The Fourth Circuit recently held that providers may not defend a False Claims Act (“FCA”) lawsuit by arguing that eligibility requirements violate the Medicaid Act. Rather, liability under the FCA may still be established if any misrepresentations made by a provider influenced decision-makers and resulted in the submission of false claims to the government.
In United States v. Walgreen Co., the government alleged a clinical pharmacy manager for a Tennessee Walgreens falsified twelve different patients’ medical records between January 2015 and June 2016. These records were falsified for the patients to receive various medications to treat Hepatitis C by passing a two-part prior authorization test. These medications were “extremely expensive,” and resulted in more than a 320% increase in this store’s revenue. Initially, this manager informed her store manager that she was an “expert” in customizing appeal letters to Medicaid, but in actuality, she was falsifying patients’ medical records to obtain this coverage. Walgreens learned of the fraud as early as 2016.
Walgreens argued that the misrepresentations could not be considered material because “they went to eligibility requirements that violated the Medicaid Act,” meaning that these drugs should have been covered regardless of the misrepresentations. The government on the other hand argued that Walgreens could not defend against its fraudulent actions by attacking the validity of the eligibility requirements. The government also argued that regardless of the Medicaid Act, the representations influenced decision-makers and thus were material and resulted in an FCA violation.
The Fourth Circuit reversed the district court’s decision dismissing the government’s action and held that the government alleged sufficient facts to establish materiality. Here, the claims containing truthful information did not satisfy the eligibility requirements. It was only after fraudulent information was submitted that the decision makers “changed course” and approved these expensive medications. Because Walgreens’ actions had “a natural tendency to influence or were capable of influencing” the decision makers, this met the FCA’s materiality requirement. The court also stated that there was no dispute that Walgreens did submit fraudulent information and that allowing Walgreens to potentially avoid FCA liability by arguing the validity of eligibility requirements “only after getting caught would hinder the [FCA’s] purpose of holding fraudsters accountable.”
Practical Takeaways
Altering a patient’s medical information is fraudulent under the FCA. This is true no matter if the underlying eligibility requirements are proper at the time the claim was submitted. If a piece of information is considered material and results in payment of a false claim, it may result in liability under the FCA. Providers should work with legal counsel to ensure that claims are submitted properly with the correct information and that their employees are aware of the ramifications of altering records to obtain prior authorizations.
If you have any questions, please contact:
- David Honig at (317) 977-1447 or dhonig@hallrender.com;
- Jessica Biondo at (248) 519-3093 or jbiondo@hallrender.com; or
- Your primary Hall Render contact.
Hall Render blog posts and articles are intended for informational purposes only. For ethical reasons, Hall Render attorneys cannot—outside of an attorney-client relationship—answer specific questions that would be legal advice.
