SDNY Dismisses False Claims Act Complaint, Finding Relators Misconstrued Medicaid Program Legal Framework

A False Claims Act case against the New York City Department of Education (NYCDOE) was dismissed on March 25, the district court holding that Medicaid providers (such as school districts that provide health services) cannot be found to have violated the False Claims Act when they followed state guidance in submitting their Medicaid claims, even if that guidance is inconsistent with federal Medicaid law. As the court found, "States must follow federal Medicaid law, while school districts must follow state Medicaid law."

It was alleged in the complaint that the NYCDOE and several other school districts had submitted false claims to the Medicaid program for case management services furnished to school children. The case, United States ex rel. Doe v. The Taconic Hills Central School District, et al., 11 Civ. 2699 (S.D.N.Y.), was brought by whistleblowers, or "relators," under the False Claims Act's qui tam provisions. Those provisions allow an individual to commence a court action on behalf of the United States, alleging the submission of false claims to the government by a defendant. A relator's complaint is filed under seal in federal district court, and the US Department of Justice (DOJ), following an investigation of the relator's allegations, may intervene in the case and take over the prosecution of it. The DOJ may also decline to intervene, in which case the realtor may prosecute the case on his or her own. In either case, the relator is entitled to receive a percentage of any amount recovered by the government if the claims are successful. In Taconic Hills, the DOJ declined to intervene, and the relators pursued the action on their own.

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