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Envision to Sell to KKR for $9.9 Billion

We represented Envision Healthcare Corporation (NYSE: EVHC) in its definitive agreement to sell to KKR in an all-cash transaction for $9.9 billion, including debt. KKR will pay $46 per Envision share in cash to buy the company, marking a 32 percent premium to the company's volume-weighted average share price from November 1, when Envision announced it was considering its options. The transaction is expected to close the fourth quarter of 2018. Read more

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Six Things to Know Before Buying a Physician Practice spotlight

Dermatology, ophthalmology, radiology, urology…the list goes on. Yet, in any physician practice management transaction, there are six key considerations that apply and, if not carefully managed, can derail a transaction. Download the 6 Things to Know Before Buying a Physician Practice to keep your physician practice management transactions on track.

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United States Dismisses False Claims Act Lawsuit against Renal Care Group After Seven Years of Litigation


January 8, 2013

In late December 2012, the United States filed a stipulation of dismissal in United States ex rel. Williams v. Renal Care Group, et al., No. 3:09-cv-00738 (M.D. Tenn.), bringing to close the seven-year-old False Claims Act lawsuit filed against Renal Care Group, Renal Care Group Supply Company, and Fresenius Medical Care Holdings, Inc.

The United States' stipulation of dismissal followed the October 2012 decision by the United States Court of Appeals for the Sixth Circuit, which reversed the district court's grant of summary judgment in favor of the United States, vacated the $82 million award in damages and penalties levied against the defendants, and entered summary judgment in favor of the defendants on two of the six counts brought by the United States. The district court's entry of the United States' stipulation of dismissal resulted in the dismissal of the remaining four counts brought against the defendants by the United States.

The lawsuit was initially filed in June 2005 as a qui tam action brought by two relators under the False Claims Act. The lawsuit alleged that the defendants violated the False Claims Act by improperly billing Medicare in connection with the defendants' requests for reimbursement for certain dialysis supplies and equipment.

In July 2007, the United States intervened in the lawsuit after two years of investigation and filed its complaint in intervention. In May 2011, after nearly four additional years of litigation, the district court granted the United States' motion for partial summary judgment and entered the $82 million damages award against the defendants.

The victory by the United States in the district court did not withstand appellate scrutiny. And, in vacating the district court's award of summary judgment and damages and entering judgment in favor of the defendants, the Sixth Circuit provided considerable guidance as to the proof required to show falsity, knowledge and materiality under the False Claims Act. See U.S. ex rel. Williams v. Renal Care Group, Inc., 696 F.3d 518 (6th Cir. 2012).

As to the question of falsity, the Sixth Circuit rejected the United States' reliance on the defendants' efforts to maximize profits as indicative of motive under the False Claims Act. As the Sixth Circuit explained: "Why a business ought to be punished solely for seeking to maximize profits escapes us."

The Sixth Circuit then addressed the type of proof required to show that a defendant acted "knowingly" under the False Claims Act, where the government argues that a defendant acts with reckless disregard of the fact that the submission of the claims at issue violated Medicare regulations. On this question, the Sixth Circuit held that the defendants were not in reckless disregard of the truth or falsity of their claims where the defendants: (1) consistently sought clarification of whether billing for the claims at issue was proper; (2) followed industry practice in attempting to decipher ambiguous regulations; (3) were forthright with the government regarding the business practices surrounding the claims at issue; and (4) sought guidance from outside counsel on the manner in which the regulations at issue should be interpreted.

As the Court explained, "[t]o deem such behavior 'reckless disregard' of controlling statutes and regulations imposes a burden on government contractors far higher than what Congress intended" in amending the False Claims Act to allow reckless disregard to satisfy the Act's knowledge requirement.

Finally, in considering the question of materiality, the Sixth Circuit concluded that the violation of a condition of participation does not render a claim materially false under the False Claims Act and, therefore, cannot lead to False Claims Act liability. Again, the Court's reasoning was straightforward: "[t]he False Claims Act is not a vehicle to police technical compliance with complex federal regulations."

The Sixth Circuit's opinion highlights the notion that good faith compliance with complex and/or ambiguous regulations typically should not give rise to False Claims Act liability, particularly where providers seek advice as to the legality of their actions and deal transparently with the government. Whether such arguments will carry the day at the motion to dismiss stage – and allow providers to avoid protracted and costly multi-year litigation – remains to be seen.

Bass, Berry & Sims attorneys Michael Dagley, Matthew Curley and Brian Roark represented the defendants in this matter.

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