December 28, 2022

The Department of Justice’s Authority in False Claims Act Cases

On December 6, 2022, the United States Supreme Court heard oral argument in United States ex rel. Polansky v. Executive Health Resources, Inc., a case regarding the government’s authority to dismiss a False Claims Act qui tam suit after it initially declined to pursue the suit. The facts of the case are straightforward. Respondent Executive Health Resources Inc. (“EHR”) is a company that provides review and billing certification services to hospitals and physicians that bill Medicare. EHR’s consultant physicians review determinations by doctors about whether certain patients are eligible for inpatient status under the Centers for Medicare and Medicaid Services (“CMS”) regulations. Dr. Jesse Polansky was an official at CMS before consulting for EHR. While working as a consultant for EHR, Dr. Polansky suspected that EHR was systematically enabling providers to over-bill Medicare by certifying for inpatient services that should have been provided on an outpatient basis. Dr. Polansky brought a qui tam action against EHR under the False Claims Act.
The suit brought by Dr. Polansky remained under seal for two years while the government investigated. After the investigation concluded, the government decided that it would not participate in the case against EHR. The case was then unsealed, and Dr. Polansky decided to proceed as the plaintiff in the United States District Court for the Eastern District of Pennsylvania. While the case was being litigated, the government notified the parties of its intent to dismiss the action. The government cited § 3730(c) of the False Claims Act for its dismissal authority which provides that “if the government proceeds with the action…[it] may dismiss the action notwithstanding the objections of the [relator]” if the relator receives notice and an opportunity for a hearing on the motion. The District Court granted the government’s motion to dismiss, but in doing so, acknowledged that it was unclear exactly what standard applied to such dismissal.
Dr. Polansky appealed to the United States Court of Appeals for the Third Circuit. The Court there considered whether, and if so when, the False Claims Act requires the government to intervene before seeking dismissal of a qui tam action. The Court also considered what standard applied to the motion to dismiss. The government maintained that section 3730(c)(2)(A) gives it the power to dismiss that does not require it to intervene at any time or make any kind of showing. Dr. Polansky, however, argued that the government does not have the authority to seek a dismissal unless it proceeds with the suit from the outset. The Third Circuit adopted a middle ground approach and determined that the government could intervene only if it met the requirements under Federal Rule of Civil Procedure 41 regarding the standard for dismissal. The Court affirmed the District Court’s decision and as a result, Dr. filed a writ of certiorari which was granted by the Supreme Court on June 21, 2022.
It remains to be seen how the United States Supreme Court will rule on this issue of whether the government has the authority to dismiss a False Claims Act lawsuit if it initially declined to take the case and if so, what standard applies. Regardless of the outcome of this case, the False Claims Act will continue to be a powerful tool at the disposal of private individuals and the government to combat fraud and corrupt practices, particularly involving Medicare.


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