Reed Smith Client Alerts

On January 25, 2018, the U.S. Department of Justice (DOJ) issued a memorandum that further limits its ability to rely on sub-regulatory guidance to establish legal requirements for health care providers. The memorandum prohibits DOJ from using the type of guidance it has historically relied upon to attempt to establish falsity in False Claims Act (FCA) cases involving issues of medical necessity. This memorandum, along with recent federal court decisions, supports the argument that the FCA is an inappropriate means by which to prosecute medical necessity cases, which require the application of the “reasonable and necessary” standard – a standard that is only defined in sub-regulatory guidance.
Lady Justice holding scales


One of the first rules learned by regulatory lawyers in training is the distinction between federal regulations, which have the force of law, and non-binding agency guidance. Health care lawyers, in particular, are often called upon to apply this rule given the mountain of agency interpretive instruction, Medicare manuals, memoranda and other authorities. In spite of a long line of cases1 in support of this distinction, in our experience it is not unusual for the federal FCA relators and DOJ attorneys to argue that guidance documents can be relied upon as binding authorities in pursuit of legal theories under the FCA.