By Jeff Overley, Law360
Law360, New York (July 23, 2014, 5:41 PM ET) — The final months of 2014 will witness high-stakes court decisions, briefings and oral arguments in a number of major health care cases, shaping the future of state medical board independence, False Claims Act litigation and the Affordable Care Act’s controversial cost-cutting panel.
Here are six cases attorneys will be watching in the second half of the year:
Justices Eye FCA Time Limits
The U.S. Supreme Court recently agreed to hear a hugely important FCA case, KBR v. Carter, that could dramatically weaken the law’s six-year statute of limitations. At issue is a Fourth Circuit decision from March 2013 that said the Wartime Suspension of Limitations Act applies to civil fraud suits, as opposed to only criminal matters. Also, the circuit court said it doesn’t matter if those whistleblower suits aren’t joined by the government and that there need not be a formal declaration of war for the WSLA to apply.
On that final point, supporters of the Fourth Circuit’s reasoning note that Congress has not formally declared war since the 1940s, despite having engaged in a number of large-scale military conflicts in Korea, Vietnam, Iraq and Afghanistan. On the flip side, critics say that such reasoning means the U.S., which has troops stationed around the globe at all times, could almost always be considered to be at war.
“That would basically eviscerate any statute of limitations,” said Robert T. Rhoad of Crowell & Moring LLP.
Justices could endorse or overturn the Fourth Circuit’s conclusion, or take a middle road by spelling out new parameters for gauging whether military activities trigger the WSLA.
“The real question will be whether the Supreme Court will just reverse it wholesale, or will they try to draw [lines] to establish qualifications for a particular conflict?” Rhoad said.
The whistleblower’s first brief on the merits is expected by mid-October. A date for oral arguments hasn’t been set.
The case is Kellogg Brown & Root Services Inc. et al. v. U.S. ex rel. Carter, case number 12-1497, in the Supreme Court of the United States.
High Court Weighs Regulatory Transparency
The Supreme Court last month agreed to hear the U.S. Department of Labor‘s challenge to a July 2013 D.C. Circuit decision that struck down the agency’s 2010 reclassification of mortgage loan officers as eligible for overtime pay because the DOL didn’t use notice-and-comment rule-making procedures.
That’s relevant for health care providers as much as anyone, given the enormous amount of health care legislation that federal regulators interpret — often to the chagrin of providers who rely on notice-and-comment protections to fight disliked policies.
“It really has to do with how much flexibility … agencies have in reversing themselves without giving notice,” said Thomas S. Crane of Mintz Levin Cohn Ferris Glovsky & Popeo PC.
While the Fifth and D.C. circuits require notice-and-comment rule-making to alter an interpretive rule, the First and Ninth circuits have found that the Administrative Procedure Act allows modifications without such input, Secretary of Labor Thomas Perez said in a February petition to the high court.
The situation is further muddled by the fact that APA matters don’t raise clear partisan differences, making it difficult to guess how justices will rule, Crane added.
“The typical court coalitions are pretty unpredictable,” he said. “These issues do not in any way fall under conservative or liberal alignment.”
The case is Perez et al. v. Mortgage Bankers Association et al., case number 13-1041, in the Supreme Court of the United States.
Ninth Circuit to Decide ACA Panel’s Fate
A little-noticed suit now at the Ninth Circuit could decide the fate of the Affordable Care Act’s Independent Payment Advisory Board, a controversial body that, once formed, will be tasked with recommending Medicare spending cuts if expenditures exceed a certain rate. Congress will then be required to take action to achieve the desired savings, and if it fails to do so, IPAB’s recommendations will automatically take effect.
In Coons v. Lew — previously known as Coons v. Geithner — an Arizona surgeon is challenging the constitutionality of IPAB, saying that the ACA didn’t include an “intelligible principle” to guide the board’s actions, according to a government brief.
A district court rejected the suit, and the Ninth Circuit heard oral arguments in early June, meaning that a ruling could come down relatively soon. The case has major implications for future health care spending, and it also could affect future legislation that grants new powers to an unelected executive branch agency.
“Much of the Affordable Care Act depends on a substantial delegation of authority by Congress to the executive branch, and the question is, what are the limits of that authority to delegate?” said Harvey M. Tettlebaum of Husch Blackwell LLP.
The case is Coons et al. v. Lew et al., case number 13-15324, in the U.S. Court of Appeals for the Ninth Circuit.
FCA Penalties Raise Constitutional Question
In another closely watched FCA suit, a wide range of health care companies and government contractors are pressing the Supreme Court to review the Fourth Circuit’s $24 million penalty against a Belgian defense contractor accused by a whistleblower of collusive conduct.
Gosselin Group NV was ordered to pay the eight-figure fine for allegedly driving up bid prices on U.S. Department of Defense shipping contracts, even though the government paid out only about $3 million and was not proven to have suffered any specific amount of financial damage.
A district court refused to award any damages, finding that the Eighth Amendment’s ban on excessive fines would be violated by applying the FCA’s per-claim formula for calculating penalties. But the Fourth Circuit reversed, saying that the $24 million judgment — described by the whistleblower as a compromise in light of damages that could have reached $50 million — would deter other would-be fraudsters.
“Its willingness to levy a $24 million penalty in the absence of any proven damages is an eye-opening reminder that contractors and health care entities that submit a large number of invoices to the federal government have to be very vigilant,” Rhoad said.
Amicus briefs urging justices to take the case have been submitted by the American Hospital Association, Pharmaceutical Research and Manufacturers of America, and the National Defense Industrial Association, and that level of interest could help convince the court to intervene.
“I would actually make the bet that they will take it up,” Rhoad said.
The case is Gosselin World Wide Moving NV et al. v. U.S. ex rel. Kurt Bunk et al., case number 13-1399, in the Supreme Court of the United States.
State Boards Challenge Antitrust Oversight
The Supreme Court in October will hear arguments on whether to uphold a Fourth Circuit ruling backing the Federal Trade Commission in its antitrust case against North Carolina’s dental board, which says it should be allowed to block nondentists from offering teeth-whitening services.
The dispute centers on whether a state regulatory board composed of professionals — dentists, in this case — should be treated as private actors that must be supervised by other state regulators in order to be immune from antitrust enforcement.
The matter has obvious implications for the authority of state medical boards and other oversight panels, as evidenced by a deluge of support for the dental board in an amicus brief filed by the American Medical Association, the Federation of State Medical Boards and more than 15 other trade groups.
Tettlebaum predicted that the case could also have implications for the Obama administration’s effort to harmonize standards of care across state lines — a goal pursued through electronic health records, quality mandates and other initiatives.
“Obviously, it’s in the interest of the government to have a more nationalized system, and if the court holds [that] these licensing boards have a substantial amount of independence, then it becomes a real impediment to the Affordable Care Act’s goals,” Tettlebaum said.
The case is North Carolina State Board of Dental Examiners v. Federal Trade Commission, case number 13-534, in the Supreme Court of the United States.
60-Day Overpayment Rule Takes Center Stage
In yet another high-profile FCA suit, the U.S. Department of Justice last month made waves by joining a whistleblower suit alleging that New York’s Mount Sinai Health System violated an ACA provision by failing to return hundreds of Medicaid overpayments within 60 days of identifying them.
That was the first time the DOJ had intervened in a complaint about the 60-day overpayment policy, and it took many observers by surprise because a regulation about the policy is still in draft form.
“A lot of clients thought there was some level of protection because the rule hadn’t been finalized,” said Lisa A. Estrada of Foley & Lardner LLP.
Mount Sinai has vowed to pursue a vigorous defense, and attorneys are eager to get their first glimpses of litigation over the 60-day policy as briefing plays out later this year.
–Additional reporting by Ben James and Melissa Lipman. Editing by Elizabeth Bowen and Philip Shea.