On the intersection of legislation and enterprise, ambiguity can current vital challenges. However one factor appears obvious underneath the False Claims Act (“FCA”) for well being care entities submitting reimbursement claims to the federal government: in the event you
subjectively consider that your claims are or may be false, you doubtless have the requisite intent to violate the FCA. And this precept could maintain true even when there’s technically some ambiguity concerning the info underlying the representations
inherent in presenting your declare to the federal government.

On June 1, 2023, in U.S. ex rel. Schutte v. Supervalu Inc. and U.S. ex rel. Proctor v. Safeway, Inc., the U.S. Supreme Court docket unanimously confirmed the FCA’s intent normal, holding that the FCA’s scienter factor activates one’s subjective information, moderately than what an objectively cheap particular person could have recognized or believed. The Court docket overturned the earlier seventh Circuit choices with related however distinct qui tams actions introduced towards two retail chain pharmacies
regarding the pharmacies’ reporting of their “typical and customary” costs.  In these circumstances, the seventh Circuit utilized the intent normal adopted by the Supreme Court docket underneath the Honest Credit score Reporting Act in Safeco Ins. Co. of America v. Burr,
551 U.S. 47 (2007), holding that the defendant pharmacies couldn’t be discovered to have acted with requisite intent underneath the FCA if their conduct was per any objectively cheap interpretation of the legislation. In every case, the defendant
pharmacies argued that the business definition of “typical and customary” is unclear. As a result of their actions had been objectively cheap provided that ambiguity, in response to the pharmacies and the seventh Circuit, the appellate court docket
held that the defendant pharmacies couldn’t have acted with intent underneath the FCA.

The Supreme Court docket disagreed. To violate the FCA, the Court docket first famous, an individual should act with fraudulent intent. The FCA defines that intent 3 ways: precise information, deliberate ignorance, or reckless disregard for the reality.  In Schutte & Proctor, the Court docket reasoned that solely subjective intent is related in figuring out legal responsibility underneath the FCA. Consequently, what an objectively cheap particular person could have recognized or believed relating to the falsity of the declare is irrelevant for FCA legal responsibility and won’t save the defendant who truly thought that its claims had been or may be false when submitted, however the acknowledged ambiguity about “typical and customary.”

The Court docket’s determination makes clear {that a} well being care supplier shall be liable underneath the FCA if the supplier submits a declare and really is aware of such declare is fake, is subjectively conscious of a considerable danger that its declare is fake, or is subjectively conscious of such a considerable and unjustifiable danger of falsity however submits the declare anyway. Even when business ambiguity may nonetheless exist in sure types, akin to within the difficult world of drug/pharmacy value reporting, an objectively cheap particular person normal can not save a supplier from being discovered to have acted with the requisite fraudulent intent underneath the FCA.

Lastly, though the Court docket made clear that it didn’t grant certiorari to determine the precise that means of “typical and customary” pricing, it’s noteworthy that the Court docket mentioned among the proof cited by the relators as to the defendant pharmacies’ (alleged) information concerning the falsity of the costs they reported. Among the many potential info that will be related to figuring out the pharmacies’ subjective intent underneath the Court docket’s determination are emails and different artifacts presumably suggesting that the defendants tried to cover sure pricing knowledge when reporting different figures to the federal government. Though the Supreme Court docket didn’t maintain that such proof does, the truth is, meet the subjective intent normal confirmed in Schutte and Proctor, it might be an uphill battle to beat such proof, and serves as a reminder concerning the potential influence of on daily basis inner communications in FCA circumstances.

Daniel Tardiff, Joyce Harris-Hennessy and Nicole Jobe are companions in Thompson Coburn’s Well being Regulation Follow Group. Thompson Coburn Summer season Affiliate Christine Moser contributed to this weblog.