On September 30, US District Judge Kathryn Kimball Mizelle from the Middle District of Florida ruled in a landmark decision that the qui tam provision of the federal False Claims Act (FCA) is unconstitutional. This ruling could have significant impact on whistleblower (Qui Tam) actions filed against healthcare providers, particularly home health and hospice (most volume of late).
In the case of Zafirov v. Florida Medical Associates LLC, Judge Mizelle ruled that the provision allowing relators (whistleblowers) to file actions on behalf of the United States for alleged violations of the FCA conflicts with Article II of the US Constitution. Zafirov was an employee and alleged the qui tam action against Medical Associates and others claiming that they violated the False Claims Act by misrepresenting patient conditions in billing Medicare. Federal Court Strikes Down Qui Tam Provision of False Claims Act | Maynard Nexsen – JDSupra
The court determined that a relator’s authority to initiate federal enforcement actions effectively positions them as an officer of the executive branch, albeit without a formal appointment by the President of the United States or any other designated authority.
Essentially, the Judge ruled that the relator in this case, if pursuing the suit without the government taking the task, is an officer of the United States, “bringing a civil enforcement action on behalf of the United States to vindicate a public right and with discretion and authority to prosecute the action to final judgment however the relator chooses (i.e., a core executive power) is an exercise of significant authority”.
The decision concluded that a relator was subject to the Appointments Clause, requiring that an officer be either nominated by the President and confirmed by the Senate or appointed by the President, a head of a department, or a court to a position established by law. The judge’s decision is available here: Mizelle Florida Court Opinion
The vast majority of False Claims Act cases are brought by qui tam whistleblowers. For instance, in Fiscal Year 2023, such cases accounted for $2.3 billion of the total $2.68 billion reclaimed by the government through FCA settlements and judgments. FCA (whistleblower) cases have been rampant in the hospice and home health space over the last several years.
A few recent cases are illustrative of False Claims Act/qui tam actions in the home health and hospice space.
- A The Dallas-based home health and hospice provider, Intrepid USA, has agreed to a $3.85 million settlement with the U.S. Justice Department. This settlement aims to resolve claims of alleged violations of the False Claims Act, which arose from two qui tam lawsuits. It is important to note that the settlement pertains solely to the allegations, with no finding of liability, as stated by the Justice Department.
- This year, Gentiva agreed to pay $19.4 million to settle False Claims Act allegations that existed before the company acquired Kindred at Home. Gentiva’s parent company, the private equity firm Clayton, Dubilier & Rice, purchased a 60% stake in Kindred at Home’s hospice assets in 2022 for $2.8 million, while the former owner, Humana Inc. (NYSE: HUM), kept the remaining 40%.
I’ve written a number of articles (posts) on this site regarding the False Claims Act and its implications for providers. For readers that want to know more, search the site or start here as this is a good primer post: https://rhislop3.com/2012/11/27/false-claims-act-providers-beware/