May 13, 2021

Volume XI, Number 133

Advertisement

May 13, 2021

Subscribe to Latest Legal News and Analysis

May 12, 2021

Subscribe to Latest Legal News and Analysis

May 11, 2021

Subscribe to Latest Legal News and Analysis

High Stakes False Claims Act Suit Dismissed by New York Federal Court

On August 7, 2014, Judge Castel of the Southern District of New York dismissed a False Claims Act (“FCA”) complaint that was based primarily on allegations that the defendant Hospital improperly focused on referral revenue in its physician compensation decisions. The Court insisted that an FCA complaint must set forth specific facts supporting the allegations regarding the impropriety of the payments and at least representative actual claims submitted.

The action was commenced in 2007 and remained under seal for almost seven years while the United States and the State of New York investigated the allegations.  The United States and State of New York declined to pursue the matter in June 2013.  The whistleblower that commenced the action then elected to proceed with the litigation without the government’s assistance seeking over $2 billion in damages and penalties.

U.S. District Court Southern District of New York

The Court held that an FCA complaint that merely describes a fraudulent scheme does not satisfy Federal Rule of Civil Procedure 9(b). Rather, an FCA complaint must set forth facts sufficient to raise a plausible inference that false claims were submitted and specifically identify at least examples of such false claims that were submitted for payment.  (The Second Circuit Court of Appeals has not decided whether a FCA complaint must identify examples of allegedly false claims, and other Circuits are divided on the issue.  District Courts in the Second Circuit have also reached conflicting results.)

Perhaps more significantly, the Court also held that the mere allegations that a hospital paid a physician more than the physician generated in revenue or that it took referral revenue into consideration is not sufficient to state a claim that the hospital’s payments to the physician violated the FCA through underlying violations of the Anti-Kickback Statute and the physician self-referral law (the “Stark Law”).  Rather, the Court explained that a hospital may take into account a physician’s “overall worth to the hospital” in making compensation decisions.

In sum, the Court’s thoughtful and well-reasoned decision is an important development in this area of the law.

Advertisement
© 2021 Proskauer Rose LLP. National Law Review, Volume IV, Number 225
Advertisement
Advertisement

TRENDING LEGAL ANALYSIS

Advertisement
Advertisement

About this Author

Edward S Kornreich, Health Care, Proskauer Law Firm
Partner

Past long-standing Chair of the Health Care Department, Ed Kornreich is a recognized authority on the legal, regulatory and business issues related to health care services.

212-969-3395
Sigal P. Mandelker, White Collar Defense Attorney, Proskauer Law Firm
Partner

Sigal Mandelker is a Partner in the New York office. She is a member of the firm’s White Collar Defense & Investigations, Appellate, International Practice, and Privacy Groups. Sigal represents individual and corporate clients in connection with government investigations and prosecutions, including white collar criminal defense, the FCPA, anti-money laundering matters, SEC and related enforcement matters, internal investigations, public corruption, and cyber security. She has a broad range of experience in domestic and international enforcement matters, appellate litigation,...

212-969-3360
Roger A. Cohen, Health Law Attorney, Proskauer Law Firm
Associate

Roger Cohen is a senior Associate in the Health Care Department. His practice focuses on representing health care and life science clients, including academic medical centers, hospitals, physician organizations, health information technology and medical device companies, private equity firms, and other financial institutions in a wide array of health care regulatory matters.

Law360 recognized Roger as a 2014 “Rising Star,” naming him as one of the top health care lawyers in the country under age 40. Similarly, SuperLawyers named Roger a New York Metro Rising Star...

212-969-3114
Advertisement
Advertisement