TAFEF’s Analysis of Texas et al. v. United States et al.

There has been significant press coverage of DOJ’s March 25, 2019 decision to change its position in Texas et al. v. United States et al. (Case 4-18-cv-00167-O, N.D. TX), which is on its way to the Fifth Circuit.  On that date, DOJ sent a brief letter to the Clerk’s office to inform the Circuit Court that “the United States is not urging that any portion of the district court’s judgment be reversed” and that it would be filing a brief in support of the Appellees. 

Naturally, the media focus has been on the broader implications of the district court’s decision striking down the Affordable Care Act in its entirety.  In our corner of the world, however, we are focusing on the possibility that the district court’s decision, if affirmed in its entirety in the Fifth Circuit and left undisturbed by the Supreme Court, would result in the repeal of the FCA and AKS amendments included in the ACA.

This week’s letter marks a significant shift on the part of DOJ.  The Department had filed a brief in the district court in June of 2018, agreeing with the plaintiff states that the ACA’s individual mandate should be struck down in light of the elimination of the ACA’s penalty provision included in the December 2017 tax bill, but arguing that the remainder of the ACA was severable and should remain in effect.  The battle in the Circuit Court will be momentous, with twenty states and the District of Columbia attempting to save the ACA, facing off against the US and eighteen states determined to see it struck down.

With respect to the provisions of the law bearing directly on qui tam practice, the question is whether the FCA and AKS amendments will survive, either because the effort to strike down the ACA is ultimately unsuccessful or because the provisions of the Act unrelated to the individual mandate are found by the courts to be severable.

We are in touch with Senator Grassley’s office to convey our concerns about DOJ’s change of position and will keep the membership informed.  For context, here are links to the district court’s decision, DOJ’s March 25 letter, and the Department’s June 2018 brief setting forth its earlier position:

Many thanks to Claire Sylvia for her assistance with this update.  Here’s a quick summary of key ACA provisions’ bearing on FCA practice:

AKS amendments

  • Section 1128B of the Social Security Act was amended to state expressly that specific intent is not an element of an AKS violation.  ACA 6402(f)(2).  The amendment eliminated the specific intent element some courts previously required (see, e.g., Hanlester Network v. Shalala, 51 F.3d 1390 (9th Cir. 1995))

  • The amendment explicitly provided that an AKS violation constitutes a false or fraudulent claim under the FCA.  ACA 6402(f)(1)

FCA amendments

  • public disclosure bar.  ACA 10104(j)(2)

  • the provision’s reference to a court lacking “jurisdiction” over publicly disclosed allegations was eliminated and replaced with “. . . the court shall dismiss. . . unless opposed by the Government” (effectively giving DOJ the authority to veto any effort to dismiss under the public disclosure bar)

  • the amendment narrowed the scope of what constitutes a public disclosure, overriding the holding in Graham County that state proceedings triggered the bar

  • the amendment provided that the allegations must be “substantially the same” as the publicly disclosed allegations, rather than “based upon” those allegations

  • public disclosure under the FCA is now limited to (a) federal criminal, civil, and administrative proceedings in which the government or its agent is a party; (b) federal reports, hearings, audits, or investigations; or (c) disclosures from the news media.  State proceedings and private litigation are not qualifying public disclosures

  • the amendment relaxed the requirements for qualification as an original source (replacing the requirement that person have “direct and independent knowledge of the allegations).  Now a relator must either 1) voluntarily provide information to the government prior to the public disclosure, or 2) voluntarily disclose prior to the filing and the information must be independent of and “materially add” to the publicly disclosed allegations

  • retention of overpayments

  • Section 6402 of the Act established that any “identified overpayment” that is not reported and repaid within 60 days is an “obligation” under the reverse false claims provision of the FCA (3730(a)(1)(G)).  (An earlier amendment to the FCA had expanded the definition of “obligation” under the FCA to expressly include “retention of overpayments.”)

  • “overpayment” is defined as any Medicare or Medicaid funds received or retained

  • “Person” is defined to include a “provider of services” or a “supplier”

Other ACA provisions

  • anti-fraud and abuse provisions requiring new compliance procedures and policies in the healthcare industry

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