A series of recent federal court decisions has fundamentally changed the legal landscape for fraud enforcement against healthcare companies. It is now significantly easier for whistleblowers to bring claims under the False Claims Act (FCA) against organizations that bill Medicare, Medicaid, and other federal healthcare programs, and significantly harder for those organizations to dismiss such cases at an early stage.
The False Claims Act and “the Law Wasn’t Clear”
The federal government’s primary tool for recovering money lost to fraud in government healthcare programs is FCA. The FCA is unique because it also allows private individuals called “relators” to file lawsuits to recover money lost to fraud on the government’s behalf. These relators are often employees, physicians, pharmacists, or administrators – people with inside knowledge – who could be entitled to recover a percent of what the government recovers in these “qui tam” actions.
However, for years, companies accused of defrauding government programs had a reliable defense: if a law or regulation they were accused of violating was unclear, they could successfully get a case dismissed before getting even initial evidence in a case. It did not matter whether the company privately knew its interpretation was aggressive or risky. If a court found the reading plausible on paper, the case was over.
That standard has now changed. In 2023, the U.S. Supreme Court unanimously ruled that what matters under the FCA is what the company actually knew or believed — not whether a hypothetical reasonable person could interpret the regulation similarly. Since then, the lowest courts have increasingly applied that standard, but not uniformly.
In August 2025, the Ninth Circuit Court of Appeals appears to have been the first federal court to apply the standard at the appellate level. In =March 2026, the Fourth Circuit followed, reversing a district court’s dismissal of an FCA case using the same standard. The trend is clear and accelerating: courts are moving away from objective interpretations of ambiguous regulations and toward a focus on a company’s subjective knowledge and intent.
What This Means for Healthcare Organizations
These rulings affect healthcare organizations participating in federal programs, not just pharmaceutical companies. Hospitals, physician practices, pharmacies, skilled nursing facilities, home health agencies, and other providers or suppliers that submit claims to Medicare or Medicaid should take note of several key implications:
Regulatory ambiguity is no longer a reliable defense. Organizations that are aware — through CMS guidance, audit findings, compliance reviews, industry communications, or other sources — that their interpretation of a billing, coding, or pricing rule carries a substantial risk of being wrong face real legal risk if they continue that practice. Courts will now examine what the organization actually knew and whether it acted recklessly or in bad faith, not simply whether its reading of the regulation could be technically defensible.
Internal documents are now central to FCA cases. Courts are examining companies’ correspondence with regulators, internal audits, compliance reports, training materials, and business decisions as evidence of what the company understood about its obligations. In a recent case, a federal appeals court pointed to the company’s own letter to CMS and its subsequent decision to change some practices but not others as key evidence of awareness. Compliance files, audit reports, and communications with government agencies may all become relevant evidence in an FCA proceeding.
Whistleblower cases are more likely to survive early dismissal. Under the prior legal framework, many qui tam cases were dismissed before the whistleblower had an opportunity to present evidence. That is no longer the norm. Cases backed by credible allegations about what a company knew are now far more likely to proceed into discovery, where internal communications, financial records, and compliance files can be examined.
Government intervention may increase. When the U.S. Department of Justice evaluates whether to join a whistleblower’s lawsuit, it weighs the likelihood that the case will survive early legal challenges. A legal environment in which FCA claims are more durable makes government intervention more likely, and government-backed cases tend to result in larger recoveries – which means a potentially higher recovery for the relator – and more serious consequences for the defendant.
The Bottom Line
Federal courts have made clear that healthcare organizations can no longer rely on regulatory gray areas to avoid accountability under the False Claims Act. What matters now is what the organization knew. Companies that are aware of compliance risks but choose to proceed face greater legal exposure than ever before.
For healthcare professionals who witness billing practices, pricing decisions, or compliance shortcuts that raise concerns, the legal environment for bringing those issues forward has never been more favorable. Whistleblower protections are stronger, cases are more likely to proceed, and the government is paying attention.
How Frier Levitt Can Help
Frier Levitt represents whistleblowers, healthcare providers, and organizations in FCA matters, compliance counseling, and government investigations. Our attorneys work with physicians, pharmacists, administrators, and compliance teams to evaluate potential FCA exposure, structure compliant billing and pricing practices, and advise individuals who are considering reporting fraud against government healthcare programs.
If you have questions about how these developments affect your organization or your obligations, contact Frier Levitt.
Frequently Asked Questions About the False Claims Act and Whistleblower Protections
What is the False Claims Act (FCA)?
The False Claims Act is a federal law that allows the government—and private whistleblowers—to pursue claims against individuals or organizations that knowingly submit false or fraudulent claims for payment to federal programs such as Medicare and Medicaid.
What changed in recent FCA court decisions?
Courts now focus on a company’s actual knowledge and intent rather than whether a regulation could be interpreted in multiple ways. This makes it harder for defendants to dismiss FCA cases early based on regulatory ambiguity.
What does “knowledge” mean under the FCA?
Under the FCA, knowledge includes actual awareness, deliberate ignorance, or reckless disregard of the truth. Organizations can face liability if they proceed with practices despite known compliance risks.
Why are whistleblower cases more likely to succeed now?
Because courts are allowing more cases to move past early dismissal, whistleblowers have greater opportunities to obtain evidence through discovery and build stronger claims.
What types of healthcare organizations are affected?
All entities that bill federal healthcare programs may be impacted, including hospitals, physician practices, pharmacies, skilled nursing facilities, and home health agencies.
What role do internal documents play in FCA cases?
Internal communications, audit reports, compliance reviews, and correspondence with regulators are increasingly used as key evidence to demonstrate what an organization knew about its practices.
Will government enforcement increase?
Yes. As FCA cases become more likely to survive early challenges, the Department of Justice may be more inclined to intervene, which often leads to higher financial exposure and more significant penalties.
What should healthcare providers do to reduce FCA risk?
Providers should proactively assess compliance risks, document decision-making processes, respond to audit findings, and ensure billing and coding practices align with current regulatory guidance.
Can individuals report suspected healthcare fraud?
Yes. Whistleblowers can file qui tam lawsuits under the FCA and may receive a portion of any financial recovery if the case is successful.
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