Supreme Court decision expands False Claims Act liability for providers

The recent Kellogg Brown & Root Servs., Inc. v. United States ex rel. Carter Supreme Court decision is a very glass half-full/half-empty ruling for healthcare providers.

Those with optimistic inclinations will point to the high court's decision not to extend the statute of limitations for civil fraud claims during wartime. The court sided with Kellogg Brown & Root (KBR) on this matter, ruling that the Wartime Suspension of Limitations Act (WSLA) applies only to criminal claims.

However, the Court disagreed with KBR on another aspect of the law, ruling that the "first-to-file" interpretation does not apply to the False Claims Act (FCA). Although the FCA bars simultaneous suits, it does not prevent a relator from filing subsequent claims if a case is dismissed.

This could lead to an increase in FCA claims in the future, George Breen (pictured right), an attorney in the Health Care and Life Sciences and Litigation practices at Epstein Becker Green in the District of Columbia, and chair of the firm's National Health Care and Life Sciences Practice Steering Committee, said in an exclusive interview with FierceHealthPayer: AntiFraud. FCA enforcement is already on the rise, netting $5.69 billion in judgements and settlements in 2014.

The term "first-to-file" does not appear in the FCA, but lawyers with KBR--accused of falsely billing the government for water purification services in Iraq--argued that the word "pending" applies even to cases that have been dismissed. Organizations such as the National Whistleblower Center have argued that the "first-to-file" interpretation of the law has barred stronger, well-informed lawsuits from litigation simply because another relator beat them to the punch.

Breen argued that the new interpretation will allow subsequent relators to build off of and improve similar claims, exposing providers to additional liability. 

"Hypothetically, if the government declines intervention and the relator abandons the lawsuit, the healthcare provider can't have any comfort that the lawsuit won't come back again or by someone else, because that lawsuit doesn't bar any subsequent suits," he said. "You now have an opportunity for relators to realize where the defects were in the original pleading or other pleadings, to correct them, and to file another lawsuit."

Restructuring fraud claims

For healthcare entities and whistleblowers alike, the Supreme Court's ruling offers new avenues to fraud litigation. According to Breen, "opportunistic" whistleblowers now have the ability to learn from the mistakes in previous claims, acquire additional information and file potentially stronger allegations. This approach is vastly different than the way circuit courts have previously interpreted the FCA.

"There was a race to the courthouse, whoever was first was successful, and that's the case that was able to go forward," Breen said. "This [decision] now throws that out the window and allows not only for subsequent and repetitive suits, but allows for someone to sit back, fix the problems that existed, and file what you might call a better lawsuit."

KBR was not the only case that sought answers to the questions surrounding the definition of "pending" FCA claims. Purdue Pharma v. U.S. ex rel. May was also awaiting a decision from the Supreme Court regarding the "first-to-file" interpretation and whether it bars future claims. On Monday, the plaintiff's petition for writ of certiorari was denied based on the high court's decision in KBR, according to SCOTUSblog.

"That's two Supreme Court cases in the same term asking the court to consider the same issue," Breen says. "That gives you a sense of the significance of the issue to healthcare providers and others."

Provider takeaways

For providers, the Supreme Court's interpretation of the FCA means that future settlement agreements may require broader protections that insulate defendants against future claims, Breen said. In other instances, the Supreme Court interpretation may push defense attorneys to litigate cases based on merits rather than accept a dismissal without prejudice.

Of course, defendants don't always have that opportunity. Some FCA claims are abandoned, particularly if the government does not intervene. But in cases where the plaintiff's arguments are weak, defense attorneys will likely attack the substance of the claim and fight for a decision that offers protection from future litigation.

Breen added that the recent decision offers a reminder that providers should remain diligent when it comes to updating and maintaining compliance programs, which act as the first line of defense against FCA claims.

"When you see a ruling that makes it easier for a relator to file a False Claims Act case--that only encourages rather than thwarts False Claims Act cases--if you're provider, it means you have to make sure your compliance program is effective and timely," he said. "What is a hot issue this year might not have been a hot issue last year. You're going to want to make sure you're looking at the right things, the right issues, and that your program is constantly evolving."

For more:
- read the SCOTUSblog post