Defendant chains are accused of fudging their “usual and customary” rates for some drugs.
Back in mid-January, the U.S. Supreme Court granted certiorari in two consolidated cases from the 7th U.S. Circuit Court of Appeals – U.S. ex rel. Schutte v. SuperValu Inc., No. 21-1326, and U.S. ex rel. Proctor v. Safeway, Inc., No. 22-111 – which has teed up a case that could undermine one of the government’s most powerful tools for fighting fraud in government contracts and programs (and, dare I say, an overreaching tool). This would be the False Claims Act (FCA): a jackhammer where a scalpel would suffice.
At issue is whether hundreds of major retail pharmacies across the country knowingly overcharged Medicaid and Medicare by overstating what their usual and customary prices were. In other words, the question presented is whether and when a defendant’s contemporaneous subjective understanding or beliefs about the lawfulness of its conduct are relevant to whether it “knowingly” violated the FCA. Unlike most civil fraud actions, the FCA allows treble damages, which in “non-lawyer-ese” equals triple damages.
To calculate base damages, you look at the injury and determine what damages to the government resulted “because of” the defendant’s acts. The burden is on the government or the relator to prove that the damages sought were caused by fraud. The defendant will want to be able to distance the alleged damages from the fraudulent acts to the extent possible (such that the damages cannot be said to have been caused by the defendant’s acts) in order to minimize its potential financial liability.
This case essentially began in 2006, when Walmart upended the retail pharmacy world by offering large numbers of frequently used drugs at very cheap prices – $4 for a 30-day supply, for example – with automatic refills. That left the rest of the retail pharmacy industry desperately trying to figure out how to compete.
The pharmacies came up with various offers that matched Walmart’s prices for cash customers, but they billed Medicaid and Medicare using far higher prices, not what are alleged to be their usual and customary prices.
Walmart did report its discounted cash prices as usual and customary, but other chains, like Safeway and SuperValu, did not. Even as the discounted prices became the majority of their cash sales, other retail pharmacies continued to bill the government at the previous (and far higher) prices.
For example, between 2008 and 2012, Safeway charged just $10 for almost all of its cash sales for a 90-day supply of a top-selling drug to reduce cholesterol. But it did not report $10 as its usual and customary price. Instead, Safeway told Medicare and Medicaid that its usual and customary price ranged from $81 to $109. In the petition, the petitioner’s “expert estimated that Safeway received $127 million more in reimbursements from government health programs than it would have if it reported its price-match and discount club prices as its usual and customary prices.”
A decision is expected this summer. Here’s a quote from the petitioner about Safeway trying to hide their price matching policy from media or investigators:
“With respect to price-matching, Safeway adopted an ‘official company policy’ of denying that it would match Walmart prices ‘if an unidentified customer calls in. This is to avoid trouble with the media or competitors.’ But ‘[i]f a regular customer known to you asks if we will match . . . the answer is YES.’”
I foresee the pharmacies facing a looming overpayment. The petition explains that, for example, after a pharmacy manager informed executives that Nebraska’s Medicaid program was requiring price-matched discount prices to be reported as usual and customary prices, an executive asked: “does anyone think we have an issue here? My question is how the state of Nebraska will know that we offered to match any price out there.” In a follow-up communication, other executives pointed out that advertising their price-matching program would “alert the Medicaid programs to start looking” into what Safeway was doing, and therefore stressed the “need to keep a low profile.”
You are probably aware that many Medicare Advantage (MA) plans are claiming that due to new rules issued by the Centers for Medicare & Medicaid
Directly contradicting another person can carry the potential to feel antagonistic or rude. But in the realm of compliance, it’s also often necessary. Rules are
Please log in to your account to comment on this article.
Expert presenters Kathy Pride, RHIT, CPC, CCS-P, CPMA, and Brandi Russell, RHIA, CCS, COC, CPMA, break down complex fracture care coding rules, walk through correct modifier application (-25, -57, 54, 55), and clarify sequencing for initial and subsequent encounters. Attendees will gain the practical knowledge needed to submit clean claims, ensure compliance, and stay one step ahead of payer audits in 2026.
Accurately determining the principal diagnosis is critical for compliant billing, appropriate reimbursement, and valid quality reporting — yet it remains one of the most subjective and error-prone areas in inpatient coding. In this expert-led session, Cheryl Ericson, RN, MS, CCDS, CDIP, demystifies the complexities of principal diagnosis assignment, bridging the gap between coding rules and clinical reality. Learn how to strengthen your organization’s coding accuracy, reduce denials, and ensure your documentation supports true medical necessity.
Denials continue to delay reimbursement, increase administrative burden, and threaten financial stability across healthcare organizations. This essential webcast tackles the root causes—rising payer scrutiny, fragmented workflows, inconsistent documentation, and underused analytics—and offers proven, data-driven strategies to prevent and overturn denials. Attendees will gain practical tools to strengthen documentation and coding accuracy, engage clinicians effectively, and leverage predictive analytics and AI to identify risks before they impact revenue. Through real-world case examples and actionable guidance, this session empowers coding, CDI, and revenue cycle professionals to shift from reactive appeals to proactive denial prevention and revenue protection.
Sepsis remains one of the most frequently denied and contested diagnoses, creating costly revenue loss and compliance risks. In this webcast, Angela Comfort, DBA, MBA, RHIA, CDIP, CCS, CCS-P, provides practical, real-world strategies to align documentation with coding guidelines, reconcile Sepsis-2 and Sepsis-3 definitions, and apply compliant queries. You’ll learn how to identify and address documentation gaps, strengthen provider engagement, and defend diagnoses against payer scrutiny—equipping you to protect reimbursement, improve SOI/ROM capture, and reduce audit vulnerability in this high-risk area.
Stay ahead of the 2026-2027 audit surge with “Top 10 Audit Targets for 2026-2027 for Hospitals & Physicians: Protect Your Revenue,” a high-impact webcast led by Michael Calahan, PA, MBA. This concise session gives hospitals and physicians clear insight into the most likely federal audit targets, such as E/M services, split/shared and critical care, observation and admissions, device credits, and Two-Midnight Rule changes, and shows how to tighten documentation, coding, and internal processes to reduce denials, recoupments, and penalties. Attendees walk away with practical best practices to protect revenue, strengthen compliance, and better prepare their teams for inevitable audits.
As AI reshapes healthcare compliance, the risk of biased outputs and opaque decision-making grows. This webcast, led by Frank Cohen, delivers a practical Four-Pillar Governance Framework—Transparency, Accountability, Fairness, and Explainability—to help you govern AI-driven claim auditing with confidence. Learn how to identify and mitigate bias, implement robust human oversight, and document defensible AI review processes that regulators and auditors will accept. Discover concrete remedies, from rotation protocols to uncertainty scoring, and actionable steps to evaluate vendors before contracts are signed. In a regulatory landscape that moves faster than ever, gain the tools to stay compliant, defend your processes, and reduce liability while maintaining operational effectiveness.
Get clear, practical answers to Medicare’s most confusing regulations. Join Dr. Ronald Hirsch as he breaks down real-world compliance challenges and shares guidance your team can apply right away.
Federal auditors are zeroing in on Inpatient Rehabilitation Facility (IRF) and hospital rehab unit services, with OIG and CERT audits leading to millions in penalties—often due to documentation and administrative errors, not quality of care. Join compliance expert Michael Calahan, PA, MBA, to learn the five clinical “pillars” of IRF-PPS admissions, key documentation requirements, and real-life case lessons to help protect your revenue.
Happy National Doctor’s Day! Learn how to get a complimentary webcast on ‘Decoding Social Admissions’ as a token of our heartfelt appreciation! Click here to learn more →
CYBER WEEK IS HERE! Don’t miss your chance to get 20% off now until Dec. 1 with code CYBER25
CYBER WEEK IS HERE! Don’t miss your chance to get 20% off now until Dec. 2 with code CYBER24
