A recent ruling in a Florida False Claims Act case may give the Supreme Court the opening it has wanted to review whether whistleblowers can act on behalf of the government to bring lawsuits against healthcare providers.
The law’s qui tam provision encourages the role of insiders, or whistleblowers, in gathering the evidence federal prosecutors need to pursue a case. But often, including in many allegations against skilled nursing operators, those whistleblowers continue to drag out costly court action even after the government declines to intervene.
The case at issue is United States ex rel. Zafirov v. Florida Medical Assocs., in which Clarissa Zafirov alleged Medicare Advantage fraud by her former employer — a claim she continued to pursue for five years after she failed to convince the government of its merits.
US District Court Judge Kathryn Kimball Mizelle ruled that qui tam lawsuits are unconstitutional because they violate Article II of the Constitution’s Appointments Clause. In an analysis on its website last week, international law firm Faegre Drinker explained Mizelle found whistleblowers in False Claims cases “self-appoint” as officers of the federal government’s executive branch.
Defense attorneys representing skilled nursing clients are already gearing up to incorporate arguments similar to those in the Zafirov case in pending False Claims cases across the us.
“As it appears to be the first ruling dismissing an FCA case on constitutional grounds, it will be something to point to — even if it’s not binding precedent — for other defendants in other cases,” Thomas Barnard, an attorney and shareholder at Baker, Donelson in Baltimore, told McKnight’s Long-Term Care News.
The “reasoning may be persuasive to other judges,” Barnard added. “Seeing how the appellate court treats this case will be very important, as well as how many other cases in District Courts rule on similar cases.”
High Court implications
While others have previously weighed the act’s constitutionality, Barnard’s colleagues wrote Thursday that Mizelle is the first judge to strike down a portion in response to a defendant’s arguments. The case is “ripe for appeal, not only to the US Court of Appeals for the Eleventh Circuit, but also eventually up to the US Supreme Court, ” they wrote.
Several sitting Supreme Court justices have already welcomed the idea of reviewing the Act’s legal standing, including in a 2023 case in which the court gave the government more leeway to dismiss whistleblowers’ claims.
“The FCA’s qui tam provisions have long inhabited something of a constitutional twilight zone,” Justice Clarence Thomas argued in a dissent. “There are substantial arguments that the qui tam device is inconsistent with Article II and that private relators may not represent the interests of the United States in litigation.”
Justices Brett Kavanaugh and Amy Coney Barret concurred with Thomas on that issue, with Kavanaugh writing that the Supreme Court should consider the arguments on the Article II issue in an appropriate case.
But it may not take that long for skilled nursing and other healthcare providers to see the influence of the Zafirov case.
“As one of the priority focus areas for DOJ enforcement and FCA litigation, long-term care could see an impact if more courts view the FCA like the court in the Middle District of Florida,” Barnard said, noting that many long-term care cases are driven by whistleblower complaints.
Other potential effects
In fiscal year 2023, False Claims settlements and judgments approached a record $2.7 billion, including a $7.1 million settlement with Saratoga Center for Rehabilitation and Skilled Nursing Care over accusations of delivering “worthless services.”
Mizelle noted the increased financial stakes and struck out against the growth of firms that specialize in litigation funding, often for a share of a whistleblower’s take in a case. Since 1986, they have been able to collect triple the damages in a successful FCA case, a device Mizelle said “encourages litigation — so much so that private realtors bring the majority of FCA actions.”
If the court strikes down the constitutionality of whistleblowers, the overall enforcement rule would still stand. Even before then, Barnard predicts that the government could choose to stay involved in more cases or issue more non-intervention notices, indicating they are still undecided about how to proceed but are OK lifting a seal.
Alternatively, the Department of Justice could put more of its resources into cases not brought by relators, Barnard said.
