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In Case of First Impression District Court Expands the Reach of the False Claims Act

By on March 14, 2016 in Uncategorized with 0 Comments

In a recent decision, Druding v. Care Alternatives, Inc.[1], the United States District Court for the District of New Jersey held that Medicare hospice certification provisions are conditions of payment, thereby effectively expanding the reach of the False Claims Act (“FCA”).

The Defendant in the matter is a for-profit provider of end-of-life hospice care in New Jersey. The Plaintiffs, former employees of the Defendant, allege the Defendant fraudulently billed Medicare for patients admitted into its facilities, who were not eligible under the Medicare regulations for hospice care. Per its regulations, Medicare will pay for hospice services if a patient’s life expectancy is six months or less. The Plaintiffs’ complaint identified fifteen patients whose conditions allegedly did not meet Medicare’s life expectancy criteria for hospice care. The Plaintiffs further allege that the Defendant engaged in aggressive marketing tactics to bring in more patients, by providing gifts and meals to physicians, administrators, directors, and social workers to induce referrals.

The Plaintiffs initially filed the lawsuit in 2008, but after nearly seven years of investigating the Plaintiffs’ claims, the United States Department of Justice elected not to intervene. Nonetheless, the Plaintiffs served their complaint on the Defendant in July of 2015. The Defendant subsequently moved to dismiss the Plaintiffs’ complaint, arguing that the applicable Medicare regulations are not conditions of payment. Conditions of payment are requirements that must be met prior to payment by Medicare. On the other hand, conditions of participation are prerequisites to participation in a federal program such as Medicare. Noncompliance with conditions of payment result in nonpayment and are actionable under the FCA; whereas, noncompliance with conditions of participation result in administrative sanctions.

The District Court rejected the Defendant’s argument and held that hospice certification provisions of the Medicare regulations are conditions of payment because Medicare explicitly conditions payment for hospice care on a written certification from a physician with supporting documentation concerning the patient’s condition. In April of 2016 the United States Supreme Court will hear oral arguments in Universal Health Services, Inc. v. United States ex rel. Escobar, and the Court will likely decide whether compliance with Medicare requirements must be expressly delineated as conditions of payment in order to trigger FCA liability. The Supreme Court’s decision will be significant for health care organizations, because it will impact the scope of cases that are actionable under the False Claims Act.

[1] Druding v. Care Alternatives, Inc., 2016 U.S. Dist. LEXIS 21488 (Feb. 22, 2016).


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