In U.S. ex rel. Wolfson v. Park Avenue Medical Associates, the U.S. Attorney’s Office in the Southern District of New York entered into a $1 million False Claims Act settlement against three related companies for improperly billing Medicare for behavioral health services.  The settlement agreement provided that the defendants “admit, acknowledge and accept responsibility for” (1) billing Medicare for psychiatric diagnostic examinations without adequate documentation; (2) billing Medicare for multiple psychiatric diagnostic examinations without demonstrating compliance with Medicare rules; and (3) billing Medicare for psychotherapy services to dementia patients without demonstrating they had the capacity to benefit from the treatment.  The government agreed to a five-year payout of the settlement amount. 

Judges Favoring Admissions of Wrongdoing

This settlement agreement follows the practice adopted in the SDNY of requiring FCA defendants to admit to an agreed statement of facts as part of an FCA settlement.  There does not appear to be a Department of Justice policy on whether to require admissions in a settlement, so that decision is up to the local district.  Defendants are understandably reluctant to enter into such settlement agreements because of the potential collateral effects of an admission of wrongdoing in a publicly filed settlement agreement.

At the same time, judges have become increasingly reluctant to simply approve government settlement agreements where there is no admission of wrongdoing.  In SEC v. Citigroup Global Markets, Inc., Judge Jed Rakoff refused to accept the parties’ proposed settlement agreement because Citigroup had not admitted or denied the allegations in the complaint.  The Second Circuit will soon decide an appeal of that decision brought by both parties. 

SDNY May Become Less Attractive To Qui Tam Relators

Regardless of how the Second Circuit rules in that case, the SDNY is at least one district which it seems will continue to require an admission of an agreed statement of facts, if not an outright admission of wrongdoing or liability.  One interesting consequence of the SDNY approach is that qui tam relators who can choose to file in several districts may think twice about filing in the SDNY.  While relators would be happy to see defendants have to admit wrongdoing, they may rather have a reasonable settlement with a defendant that neither admits nor denies liability.   A required admission of wrongdoing may stand in the way of  – or significantly delay – an FCA settlement that could otherwise be in the interests of both relator and the defendant. 

Whether the SDNY position on demanding an admission of wrongdoing is likely to be an impediment to settlement is one additional factor qui tam relators will have to consider when they decide where to file their case.