Examining the Distinction Between Conditions of Participation Versus Conditions of Payment

Federal courts are considering an emerging issue in distinguishing conditions of participation versus conditions of payment, the latter of which is actionable under the False Claims Act.
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The statutory requirements of the False Claims Act are highly-specific, requiring a precise intent to defraud the government out of taxpayer dollars. An emerging issue across several federal courts involves the pivotal distinction between conditions for participation in Medicare or Medicaid versus conditions for reimbursement for patients enrolled in these programs. Violations of the former, while probably actionable under alternative civil laws, do not give rise to False Claims Act liability. The latter, however, will trigger the False Claims Act provided the court finds that the defendant engaged in intentional, fraudulent conduct with regard to requests for reimbursement from government programs. Drawing a distinction between the two, however, has proven to be a source of contention within recent cases, which is discussed further below.

Understanding the difference

Federal and state healthcare programs maintain a number of participation requirements for doctors, healthcare providers, hospitals, and pharmaceutical companies to follow. If these requirements are not followed, or the entities are consistently engaging in unlawful conduct, the government may revoke the company’s privileges with regard to treating or working with Medicare and Medicaid enrollees.

By contrast, the issue arising under the False Claims Act is distinct in that the misconduct occurring on the part of the defendant involves violations of regulations and guidelines set forth by the Centers for Medicaid and Medicare (CMS) with regard to the level of care, billing protocols, and other laws imposed upon healthcare providers when seeking reimbursement. As we often report on this blog, violations of the Medicare and Medicaid guidelines in this regard often triggers False Claims Act liability as it is the actual act of submitting a claim based on false, fraudulent, or exaggerated healthcare services that renders the provider liable.

Conflict between the parties

We recently reported on the New York District Court’s dismissal of several cases involving Omnicare and plaintiff Fox Rx, a provider of prescription medications to nursing facilities and healthcare providers. In its allegations, Fox asserted that the defendant’s acts of disbursing medication past its expiration date and failing to substitute generic drugs when necessary amounted to a violation of the False Claims Act. The court, however, reasoned that these infractions did not directly impact the government’s “disbursement decisions” and were merely conditions on pharmacies and healthcare providers for participation in healthcare programs.

In another case upon which we have reported, the court in United States ex rel. Escobar v. United Healthcare Services held that a long-term care facility violated conditions of participation (as opposed to payment) by violating state health regulations. The case is currently on appeal and the Massachusetts Attorney General has urged the Circuit Court to reconsider this decision. More specifically, the Attorney General asked for clarity on the issue of distinction between these two issues.

In all likelihood, this issue will continue to face federal courts, creating a controversy possibly ripe for review by the U.S. Supreme Court.

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For more information about how your information may create a cause of action under the False Claims Act, please contact Berger & Montague, P.C. right away.

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By | 2018-03-25T16:29:19+00:00 October 23rd, 2014|False Claims Act Information|