False Claims Act

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Judge Kathryn Kimball Mizelle in the Middle District of Florida has once again ruled that the qui tam relator provisions of the False Claims Act (FCA) violated the Appointments Clause of the U.S. Constitution. In a May 29, 2025 order in United States ex rel. Gose v. Native American Services Corp., Judge Mizelle followed the same logic that led to her ruling last fall in United States ex rel. Zafirov v. Florida Medical Associates, LLC.   

In Zafirov, Judge Mizelle ruled that the FCA’s provisions that permit a private citizen to bring a claim in the absence of intervention by the federal government are unconstitutional because they established a mechanism whereby “unaccountable, unsworn, private actors” are permitted “to exercise core executive power with substantial consequences to members of the public.”  In reaching this conclusion, Judge Mizelle, who clerked for Justice Thomas, followed reasoning in a dissent by Justice Thomas in the decision United States ex rel. Polansky v. Executive Health Resources, Inc. (599 U.S. 419).

Zafirov has been appealed to the U.S. Court of Appeals for the Eleventh Circuit. The parties have completed briefing in the case, but the court has not yet scheduled oral argument. In the absence of an appellate ruling to the contrary, Judge Mizelle continues to apply her analysis to FCA cases before her.Continue Reading Florida judge once again rules against constitutionality of False Claims Act relators

At the Federal Bar Association’s (FBA) Annual Qui Tam Conference on February 20, 2025, Department of Justice (DOJ) representatives Michael Granston (Deputy Assistant Attorney General for Commercial Litigation) and Jamie Yavelberg (Director of the Fraud Section in the Civil Division) discussed enforcement priorities for the False Claims Act (FCA), including Medicare Advantage, cybersecurity, and pandemic…

On January 15, the Department of Justice (DOJ) reported that False Claims Act (FCA) recoveries for civil cases in fiscal year 2024 totaled approximately $2.9 billion, representing about a $200 million increase from 2023. And these numbers do not account for two major settlements that were reached shortly after the close of the fiscal year that would have added an additional $830 million to the total. Of the total recovered by DOJ in 2024, approximately $1.67 billion (58%) related to matters involving the health care sector. Although a lower percentage of these recoveries related to health care than prior years, the health care sector remains the primary industry under scrutiny.  

For the second year in a row, the total number of qui tam lawsuits increased, demonstrating continued fraud enforcement by the agency and an active environment for private whistleblowers. The 979 qui tam cases filed in 2024 is a new record, blowing past the prior record of 757 cases in 2013 and far exceeding last year’s total of 713. And while the number of government-initiated cases dropped from last year’s record pace, the 423 non qui tam cases filed in 2024 is an order of magnitude higher than any other year since 1986.

This increase in FCA activity comes at a time of uncertainty for the law. As Reed Smith covered last fall, a federal judge in Florida ruled that the qui tam provisions of the FCA violated the Appointments Clause of the Constitution by investing core executive powers into unappointed whistleblowers. That decision followed reasoning in a Supreme Court dissent and is on appeal to the U.S. Court of Appeals for the Eleventh Circuit. Incoming Attorney General Pam Bondi assured senators during her confirmation hearing that she would defend the constitutionality of the provisions.Continue Reading DOJ exceeds $2.9 billion in FCA recoveries in 2024 and reports a record number of qui tams

In the final 2025 Medicare Physician Fee Schedule, which is set to be published in the Federal Register on December 9, the Centers for Medicare and Medicaid Services (CMS) included substantive changes to the regulations governing when a provider must report and return a Medicare overpayment in order to avoid liability under the False Claims…

Are the qui tam provisions of the False Claims Act an unconstitutional delegation of authority to private citizens? One federal court, accepting an invitation from a Supreme Court dissent, ruled the answer is yes.

In an opinion issued yesterday dismissing a False Claims Act case, Judge Kathryn Kimball Mizelle of the U.S. District Court for the Middle District of Florida ruled that the statute’s provisions that permit a private citizen to bring a claim for a violation of the False Claims Act in the absence of intervention by the Federal Government are an unconstitutional delegation of executive authority that violated the Appointments Clause of Article II of the Constitution.

According to the court, the qui tam provisions, as strengthened by the False Claims Act Amendments Act of 1986 (Pub. L. No. 99-562), established a mechanism whereby “unaccountable, unsworn, private actors” are permitted “to exercise core executive power with substantial consequences to members of the public.” The court ruled that such a provision was unconstitutional as it permitted a private citizen to stand in as the “avatar in litigation” in which the interest of the United States is in issue.Continue Reading Are False Claims Act Whistleblower Cases Unconstitutional?

The Department of Justice (DOJ) reported that its False Claims Act (FCA) recoveries for civil cases raked in approximately $2.7 billion for fiscal year 2023, representing a $450 million jump from 2022 recoveries.  Of the $2.7 billion recovered by the DOJ for 2023, approximately $1.8 billion (67%) came from the health care sector.

The real headline, however, may be the record-setting number of new FCA cases initiated in 2023 ­–– 500 initiated by the government and 712 initiated by private relators, for a total 1,212 new cases, over 250 more than the next-highest year (2022). Previous trends aside, this signals busy times ahead for the FCA.Continue Reading DOJ Announces $2.7 Billion in FCA Recoveries and Enforcement Priorities

On October 26, 2023, the Department of Justice (“DOJ”) announced that a Miami federal grand jury returned an indictment charging a Medicare Advantage Organization’s (“MAO”) former director of Medicare risk adjustment analytics with six counts of criminal fraud. DOJ alleged that the MAO received more than $53 million in overpayments from the Centers for Medicare & Medicaid Services (“CMS”) due to false diagnoses submitted on reimbursement claims for beneficiaries enrolled in the MAO’s plans.

What’s perhaps most notable about this matter is that DOJ declined to prosecute the MAO because of the MAO’s significant and timely self-disclosure, cooperation, and remediation efforts, in addition to the MAO’s agreement to repay CMS the full amount of the estimated overpayments.Continue Reading No Criminal Charges for Cooperative Medicare Advantage Organization

As promised back in April in an announcement of its plans to modernize compliance program guidance, the Department of Health and Human Services Office of Inspector General (OIG) issued the first of its new guidance documents for the health care industry on November 6, 2023. The first release is a general compliance program guidance (GCPG) designed to serve as a resource to all segments of the health care industry, regardless of the particular items or services offered.

In its newest release, OIG reiterates its view that the GCPG is by its very nature a voluntary guidebook that can act as a roadmap for a compliance program to follow, but that it is not binding on any individual or entity in the health care industry. This updated GCPG includes the following information for health care compliance programs, which we summarize further below: (1) key Federal authorities for entities engaged in health care business; (2) the seven elements of a compliance program; (3) adaptations for small and large entities; (4) other compliance considerations; and (6) OIG processes and resources.

Additional industry specific compliance guidance documents will be forthcoming, according to OIG, with its first updated guidance setting the stage for those to follow.Continue Reading HHS OIG Issues General Guidance as First Step in Effort to Modernize Compliance Guidance

On February 16, 2023, the Federal Bar Association (FBA) kicked off its sixth annual Qui Tam Conference with its customary “Year in Review” panel, which spotlighted the key False Claims Act (FCA) decisions and developments from 2022. Consistent with the annual press release and FCA recovery statistics issued by the U.S. Department of Justice (DOJ) earlier this month, the panel made clear that despite lower recoveries, 2022 was a busy and important year for FCA enforcement.

For the fiscal year ending September 30, 2022, total FCA recoveries surpassed $2.2 billion. Although this number represented a drop of more than 50% from 2021 when FCA recoveries exceeded $5.7 billion due to several high-profile settlements, 2022 saw a record amount of FCA enforcement activity, with 948 new FCA matters initiated, and 351 settlements and judgments under the FCA: the second-highest number recorded in a single year.Continue Reading FCA enforcement going strong in 2022, particularly in declined health care qui tams

The Centers for Medicare & Medicaid Services (“CMS”) has proposed a new rule that, among other changes, would amend the “identified overpayment” standard in the current regulations for Medicare to align with the False Claims Act’s (“FCA”) “knowingly” standard. The proposed rule plans to remove “the exercise of reasonable diligence” language from the relevant regulations and replace that language with the “knowingly” standard from the FCA.

The regulations at issue — 42 C.F.R. § 401.305(a)(2); 42 C.F.R. § 422.326(c) and 42. C.F.R. § 423.360(c) — are supposed to implement, in part, Section 6402(a) of the Affordable Care Act (“ACA”), codified at 42 U.S.C. § 1320a-7k. This section of the ACA explains that if an overpayment under the various Medicare programs has been identified and has not been reported and returned in a set amount of time, then an enforcement action can be brought under the FCA. This section also states that the terms “knowing” and “knowingly” have the same meaning as under the FCA.

The FCA defines these terms to mean that a person has actual knowledge of information, acts in deliberate ignorance of the truth or falsity of information, or acts in reckless disregard of the truth or falsity of information; the terms do not require a specific intent to defraud. 31 U.S.C. § 3729(b)(1).Continue Reading CMS Proposes Amending Identified Overpayment Rules to Align with FCA Knowledge Standard

The U.S. Court of Appeals for the Eighth Circuit recently weighed in on the causation standard for False Claims Act (“FCA”) cases premised on Anti-Kickback Statute (“AKS”) violations. United States ex rel. Cairns v. D.S. Med. LLC, 42 F.4th 828 (8th Cir. 2022). The panel adopted a strict interpretation, finding that the government or whistleblowers must show a “but-for” causal relationship between kickbacks and claims for payment to establish the requisite link in the FCA liability chain, creating a circuit split on an issue that courts have struggled with for years.

The decision is notable for FCA defendants as it offers support for a defense they have long asserted, and that courts have been reluctant to condone, including an opinion from the U.S. Court of Appeals for the Third Circuit that refused to require a direct causal link between an AKS violation and a false claim.Continue Reading Eighth Circuit Finds “But-For” Causation Standard for AKS-Premised FCA Cases

Supreme Court review of Rule 9(b)’s application in False Claims Act cases may finally be coming whether the Executive Branch likes it or not.

In January, the Supreme Court, which is considering a certiorari petition in Johnson v. Bethany Hospice and Palliative Care, LLC, asked the Solicitor General to weigh in on whether the Court should accept the case. The case presents the question of what Rule 9(b) requires in cases arising under the False Claims Act, which is an important threshold question in many False Claims Act cases resulting in significant motions practice.

As past Solicitors General have done before her, the current Solicitor General’s brief filed late on May 24 argued that the Supreme Court should not grant plenary review because there really isn’t a meaningful circuit split on the issue. The brief also argues that the case is not a good vehicle for Supreme Court review because the district court dismissed the relator’s case on the alternative ground that the relator had not adequately pleaded violations of the federal anti-kickback statute, an issue the U.S. Court of Appeals for the Eleventh Circuit did not reach on appeal.Continue Reading SCOTUS Review of Rule 9(b) in False Claims Act cases may be on the way

On February 23, 2022, the Federal Bar Association (FBA) kicked off its fifth annual Qui Tam Conference to highlight key areas for False Claims Act (FCA) enforcement in the coming year. The conference opened with a keynote address by Gregory E. Demske, Chief Counsel to the Inspector General, Department of Health and Human Services (HHS), Office of Inspector General (OIG). Then, a series of panels analyzed the FCA-related developments from the prior year, recent efforts by the U.S. Department of Justice (DOJ) to combat cybersecurity fraud, and some of the schemes promoting alleged telehealth fraud during the ongoing COVID-19 public health emergency. Based on the comments of government speakers, all speaking in their individual capacities, below are key takeaways of what we expect the government to prioritize in 2022:

Pandemic-related fraud and telehealth fraud are key targets

Reinforcing the DOJ’s current enforcement priorities, we expect the DOJ to continue to focus its resources and enforcement activity on where it stands to recover the most dollars swiftly: pandemic-related fraud (e.g., misuse of CARES Act relief funds) and telehealth fraud.

During his keynote address, Demske similarly acknowledged these two areas of focus and added Medicare Advantage, the opioid epidemic, and nursing homes as ongoing priorities for OIG enforcement. Notably, Demske cited OIG’s Data Analytics Group as a robust resource for the agency to identify anomalies in large data sets (e.g., outlier distributions of CARES Act provider relief funds) that may lead to targeted enforcement.

For more information about the fraud and abuse implications of CARES Act provider relief funds, as well as practical tips for navigating the evolving CARES Act regulatory environment, please check this Reed Smith client alert.
Continue Reading FBA’s 2022 Qui Tam Conference Puts Annual Spotlight on FCA Enforcement Trends and Developments

The Department of Health and Human Services’ Office of Inspector General (OIG) will be lifting its long-standing refusal to accept requests for advisory opinions if the request describes a course of action that is “the same or substantially the same” as a course of action that is either under investigation by OIG, or is the subject of a proceeding involving a governmental agency. As of February 10, 2022, a new final rule issued by the OIG will do away with that restriction and allow entities to request an advisory opinion, even if the requested course of action is the same or substantially the same as one under investigation or is the subject of a proceeding involving a governmental agency. Previously, the OIG’s policy deliberately left unsettled many fraud-and-abuse issues implicated by pending investigations or litigation.

As the final rule points out, however, seeking clarity during a pending investigation or litigation will carry risk: the mere fact that a course of action is the subject of a qui tam case or under investigation “will weigh against the issuance of a favorable advisory opinion because such circumstances generally indicate that the arrangement does not present a sufficiently low risk of fraud and abuse.”

This warning seems to assume that all investigations and litigation have equal merit, which is certainly not the case with matters initiated by self-appointed whistle-blowers under the False Claims Act, who often bring cases with very little merit. Nevertheless, the new rule provides flexibility, and provides opportunities for the OIG to provide guidance to health care companies seeking to develop business opportunities that, for example, a long-pending and/or declined qui tam case may have stymied.Continue Reading Pending investigations/cases no longer prevent OIG advisory opinions

On August 12, 2021, the Seventh Circuit joined the Third, Eighth, Ninth, and D.C. Circuits in holding that the “objective reasonableness” standard for determinations of scienter, as set forth by the Supreme Court in Safeco Insurance Co. of America v. Burr, 551 U.S. 47, 70 (2007), applies in the context of False Claims Act (FCA) litigation.  In doing so, the Seventh Circuit observed that, under Safeco, a defendant cannot possess the requisite scienter under the FCA if: (1) it has an objectively reasonable reading of the statute or regulation; and (2) there was no authoritative guidance warning against its view.  This case has significant implications for defendants in FCA litigation by finding that an objectively reasonable interpretation of the law will defeat allegations of false claims.

Further, the decision is the latest victory in a spate of cases brought by the plaintiffs’ bar claiming that pharmacies are required to report special prices—such as membership club prices or matched competitor prices—as their usual and customary (U&C) prices. Virtually every pharmacy that has operated a membership club has faced scrutiny through actions under the FCA and consumer-class actions. The Seventh Circuit’s decision comes in the wake of the recent jury verdict in favor of CVS in the matter of Carl Washington (formerly known as Corcoran) et al. v. CVS Pharmacy, Inc., No. 15-cv-03504 (N.D. Ca. Jun. 24, 2021).   This victory will support pharmacies’ defenses in other similar litigation alleging the submission of false U&C prices, particularly when the alleged false conduct occurred before 2016, given that the Seventh Circuit found that reporting retail prices—as opposed to special prices such as price matches—was an objectively reasonable approach to U&C reporting.

The Lower Court’s Decision:
Continue Reading Seventh Circuit adopts Safeco objective reasonableness standard in the context of false claims act cases

On May 18, 2021, in a statement issued by the U.S. Department of Health and Human Services’ (HHS) Office of Inspector General, Acting U.S. Attorney for the Eastern District of California, Phillip Talbert, and California Attorney General, Rob Bonta (the Statement), the health care industry was reminded of the prohibition against charging individuals for COVID-19…

On May 14, 2021, the Centers for Medicare & Medicaid Services (CMS) released a new final rule that further delays until December 15, 2021, the effective date of the final rule titled “Medicare Program; Medicare Coverage of Innovative Technology (MCIT) and Definition of ‘Reasonable and Necessary’” (the January 2021 Rule), which was published in the…

In recent years, the U.S. Department of Justice (“DOJ”) has increasingly leveraged data analytics to combat fraud. Principal Deputy Chief of DOJ’s Fraud Section, Joe Beemsterboer, described the department’s data-mining capabilities as the “foundation of how [DOJ] investigate[s] and analyze[s] cases,” and explained that digital forensics equips the department with “powerful” tools for identifying “trends,”…

Effective January 14, 2021, the Internal Revenue Service (“IRS”) implemented a final rule (the “Final Rule”) concerning the tax deductibility of settlement payments made to the government.  This rulemaking followed a legislative update to the Internal Revenue Code of 1986 (“IRC”), which was implemented as part of the 2017 federal tax overhaul and specifically included…

Earlier this month and with little fanfare, the Centers for Medicare & Medicaid Services (CMS) issued a proposed rule that would invoke CMS’s rarely used retroactive-rulemaking authority to essentially ensure that, despite the Supreme Court’s adverse rulemaking decision in Azar v. Allina Health Services, 139 S. Ct. 1804 (2019), CMS will apply the same Medicare payment methodology found procedurally improper in Allina. CMS’s invocation of its retroactive-rulemaking authority to effectively circumvent Allina sets a potentially dangerous precedent that should not go unnoticed by all Medicare stakeholders.
Continue Reading “Contrary to the Public Interest”: CMS invokes retroactive-rulemaking authority to escape consequences of Allina