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Medicare Secondary Payer Compliance: The False Claims Act (FCA) for Providers (Part VI)

This is part 6 of 7 in the Medicare Secondary Payer Compliance series. All titles in this series can be viewed below. Subscribe to our blog to receive these future updates. Prior installments of this series can be accessed using the links provided.

The federal government’s most powerful and popular enforcement tool for Medicare and Medicaid reimbursement matters is the False Claims Act, 31 U.S.C. §§ 3729 et seq.. The FCA is a federal law that imposes fines and penalties on individuals and entities that submit false or fraudulent claims to the federal government, cause a false or fraudulent claim to be submitted, or submit a false certification of compliance with a law in order to have a claim paid by the government. A violation of the FCA can lead to the payment of triple damages, attorney’s fees, and fines for each false or fraudulent claim. False certifications may be expressly stated, such as when a contractor affirmatively states that it has complied with specific legal requirements, or may be implied, based on the theory that each claim or invoice would not be paid by the government unless all of the legal prerequisites have been met even if they are not expressly stated in the claim itself.  The “implied false certification” theory of wrongdoing under the FCA was endorsed recently by the Supreme Court’s decision in Universal Health Services, Inc. v. United States ex rel. Escobar, which expands the potential for Medicare Secondary Payer (MSP) enforcement.[1]  The Supreme Court ruled that an implied false certification action can survive if the defendant made a misrepresentation “about compliance with a statutory, regulatory, or contractual requirement [that is] material to the Government’s payment decision.”  Through the implied false certification theory of liability both relators and the government have a potentially powerful tool to regulate noncompliance with several regulations and statutes, including the MSP.  One recent decision helps explain how the Escobar analysis is applied by trial courts. United States ex rel. Jersey Strong Pediatrics, LLC v. Wanaque Convalescent Center et al.[2]

In this case, a qui tam whistleblower (or relator) alleges that Wanaque Convalescent Center billed only Medicare/Medicaid for services rendered to patients admitted to its skilled nursing facility and failed to bill any third party, which resulted in overpayments triggering MSP and FCA liability.  In its amended complaint, the whistleblower detailed eight instances of allegedly incorrect billing where the patient’s medical record listed Medicare or Medicaid as payers even though the patient had multiple forms of insurance.[3]

The defendants filed a motion to dismiss the amended complaint, arguing that false claims were not submitted as private insurance plans did not cover the services rendered, and that this resulted in Medicare or Medicaid becoming the primary payer for the specific services.  The defendants further contended that the relator’s allegations lacked the heightened materiality standard set forth in Escobar, claiming that the relator merely cited to federal regulations that the relator deemed “material” to the government’s decision to reimburse, rather than providing specific facts that any claim for payment has been rejected as being noncompliant with the MSP or any other regulation.[4]  The relator responded that noncompliance with the MSP satisfies the “materiality” standard set by Escobar.

The court denied the motion to dismiss, noting that the government has a great interest in ensuring strict compliance with the MSP, and therefore compliance with the MSP is “material” to the government’s decision to render payment.  The court found that the amended complaint alleged sufficient detail to put the defendants on notice, sufficiently pled knowledge, and found that the relator sufficiently pled that “MSP laws are material to the government’s decision to pay Medicare/Medicaid claims in this context.”[5]

As this moves forward from the initial pleadings, the key issue is whether the defendant may be liable under the FCA for violations of the MSP for submitting allegedly improper claims to Medicare or Medicaid as the primary payer and impliedly certifying those claims as compliant with all federal laws and regulations.[6]

Small and mid-sized providers in particular should be alert to the application of this law, particularly if their payment and billing system is not as sophisticated as may be seen in a larger hospital system or medical group. Although there were Medicare and Medicaid beneficiaries who were disabled, the MSP law applies equally for those that are injured and may receive recovery, such as someone in a car accident. As part of a compliant screening process for patients, providers may want to inquire before or during the treatment of a patient whether the injuries of the patient were the result of an accident involving a third party. If so, providers should  be aware of potential billing issues that may arise if a third party is responsible  for the primary payment of a patient’s medical costs.

Andrew Kuder, a Law Clerk (not admitted to the practice of law) in the firm’s Newark office, contributed significantly to the preparation of this post.

[1] 136 S. Ct. 1989, 1996 (2016).

[2] United States ex rel. Jersey Strong Pediatrics v. Wanaque Convalescent Ctr., No. 14-6651-SDW-SCM, 2017 U.S. Dist. LEXIS 150566 (D.N.J. Sept. 18, 2017).

[3] Am. Compl. ¶¶ 76-127.

[4] Defs. Mot. to Dismiss the First Am. Compl., 5-7 (Aug. 29, 2017).

[5] Wanaque Convalescent Ctr., 2017 U.S. Dist. LEXIS 150566 at *7-9.

[6] Id. at *7-8.

©2018 Epstein Becker & Green, P.C. All rights reserved.


About this Author

Gary Herschman, Epstein Becker Law Firm, Healthcare Attorney

GARY W. HERSCHMAN is a Member of the Firm in the Health Care and Life Sciences practice, in the Newark and New York offices of Epstein Becker Green. He also serves on Epstein Becker Green’s National Health Care and Life Sciences Steering Committee, and prior to joining the firm, Mr. Herschman was Co-Chair of the Health Care Practice Group of a large regional law firm. He is also a member of the firm's Board of Directors.

Mr. Herschman represents a diverse group of health care clients, including health systems, hospitals, nursing...

Melissa Jampol, Epstein Becker Law Firm, Health Care Attorney

Melissa Jampol is a Member of the Firm in the Health Care and Life Sciences and Litigation practices, in the New York office of Epstein Becker Green. A former federal and state prosecutor, Ms. Jampol represents health care organizations, and their officers and directors, in a variety of enforcement matters at both the state and federal levels.

During her tenure as an Assistant U.S. Attorney in the U.S. Attorney’s Office for the District of New Jersey, Ms. Jampol served in the Health Care and Government Fraud, Violent Crime, and Organized Crime & Gang Units, where she led significant, complex investigations and prosecuted a broad range of high-profile criminal cases, including those involving health care fraud, money laundering, mail and wire fraud, tax fraud, Anti-Kickback Statute violations, child abuse, violations of racketeering (RICO) statutes, and securities fraud. She previously served as an Assistant District Attorney at the New York County (Manhattan) District Attorney's Office, where she investigated and prosecuted sex crimes and violent crimes and led investigative teams on money-laundering and tax-evasion cases.

Robert E. Wanerman, Epstein Becker Green, Health Lawyer

ROBERT E. WANERMAN is a Member of the Firm in the Health Care and Life Sciences practice, in the Washington, DC, office of Epstein Becker Green. His practice concentrates on regulatory, reimbursement, and compliance matters affecting health care manufacturers, service providers, and investors in health care organizations. He has extensive experience counseling clients in matters arising under the Medicare and Medicaid programs, administrative law and procedure, the False Claims Act, clinical research rules, grant administration rules, the Anti-Kickback and Stark laws,...

Tristan Potter-Strait Healthcare Lawyer Epstein

Tristan A. Potter-​Strait is an Associate in the Health Care and Life Sciences practice, in the Newark office of Epstein Becker Green. She will be focusing her practice on such areas as fraud and abuse, compliance, transactional regulatory health care due diligence, and government investigations. 

Ms. Potter-Strait received her J.D., cum laude and with a concentration in Health Law, from Seton Hall University School of Law, where she also earned a Health Care Compliance Certification, received the school’s Health Law Award.