Recent Amendments to False Claims Act Not Retrospective

In the first court decision construing the May 2009 amendments to the False Claims Act, 31 U.S.C. § 3729 (FCA), a Delaware District Court has held that the amendments are not retroactive. In so holding, the Court dismissed claims brought by the United States under pre-amendment § 3729(a)(2) against a physician for alleged “upcoding” since the complaint failed to allege that the allegedly fraudulent claims were actually paid.

In United States v. Aguillon, 08-789-SLR (June 24, 2009 Del. D.C.), the Department of Justice (DOJ) alleged that a physician violated the FCA in submitting allegedly false claims to the Medicare Part B program. The DOJ alleged that the physician billed for higher level Evaluation and Management (E&M) services than were medically warranted or actually provided.

Prior to the 2005 and 2006 claims at issue, however, the Delaware Medicare administrative contractor (the Carrier) had placed the physician on pre-payment review. As a result of this pre-payment review, the 2005 and 2006 E&M services at issue in the DOJ’s FCA complaint were not actually fraudulently paid. The Carrier down-coded many of the claims, which were thus paid at the correct reimbursement rate. Claims that were not down-coded were completely disallowed, and were not paid.

Dr. Aguillon moved to dismiss the complaint for failure to state a claim pursuant to Federal Rule of Civil Procedure 12(b)(6). The Court dismissed the claims under § 3729(a)(2), which required that a defendant “knowingly makes, uses, or causes to be made or used, a false record or statement to get a false or fraudulent claim paid or approved by the Government.” § 3729(a)(2) (amended May 2009, current version available at 31 U.S.C. § 3729(a)(1)(B)). Under Third Circuit precedent, a claim under § 3729(a)(2) required that the claim was actually paid or approved. United States ex rel. Schmidt v. Zimmer, Inc., 386 F.3d 235, 242 (3rd Cir. 2004). Because the Government’s complaint failed to allege that any of the allegedly false claims were actually paid or approved, the Court dismissed the claims brought under § 3729(a)(2), but allowed claims under § 3729(a)(1) to proceed.

The Court undertook a sua sponte analysis, without briefing from the parties, of whether the amendments signed into law on May 20, 2009, the Fraud Enforcement and Recovery Act of 2009 (FERA), applied retrospectively. The Court found an apparent conflict in whether Congress intended the amendments to have retrospective application, noting that in one place the Congressional record states that “courts should rely on these amendments to clarify the existing scope of False Claims Act liability,” yet in another place “directed against applying the amendments in a way that would cause retrospective effects.” Addressing the perceived conflict, the Court found that “retrospective application of the amendments would cause retrospective effects . . . [by] increas[ing] defendant’s liability for past conduct.” The Court failed to cite, however, the FERA provision making June 7, 2008 the effective date of the amendments to § 3729(a)(2). Finding that Congress had failed to provide “the requisite instruction necessary for the amendments to be used to cause retroactive effects,” the Court found that the 2009 FCA amendments are not retrospective.