Hospital groups express concern over earlier court ruling that could expand False Claims Act liability

The groups argue that allowing FCA claims to be brought for post-termination actions would defy congressional intent and leave hospitals subject to excessive financial liability.

Hospital advocates are hoping the U.S. Supreme Court will agree to review a case stemming from a recent appeals court decision involving the False Claims Act (FCA).

The American Hospital Association, Federation of American Hospitals and four state hospital associations have petitioned the Supreme Court to review a March 2021 decision in which the U.S. Court of Appeals for the Sixth Circuit ruled that anti-retaliation provisions of the FCA are grounds for an employee to challenge post-termination actions taken by an employer.

The hospital groups’ amicus brief states that the decision “erroneously exposes employers to virtually unbounded retaliation liability.”

The circumstances of the case

The case in question involved a physician who initially filed a qui tam complaint alleging that his employer, William Beaumont Hospital in Royal Oak, Michigan, had violated the FCA and the Michigan Medicaid False Claims Act (qui tam refers to actions in which a private party brings a complaint on behalf of the government and is eligible to receive damages). The physician also alleged the hospital had taken retaliatory actions against him that affected his standing.

The claim was settled with involvement from federal and state regulatory authorities, but the physician amended the complaint to allege that the hospital terminated him unfairly and then undermined his efforts to find a comparable job elsewhere. A district court dismissed the latter part of that claim, ruling that FCA provisions apply only to actions taken against a current employee. But the appeals court ruled that the term employee in the statute can be interpreted to mean former employees as well.  

The appeals court acknowledged that the decision could create ambiguity because the Tenth Circuit Court of Appeals ruled in 2018 that FCA anti-retaliatory protections exclude former employees. The split appears to make review by the Supreme Court more likely.

Reasons for concern among hospitals

The amicus brief details reasons why expanded liability under the FCA would adversely affect hospitals.

Of 922 FCA matters filed in 2020, the brief states, 573 involved healthcare defendants. Of qui tam cases specifically, 70% involved healthcare entities.

“Hospitals are heavily regulated; the regulations governing them are often impenetrable; and they receive a majority of their reimbursement from government healthcare programs,” according to the amicus brief. “Together, those factors make them uniquely vulnerable to FCA claims, many of which are dismissed as meritless despite having already imposed significant costs on hospitals.”

A specific concern is that hospitals submit a large number of claims to the government, which provides billions of dollars in payments each year. “This vastly increases the number of claims that can be included in a single FCA suit,” the brief states, adding that the situation is exacerbated because the FCA generally has a six-year statute of limitations and provides for treble damages relative to the claimed amount.

The brief adds that implementing the March ruling “would make this untenable situation even worse” and would misconstrue statutory intent.

The financial hit from greater FCA exposure would be drastic, the groups wrote, “and will almost certainly divert scarce resources from [hospitals’] core mission of providing patient care and improving the health of their communities.”