Supreme Court to rule on whether providers can sue states over inadequate Medicaid rates

The Supreme Court may be willing to reconsider a ruling that has had a dramatic impact on False Claims cases since 2016, including an extraordinary $347 million reversal in favor of nursing home operator Consulate Health Care.

Justices Monday called for the Trump administration to weigh in on a case involving drugmaker Gilead Sciences. At issue is whether a False Claims allegation automatically fails when the government continues to approve services or pay for products after learning of alleged infractions. It’s a precedent that seemed to be set in the 2016 Universal Health Services v. Escobar decision.

The court asked the solicitor general for an opinion when pleadings offer no basis for overcoming “the strong inference of immateriality” that arises from the government’s response.

Escobar has been widely cited as weakening false claims cases because the court found the government’s continued payments to providers under investigation were proof that the rules broken didn’t matter to the regulator.

In January, a Florida judge used the ruling to erase a $347 million verdict against nursing Consulate.

In Ruckh vs. CMC, one-time employee Angela Ruckh claimed the company, previously operating as La Vie Rehab, overcharged Medicare and Medicaid by inflating therapy claims.

A jury verdict led to $115 million in Medicare and Medicaid damages, tripled under provisions of the False Claims Act, and a minimum penalty of $5,500 for each of the 446 cited false claims.

Consulate was expected to pay $331 million of that, with 15% to 25% whistleblower award going to Ruckh.

Instead, U.S. District Judge Steven D. Merryday cited the Supreme Court’s Escobar ruling, effectively finding that federal and state payments made after the defendants’ claims were “very strong evidence” that the allegations weren’t material.

In the Gilead case, justices met Friday to discuss allegations by former Gilead employees Jeffrey and Sherilyn Campie that the company misrepresented information about drug ingredients to the Food and Drug Administration.

In a 16-page petition, Gilead, best known for its antiviral HIV drugs, asked the Supreme Court to rule that the Campies’ false claims case can’t stand because the FDA approved its drugs despite “knowledge of alleged misrepresentations.”

The Ninth Circuit, which said the whistleblowers’ case against Gilead can proceed, erred by not following the rationale of those courts’ materiality rulings, Gilead said.