents an innovative framework for population health providers and virtual care organizations to align to the clinical and operational value created for risk bearing entities. Below we discuss the necessary emphasis in delta MLR contracting on the integration of documentation and coding practices, data, actuarial analytics, quality initiatives, and medical management. We also focus on the need for full financial alignment of virtual care solutions and risk bearing entities in achieving the Quintuple Aim.

By focusing on these elements, innovative providers can enhance patient outcomes, optimize financial performance, and navigate the complexities of value-based care more effectively. 

Continue Reading Delta MLR Contracting: Integrating Risk, Quality and Affordability