FCA Now

On February 22, 2021, the United States Supreme Court declined to resolve a circuit split regarding the proper standard under which False Claims Act (“FCA”) claims in the medical context should be reviewed. See Care Alternatives v. United States, No. 20-371, 2021 U.S. LEXIS 915 (Feb. 22, 2021). The Court’s decision leaves open the question of what constitutes “falsity” under the FCA and opens the door to further expansion of the circuit split as additional appeals reach jurisdictions that have not yet determined this question of law. In United States ex rel. Druding v. Druding, the Third Circuit Court of Appeals considered whether the district court properly concluded relators were required to demonstrate “objective falsity” in order to satisfy the falsity element of an FCA claim. 952 F.3d 89 (3d Cir. 2020). There, relators alleged that Care Alternatives, a palliative care provider, submitted false hospice-reimbursement claims to Medicare and Medicaid for care provided to patients that were not sufficiently ill to qualify for hospice care. Id. at 93. The relators’ case relied heavily upon the expert report of a geriatric care physician, who examined the records of dozens of hospice-admitted patients and opined that 35 percent (35%) of the patients did not qualify for hospice care under the federal guidelines. Id. at 94. Care Alternatives’ expert, also a physician, concluded the opposite, finding that a physician could have reasonably determined that each patient was near the end of life and appropriately admitted to hospice care. Id. After extensive discovery, including the dueling expert opinions, Case Alternatives moved for summary judgment, arguing inter alia that relators had not produced sufficient evidence of falsity. Id. The district court agreed with Case Alternatives, holding that the “mere difference of opinion between physicians, without more, is not enough to show falsity” because “medical opinions are subjective and cannot be false.” Id. In so holding, the district court embraced the “objective falsehood” standard for falsity under the FCA articulated by the Eleventh Circuit Court of Appeals in United States v. AseraCare, Inc., 938 F.3d 1278 (11th Cir. 2019). On appeal, the Third Circuit reversed, finding that the district court’s reliance upon an “objective falsity” standard “improperly conflates the elements of falsity and scienter, inconsistent with the application of the FCA.” Druding, 952 F.3d at 95. Turning to the text of the statute, the court noted the FCA provides that “any person who ‘knowingly presents, or causes to be presented, a false or fraudulent claim for payment or approval’ is liable to the United States…” Id. (emphasis in original). Based on that statutory text, and the lack of a definition within the statute for the terms “false” or “fraudulent,” the court determined that, under common law principles, an “opinion can be considered ‘false’ for purposes of liability” and therefore medical opinions may supply a basis for finding falsity under the FCA. Id. The court further noted that the scienter element of an FCA claim, distinct and separate from the falsity element, served to limit the possibility that hospice providers would be “exposed to liability under the FCA any time the Government could find an expert who disagreed with the certifying physician’s medical prognosis.” Id. at 96. Thus, “[b]y requiring ‘factual evidence that Defendant's certifying doctor was making a knowingly false determination,” the court determined the lower court’s “‘objective’ falsity standard conflates scienter and falsity” by “incorporat[ing] a scienter element into its analysis regarding falsity.” Id. at 96. The court explained that the correct standard for falsity under the FCA “simply asks whether the claim submitted to the government as reimbursable was in fact reimbursable, based on the conditions for payment set by the government.” Id. at 97. Following its defeat at the Third Circuit Court of Appeals, Care Alternatives sought to appeal the decision to the Supreme Court. In its petition, Care Alternatives noted the need for the Court to resolve the “square circuit split” between the Third and Eleventh Circuits which “creates the untenable prospect that hospices in New Jersey will face treble damages for the same difficult medical judgments that cannot be second-guessed in Florida.”  Care Alternatives also emphasized the importance of the legal issue, contending that “the Third Circuit’s decision opens up hospices and physicians to crushing financial liability and reputational harm, notwithstanding near universal acknowledgment that determinations about life expectancy are notoriously difficult and inexact.” On February 22, 2020, the Supreme Court declined to hear Care Alternatives’ appeal without comment, leaving unresolved a growing circuit split between the Fourth, Seventh, Tenth, and Eleventh Circuits, which have adopted the objective falsity standard, and the Third and Ninth Circuits, which have embraced the more lenient standard for falsity. Given the prevalence of FCA claims premised upon medical reimbursements, the circuit split is likely to expand. Although the Third and Ninth Circuits have established a lower bar for relators to establish the falsity element for a claim—perhaps eliminating a pathway for defendants to resolve FCA claims at the summary judgement stage—both courts have stressed that the scienter requirement under the FCA, i.e., the requirement that Defendant knows “the treatment was not medically necessary,” Winter ex rel. United States v. Gardens Reg'l Hosp. & Med. Ctr., Inc., 953 F.3d 1108, 1114 (9th Cir. 2020), should serve to appropriately limit liability. Whether and to what extent this circuit split bears on the outcomes of FCA cases is an issue for FCA practitioners and their clients to monitor.

Less than a year after United States Attorney Christina E. Nolan warned electronic health records (“EHR”) companies in a DOJ press release that they “should consider themselves on notice” following a $57.25 million FCA settlement with EHR software developer Greenway Health LLC, the DOJ announced in a recent press release a $145 million settlement with another EHR vendor, Practice Fusion, Inc.  The settlement includes $26 million in criminal fines and forfeitures, which Practice Fusion agreed to pay as part of a deferred prosecution agreement.  That settlement figure is notable as the largest criminal fine in the District of Vermont’s history.  Practice Fusion agreed to pay another $118.6 million in civil settlement, which includes approximately $113.4 million to the federal government and up to $5.2 million to states that opt to participate in separate state agreements. Practice Fusion, founded in 2005, provided electronic medical record software called Practice Fusion Solution free of charge. Instead of making money through software sales and support, the company supported itself through drug advertising revenues. The government brought both civil and criminal claims against Practice Fusion.  Like the Greenway case, the government alleged Practice Fusion submitted false claims by certifying its EHR software products had specific capabilities when the software apparently did not.  The settlement also resolves claims that Practice Fusion violated anti-kickback laws through programs it ran with opioid and other drug manufacturers.  According to the criminal Information filed in the District of Vermont by U.S. Attorney Nolan—the same district that filed charges leading to the Greenway settlement—Practice Fusion created pain clinical decision support (“CDS”) alerts that were inconsistent with CDC Guidelines and clinical quality measures.  As alleged, these CDS alerts were intended to prompt physicians to prescribe—and therefore increase sales of—extended release opioids in exchange for remuneration from the opioid manufacturer.  The extended release opioid CDS alerts began in 2016, even as the opioid crisis was coming to a head and the CDC released guidelines identifying addiction and overdosing as concerns with opioid use. The settlement is noteworthy for several reasons.  It resolves the first ever criminal prosecution of an EHR company, according to the press release.  It also demonstrates the government’s willingness to combat the opioid crisis by targeting entities other than opioid drug manufacturers.  In addition, the settlement was the result of charges brought solely by the government without any qui tam relators, just like the case in the Greenway settlement, demonstrating the government’s willingness to investigate EHR companies on its own initiative.  Finally, the settlement clearly emphasizes U.S. Attorney Nolan’s prior admonition, “EHR companies should consider themselves on notice.”

In an article published late last year, Dorsey reported on the Department of Justice’s announcement regarding the formation of a new Procurement Collusion Strike Force.  The Strike Force focuses on the nexus between antitrust and public procurement, with the stated aim of targeting antitrust crimes “such as bid-rigging conspiracies and related fraudulent schemes.”  If there was any question whether DOJ was serious about targeting such conduct, a recent DOJ settlement suggests it is. In a press release last week the Department announced a $29 million False Claims Act settlement to resolve allegations that three corporate defendants rigged the bidding of an auction to buy a government loan on the cheap.  The underlying lawsuit accused defendants Hybrid Technology LLC, Hybrid Tech Holdings LLC (collectively, “Hybrid”), and Ace Strength International of rigging bids for the right to acquire a $168.5 million nonperforming loan from the Department of Energy (“DOE”), which was secured by the assets of now-bankrupt Fisker Automotive Inc. and Fisker Automotive Holdings Inc. (collectively, “Fisker”).  Hybrid submitted the sole bid, for $25 million, and won the nonperforming Fisker loan.  The qui tam action was filed by FAH Liquidating Trust, the successor to the official committee of unsecured creditors of Fisker, and its legal counsel William R. Baldiga.  As successful relators, the Trust and Baldiga will receive $5.2 million of the $29 million settlement. The lawsuit more specifically alleges that Hybrid was one of three bidders that made it to the final stage of the DOE’s auction process, the live auction.  The other two bidders were Wanxiang America, Inc. (“Wanxiang”) and WM GreenTech Automotive Corp. (“GTA”).  Hybrid allegedly communicated with Wanxiang to discourage Wanxiang from bidding, including phone calls between Hybrid and Wanxiang executives while the live auction was taking place.  Hybrid allegedly repeated that conduct with GTA, and was successful in dissuading both Wanxiang and GTA from bidding such that Hybrid won the auction with its sole bid for $25 million. Hybrid faced the threat of liability under the FCA for allegedly making false statements and submissions to the government about Hybrid’s independent participation in the auction, per the lawsuit’s allegations.  As a precondition to participating in the auction, the lawsuit alleges Hybrid was required to state that it would “act independently” as a bidder, that its “bids would be submitted in good faith,” and that its participation in the auction would be “conducted in accordance with the law.”  After having won the auction, the lawsuit alleges Hybrid signed a Loan Purchase Agreement with DOE wherein Hybrid further represented it would continue to abide by the law and that its prior statements of independence, good faith, and legal conduct, remained “true and correct in all material respects.”  The lawsuit alleges Hybrid’s collusion with Wanxiang and GTA rendered Hybrid’s statements and representations to DOE false. This particular case was not the direct result of the Department’s new Procurement Collusion Strike Force, as the investigation into Hybrid preceded its creation.  But the case is symbolic of the conduct targeted by the Strike Force, and serves as a reminder that the Department is willing to team up in other ways—here with the relators and a “coordinated effort” led by the Civil Division, the District of Columbia U.S. Attorney’s Office, and DOE’s Office of Inspector General—to root out anticompetitive behavior involving government contracts.  Moreover, to avoid attracting the attention of such authorities, including the Department’s Procurement Collusion Strike Force, organizations in the public procurement space that are involved in joint ventures or that are collaboratively working with business partners should be mindful of the antitrust issues that can surface at the intersection of industry and government contracts.

Within the last five years, district courts in the Seventh Circuit have repeatedly denied motions to dismiss qui tam lawsuits brought under the FCA that allege a scheme to defraud government health programs by reporting inflated “usual and customary” prices for prescription drugs. By contrast, at least one district court in the Sixth Circuit recently granted such a motion under Rule 9(b). On March 7, 2019, a district court in the Tenth Circuit—considering similar prescription drug allegations for the first time—sided with the Seventh Circuit and denied defendants’ motion to dismiss plaintiffs’ FCA claims. In United States ex rel. Strauser v. Stephen L. LaFrance Holdings Inc., plaintiffs allege that between 2008 and 2012, defendants charged cash-paying customers four dollars for a thirty-day supply of any one of more than 300 commonly prescribed generic medications. Unlike cash-paying customers, plaintiffs allege that defendants charged Medicaid beneficiaries a higher price for the same drugs and reported that higher price as the “usual and customary charge to the general public” for purposes of receiving Medicaid reimbursement. Because Medicaid bases its payments on the so-called usual and customary prices reported by the pharmacies, plaintiffs allege that defendants did not extend the same four-dollar discount pricing to Medicaid in an effort to increase their reimbursement. In their complaint, Plaintiffs allege that defendants’ practices constituted fraudulent claims for payment under the FCA because it was understood throughout the pharmacy industry that “usual and customary charge” referred to the amount a pharmacy charged cash-paying customers. Plaintiffs also allege that defendants attempted to avoid detection by not advertising the four-dollar generic pricing in the media or through brochures, signs, or other promotional materials. Defendants moved to dismiss plaintiffs’ FCA claims by arguing, among other things, that plaintiffs failed to plead scienter with sufficient particularity. Defendants argued that the relevant FCA provisions—i.e., 31 U.S.C. § 3729(a)(1)(A), (B), and (G)—apply only to persons who act “knowingly.” Defendants argued that they could not have acted knowingly because excluding discount pricing of generic drugs from the usual and customary charges “was a reasonable interpretation of [an] ambiguous legal framework and not clearly proscribed by law.” The court found defendants argument unpersuasive. The court noted that defendants’ argument was “in tension with the plain meaning of the words ‘usual and customary,’” as well as plaintiffs’ allegation that the phrase is understood throughout the pharmacy industry to refer to the amount a pharmacy charges cash-paying customers. The court’s decision is notable in that expands the Seventh Circuit’s general acceptance of FCA claims regarding “usual and customary” prices for prescription drugs to a different jurisdiction. The court’s decision also serves as yet another win for whistleblowers complaining of fraudulent prescription drug practices and prices. The decision is found at: United States ex rel. Strauser v. Stephen L. LaGrance Holdings, Inc., 2019 U.S. Dist. LEXIS 36385 (N.D. Okla. Mar. 7, 2019).

Federal scrutiny of charities that assist patients with accessing prescription drugs has increased with rising prescription drug prices.  Some prescription drug charities receive funding from medical providers or drug manufacturers, which can raise questions about whether the charities’ funders are using the charities to generate improper recommendations or referrals. In December 2017, the U.S. Department of Health and Human Services Office of Inspector General rescinded a 2006 advisory opinion that had assured a patient-assistance charity that its subsidies for individuals’ prescription drug purchases would not subject it to federal Anti-Kickback Statute liability. The OIG’s rescission could signal shifting federal policy towards increased scrutiny of drug charities funded by drug manufacturers. Amidst these changes, a new decision from the U.S. Court of Appeals for the Third Circuit is a good reminder that AKS compliance issues do not automatically translate into FCA violations. In United States ex rel. Greenfield v. Medco Health Sols., Inc., --- F.3d ‑‑‑‑, 2018 WL 473158, at *1 (3d Cir. Jan. 19, 2018), the court held that an FCA claim premised on an AKS violation must show that a particular patient was exposed to an illegal recommendation or referral and that a claim for payment for care for that patient was submitted to the government. Medco concerned Accredo Health Group, Inc., a specialty pharmacy servicing patients with hemophilia. Accredo supported hemophilia charities, two of which allegedly recommended Accredo as a preferred provider through communications to their members. The relator alleged that this amounted to an AKS violation, which gave rise to an FCA claim because Accredo had certified compliance with the AKS when submitting its reimbursement claims to government payors. Accredo successfully argued to the trial court that the relator’s claim failed because he could not show any evidence that any beneficiaries of federal programs chose Accredo because of its alleged improper payments to the charities. On appeal, the relator argued that this amounted to a requirement that he show each patient subjectively sought Accredo’s care because of Accredo’s charitable donations. The court in Medco set out to identify “what ‘link’ is sufficient to connect an alleged kickback scheme to a subsequent claim for reimbursement: a direct causal link, no link at all, or something in between.” The United States, as amicus curiae in support of neither party, urged the court to hold that no proof of a patient’s subjective intent to utilize Accredo because of the charities’ recommendation was required to establish an FCA violation. The court agreed, holding that proof of an FCA violation required evidence that at least one of Accredo’s claims sought reimbursement for care provided in violation of the AKS, but that a patient’s subjective reason for choosing Accredo need not be proven. Nevertheless, the referral or recommendation that violated the AKS must be the referral or recommendation that resulted in the false claim. The court held the relator had failed to show that any of Accredo’s 24 federally insured patients were exposed to the recommendation of the hemophilia charities or that they were even members of the charities. The court explained that “[a] kickback does not morph into a false claim unless a particular patient is exposed to an illegal recommendation or referral and a provider submits a claim for reimbursement pertaining to that patient.” The court rejected the relator’s request that the court infer the patients were members of the charities based on the relator’s assertion that “[e]ssentially all hemophelics” in the geographic area Accredo served were members of the charities to which Accredo donated. This inference was not enough because it was impossible to rule out the chance that none of the patients was a member and that none was exposed to the charities’ recommendation. Thus, the relator’s evidence failed to “link Accredo’s alleged kickback scheme to any particular claim” and so Accredo did not face FCA liability. The court pointed out several issues it did not address in its opinion. It expressed no view as to whether Accredo’s relationship with the charities was an AKS violation in the first place. Nor did the court reach the issues of whether the relator could satisfy the FCA’s materiality requirement, even if he had shown a link between the patients exposed to the charities’ recommendation and Accredo’s claims. And although not addressed by the court, the low number of federally insured patients at issue—24—means the court did not have an opportunity to address claims against a provider who services a large number of federally insured patients. Medco does not explain what evidence would be sufficient to show at least one of a large number of patients were exposed to an improper referral or recommendation. Still, the Medco decision is a useful reminder that the AKS and FCA have separate elements, and an AKS violation does not automatically translate to FCA liability.  Organizations in the healthcare space--particularly charities--should take heed.

In recent weeks, the United States Department of Justice (“DOJ”) issued two memoranda that might change the calculus of False Claims Act (“FCA”) cases.  The memoranda at a minimum provide organizations with new—or at least invigorated—defenses to qui tam actions and civil enforcement matters. First, on January 10, Michael Granston, Director of DOJ’s Civil Frauds section, issued a memorandum encouraging DOJ trial attorneys to consider dismissing unmeritorious qui tam cases (even over the objection of the relator).  The DOJ’s authority to dismiss FCA cases has long been built directly into the governing statute, 31 U.S.C. § 3730(c)(2)(A), which provides that: The Government may dismiss the action notwithstanding the objections of the person initiating the action if the person has been notified by the Government of the filing of the motion and the court has provided the person with an opportunity for a hearing on the motion. In practice, DOJ trial attorneys rarely use this power, preferring to allow qui tam cases they declined to intervene in to continue being prosecuted by the relator.  The Granston Memo encourages a shift in practice by suggesting that DOJ attorneys should dismiss qui tam cases that lack substantial merit.  Meritless qui tam cases drain limited government resources and may “generate adverse decisions that may affect the government’s ability to enforce the FCA.”  To aid in determining whether a DOJ attorney should seek dismissal of a declined qui tam action, the Granston Memo sets forth seven factors, including curbing parasitic qui tams and preserving government resources. Second, on January 25, the Associate Attorney General (“AAG”) issued a memorandum prohibiting reliance on government agency “guidance documents” as a basis for liability in DOJ affirmative civil enforcement matters—including FCA cases.  Such “guidance documents” include all non-statutory or regulatory documents that purport to advise the public of legal rights or obligations, as are commonly issued by agencies like the US Environmental Protection Agency and the Department of Health and Human Services.  The memo advises DOJ litigators that because “[g]uidance documents cannot create binding requirements that do not already exist by statute or regulation . . . [DOJ] litigators may not use noncompliance with guidance documents as a basis for proving violations of applicable law.”  The AAG's memo acknowledges that sub-regulatory guidance serves a valuable function, and does not likely presage a government-wide change in agency’s use of such documents.  But FCA matters—qui tam or otherwise—that are built on such sub-regulatory guidance are on shakier ground. These memoranda create interesting implications for FCA cases.  First, the AAG’s memo narrows potential FCA liability by excluding a wide range of agency documents from being the basis of FCA violations.  The AAG’s memo also raises interesting questions about what agency materials might be evidence of “materiality,” particularly after the Supreme Court’s recent Escobar decision.  Second, although the authority of the DOJ to dismiss qui tam actions has not changed, the government may be newly receptive to arguments for the dismissal of plainly deficient qui tam cases.  The memo thus presents an opportunity for legal counsel to affirmatively seek dismissal of a weak FCA case—a move that could potentially save the accused violator the time and expense of otherwise defending against the case. The two memoranda are available here and here.

Last month the Eighth Circuit considered and rejected an Eleventh Amendment sovereign immunity defense to a qui tam action under the False Claims Act.  In United States ex rel. Fields v. Bi-State Development Agency, No. 16-3783, 2017 U.S. App. LEXIS 13925 (8th Cir. August 1, 2017), a former employee of Bi-State alleged that the defendant interstate compact entity raised funds and required its employees to volunteer for a county executive’s reelection campaign, in violation of the Hatch Act.  The Government did not intervene.  Bi-State, an entity formed by Illinois and Missouri and ratified by Congress, and which owns and operates public transportation services, argued on summary judgment that it should be immune from suit under the Eleventh Amendment.  The federal district court for the Eastern District of Missouri disagreed, Bi-State brought an interlocutory appeal, and the Eighth Circuit affirmed. The Eighth Circuit had previously considered whether Eleventh Amendment sovereign immunity protected Bi-State from suit, holding in Barket, Levy & Fine, Inc. v. St. Louis Thermal Energy, 945 F.2d 1084 (8th Cir. 1991) that it did not.  An entity asserting an Eleventh Amendment defense must establish it is an arm of the state.  It must show “good reason to believe that the [compacting] [s]tates structured the new agency to enable it to enjoy the special constitutional protection of the [s]tates themselves.” Id. at 1086 (alterations in the original). Bi-State argued that a change in law affecting the first of six factors the Eighth Circuit weighs in analyzing Eleventh Amendment immunity—whether the compacting states characterize the entity as an arm of the state—should lead to a different conclusion than the holding in Barket.  Since Barket, Missouri deleted a statutory section that had provided an exception to sovereign immunity for multistate compact entities.  Because both Illinois law and the language of the compact still weighed in favor of treating Bi-State more as a municipality than as an arm of the state, however, the Eighth Circuit explained the change in Missouri law did not necessitate a different outcome.  The court went on to consider each of the other factors, finding that they pointed in different directions. Instead, the court looked to the “Eleventh Amendment’s twin reasons for being” to decide whether to extend its protections in this case: “respect for dignity of the states as sovereigns,” and “prevention of federal-court judgments that must be paid out of a [s]tate’s treasury.” Fields, 2017 U.S. App. LEXIS at 18.  The Court reasoned that suing an agency that is the creation of multiple states and the federal government did not present the same affront to dignity as suing a state.  Most importantly, though, neither Illinois nor Missouri would be financially obligated to satisfy a judgment against Bi-State.  Bi-State, then, had failed to show good reason to believe Illinois and Missouri structured it to enjoy immunity from suit, and the Eighth Circuit remanded the case for further proceedings.

On Tuesday, February 21, 2017, the Supreme Court summarily vacated the judgment in Bishop v. Wells Fargo & Co. and remanded the case to the Second Circuit in light of the Court’s recent decision in Universal Health Servs. v. United States ex rel. Escobar, which recognized the implied certification liability theory in FCA suits. In Bishop, the plaintiffs originally brought FCA claims against Wells Fargo, specifically alleging that that Wachovia Bank and World Savings Bank (both of which later merged into Wells Fargo) engaged in improper accounting practices to disguise the fact that the banks were undercapitalized, which itself was a violation of Federal Reserve rules.  Plaintiffs’ FCA claims were based on the idea that each time the banks borrowed money from the Fed’s Term Auction Facility, they were allegedly falsely certifying to the Fed that they were in sound financial condition. The Second Circuit in Bishop v. Wells Fargo & Co., 823 F.3d 35 (2d Cir. 2016) affirmed a district court ruling dismissing the FCA claims, holding that even if the allegations concerning fraudulent accounting practices were true, the plaintiffs could not tie the fraud to accusations of actionable implied false claims submitted to the government for payment.  Because the banking laws did not expressly condition Fed loans on compliance, it was irrelevant whether knowing the true capitalization of the banks would have cause the Fed to change its lending terms. After the Second Circuit’s Bishop decision, however, the Supreme Court announced its holding in Universal Health Servs. v. United States ex rel. Escobar, 136 S. Ct. 1989 (2016), which upheld the theory of implied certification liability under the FCA, where the alleged misrepresentation to the government is “material” to the government’s payment decision. Following Escobar, the plaintiffs in Bishop asked the Supreme Court to revive their suit, citing the Court’s subsequent affirmation of the implied certification theory of FCA liability and arguing that Escobar abrogated longstanding Second Circuit precedent which had rejected classic “implied certification” liability. The Court’s summary disposition illustrates the ongoing importance of Escobar to the viability FCA suits brought in appellate circuits which previously did not recognize the implied certification theory.  Moreover, financial institutions will need to closely monitor subsequent developments in Bishop given the implications of implied certification liability rooted in noncompliance with banking regulations. The Supreme Court’s summary disposition in Bishop can be found Here. Dorsey’s FCA Now blog has previously provided insights and updates on Escobar that can be found at the following links: https://www.dorseyfca.com/district-court-grants-motion-to-dismiss-relators-claims-in-one-of-the-first-post-escobar-decisions/ https://www.dorseyfca.com/implied-certification-escobar-and-the-impact-on-healthcare-providers/ https://www.dorseyfca.com/supreme-court-upholds-implied-certification-theory-of-liability-imposes-limitations-on-its-reach/

The U.S. District Court for the Southern District of Texas has dismissed an FCA retaliation claim brought by a nurse who claimed to have blown the whistle on misuse of funds at a hospital that received significant federal revenue. In Endicott v. Oakbend Medical Center, the nurse alleged she was fired after she complained that several hospital executives were using hospital employee time to enrich the executives’ private business.  She alleged the hospital and executives “knowingly used Medicaid and Medicare funds that were supposed to be used to pay vendors, physicians, and fund employee salaries” to advance the private business’s interests.  She claimed illegal retaliation under the FCA, asserting she was fired for objecting to the alleged activity. The FCA bars an employer from retaliating against an employee who engages in lawful acts in furtherance of an FCA lawsuit or other efforts to stop FCA violations. But the employee’s acts must be aimed at matters that could reasonably lead to a viable FCA claim.  For an employee’s internal complaints to be protected, they must concern false or fraudulent claims for payment submitted to the federal government.  The employee must allege that she believes in good faith, and a reasonable employee in similar circumstances might believe, that the employer is defrauding the government.  Complaining about an employer’s internal misconduct unrelated to false claims is not enough.  Nor is it sufficient to allege a non-governmental third party was the victim of fraud. The court rejected the premise of the nurse’s FCA claim—the hospital’s receipt of “substantial revenue” from Medicare and Medicaid. The nurse alleged the hospital improperly used this revenue to pay employees who were simultaneously working for the executives’ business.  But she failed to assert that the hospital submitted false claims for payment to the federal government.  The hospital’s alleged use of legitimately obtained funds for improper purposes did not create FCA liability.  The nurse’s subjective belief that the hospital’s activity constituted fraud on the government was thus insufficient to state a claim for retaliation. The court’s decision reaffirms that hospitals may face a host of consequences for misusing legitimately obtained federal revenue, but FCA liability is not typically one of them.