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Eleventh Circuit Holds that Diabetic Testing Supply Company Did Not Violate the False Claims Act

On May 26, 2017, the U.S. Court of Appeals for the Eleventh Circuit issued a decision holding that a diabetic testing supply company did not violate the federal False Claims Act (“FCA”) by making unsolicited phone calls to Medicare beneficiaries.

Two whistleblowers (referred to as Relators by the FCA)—both former salespersons for Lincare, Inc., a supplier of diabetic testing supplies—filed an action under the FCA against Lincare. The suit alleged that Lincare improperly generated orders by making unsolicited telephone calls to Medicare beneficiaries in violation of Medicare’s rules against such marketing practices. The relators alleged that since Lincare had violated Medicare’s rules in generating such orders, all claims submitted to Medicare for reimbursement of items resulting from such unauthorized marketing violated the FCA.

In two separate orders, from July 2015 and January 2016, respectively, Judge Kathleen Williams of the U.S. District Court for the Southern District of Florida granted summary judgment in favor of Lincare. In the July 2015 Order, the District Court found that “the evidence was insufficient to create a genuine issue of material fact with regard to scienter—that is, whether the defendant ‘knew or should have known that its policies or practices violated the applicable statutes and implementing regulations.’” In the January 2016 order, the District Court found that Lincare did not violate Medicare’s anti-telemarketing rules because Lincare had received prior written permission to contact Medicare beneficiaries. The relators appealed both rulings to the Eleventh Circuit.

The Eleventh Circuit held that the District Court used the wrong standard regarding knowledge under the FCA. The Court explained the proper standard is that “a relator must show that the defendant acted ‘knowingly,’ which the FCA defines as either ‘actual knowledge,’ ‘deliberate ignorance,’ or ‘reckless disregard,’” but the District Court applied a standard that could possibly permit defendants to avoid liability even in situations where they had actual knowledge of a violation. Despite this, the Eleventh Circuit held that the District Court came to the right conclusion in that the relators did not provide sufficient evidence that Lincare knowingly violated the FCA.

The Eleventh Circuit also affirmed the District Court’s holding that Lincare did not violate the prohibition against unsolicited phone calls to Medicare beneficiaries. The Eleventh Circuit explained that Lincare met an exception to the prohibition whereby a supplier such as Lincare may contact Medicare beneficiaries who had either purchased covered items from Lincare within 15 months of the call or had given written consent to be contacted. Accordingly, the Eleventh Circuit affirmed the District Court’s order granting summary judgment to Lincare.

The attorneys at CCLB represent healthcare providers of all types and sizes in connection with government investigations and False Claims Act litigation. For any questions, or if we can be of any assistance with such a matter, please contact us at (404) 262-6505 or sgrubman@cclblaw.com.