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Brief Your CEO: New SCOTUS Case May Help Your Lab Defend Meritless Whistleblower Cases

by | Aug 1, 2023 | Brief Your CEO-lca, Essential, Lab Compliance Advisor

A recent SCOTUS ruling on a healthcare fraud case could help defend labs against baseless whistleblower cases.

Compliance officers and other lab leaders need to keep their executive and management teams apprised of new court cases that may impact their lab’s liability under healthcare fraud laws. One such case—U.S. ex rel. Polansky—was decided on June 16 when the Supreme Court of the US (SCOTUS) ruled that the Department of Justice (DOJ) has broad authority to dismiss qui tam whistleblower lawsuits it deems meritless and/or counter to government interests.1 Here’s how to explain the case and its potential significance for your lab:

Step 1: Establish the Legal Context

The Polansky case is key because it addresses the most important federal healthcare fraud law on the books, the False Claims Act (FCA), which bans submitting or causing the submission of false payment claims to Medicare, Medicaid, and other federal healthcare programs. If your lab is ever investigated, prosecuted, or sued for federal healthcare fraud, it will likely be under the FCA.

A) Explain How the Qui Tam Process Typically Works

The FCA is enforced by federal government agencies, including the DOJ. However, the law also includes unique provisions that allow private whistleblowers, known as relators, to file “qui tam” lawsuits on the government’s behalf. If the case is successful, the relator gets a share of whatever the government recovers via settlement or judgment.

The qui tam process begins when relators file the case under seal. The government then has 60 days (though this deadline is often extended) to decide what to do about the case. The options:

  • Intervene, in which case the government becomes the primary plaintiff (complainant) in the case
  • Decline to intervene, in which case the relator remains the primary plaintiff acting on the government’s behalf
  • Seek to have the lawsuit dismissed under Section 3730(c)(2)(A) of the FCA if the government believes the suit doesn’t serve its interests2

If a relator files a qui tam lawsuit against your lab and the government intervenes, it generally spells bad news. That’s because government intervention increases the risk of going to trial and therefore the incentive for your lab to settle the case. On the other hand, if the government chooses not to intervene, the risk shifts to relators, who must go it alone knowing that, even if they prevail, the government will still get most of the money. The Polansky case deals with the government’s third option—requesting that the case be dismissed.3

Step 2: Explain the Basics of the Polansky Case

The case began when a physician working for a hospital billing firm filed a qui tam suit accusing his employer of violating the FCA by enabling clients to falsely bill Medicare for outpatient services at higher-reimbursing inpatient rates.

For two years, the case remained under seal until the DOJ finally decided not to intervene. Undaunted, the physician went forward without the government. During the pretrial discovery process, the doctor served the DOJ and defendant billing company with demands for documents and deposition testimony, seeking evidence to use in the case. After five years of discovery, the DOJ asked the court to dismiss the case.

Having already spent nearly $20 million to litigate the case, the physician argued that, in declining to intervene while the case was under seal, the DOJ no longer had the right to get the case dismissed.4 The Pennsylvania federal district court disagreed and granted dismissal; the physician appealed, but the Third Circuit affirmed the ruling.

Given that federal courts have split on the issue (with the First, Sixth, Seventh, Ninth, Tenth, and District of Columbia Circuit Courts having addressed it), SCOTUS decided to take the case to resolve the controversy over the government’s Section 3730 (c)(2)(A) dismissal authority.5

Step 3: Discuss the Ruling and Its Significance

The takeaway from Polansky is SCOTUS’ affirmation that the DOJ has broad discretion to get baseless qui tam cases dismissed, meaning that your lab may now have better protection against such cases. Two important points to note about the ruling:

1. The DOJ May Seek Dismissal at Any Time

Ruling: SCOTUS ruled 8–1 that the DOJ can seek to dismiss a qui tam suit at any stage in the litigation, even after declining to intervene during the seal period.

Significance: This apparent technicality has potentially enormous significance if a relator files a baseless qui tam lawsuit against your lab. Picture this scenario: The case against your lab is under seal and the DOJ is deciding whether to intervene. You assemble your legal team and seek to persuade the DOJ officials investigating the matter that the case is baseless and doesn’t warrant intervention. The DOJ agrees. But, after all that you’ve invested in getting the DOJ to decline intervention, you’ll still have to defend yourself in court if the relator decides to proceed with the case anyway.

Thanks to Polansky, you’ll now have the option of asking the DOJ to seek dismissal under Section 3730 (c)(2)(A), even if it declined to intervene while the case was under seal. Just as importantly, the relator will know that you have this option. The looming possibility of the DOJ’s stepping in to seek dismissal at any time makes every dollar the relator spends on discovery and other litigation costs a risk.

Bottom Line: Relators who have weak cases will be under greater pressure to drop their lawsuits if the DOJ elects not to intervene.

2. The DOJ Is More Likely to Win Dismissal Motions

Ruling: The second big question Polansky resolved is the standard federal courts should use in deciding to grant the DOJ’s motion to dismiss a qui tam case. Rejecting previous courts’ rulings on this issue, SCOTUS said that courts should follow the normal rules governing voluntary dismissal of lawsuits under Section 41(a) of the Federal Rules of Civil Procedure.6

Significance: Section 41(a) is a very easy standard for the government to meet. SCOTUS understood that and deliberately set the bar low because it wanted to ensure that courts give “substantial deference” to the government’s views on whether a qui tam suit should be dismissed under Section 3730 (c)(2)(A).1

Bottom Line: Polansky won’t and isn’t intended to discourage or thwart meritorious qui tam lawsuits against labs and other providers for FCA violations. In fact, the case should have no impact on relators with legally sound allegations supported by substantial evidence. However, broader government authority to dismiss may help ensure that meritless claims that waste time, money, and resources without serving any public interest don’t make it to court. This will likely give labs and other healthcare providers targeted by these lawsuits new strategic options and greater leverage in settlement negotiations.

The FCA Qui Tam Constitutionality Wildcard

A good briefing should also address any potential long-term implications of new court rulings. There’s one such chestnut in Polansky that, while likely to prove a false alarm, is still worth mentioning: the decision includes “dicta,” or nonbinding legal statements, by three justices suggesting that the very qui tam provisions of the FCA might be unconstitutional. Given the huge costs of defending qui tam litigation, it’s possible that healthcare providers and other companies that contract with the federal government may consider bringing a test case before the Supreme Court to probe the qui tam constitutionality issue.


  1. https://www.supremecourt.gov/opinions/22pdf/21-1052_fd9g.pdf
  2. https://www.law.cornell.edu/uscode/text/31/3730
  3. https://www.g2intelligence.com/granston-memo-whistleblower-dismissals-may-be-tougher-than-doj-thought-2/
  4. https://www.hklaw.com/en/insights/publications/2023/06/us-supreme-court-rules-on-false-claims-act-dismissals
  5. https://www.g2intelligence.com/federal-courts-split-on-government-dismissals-of-qui-tam-claims-3/
  6. https://www.federalrulesofcivilprocedure.org/frcp/title-vi-trials/rule-41-dismissal-of-actions/

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