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Healthcare Organizations and Practitioners Receive New Protection Against Frivolous Whistleblower Lawsuits

June 19, 2023

Last Friday, the U.S. Supreme Court (SCOTUS) handed down an important ruling that will give healthcare organizations and practitioners relief against meritless whistleblower lawsuits. The ruling could result in saving organizations and practitioners their time, money, and reputation.

In a near-unanimous 8-1 decision, the SCOTUS affirmed the Third Circuit Court of Appeals on whether the federal government may obtain dismissal of a whistleblower lawsuit it declined to intervene under the federal False Claims Act (FCA). Upon a defendant’s request or its own volition, the federal government may move to voluntarily dismiss a FCA case over the objection of the whistleblower.

The False Claims Act 

Under the federal False Claims Act (FCA), a whistleblower may file suit on behalf of the United States against anyone who commits healthcare fraud upon the Medicare or Medicaid programs. The FCA imposes civil liability on any individual or organization (e.g., physician, hospital, medical practice, lab, medical supply, pharmacy) who knowingly submits a false claim to a federally funded healthcare program. If found liable, a federal court will enter a judgment against the individual or organization for three times the amount received from the government and may impose civil penalties of up to $27,018 for each false claim.

The FCA requires whistleblowers to file their case under seal, outside the public view, and provide the U.S. Department of Justice (U.S. DOJ) or U.S. Attorney’s Office a copy of their complaint with supporting evidence. The FCA grants the federal government time to consider and investigate the whistleblowers’ claims. At the conclusion of its investigation, the federal government may intervene and take over the case or decline and allow the whistleblower to pursue the case. If it intervenes, the federal government prosecutes the case in court and if a settlement or judgment is reached, the whistleblower can receive between 15-25% of the money. If the federal government declines to intervene, the whistleblower may continue the case and if a settlement or judgment is reached, the whistleblower can receive between 25-30% of the money. In a declined case, the federal government maintains ultimate control over the case. The whistleblower must keep the federal government informed and obtain its express approval for any settlement of the case.

Declined FCA Cases

The FCA permits the federal government to dismiss a case over a whistleblower’s objection provided the whistleblower receives notice and a hearing, upon request, on the motion to dismiss. Prior to 2018, U.S. Attorney Offices generally allowed, with some exceptions, whistleblowers to pursue their cases after the federal government declined to intervene. The majority of declined cases ended in a dismissal by the district court. Some declined cases took years to complete at great cost to defendant healthcare organizations and practitioners and risk of adverse court opinions affecting the federal government’s ability to investigate and prosecute healthcare fraud.

In 2018, Michael D. Granston, Director of Fraud Section, Civil Division Commercial Litigation Branch, U.S. DOJ, issued a memorandum outlining the federal government’s policy on dismissing declined FCA cases. Under Granston’s memo, U.S Attorneys should consider dismissing a FCA case when: (1) a case lacks merit, (2) a government investigation already exists, (3) a case could affect government policies or programs, (4) to protect US DOJ’s litigation prerogatives, (5) to protect classified information, (6) the government’s costs outweigh any potential recovery, or (7) the whistleblower interferes with the government’s investigation. Upon warning that the federal government planned to dismiss an FCA case, whistleblowers would be afforded an opportunity to voluntarily dismiss the FCA case.

After the Granston memo, U.S. DOJ and U.S. Attorney Offices began moving to dismiss more declined cases which led to several court battles with whistleblowers seeking to stop dismissal and continue with their FCA cases. Before the SCOTUS’ ruling, the federal courts of appeal were split on whether the district courts could review the federal government’s request to dismiss and if so, what standard of review could be used.

United States ex rel. Polansky v. Executive Health Resources, Inc.

In 2012, the whistleblower, a doctor, filed this FCA case under seal alleging that the defendant, a billing service, helped a hospital commit fraud against the Medicare program by filing false claims at higher in-patient rates when in fact the hospital provided out-patient services reimbursed at lower rates. After reviewing the claims, the federal government declined to intervene, and the whistleblower continued with the case. After several years of discovery, the federal government considered the cost of monitoring and supporting the case weighed against the benefits of allowing the whistleblower to continue. As a result, the federal government moved to dismiss the case in 2019 over the whistleblower’s objection. The District Court granted the motion and dismissed the case. On appeal to the Third Circuit Court of Appeals, the Court affirmed the District Court’s decision and held that the federal government can dismiss a declined FCA case provided that it intervenes at any point including the motion to dismiss. The Third Circuit further held that a district court should apply the same standard of review as a motion to voluntarily dismiss a case under Rule 41(a) of the Federal Rules of Civil Procedure.

The SCOTUS granted certiorari and agreed to review the Third Circuit’s decision. After reviewing the case and the Third Circuit’s analysis, the SCOTUS affirmed the decision on the same grounds. As long as the federal government gave good grounds for believing the FCA case would not vindicate its interests, a district court did not abuse its discretion in dismissing the FCA case.

The SCOTUS’ decision provides healthcare organizations and practitioners additional protection against whistleblowers in declined FCA cases. These whistleblowers may keep declined FCA cases alive and pressure healthcare organizations and practitioners into sizable settlements in order to avoid additional burdens, additional costs, bad publicity, and the risk of losing at trial. In light of the SCOTUS ruling, healthcare organizations and practitioners may now pursue dismissal by the federal government as part of an effective response to meritless or frivolous whistleblower FCA cases. Dismissal by the federal government helps healthcare organizations and practitioners avoid further burdens and save time, money, and reputation.

Clark Hill’s Healthcare team is ready to assist healthcare organizations and practitioners in complying with CMS, Medicaid, and Medicare program requirements, and as necessary, preparing for and defending against government audits, investigations, and prosecutions.

For further information, please contact the author, Jose Vela Jr. at

The views and opinions expressed in the article represent the view of the author and not necessarily the official view of Clark Hill PLC. Nothing in this article constitutes professional legal advice nor is it intended to be a substitute for professional legal advice.

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