The FCA continues to be the federal government’s primary civil enforcement tool for investigating allegations that healthcare providers or government contractors defrauded the federal government. In the coming weeks, we will take a closer look at recent legal developments involving the FCA. This week, we examine the requirement that a relator plead and prove that a defendant acted with the requisite level of knowledge to establish an FCA claim and evaluate how courts have evaluated this issue in recent cases.

In U.S. ex rel. Saldivar v. Fresenius Medical Care Holdings, Inc., 2015 WL 7293156 (N.D. Ga. Oct. 30, 2015), the district court granted Fresenius’s motion for summary judgment, holding that no reasonable jury could find that Fresenius acted “knowingly.” The relator alleged that Fresenius violated the FCA by impermissibly billing Medicare for overfill in medication vials. The district court explained—in a 108-page opinion—that the relator could not prove that Fresenius knew its billing for overfills was impermissible or that it acted with deliberate ignorance or reckless disregard as to whether such billing was permissible. The district court focused on whether Fresenius had actual knowledge that it should not seek Medicare reimbursement for overfills. Key to this analysis were the facts that: (1) Fresenius relied on counsel in determining whether to bill Medicare and the law was silent on this issue during the relevant time period; (2) Fresenius and its counsel believed that many companies had billed for overfills and that the government knowingly reimbursed those companies for years; (3) Fresenius was very serious in its efforts to comply with Medicare rules and regulations; and (4) Fresenius had previously disclosed its overfill billing to the government, but was never warned that its actions were improper.

In U.S. ex rel. Fowler v. Evercare Hospice, Inc., 2015 WL 5568614 (D. Colo. Sept. 21, 2015), the district court denied a motion to dismiss claims that Evercare knowingly made fraudulent claims for hospice patients for whom there was no documentation of terminal illness. The district court found that the government sufficiently pleaded knowledge by alleging that Evercare pressured employees to admit patients, failed to train nurses to recognize when patients were terminally ill and threatened physicians who declined patient admissions. The district court considered Evercare’s failure to ensure that physicians received adequate clinical information and its influence over physicians’ judgment were sufficient allegations to plead, at a minimum, that Evercare acted in reckless disregard of the truth or falsity of its claims.

In U.S. ex rel. Estate of Donegan v. Anesthesia Associates of Kansas City, PC, 2015 WL 3616640 (W.D. Mo. June 9, 2015), the district court granted the defendant’s motion for summary judgment on allegations that it violated the FCA by submitting anesthesiology claims for which anesthesiologists did not participate in a patient’s “emergence.” The district court found that the relator could not prove the defendant knowingly submitted a false claim because the meaning of “emergence” in Medicare regulations is ambiguous and the defendant’s interpretation of the term was reasonable. Although the district court noted the defendant’s interpretation was “opportunistic because it has a financial motive to interpret the regulation this way,” it found that a defendant was not culpable simply for “taking advantage of a disputed legal question.”

Following more than a decade of litigation in U.S. ex rel. Kirk v. Schindler Elevator Corp., 926 F.Supp.2d 510 (S.D.N.Y. 2015), the district court granted summary judgment in favor of Schindler Elevator on the issue of knowledge. The relator alleged that Schindler failed to comply with the Vietnam Era Veterans Readjustment Assistance Act and associated regulations by submitting false annual reports about the number of veterans employed by the company. The relator also alleged that Schindler’s failure to have a mechanism for counting veterans amounted to reckless disregard. The district court found that failing to have a written policy for statutory or regulatory compliance—where none is required by statute or regulation—cannot establish scienter under the FCA by itself. Furthermore, because the district court determined that there was a legitimate disagreement regarding the interpretations of the regulations and that Schindler acted in good faith, the court found that Schindler did not knowingly submit a false claim. Finally, the district court found that allegations of an employee’s identification of errors in a company’s data collection or a recognized need for better quality control do not constitute reckless disregard within the meaning of the FCA.