Qui Tam Whistleblower Action Gets Boost as State Medicaid Program Halts Payments to Clinic Over Medicaid Fraud Allegations

The Medicaid program in Massachusetts has halted Medicaid payments to a Lawrence, Mass. clinic over fraud allegations that were first raised in a leading False Claims Act qui tam whistleblower action that is pending in federal court in Boston, according to a Boston Globe report. The Lawrence counseling clinic is accused of fraud for submitting Medicaid claims for payment of fees for licensed doctors and supervised therapists when in fact patients were treated by unlicensed and unsupervised nurses.

The Medicaid fraud allegations were raised by a family whose daughter died while a patient undergoing treatment at the Lawrence clinic. The family filed a qui tam whistleblower action naming as defendants the clinic and its parent company, Universal Health Services, Inc., a publicly traded company that is in the Fortune 500.

In June 2016, the U.S. Supreme Court ruled in Universal Health Services v. U.S. ex rel. Escobar that the family of a patient who filed the qui tam whistleblower action could proceed with the False Claims Act case. However, the Supreme Court asked the lower courts to reconsider whether the qui tam whistleblower had adequately alleged that the Medicaid fraud was material to the government’s decision to pay the clinic’s Medicaid claims.

The family that filed the qui tam whistleblower action alleged that Universal committed Medicaid fraud by not following regulations that require nurse practitioners to prescribe medication under the supervision of a certified staff psychiatrist. The clinic submitted Medicaid claims for payment allegedly disregarding those regulations.

Top qui tam whistleblower attorney Stephen M. Kohn said at the time the Supreme Court ruled in the case: “The arguments raised by the healthcare industry were particularly troubling because they would have permitted low-income persons who obtain medical services through Medicaid to obtain inferior and even life-threatening treatment.”

The Supreme Court’s June 2016 ruling has also had an impact on all qui tam whistleblower actions that are filed alleging Medicare fraud and most other types of government contracting fraud. In February of 2018, Senator Chuck Grassley raised concerns in remarks on the Senate Floor that some False Claims Act defendants are “tying in knots” the lower courts following the Supreme Court’s ruling in Universal Health Services and he said defendants and lower courts are misconstruing Justice Thomas’ holding that false claims must be material to the government’s decision to pay. Grassley said that these judicial developments are disturbing because they are elevating materiality to a new government knowledge defense that Congress abolished in 1986.