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The False Claims Act is Not a Compliance Tool

Philip Betbeze, for HealthLeaders Media, May 3, 2013

The suit, which was fueled by information disclosed by a former MedQuest employee whistleblower, asserted that the company used physicians in its employ who were not designated to monitor the procedures. There was no question over whether the work was done or whether the violations occurred.

What MedQuest did, however, isn't fraud. At least in the eyes of the court.

"What's most significant legally is that the 6th Circuit said that the FCA is a powerful and blunt instrument and is not appropriate to police regulatory compliance issues in the complex medical arena," says Ty Howard, a partner in the white collar crime defense and healthcare groups at the Nashville-based law firm of Bradley Arant Boult Cummings.

A former federal prosecutor of white-collar fraud, Howard says the court isn't necessarily saying that what MedQuest did is OK, but that the remedy should not come through the FCA. "That's significant for the industry, because with the use of this powerful tool with its trebling damages—the judgments rack up quickly."

Howard says the MedQuest decision is precedent-setting when viewed in conjunction with another suit filed under the FCA that the same court overturned last fall.

In a case brought against Renal Care Group Inc., a dialysis provider, the 6th Circuit overturned another interpretation of the FCA as overly broad. In that suit, the Sixth Circuit ruled that medical service providers that have established separate corporate entities to maximize corporate profits and take advantage of separate Medicare reimbursement programs do not inherently violate the False Claims Act.

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