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Nicholas Francis Alarif focuses his practice in health care regulatory and fraud and abuse matters, including the physician self-referral law (Stark Law), False Claims Act (FCA), the Federal Anti-Kickback Statute and other health care compliance matters. He also advises clients on the complex legal and factual issues surrounding Medicare Parts A–D reimbursement and other Centers for Medicare & Medicaid Services (CMS) payment policies. Read Nicholas Francis Alarif's full bio.

On April 11, 2018, the Eleventh Circuit split from several other circuits on the question whether False Claims Act (FCA) relators can rely on the three-year statute of limitations extension in 31 U.S.C. § 3731(b)(2) in cases where the United States declines to intervene.

Under § 3731(b), an FCA case must be filed within the later of:

  1. 6 years after the date on which the violation…is committed, or
  2. 3 years after the date when facts material to the right of action are known or reasonably should have been known by the official of the United States charged with responsibility to act in the circumstances, but in no event more than 10 years after the date on which the violation is committed.

In United States of America, ex rel. Billy Joe Hunt v. Cochise Consultancy Inc. et al., No. 16-12836, the relator filed his claim more than six years after the alleged violations, but within three years of when he first informed the government of the facts giving rise to the claim. (He may have been delayed in filing his claim owing to the fact he was in federal prison for his role in a separate kickback scheme involving the same company.) Thus, the case turned on whether the three-year extension in § 3731(b)(2) applies to cases where the government has declined to intervene.

The district court’s answer was ‘no.’ It dismissed the case based on the statute of limitations. This approach was consistent with published decisions from the Fourth Circuit and Tenth Circuit—both of which emphasized that applying § 3731(b)(2) to cases where the Government did not intervene could lead to “bizarre scenarios” in which the statute of limitations period for a relator’s claim is dependent on a nonparty to the action. See United States ex rel. Sanders v. N. Am. Bus Indus., Inc., 546 F. 3d 288, 293 (4th Cir. 2008) and United States ex rel. Sikkenga v. Regence BlueCross BlueShield of Utah, 472 F.3d 702, 726 (10th Cir. 2006) (“Surely, Congress could not have intended to base a statute of limitations on the knowledge of a non-party.”).

But, reviewing the district court’s decision on appeal, the Eleventh Circuit split from its sister circuits and reversed the decision below, resurrecting the relator’s claims. The court asserted that the Fourth Circuit and Tenth Circuit erred because they “reflexively applied the general rule that a limitations period is triggered by knowledge of a party. They failed to consider the unique role that the United States plays even in a non-intervened qui tam case.”

Instead, the court adopted a textual analysis, concluding that nothing in § 3731(b) suggests that the three-year extension applies only to intervened cases. Likewise, it rejected the defendants’ arguments that applying § 3731(b)(2) to non-intervened cases would render § 3731(b)(1) superfluous, and would encourage relators to wait to bring a secreted fraud to the government’s attention. The court emphasized that under its reading, § 3731(b)(1) would not be redundant in all circumstances, and that despite the three-year extension in paragraph (2), relators nonetheless face considerable structural pressure to bring their claims as soon as possible, at risk of losing the right to recover.

The defendants in Hunt also argued that § 3731(b) is ambiguous and asked the court to consult legislative history for guidance. The court disagreed that the statute is ambiguous, and added that even if it were appropriate to consult the legislative history of § 3731(b), the court would conclude that Congress intended § 3731(b)(2) to apply even where the government has not intervened.

After determining that § 3731(b)(2) is available to a relator in a non-intervened case, the Eleventh Circuit turned to the question whether the three-year extension is triggered by knowledge of the relator or knowledge of a government official. The Ninth Circuit held previously that while § 3731(b)(2) is available in a non-intervened case, the three-year period turns on the relator’s knowledge, not the government’s knowledge. United States ex rel. Hyatt v. Northrop Corp., 91 F.3d 1211, 1217 (9th Cir. 1996). Here again, the Eleventh Circuit reached the opposite conclusion, splitting from the decision in Hyatt:

Because the text unambiguously identifies a particular official of the United States as the relevant person whose knowledge causes the limitations period to begin to run, we must reject the Ninth Circuit’s interpretation as inconsistent with that text.

The Bottom Line: The Eleventh Circuit’s decision that the three-year tolling provision is available to qui tam relators is an outlier, and it creates a significant split among the circuits with regard to a key application of the statute of limitations in non-intervened FCA cases. Practitioners in the Eleventh Circuit (and elsewhere) should be careful to preserve arguments on this issue for further review, as this issue appears ripe for resolution in the Supreme Court.

The table below summarizes the current law on this question:

State of the Law on § 3731(b)(2)
Jurisdiction Position
First Circuit No circuit decisions, but some district courts have held that Section 3731(b)(2) is available to a relator in a non-intervened case, and that an official of the United States is the relevant person whose knowledge triggers the limitations period. See e.g., U.S. ex rel. Ven-A-Care v. Actavis Mid Atlantic LLC, 659 F. Supp. 2d 262 (1st Cir. 2009) )
Second Circuit No circuit decisions, and caselaw in the district courts is split. Compare United States ex rel. Wood v. Allergan, Inc., 246 F.Supp.3d 772 (S.D.N.Y. 2017) (relators may avail themselves of Section 3731(b)(2)) with United States ex rel. Finney v. Nextwave Telecom, Inc., 337 B.R. 479 (S.D.N.Y. 2006) (Section 3731(b)(2) applies only in cases in which the government intervenes).
Third Circuit Section 3731(b)(2) applies when the government is not a party, but that the relator is the “official of the United States”—so the limitations period begins to run based on the relator’s knowledge. United States ex rel. Malloy v. Telephonics Corp., 68 F. App’x 270, 272-73 (3d Cir. 2003) (unpublished).
Fourth Circuit Section 3731(b)(2) extends the FCA’s default six-year period only if the government is a party. United States ex rel. Sanders v. N. Am. Bus Indus., Inc., 546 F. 3d 288 (4th Cir. 2008).
Fifth Circuit No circuit decisions, but caselaw in the district courts has held that tolling is available to relators, but relators’ knowledge is trigger.. See e.g., U.S. ex rel. Gonzalez v. Fresenius Medical Care N. Am., 2008 WL 4277150 (W.D. Tex. 2008) (Section 3731(b)(2) applies when the government is not a party, but that the relator is the “official of the United States”—so the limitations period begins to run based on the relator’s knowledge).
Sixth Circuit No circuit decisions, but caselaw in the district courts has held that Section 3731(b)(2) extends the FCA’s default six-year period only if the government is a party . See e.g., United States ex rel. Griffith v. Conn, 117 F. Supp. 3d 961 (E.D. Ky. 2015).
Seventh Circuit No circuit decisions, but district courts have found tolling available to relators, but relators’ knowledge is trigger.. See e.g., See United States ex rel. Bidani v. Lewis, No. 97-CV-6502, 1999 WL 163053 (N.D. Ill. 1999) (Section 3731(b)(2) applies when the government is not a party, but that the relator is the “official of the United States”—so the limitations period begins to run based on the relator’s knowledge).
Eighth Circuit No circuit decisions, but caselaw in the district courts has held that Section 3731(b)(2) extends the FCA’s default six-year period only if the government is a party. See e.g., United States ex rel. Dicken v. N.W. Eye Ctr., 2017 WL 2345579 (D. Minn., 2017) ().
Ninth Circuit Section 3731(b)(2) applies when the government is not a party, but the relator is the “official of the United States”—so the limitations period begins to run based on the relator’s knowledge. United States ex rel. Hyatt v. Northrop Corp., 91 F.3d 1211, 1217 (9th Cir. 1996).
Tenth Circuit

Section 3731(b)(2) extends the FCA’s default six-year period only if the government is a party. United States ex rel. Sikkenga v. Regence

BlueCross BlueShield of Utah, 472 F.3d 702 (10th Cir. 2006).

Eleventh Circuit Section 3731(b)(2) is available to a relator in a non-intervened case. An official of the United States is the relevant person whose knowledge triggers the limitations period. See discussion above.
D.C. Circuit No circuit decisions, but caselaw in the district courts has held Section 3731(b)(2) extends the FCA’s default six-year period only if the government is a party. See e.g., United States ex rel. Landis v. Tailwind Sports Corp., No. 1:10CV00976 (CRC), 2016 WL 3197550 (D.D.C. June 8, 2016).

 

A hospital system in Missouri recently agreed to settle with the US Department of Justice (DOJ) for $34 million to resolve claims related to alleged violations of the Stark Law. On May 18, 2017, DOJ announced a settlement agreement with Mercy Hospital Springfield (Hospital) and its affiliate, Mercy Clinic Springfield Communities (Clinic). The Hospital and Clinic are both located in Springfield, Missouri. The relator’s complaint was filed in the Western District of Missouri’s Southern Division on June 30, 2015.

The complaint’s allegations center on compensation arrangements with physicians who provided services in an infusion center. According to the complaint, until 2009 the infusion center was operated as part of the Clinic, and the physicians who practiced at the infusion center shared in its profits under a collection compensation model. In 2009, ownership of the infusion center was transferred to Mercy Hospital so that it could participate in the 340B drug pricing program, substantially reducing the cost of chemotherapy drugs. The complaint alleges that the physicians “expressed concern about losing a substantial portion of the income they had received under the collection compensation model as a result of the loss of ownership of the Infusion Center.” In response, the Hospital allegedly assured them that they would be “made whole” for any such losses. While it doesn’t provide precise details, the complaint alleges that the Hospital addressed the shortfall by establishing a new work Relative Value Unit (wRVU) for drug administration in the infusion center, which now operated as part of the Hospital. The value of this new wRVU was allegedly calculated by “solving for” the amount of the physician’s loss and “working backwards from a desired level of overall compensation.” Physicians were able to earn the wRVU for the patients they referred to the infusion center. The complaint alleges that the drug administration wRVU rate was 500 percent of the comparable wRVU for in-clinic work. In its announcement of the settlement agreement, DOJ characterized the compensation arrangement as being “based in part on a formula that improperly took into account the value of [the physicians’] referrals of patients to the infusion center operated by [the Hospital].” Continue Reading Physician Compensation Scrutiny Continues in Recent FCA Settlement

This April, providers cheered when a federal district court in the Middle District of Florida found insufficient evidence to support a relator’s theory that a hospital had provided free parking to physicians, in violation of the Stark Law and Anti-Kickback Statute (AKS). In the Report and Recommendation for United States ex rel. Bingham v. BayCare Health Systems, 2017 WL 126597, M.D. Fla., No. 8:14-cv-73, Judge Steven D. Merryday of the Middle District of Florida endorsed magistrate judge Julie Sneed’s recommendation that Plaintiff Thomas Bingham’s Motion for Partial Summary Judgment be denied and that Defendant BayCare Health System’s Motion for Summary Judgment be granted. However, as we discussed in a previous FCA blog post regarding these allegations, this type of case encapsulates a worrying and costly trend where courts allow thinly pleaded relator claims in which the government opted not to intervene, to survive past the motion to dismiss stage into the discovery phase of the litigation.

Bingham is a serial relator who practices as a certified real estate appraiser in Tennessee and was unaffiliated with BayCare. In his latest attempt, Bingham alleged that BayCare Health System had violated the Stark Law and the AKS by providing affiliated physicians free parking, valet services and tax benefits to induce physicians to refer patients to the health system. Continue Reading A Hospital’s Deserving Stark and AKS Victory—But At What Cost?