Supreme Court Allina decision has potentially huge consequences for Medicare False Claims Act cases

When it came out, the Supreme Court’s Azar v. Allina Health Services decision didn’t immediately look like one that would have much of an impact on False Claims Act jurisprudence. It’s central holding—that a provision of the Medicare Act, 42 U.S.C. §1395hh(a)(2), required the Centers for Medicare & Medicaid Services (“CMS”) to subject all Medicare-related determinations “that establish[] or change[] a substantive legal standard” to formal notice-and-comment rulemaking—was enmeshed in regulatory gobbly gook, and didn’t appear to necessarily constrain relators. 

A recent decision from the Eastern District of Pennsylvania, however, indicates that Allina might be a huge deal for the FCA, too. The case—Polansky v. Executive Health Resources, Inc., 2019 WL 5790061 (E.D. Pa. Nov. 5, 2019)—was a FCA case based on reimbursement guidance that hadn’t been through notice and comment. The court reasoned that, under Allina, CMS was required to promulgate all “substantive legal standards” through notice and comment rulemaking, under the D.C. Circuit’s decision in Allina, the standard at issue in Polansky impacted Medicare reimbursement, and was therefore a “substantive legal standard,” CMS didn’t pass the standard through notice and comment rulemaking, and, therefore, the relator couldn’t rely on it as a basis for his FCA suit.

This has huge potential impacts for all FCA cases that are based on Medicare rules. Indeed, Medicare imposes many requirements through Local Coverage Determinations and other guidance that is not subjected to notice and comment rulemaking, and courts have allowed FCA cases based on alleged violations of that guidance to proceed to trial. See, e.g., United States ex rel. Youn v. Sklar, 273 F. Supp. 3d 889, 898 (N.D. Ill. 2017) (finding “that the LCDs are binding and may provide the basis for a claim for submission of false claims under the FCA.”); U.S. ex rel. Ryan v. Lederman, 2014 WL 1910096, at *1 (E.D.N.Y. May 13, 2014). Polansky might be a sign that this line of cases is being reigned in, and that absent notice and comment, a Medicare payment standard cannot create FCA liability.

November 12, 2019