The FCA Insider

The FCA Insider

Insights and updates on False Claims Act Litigation

FCA Litigation

Eleventh Circuit Upholds False Claims Act Qui Tam Constitutionality, Vacating Florida District Court Ruling

On September 1, 2026, the Eleventh Circuit issued its highly anticipated decision in United States ex rel. Zafirov v. Fla. Med. Assocs., LLC, holding that the False Claims Act’s qui tam provision does not violate the Appointments Clause of the Constitution and vacating a Florida district court’s dismissal order that had been based on such grounds. This decision, however, is unlikely to be the last to address the constitutionality of the False Claims Act provision permitting whistleblowers to litigate fraud cases on behalf of the United States after the Department of Justice has declined to intervene in those cases. 

The Zafirov case arose from a 2019 lawsuit filed by Dr. Clarissa Zafirov under the False Claims Act’s qui tam provision—which allows relators who have knowledge about fraud against the government to pursue a case against the perpetrator of the fraud on the United States’ behalf—against her employer, a medical provider, and related entities, alleging that the defendants committed Medicare fraud. After conducting an investigation, the Department of Justice declined to intervene in the case and Dr. Zafirov proceeded to litigate the case on behalf of the United States, in accordance with the False Claims Act’s qui tam provision. In February 2024, defendants moved for judgment on the pleadings or dismissal of the case. Defendants echoed concern expressed in a 2023 dissent from Justice Thomas in Polansky v. Executive Health Resources, Inc., 599 U.S. 419 (2023), which questioned the constitutionality of the qui tam provision.  Defendants argued that the False Claims Act’s qui tam provision violated the Constitution’s Appointments Clause because relators exercise significant federal authority in a continuing position without appointment by the President. They also argued that the qui tam provision violates the Take Care Clause and Vesting Clause of the Constitution, though these arguments were not addressed by either the district court or the appellate court.

In fall 2024, in United States ex rel. Zafirov v. Fla. Med. Assocs., LLC, 751 F. Supp. 3d 1293, 1309 (M.D. Fla. 2024), the Middle District of Florida became the first court to hold that the qui tam provision of the False Claims Act is unconstitutional because it “directly defies the Appointments Clause [of the Constitution] by permitting unaccountable, unsworn, private actors to exercise core executive power with substantial consequences to members of the public.” Central to this finding was the district court’s conclusion that relators are officers of the United States. In making this conclusion, the district court held that the authority to bring civil enforcement actions constitutes “significant authority,” and that the “office of relator” is a continuing position.

In reversing the district court, the Eleventh Circuit found that relators “do not hold a continuing position, which is sufficient to determine that relators are not officers who must be presidentially appointed.” While the appellate court acknowledged that some relators litigate actions for multiple years, it held that a relator does not have a permanent tenure, and therefore “does not have a position with duration that makes him an officer.” Nor, the Eleventh Circuit noted, does a relator’s entitlement to a portion of the judgment in a successful False Claims Act Case constitute a “continuing emolument.” Finally, the court found that relators occupy only a personal role, because relators assume a duty to litigate each case that they file and those duties cannot be assumed by anybody else (except for the Government if it chooses to intervene).

The Eleventh Circuit’s decision reinforces the existing consensus among the Fifth, Sixth, Ninth, and Tenth Circuits that the False Claims Act’s qui tam provision does not violate the Appointments Clause.

However, the decision does not provide a definitive answer to the constitutionality question and comes amid increasing instances of skepticism by courts regarding constitutionality following Justice Thomas’s dissent in Polansky. In that opinion, Justice Thomas asserted that 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.” In a concurring opinion, Justices Kavanaugh and Barrett agreed with Justice Thomas that the Court should consider those “substantial arguments” in an “appropriate case.”

Despite Fifth Circuit precedent regarding the constitutionality of the False Claims Act’s qui tam provision, Judge Stuart Kyle Duncan authored a concurring opinion in U.S. ex rel. Montcrief v. Peripheral Vascular Assocs., P.A., 133 F.4th 395 (5th Cir. 2025) citing Justice Thomas’s dissent and concluding that the qui tam provision violates the Appointments Clause. The Third Circuit also heard oral argument on the constitutionality question earlier this year on appeal of a New Jersey district court’s decision in U.S. ex rel. Penelow v. Janssen Products, LP, 2025 WL 937504 (D.N.J. Mar. 28, 2025), with a ruling in that appeal still pending.

Following the Eleventh Circuit’s ruling, the defendants in Zafirov may ask for en banc review and/or petition for certiorari from the Supreme Court. While there appear to be at least three Supreme Court Justices who are willing to consider the constitutionality of the qui tam provision, whether there is a fourth vote sufficient to grant certiorari or five votes to find the qui tam provision unconstitutional remains to be seen. Moreover, it is not clear that the Justices will be keen to consider the issue where there is no current circuit split among the appellate courts. On remand, the district court in Zafirov will likely address the defendants’ remaining constitutional arguments regarding the Take Care and Vesting Clauses.  The Eleventh Circuit’s ruling is thus not the final word in this case, let alone regarding the broader question of the constitutionality of relators litigating declined False Claims Act cases.

Parties facing potential qui tam actions should continue to monitor this area of law and be mindful of the prevailing standard in the circuit in which they are litigating unless and until the Supreme Court decides to address the issue. For now, qui tam litigation will proceed as the constitutional challenges continue to wend their way through the courts.

FCA Defenses, Investigations, Regulatory

First Healthcare Company Avoids Criminal Charges Under DOJ’s New Self-Disclosure Policy

On July 29, 2026, the Department of Justice (“DOJ”) announced that it declined to bring criminal charges against Campus Eye Management Holdings LLC and its subsidiary, Campus Eye Management LLC (collectively “Campus Eye”), a New Jersey-based management services organization. Campus Eye is the first healthcare company to avoid criminal prosecution under the DOJ’s new corporate enforcement policy.

The declination was issued by the DOJ’s National Fraud Enforcement Division. It resolved a criminal investigation into Campus Eye’s role providing billing and administrative services to an optometry practice and ambulatory surgery center (“ASC”). The investigation centered on healthcare fraud, illegal kickbacks, and conspiracy.

At the same time, the DOJ unveiled a seven-count indictment against E. Bruce DiDonato, the founder of the optometry practice and ASC. DiDonato is accused of running a years-long scheme to bill Medicare and private insurers for unnecessary diagnostic eye tests and to pay illegal kickbacks to referring surgeons. According to the DOJ, the scheme ran from at least 2015 through March 2023 and generated approximately $3.4 million in allegedly fraudulent Medicare claims, about $1 million of which Medicare actually paid.

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CMS Guidance

CMS Proposes Provider Enrollment Changes to Strengthen Program Integrity

On July 6, 2026, the Centers for Medicare & Medicaid Services (CMS) published its Calendar Year 2027 Home Health Prospective Payment System Proposed Rule (the “Proposed Rule”) in the Federal Register, which includes several provider enrollment changes that would be applicable to all provider and supplier types. In its efforts to strengthen program integrity, CMS has proposed changes to the grounds for, and consequences of, provider enrollment denials and revocations.

Key proposed provider enrollment changes are described below. Comments to the Proposed Rule are due by 5pm ET on August 31, 2026.

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Regulatory

DoW Suspends CMMC Phase II Requirements – Launches 60-Day Review

On July 13, 2026, the Department of War (DoW) announced the immediate suspension of all Cybersecurity Maturity Model Certification (CMMC) Phase II requirements, which had originally been scheduled to take effect Nov. 10, 2026, including the transition to mandatory third-party assessments by CMMC Third-Party Assessment Organizations for contractors handling Controlled Unclassified Information. The DoW simultaneously established a CMMC Reform Task Force charged with delivering a comprehensive report within 60 days recommending “realistic, scalable security measures” for the Defense Industrial Base.

The suspension aligns with Secretary of War Pete Hegseth’s Acquisition Transformation System directives and the broader “Arsenal of Freedom” initiative. Critically, the action does not relieve contractors of their underlying obligations to protect federal data, which includes the current DFARS 252.204-7012 (Safeguarding Covered Defense Information and Cyber Incident Reporting) and the NIST SP 800-171 Rev. 2 security controls upon which the CMMC Phase II requirements are based.

Read on to learn more about the announcement and what government contractors need to know to maintain compliance.

Regulatory

OIG Clears Pathway for Free Supplemental Cancer Screening Report

On May 15, 2026, the Office of Inspector General (“OIG”) of the U.S. Department of Health and Human Services issued Advisory Opinion No. 26-11 (the “Opinion”), a favorable opinion for a proposed arrangement that involved providing patients a free supplemental cancer screening report (the “Proposed Arrangement”). The Opinion provides guidance for healthcare companies navigating the intersection of innovative diagnostic offerings and federal fraud and abuse laws.

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FCA Defenses, FCA Litigation, Regulatory

AI-Assisted Billing Could Create FCA Pitfalls: How Healthcare Companies Can Get Ahead of Risk

Across the healthcare industry, providers are increasingly relying on AI-assisted billing tools to automate medical coding, prior authorization workflows, and the submission of claims to Medicare, Medicaid and other federal payors. The efficiency gains can be substantial, as can the heightened False Claims Act (FCA) exposure these systems can create. As AI continues to develop and becomes more widely integrated into healthcare billing, relators and prosecutors are likely to explore new avenues for evaluating, and litigating, how these tools are deployed, monitored and overseen.

Like every billing system, AI-assisted billing tools can make mistakes. However, AI-assisted systems can scale those mistakes across thousands of claims, and the records those systems generate may make it easier for the government or relators to argue that a provider’s submission of those claims violated the FCA.

Read on to learn what healthcare companies should know when deploying AI-assisted billing, and best practices for getting ahead of FCA risk.

Regulatory

How Federally Funded Organizations Should Prepare for OMB Proposed Overhaul of Grants Oversight, DEI Bans, Easier Terminations

As part of the Trump administration’s efforts to implement a broad range of executive orders targeting diversity programs and other policy priorities in federal grantmaking, OMB published a proposed rule on May 29, 2026, that would substantially revise the Uniform Administrative Requirements, Cost Principles and Audit Requirements for Federal Awards (2 C.F.R. part 200). Organizations that receive federal funds should start considering a host of actions to prepare for these changes if implemented, including determining whether any current programs and policies that exhibit DEI characteristics should continue and, if so, documenting their business rationale and legal basis. Organizations will also be required to ensure that they, subrecipients, and downstream contractors update and maintain policies that follow the new requirements, especially as agencies may have broader powers to terminate funding deemed no longer to advance “the national interest.” Finally, organizations should consider submitting public comments to alert the government of provisions that would benefit from more clarity or may cause undue burdens.

Read on to learn more about the background and implementation of these policies.

FCA Litigation, Settlements

Canadian Steel Companies and Owner to Pay $19M to Settle False Claims Act Allegations Relating to Evaded Customs Duties

On May 20, 2026, the DOJ announced a settlement under the False Claims Act (FCA) with two Canada-based steel companies, Farjess Inc. and Royal Canadian Steel Inc., and their part-owner and president, Feroz Jessani. They agreed to pay $19 million to resolve allegations that they knowingly and improperly misrepresented the country of origin and failed to pay duties owed on flat-rolled steel manufactured in Europe and Asia. The settlement underscores the government’s continued and aggressive use of the FCA to pursue Trump administration policy priorities, including the active implementation of tariffs and customs duties, and reinforces the importance of accurate country-of-origin declarations when importing foreign materials and products.

Read on to learn more about the settlement and its implications for companies engaged in importing goods into the United States.

DOJ

DOJ’s New West Coast Strike Force Puts Health Care Providers on Notice

The DOJ’s National Fraud Enforcement Division announced on April 30, 2026, the formation of the West Coast Health Care Fraud Strike Force, a multi-district enforcement initiative spanning Arizona, Nevada and the Northern District of California. Announced by Assistant Attorney General Colin McDonald, the new Strike Force signals a significant escalation of federal healthcare fraud enforcement in the broader West Coast region and warrants close attention from healthcare providers, technology companies and other industry participants operating in the area.

Read on to learn more about the Strike Force and what industry participants should do to prepare.

OIG, Regulatory

HHS Inspector General Reminder: Kickback Liability Turns on Intent, Not Market Value or Stark Law Compliance

OIG FAQ

The U.S. Department of Health and Human Services Office of Inspector General (OIG) updated its FAQs on Fraud and Abuse Authorities to add a new answer on fair market value (FMV) in FAQ 17 and revise the answer on how the physician self-referral law (Stark Law) overlaps with the federal Anti-Kickback Statute (AKS) in FAQ 4. The takeaway from FAQ 4 and FAQ 17 is clear: An arrangement can violate the AKS even if the compensation is FMV or the arrangement fits within a Stark Law exception.

This update is not new law, but it is a strong reminder that AKS liability turns on intent, not on FMV or Stark Law compliance alone.

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