AHA, AHIP Urge Supreme Court to Uphold False Claims Act Ruling

The American Hospital Association (AHA) and AHIP have filed an amicus brief challenging the federal government’s interpretation of the False Claims Act, stating that it would adversely impact hospitals, providers, and payers.

The brief was in response to United States v. Supervalu Inc. v. Safeway Inc., which raised the question of the False Claims Act’s scienter element, or defendant’s knowledge and nature of intent. The statute says that liability requires a person to “knowingly” file false claims.

In the consolidated cases, SuperValu and Safeway pharmacies faced allegations that they filed false claims for dispensed prescription drugs under Medicare and Medicaid programs.

The whistleblowers alleged that the pharmacies failed to account for discounts when reporting their “usual and customary” prices for prescription medication. Pharmacies must submit the “usual and customary” figures to the federal government, which then factors the discounts into the reimbursement calculation.

Since the pharmacies did not report the discounts, the whistleblowers alleged that they received inflation reimbursement from the government.

The US Seventh Circuit Court of Appeals sided with the pharmacies. It ruled that the relators failed to establish that the defendants acted “knowingly” or acted with reckless disregard when they did not report the discounts. Therefore, the Court determined that the defendants could not be liable under the False Claims Act.

AHA and AHIP have jointly filed an amicus brief urging the Supreme Court to uphold the appeals court ruling. Given the different stakeholders they represent, the organizations usually have opposing views on healthcare policies. However, they agreed that the current interpretation of the False Claims Act does not benefit providers or payers.

“While AHA and AHIP may not always share the same opinion on matters of litigation and policy, we agree that the current regulatory landscape and construction of the False Claims Act creates an untenable situation for healthcare providers and health insurance providers,” the organizations said in a statement. “If the government’s argument is accepted, our members will be forced to spend more on litigation and less on patient care.”

The amicus brief highlighted how Medicare and Medicaid continue to operate due to provider and payer participation, but this participation requires navigating complex statutory, regulatory, and sub-regulatory requirements.

The federal government has contended that due to its limited resources, regulated entities are responsible for seeking clarification of complex legal obligations to avoid liability under the False Claims Act, despite acknowledging the potential ambiguity in its statutes of regulations.

“In such cases, even if a defendant’s conduct comports with an objectively reasonable construction of an ambiguous regulatory requirement, the defendant can still face FCA allegations and be exposed to punitive treble damages, statutory penalties, and reputational harm if the government or a court ultimately rejects its reasonable construction,” AHA and AHIP wrote in the brief.

According to the organizations, placing the onus on regulated entities would divert resources away from the main focuses of healthcare providers and payers: providing quality care to patients and reducing care costs.

“We urge the Supreme Court to adopt an interpretation of the FCA that does not undermine the ability of our members to ensure that Americans have access to high-quality, affordable healthcare,” AHA and AHIP wrote.