1st Circuit Court of Appeals Upholds Tax Refund In False Claims Act Case

August 18, 2014 By

The United States Court of Appeals for the First Circuit upheld the district court’s decision allowing Fresenius Medical Care Holdings, Inc. (f/k/a National Medical Care, Inc.) to deduct $95 Million from a $385 Million dollar civil settlement under the False Claims Act (“FCA”).  Accordingly, the First Circuit affirmed the district court’s tax refund judgment in favor of Fresenius in the amount of $50,420,512 (Fresenius Medical Care Holdings, Inc. v. United States, August 13, 2014, Case No. 13-2144).

The First Circuit held that, in determining the tax treatment of a FCA civil settlement, the court may consider factors beyond the presence or absence of a tax characterization agreement.  In reaching its decision, the Court applied generally accepted principles of tax law to depart from earlier contrary authority in Talley Industries Inc. v. Commissioner, 116 F.3d 392 (9th Cir. 1997).

Because Fresenius and the government did not agree on the tax characterization of the FCA civil settlement, the critical consideration in determining deductibility was the extent to which the disputed settlement payment was compensatory as opposed to punitive.  The Court acknowledged that no deduction may be made for fines or penalties paid to the government for legal violations, whereas compensatory damages paid to the government, which are deductible, do not constitute a fine or penalty.  26 U.S.C. §162(f).

The First Circuit rejected the government’s argument and interpretation of Talley, in part, based on the notion that substance prevails over form in tax characterizations of transactions between private parties, and that amounts paid or received in settlement should receive the same tax treatment, to the extent practicable, as would have applied had the dispute been litigated to judgment.

Judge Selya, who is known for using uncommon words and phrases to draw an intersection between jurisprudence and interesting prose, authored the Fresenius opinion for the First Circuit and he did not disappoint.  The opinion, makes use of several intriguing words and phrases, such as:  gallimaufry, explicated, ordained, asseverates, asseveration, talismanic, ferocity, expedient, indistinct beacon, inters, the graveyard of forgotten canons, perforce, infelicitous asymmetry, judicial fiat, paint the lily, remonstrance, calumnizes, patina of plausibility, pari passu, and praxis.

For additional information regarding the False Claims Act, please contact Adam Snyder.

 

 

Filed Under: False Claims Act, Tax Tagged With: ,

Surviving A Motion to Dismiss False Claims Act Suit

August 7, 2014 By

A federal district court recently denied defendant’s motion to dismiss a false claims act lawsuit, concluding that the realtor had alleged a sufficiently detailed factual basis for the claims and provided representative examples of the alleged false claims.  The complaint, filed by a nurse anesthesiologist, alleged that the defendant had violated (and was continuing to violate) the false claims act by indicating on a form that “medical direction” was provided at the time of the anesthesia services regardless of whether one of the defendant’s anesthesiologists prescribed the anesthesia and was present.  This form was then used by defendant’s billing office to prepare and submit payment requests.

In denying the motion to dismiss the false claims act complaint, the court generally noted that the realtor’s allegations were sufficiently specific to allow defendant to identify the instances provided as examples and respond to the allegations.  The court also observed that the examples alleged by realtor included details that only a person with personal knowledge of the events would know.  Finally, the court actually summarized the facts alleged by realtor that satisfied the who, what, when, where, and how necessary to survive a motion to dismiss a false claims act lawsuit.

In its decision, the court distinguished an earlier false claims act lawsuit involving similar allegations that was dismissed for failure to meet specificity requirements thereby providing practitioners with slightly more refined guidance as to the nature and specificity of allegations required for a false claims act lawsuit.

For questions regarding the false claims act please contact Greg Montgomery.

Filed Under: False Claims Act Tagged With: ,

New Law Would Limit Liability for Innocent Billing Errors

August 9, 2013 By

The Fairness in Health Care Claims, Guidance and Investigations Act, H.R. 2931  would amend the False Claims Act (“FCA”) by requiring that regulators satisfy procedural steps before embarking on costly fraud investigations.  The Bipartisan legislation, introduced by Representatives Howard Coble (R), North Carolina and David Scott (D), Georgia, would raise the burden of proof under the FCA, would except matters that do not exceed a ‘de minimus’ threshold, and would establish safe harbors for reliance on regulator guidance and implementation of model compliance programs.

The American Hospital Association issued a letter in support of the proposed legislation as well as a memo describing the legislation.

For more information regarding the False Claims Act or Government Investigations, please contact Adam Snyder at 206.447.7000.

Filed Under: Compliance, False Claims Act, OIG Tagged With:

Tacoma Physician Group Pays $14.5 Million To Settle Medicare Over-Billing Allegations

July 7, 2013 By

Sound Physicians, a Tacoma-based, national physician group that employs more than 700 hospitalists, paid $14.5 million to settle claims that it over-billed Medicare.  Former Sound Physicians’ employee Craig Thomas filed a whistleblower lawsuit under the qui tam provisions of the False Claims Act.  The lawsuit alleges that the company knowingly submitted inflated claims where documentation did not support the level of service billed.  Qui tam relators are generally entitled to 15 – 30 percent of the government’s recovery; Thomas will receive $2.7 million, or approximately 18.6%, of the $14.5 million settlement.  The settlement represents one of several recent settlements between the government and health care providers under the False Claims Act.

To read the Department of Justice press release click here.

To read qui tam Relator Craig Thomas’ statement click here.

For more information about government investigations, Medicare compliance, or the False Claims Act, please contact Adam Snyder.

Filed Under: Compliance, False Claims Act, Medicare, Washington Tagged With: ,