Headlines that Matter for Companies and Executives in Regulated Industries

Supreme Court Justices Signal Skepticism of Qui Tam Constitutionality

On Friday, June 16, the US Supreme Court ruled that the US Department of Justice (DOJ) has the authority to dismiss qui tam suits brought under the False Claims Act (FCA) in which DOJ initially declines to intervene.

The case presented two questions for the Court: first, whether the DOJ has the authority to dismiss a qui tam suit if it declined to intervene during the seal period, and second, what standard should a district court apply in ruling on the government’s motion to dismiss in such a scenario. In an 8-1 decision, the Court held that the “Government may seek dismissal of an FCA action over a relator’s objection so long as it intervened sometime in the litigation, whether at the outset or afterward.” The Court further held that, “in handling such a motion, district courts should apply the rule generally governing voluntary dismissal of suits: Federal Rule of Civil Procedure 41(a).”

Under the Court’s ruling, the DOJ may decline to intervene at the outset of a qui tam suit, allow the whistleblower to proceed with the action, and then later intervene to dismiss the lawsuit at any time, even over the objection of the whistleblower.

In his dissenting opinion, Justice Clarence Thomas posited that the FCA does not permit the government to unilaterally dismiss qui tam suits if it initially declines to intervene and pursue the case. Justice Thomas’ dissent went further and questioned the constitutionality of the entire qui tam system. And, while they signed on to the majority opinion, Justices Brett Kavanaugh and Amy Coney Barrett raised this same question in their concurrence.

With three Justices signaling their skepticism, there is speculation that the Court may soon again be addressing the constitutionality of the FCA qui tam provisions. If so, it remains to be seen whether this Court will be more receptive to such arguments than in cases past.

For more information, access the SCOTUS opinion here and explore further insights on the topic here.

Skilled Nursing Facility and Management Company Pay Nearly $4 Million to Resolve FCA Allegations

A skilled nursing facility, Alta Vista Healthcare & Wellness Centre, LLC and its management company, Rockport Healthcare Services, have agreed to pay the United States and state of California nearly $4 million to settle allegations that they violated the FCA by paying kickbacks to physicians to induce patient referrals.

According to the DOJ, from 2009 through 2019, Alta Vista — under the direction and control of Rockport — provided physicians with “extravagant gifts, including expensive dinners for the physicians and their spouses, golf trips, limousine rides, massages, e-reader tablets, and gift cards worth up to $1,000.” The government further alleges that “Alta Vista paid these physicians monthly stipends of $2,500 to $4,000, purportedly for their services as medical directors.” Finally, per the DOJ, at least one purpose of the gifts and payments was to induce the physicians to refer patients to Alta Vista.

The settlement stems from a qui tam suit filed in 2015 by a former employee of Alta Vista. Under the settlement, Alta Vista and Rockport will pay $3,228,300 to the United States and $596,700 to California. The whistleblower will receive $581,094 as her share of the federal government’s recovery.

In addition to payments to the United States and California, Alta Vista and Rockport have entered into a five-year Corporate Integrity Agreement with the US Department of Health and Human Services Office of Inspector General. Among other requirements, the agreement necessitates an independent review of Alta Vista’s and Rockport’s physician relationships.

DOJ’s press release is available here.

Billing Company Settles FCA Allegations for Medically Unnecessary COVID-19 Tests

On Friday, June 16, the DOJ announced that VitalAxis, Inc. has agreed to pay $300,479.58 to resolve allegations that it violated the FCA by causing the submission of false claims to Medicare “for medically unnecessary respiratory pathogen panels run on seniors who received COVID-19 tests.”

According to the DOJ, throughout 2020, VitalAxis, Inc. — a billing company for diagnostic laboratories — performed billing services for a laboratory that provided COVID-19 testing to residents of senior living communities. The government alleges that “the laboratory directed VitalAxis to bill Medicare for respiratory pathogen panels purportedly ordered by a physician who had not actually ordered the tests and who was ineligible to treat Medicare beneficiaries.” Despite this, “VitalAxis found the credentials of a different physician and, without authorization, billed Medicare using that physician’s name.” Per the DOJ, these actions resulted in Medicare paying the laboratory for medically unnecessary tests.

VitalAxis received cooperation credit for its actions with respect to this matter. Specifically, the government noted that VitalAxis’ cooperation included, among other things, “performing and disclosing the results of an internal investigation, disclosing relevant facts and material not known to the government but relevant to its investigation, providing information relevant to potential misconduct by other individuals and entities, and admitting liability.”

DOJ’s press release is available here.

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