Important Laws to Trigger False Claims Act Liability

False Claims Act liability has been based on defendants falsely certifying their compliance with laws and regulations. But in deciding which laws and regulations can be used as a basis of this type of liability, such that defendants deserve the huge fines and penalties of the False Claims Act, courts often have to make subjective decisions about what laws and regulations are “important” enough for this type of liability.

To take a recent example, in United States ex rel. Wilkins v. United Health Group, Inc., the U.S. Court of Appeals for the Third Circuit had to decide which laws and regulations among the hundreds of thousands imposed on Medicare participants were sufficiently seriously to merit False Claims Act liability through their violation.

It first held that the relators’ allegations that defendants violated Medicare marketing regulations were insufficient to state a claim. Specifically, the relators in this case claimed that defendants implemented the following improper practices:

1. Distributing marketing flyers that the Centers for Medicare & Medicaid Services (CMS) didn’t approve
2. Engaging in marketing activities in waiting rooms of doctors’ offices
3. Allowing non-licensed individuals to engage in marketing activities
4. Using an excessive number of sales representatives at presentations
5. Asking people to raise their hands at Medicare presentations if they were “dual-eligible” for Medicare and Medicaid
6. Chasing people in supermarkets to ask if they were dual eligible
7. Using agents to engage in door-to-door solicitation
8. Giving out prizes at Medicare presentations in excess of $15 in value

The court held that the government’s payments of defendants’ Medicare claims were not conditioned on their compliance with marketing regulations. Specifically, the court noted that, when proceeding under a false certification theory, compliance with the regulation allegedly violated must be a condition of payment from the government. And, even though federal regulations provided that Medicare could terminate a contract with a defendant that failed to comply with marketing guidelines, the court noted that, since the government allowed a 30-day period for correction, the violations were correctible and, if corrected, would allow a defendant to continue as a Medicare participant.

Interestingly, the court seemed to acknowledge its subjective decision-making, as it noted that “we think that anyone examining Medicare regulations would conclude that they are so complicated that the best-intentioned plan participant could make errors in attempting to comply with them.” The court also questioned the wisdom of allowing every violation of a Medicare regulation to be the basis for a False Claims Act action, and it stated that federal agencies were better suited than courts to ensure compliance with Medicare marketing regulations.

By contrast, the court upheld the relators’ claims that defendants violated the False Claims Act by falsely certifying compliance with the anti-kickback law. It noted that compliance with the anti-kickback law is “clearly” a condition of payment for Medicare. It also took some comfort in the fact that the statute contained a number of “safe harbor” payment arrangements to protect the unwary from committing violations and that the statute imposed a “willfulness” requirement, such that a defendant couldn’t be held responsible for “unknowing” conduct.

Does the line that the court is attempting to draw make sense? Are marketing regulations unimportant? Are kickbacks really worse than marketing plans and products through coercion and, in some cases, harassment?

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