Nathan A. Adams IV is a Partner in Holland & Knight's New York office.
In United States ex rel. Doe v. Heart Solution, P.C., 923 F. 3d 308 (3d Cir. 2019), the court of appeals ruled that individual employees with no ownership interest in a company that presents a fraudulent claim can still be liable under the FCA. The Patels, a husband and wife duo, pled guilty to separate but nearly identical criminal information charges for defrauding Medicare. The Patels falsely represented to Medicare that neurological testing was being supervised by a licensed neurologist. Ms. Patel argued that because she did not have any ownership interest in Mr. Patel's healthcare company, she had no duty to ensure that it employed a supervising neurologist. The court disagreed, holding that an ownership interest is not required for FCA liability. Collateral estoppel was another issue in the case. The court ruled that the defendant's healthcare company could not be collaterally estopped, based on a Medicare fraud conviction and plea colloquy, from contesting FCA liability or damages where the company was not charged with healthcare fraud, and its role in defrauding Medicare by submitting false reports about neurological testing was not actually litigated or determined by a final judgment in the criminal proceeding. In addition, Ms. Patel's admission that she submitted false claims to Medicare about the neurological testing at her husband's healthcare company, and that her husband's company and her company were paid roughly $1.18 million from Medicare for unsupervised neurological testing, did not collaterally estop her from denying liability or damages with regard to the government's common law claims for unjust enrichment, disgorgement of profits and payment by mistake of fact because the admissions left open the possibility that the defendant's husband and his company retained the entire benefit of the fraud. She was collaterally estopped from denying the falsity and knowledge elements of the government's FCA claims. The court would not allow Mr. Patel's unsworn statement that his company employed a supervising neurologist during certain years to create an issue of fact on summary judgment.
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