Healthcare Industry Eagerly Awaits Supreme Court Ruling in United States, ex rel. Polansky v. Executive Health Resources

Jon Wingens

Introduction

The healthcare industry is waiting with bated breath as it anticipates a Supreme Court decision this term in United States, ex rel. Polansky v. Executive Health Resources, Inc.[1] The case turns on a highly technical debate over how the statutory language of the qui tam provisions of the False Claims Act operates, but the consequences promise to be anything but academic. Demonstrating how important the outcome of this case is to the healthcare industry, multiple large healthcare organizations have filed amicus briefs opposing a reading of the statute that threatens to open up hospitals and other healthcare providers to increasingly expensive lawsuits brought by private citizens, in the name of the government.[2] For example, the Advanced Medical Technology Association, the Pharmaceutical Research and Manufacturers of America, the American Health Care Association, and the American Hospitals Association have all filed amicus briefs in the case (with the latter two co-signing an amicus brief with the Chamber of Commerce).[3] This post explains what is at issue in this case and why many healthcare organizations are tracking it closely.

The False Claims Act and Qui Tam Provisions

 At issue in Polansky is the ability of the government to dismiss a civil action brought by a private individual against another person or corporation for violating the False Claims Act, which creates liability for any person who “knowingly presents, or causes to be presented, a false or fraudulent claim for payment or approval.”[4] The Act is a potent tool for fighting fraud because (1) it carries exorbitant penalties and (2) it is one of only two federal statutes to allow qui tam enforcement—enforcement of federal law by private individuals.[5]

The punishment for false claims submitted to the government, say, by a doctor improperly billing Medicare, is calculated by adding a penalty of $5,000–$10,000 (which is adjusted for inflation over time) for each false claim and three times the damages suffered by the government as a result of the submission of the false claim(s).[6] This can result in remarkable penalties. For example, in United States v. Lorenzo, the government brought a False Claims Act action against a dentist who had submitted roughly $130,000 worth of false claims to the government. The result was a judgment against the defendant of over $18 million.[7] The Supreme Court has described the penalty scheme as “essentially punitive in nature.”[8]

Qui tam statutes enlist the public to aid the government in recovering civil penalties from those who have defrauded the government, by allowing individual relators—individuals who bring lawsuits on behalf of other parties (in this instance, on behalf of the government)—to bring an action for fraud on behalf of the government, and rewarding the relators with a share of any damages received at the end of the action.[9] The qui tam nature of the False Claims Act allows the government to combat fraud on a much wider scale than if only government attorneys could bring actions under the Act. And, qui tam actions have become even more important with time: in 2021, $1.6 billion out of the $5.6 billion recovered through settlements and judgments in False Claims Act cases arose from lawsuits filed under the qui tam provisions of the Act.[10] That year, qui tam plaintiffs filed 598 False Claim Act claims.[11] By comparison, in 1988, two years after Congress passed amendments to further incentivize the use of qui tam actions, qui tam plaintiffs filed just 43 of these claims.[12] The intention behind strong qui tam provisions was to create broader enforcement to fight an ever-growing problem, and it appears to be achieving that goal.[13]

The Dispute in Polansky

The question the Supreme Court faces in Polansky is how easy it should be for the government to dismiss an action brought by a private relator, which the government initially allowed the relator to proceed with unbothered. A dismissal would mean relief from liability for the defendant. The False Claims Act qui tam provisions provide the government an initial choice to allow a qui tam relator to proceed with an action or to take over that action from the relator (which would allow the government to move to dismiss, if it so desires).[14] Then, the statute proceeds to define a series of rights and obligations that attach to the government and the relator depending on the government’s initial choice. Central to the instant dispute is whether the provision that states “[t]he Government may dismiss the action notwithstanding the objections of the [relator] if the [relator] has ... [notice and] an opportunity for a hearing”[15] applies regardless of the government’s decision at the outset or if an initial decision not to intervene makes it harder or impossible for the government to dismiss the relator’s suit.

In this case, Dr. Jesse Polansky worked at Executive Health Resources (“EHR”) as the company’s Executive Medical Director. EHR is a physician advisory service that reviews and certifies Medicare billing submitted by hospitals and physicians. While at the company, Dr. Polansky alleges that he noticed EHR encouraging its clients to exploit the difference in reimbursement rates for inpatient and outpatient services by having them intentionally misclassify patients who received outpatient care, as having received inpatient care. If Polansky’s allegations are correct, EHR’s clients submitted hundreds of thousands of fraudulent claims to the government. Medicare generally pays thousands more dollars for inpatient care than for outpatient care so this behavior would have resulted in substantial excessive spending by the government. After years of allowing Polansky to litigate, the government moved to summarily dismiss the case. The Supreme Court must now decide if that was proper.

The Stakes for the Healthcare Industry

In 2021, as with most previous years, health care fraud enforcement was the number one source of the government’s False Claims Act settlements: of the $5.6 billion recovered from settlements in 2021, $5 billion was related to the health care industry.[16] For example, the False Claims Act was instrumental in prosecuting Purdue Pharma for its substantial role in exacerbating the country’s opioid epidemic.[17] Relatedly, qui tam actions have become an increasingly substantial source of False Claims Act suits: in 1987, qui tam suits made up about 8% of actions brought under the False Claims Act, but in 2021, they accounted for roughly 75%.[18] Often, former employees of healthcare organizations are the whistleblowers bringing qui tam actions against their former employers.[19] The plaintiff in Polansky was a medical professional who worked at EHR before learning of its allegedly fraudulent behavior.

Health care providers have bemoaned the use of the False Claims Act against them, describing it as overreach and arguing that the qui tam provision is akin to permitting bounty hunters to run amok without considering the types of costs and benefits that an ordinary government agency would assess.[20] The Trump Justice Department responded to these complaints by issuing an agency memorandum instructing government lawyers to be “judicious” in exercising their dismissal authority, keeping an eye to “advanc[ing] the government’s interests, preserv[ing] limited resources, and avoid[ing] adverse precedent.”[21] Essentially, the Department of Justice told its lawyers to strongly consider dismissing qui tam suits. This memo—and its aftereffects—have been welcomed by the health care industry.[22] If the Supreme Court chooses to bolster the government’s dismissal authority in the Polansky case, healthcare organizations will, as with the Trump administration’s memo, consider that a victory in their fight against qui tam actions.

 

[1] U.S., Ex Rel. Jesse Polansky, M.D., MPH, Petitioner v. Executive Health Resources, 142 S. Ct. 2834 (No. 21-1052).

[2] See 31 U.S.C. § 3730(b)(1) (stating that a an individual may bring an action “for the United States” and “in the name of the government”).

[3] Brief of Advanced Medical Technology Association as amicus curiae in support of respondents, U.S., Ex Rel. Jesse Polansky, M.D., MPH, Petitioner v. Executive Health Resources, 142 S. Ct. 2834 (No. 21-1052); Brief of Pharmaceutical Research and Manufacturers of America as amicus curiae in support of respondents, U.S., Ex Rel. Jesse Polansky, M.D., MPH, Petitioner v. Executive Health Resources, 142 S. Ct. 2834 (No. 21-1052); Brief of the Chamber of Commerce for the United States of America, et al. as amicus curiae in support of respondents, U.S., Ex Rel. Jesse Polansky, M.D., MPH, Petitioner v. Executive Health Resources, 142 S. Ct. 2834 (No. 21-1052).

[4] 31 U.S.C. § 3729(a)(1).

[5] Charles Doyle, Cong. Rsch. Serv., Qui Tam: The False Claims Act and Related Federal Statutes (2013).

[6] 31 U.S.C § 3729(a).

[7] United States v. Lorenzo, 768 F. Supp. 1127 (E.D. Pa. 1991).

[8] Vermont Agency of Nat. Res. v. U.S. ex rel. Stevens, 529 U.S. 765, 784 (2000).

[9] Id.

[10] Press Release, Dep’t. of Just., Justice Department’s False Claims Act Settlements and Judgments Exceed $5.6 Billion in Fiscal Year 202,  (Feb. 2, 2022), https://www.justice.gov/opa/pr/justice-department-s-false-claims-act-settlements-and-judgments-exceed-56-billion-fiscal-year.

[11] Id.

[12] Id.

[13] S. Rep. No. 99-345, at 2 (“only a coordinated effort of both the Government and the citizenry will decrease this wave of defrauding public funds”).

[14] 31 U.S.C § 3730(b)(4).

[15] 31 U.S.C. 3730(c)(2)(A).

[16] Press Release, Dep’t. of Just., Justice Department’s False Claims Act Settlements and Judgments Exceed $5.6 Billion in Fiscal Year 202,  (Feb. 2, 2022), https://www.justice.gov/opa/pr/justice-department-s-false-claims-act-settlements-and-judgments-exceed-56-billion-fiscal-year.

[17] Id.

[18] Id.

[19] E.g., United States v. Chattanooga-Hamilton Cnty. Hosp. Auth., 782 F.3d 260 (6th Cir. 2015) (Where the plaintiff was the Interim Director of Care Management for the defendant – a healthcare service provider that operated throughout Tennessee) ; U.S. ex rel. White v. Gentiva Health Servs., Inc., No. 3:10-CV-394-PLR-CCS, 2014 WL 2893223, at *1 (E.D. Tenn. June 25, 2014) (Where the plaintiff was a registered nurse and Director of Clinical Operations and Services for the defendant – a home-health agency).

[20] See Melinda Hatton, DOJ Memos Chart a New Course on False Claims Act Enforcement, American Hospital Association (2018), https://www.aha.org/news/blog/2018-02-09-doj-memos-chart-new-course-false-claims-act-enforcement.

[21] Memorandum from Michael D. Granston, Dir., Com. Litig., Fraud Section, Dep’t. of Just. (Jan. 10, 2018), https://www.insidethefalseclaimsact.com/wp-content/uploads/sites/860/2018/12/Granston-Memo.pdf.

[22] Douglas Hallward-Driemeier et. al., DOJ’s Granston Memo and Recent Government-Requested Dismissal of False Claims Act Case Have Significant Implications for FDA-Regulated Entities, Ropes & Gray (2019), https://www.ropesgray.com/en/newsroom/alerts/2019/11/dojs-granston-memo-and-recent-government-requested-dismissal-of-false-claims-act-case.