Two incredibly far-reaching opinions were issued in the second half of 2004 concerning the federal False Claims Act ("FCA"). Both cases turned on the interpretation of 31 U.S.C. § 3729(a)(1), the FCA provision that states that liability arises when any person "knowingly presents, or causes to be presented, to an officer or employee of the United States Government .a false or fraudulent claim for payment or approval." Both opinions endorsed a strict reading of the term "officer or employee of the United States Government," that would appear to exclude entities and individuals, e.g., state Medicaid officials, who do not have an employment relationship with the United States Government.

An October 2004 Alabama district court interpreted an August 2004 D.C. Circuit Court of Appeals case to dismiss the FCA case before it. The district court case, United States ex rel. Atkins v. McInteer, No. 03-AR-1540-S, 2004 WL 2651341 (N.D. Ala. Oct. 27, 2004), is significant because of the way the court (J. Acker) interpreted 31 U.S.C. § 3729(a)(1).

Judge Acker applied the D.C. Circuit case, United States ex rel. Totten v. Bombardier Corporation, 380 F.3d 488 (D.C. Cir. 2004), rehearing en banc denied, 2004 U.S. App. LEXIS 25245 (D.C. Cir. Dec. 8, 2004), to find that the alleged false claims were made to Alabama Medicaid, which is a grantee, not a federal officer or employee as defined by 31 U.S.C. § 3729(a)(1). Thus, there was no presentation of a false claim to "an officer or employee of the United States Government." Case dismissed.

In Totten, the D.C. Circuit found that the FCA was not applicable when a qui tam relator, i.e., a whistleblower, complained that false claims (for allegedly defective railroad cars) had been presented to Amtrak, a grantee of federal funds, as distinguished from the federal government itself. The Totten court pointed out that the FCA creates a cause of action only if a false claim is "presented .to an officer or employee of the United States Government." The threshold question in Totten was whether an FCA plaintiff may prevail against a defendant who submits a false claim to a federal grantee such as Amtrak, without presenting evidence that the claim was ever actually submitted to the U.S. government. Totten, 380 F.3d at 491. As Judge Acker explained in Atkins:

In other words, a false claim, if presented to an entity that, in turn, has received or subsequently receives money from the United States with which to pay the claim, is not actionable, despite the fact that the money, in whole or in part, comes from the United States.

Atkins at *1.

Those familiar with entities like carriers, fiscal intermediaries and DMERCs will immediately see the implications of these two cases. Those entities are not officers or employees of the United States Government either; they are contractors. Claims made by health care providers are necessarily submitted to those entities that are under contract to the government to do claims processing. If the courts continue to apply Totten as Judge Acker did to Alabama Medicaid, then the FCA becomes wholly inapplicable to the vast, vast numbers of claims submitted to carriers, fiscal intermediaries and DMERCs.

We strongly expect that the United States will petition the Supreme Court to grant review of and to overturn Totten. However, since the D.C. Circuit denied rehearing en banc only on December 8, 2004, the petition for certiorari to the Supreme Court has not been made as of this writing.