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Seven Things To Know When You Receive A Notice Of Investigation From The Department Of Health

Supreme Court Says FCA Case Liability Requires Defendants’ Subjective Belief

By George F. Indest III, J.D., M.P.A., LL.M., Board Certified by The Florida Bar in Health Law

In a precedential decision that leaves the whistleblower plaintiffs bar reeling, on June 1, 2023, the Supreme Court handed down an opinion on the knowledge standard required in False Claims Act (FCA) cases. In a unanimous ruling, the high court said liability of defendants in FCA cases would be based on their own belief in the falsity of their claims, rather than an “objectively reasonable” interpretation of the law or regulation. This appears to set the age-old maxim of “ignorance of the law is no excuse” on its head. Now, apparently, a defendant can argue that he, she or it was ignorant of the law and win.

The case before the Supreme Court was consolidated from two lower court decisions in the cases United States ex rel. Schutte v. SuperValu Inc. and United States ex rel. Proctor v. Safeway.

When Subjective Belief is Relevant in FCA Cases.

In the cases which the Supreme Court decided, the whistleblowers accused SuperValu and Safeway of violating the FCA by overcharging MedicareMedicaid, and the Federal Employee Health Benefits Program for prescription drugs.

According to the rules of these programs, pharmacies cannot charge the government more than the “usual and customary” price for a drug, which is the cash price charged to the general public. The plaintiffs claimed that the pharmacies overbilled the government when they started offering discounted prices to consumers under a price-match program to compete with other pharmacies. They also offered a membership discount program but did not adjust their “usual and customary” prices, continuing to charge the government more than they should have.


The Lower Court’s Ruling.

The Seventh Circuit Court of Appeals ruled in April 2022, that the pharmacies had submitted false claims by not reporting their discounted prices, which were the “usual and customary” prices. The appeals court also stated that the retailers had made reasonable interpretations of ambiguous laws without being warned against it by authoritative guidance. The circuit court referred to the Safeco standard from the Supreme Court’s 2007 Safeco Insurance Co. of America v. Burr case in its decision.

Click here to learn more about the Seventh Circuit Court of Appeal’s ruling.

The Supreme Court’s Ruling.

The Seventh Circuit’s perspective was rejected by the Supreme Court, which instead focused on the defendant’s intentions when submitting false claims. Justice Clarence Thomas, writing for a unanimous court stated, “What matters for an FCA case is whether the defendant knew the claim was false. Thus, if [the defendants] correctly interpreted the relevant phrase and believed their claims were false, they could have known their claims were false.” Read the opinion in full here.

Under this rationale, a defendant could successfully make the argument, “I didn’t know the claim was false and I never bothered to do anything to make sure of that fact.” Even objectively unreasonable claims, such as charging a million dollars for a drug which only cost one dollar, could be successfully defended.

Contact Health Law Attorneys Experienced in Handling Health Care Fraud Investigations and other Legal Proceedings.

The Health Law Firm represents healthcare providers in Medicare and Medicaid audits, and in RAC audits throughout Florida and across the U.S. We also represent health providers in civil and administrative litigation by government agencies and insurance companies attempting to recoup claims that have been paid.

The Health Law Firm’s attorneys routinely represent physicians, dentists, pharmacists, psychotherapists, medical groups, clinics, pharmacies, assisted living facilities (ALFs), home health agencies, nursing homes, group homes and other healthcare providers in Medicaid and Medicare investigations, audits and recovery actions.

To contact The Health Law Firm please call (407) 331-6620 or toll-free at (888) 331-6620 and visit our website at www.TheHealthLawFirm.com.

Sources:

Elberg, Jacob. “Supreme Court maintains focus on defendant’s subjective beliefs in False Claims Act cases.” SCOTUS Blog. (June 1, 2023). Web.

Wilson, Daniel. “Justices Say FCA Liability Hinges On Defendants’ Beliefs.” Law360. (June 1, 2023). Web.

Gaivin, Kathleen. “False Claims Act ruling by High Court a ‘clear win’ for government, expert says.” McKnights Senior Living. (June 2, 2023). Web.

About the Author:  George F. Indest III, J.D., M.P.A., LL.M., is Board Certified by The Florida Bar in Health Law; he is the President and Managing Partner of The Health Law Firm, which has a national practice. Its main office is in Orlando, Florida, area. www.TheHealthLawFirm.com The Health Law Firm, 1101 Douglas Avenue, Suite 1000, Altamonte Springs, Florida 32714, Phone: (407) 331-6620 or Toll-Free: (888) 331-6620.

Current Open Positions with The Health Law Firm. The Health Law Firm always seeks qualified individuals interested in health law. Its main office is in the Orlando, Florida, area. If you are a current member of The Florida Bar or a qualified professional who is interested, please forward a cover letter and resume to: [email protected] or fax them to (407) 331-3030.

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