Health Headlines – March 2, 2026

Second Circuit Reaffirms Rule 9(b) Particularity Standard in FCA Action

On February 24, 2026, the Second Circuit affirmed the Eastern District of New York’s dismissal of a qui tam action brought against Siemens Medical Solutions USA, Inc. (“Siemens”). The relator alleged that Siemens delivered defective medical devices to patients, but the claims were dismissed for failure to plead even a single example of a defective shipment.

The relator brought suit against Siemens under the False Claims Act (“FCA”) and the United States declined to intervene. According to the relator’s allegations, Siemens submitted and caused others to submit false claims to the government related to in vitro diagnostic devices (“IVDs”). Because IVDs are temperature-sensitive and may malfunction if exposed to excessive heat or cold, relator alleged that Siemens systematically delivered unreliable IVDs by shipping them at improper temperatures.

On April 9, 2025, the district court dismissed the relator’s Second Amended Complaint for failure to allege with sufficient specificity that Siemens’ shipping practices actually compromised any IVDs. On appeal, the Second Circuit agreed. Applying Rule 9(b)’s requirement that FCA plaintiffs plead the “who, what, when, where, and how” of the alleged fraud, the Court found the relator’s complaint fatally deficient. While the relator alleged that Siemens systematically exposed all of its IVDs to improper temperatures, she failed to allege any “single example of an IVD that was actually rendered unreliable because Siemens shipped it to a customer at improper temperatures.” Reiterating circuit precedent that requires whistleblowers to identify specific instances of falsity, the Court stated, “Siemens sold millions of IVDs in the relevant time period, all of which [r]elator theorizes were shipped defectively. But [r]elator fails to specify a single example of a defective shipment, so she has not made plausible allegations creating a strong inference that specific false claims were submitted to the government.” 

The Second Circuit also rejected the relator’s alternative theories that Siemens falsely certified compliance or caused civilian customers to submit fraudulent claims to the government. The Court found that the relator merely “speculate[d] that some IVDs shipped to the government may have become unreliable” without “sufficiently alleg[ing] that Siemens deprived the government of the intended benefits of its contracts.” As to the civilian-customers theory, the court ruled that the relator failed to identify any Siemens customer who actually submitted an IVD claim to the government, instead relying on the assumption that because Siemens sells so many devices, a reimbursement claim must have reached the government at some point.

A copy of the Second Circuit’s summary order is available here.

Reporter, Rebecca Hsu, Atlanta, GA, +1 404 572 3339, rhsu@kslaw.com. 

COVID Relief Funds Improperly Used By Nearly Half of Hospitals, OIG Audit Shows

On February 23, 2026, the Office of Inspector General (“OIG”) released findings from its audit of 30 selected Indian Health Service (“IHS”) and rural providers that received Provider Relief Fund (“PRF”) payments during the COVID-19 pandemic. The audit determined that 14 of the 30 providers either did not comply or may not have complied with the terms, conditions, and federal requirements governing the use of PRF funds—resulting in over $90 million in unallowable expenditures or unsupported lost revenue claims. The Health Resources and Services Administration (“HRSA”) concurred with OIG’s recommendations and indicated it will seek repayment from the noncompliant providers.

This latest headline from OIG is the latest in a campaign of audits against providers who received PRF funding, and the 14 targeted in this audit join the ranks of 7 hospices, 10 nursing facilities, 28 hospitals (June 11, 2025 report; September 19, 2025 report), 4 dental providers, and 9 assisted living facilities to receive similar treatment over the past two years.

Background: Provider Relief Fund

At the onset of the COVID-19 pandemic and as operational costs increased, providers reported revenue declines as operational costs surged. Many facilities (particularly rural hospitals and Critical Access Hospitals) faced heightened financial uncertainty compared to providers operating within larger health systems.

In response, Congress appropriated $178 billion to HHS to establish the Provider Relief Fund to provide financial relief for (1) health care-related expenses attributable to COVID-19, (2) lost revenues (such as revenue declines from canceled elective services) attributable to the pandemic, (3) COVID-19 testing and treatment for uninsured individuals, and (4) the administration of COVID-19 vaccines. According to the OIG’s recent report (the “Report”), of the $178 billion HRSA disbursed, the vast majority of funds (approximately $145.9 billion) went directly to eligible hospitals.

Providers who accepted PRF payments were required to agree to various terms and conditions, including that the funds would be used only for COVID-19-related purposes, that expenses would not be duplicated by other funding sources, and that salaries paid with PRF funds would not exceed federal Executive Level II thresholds ($197,300 in 2020 and $199,300 in 2021).

How the 30 Providers Were Selected

OIG’s audit focused on a nonstatistical sample of 30 IHS facilities and rural providers (from a population of 4,516 IHS and rural providers that received and retained one or more PRF payments) that collectively received approximately $1.56 billion in PRF payments during the period from April 10, 2020, through June 30, 2021. 

OIG selected the 30 providers based on a risk analysis considering multiple factors: the total amount of PRF payments received (each sampled provider received more than $5 million during the audit period), geographic location (with emphasis on states with high percentages of rural populations), and organizational structure (including providers with parent-subsidiary relationships). The sampled providers were located across 20 states. Of the 30 providers, two were IHS facilities and 28 were part of rural provider systems that included hospitals.

For each selected provider, OIG reviewed expenditure reports submitted to HRSA and examined nonstatistical samples of expenses based on materiality and expense descriptions (such as salaries, supplies, and equipment). OIG also reviewed the providers’ lost revenue calculations to ensure compliance with HRSA’s reporting requirements.

Findings Regarding Improper Use of Funding

Of the 30 providers examined, OIG found that 16 used their PRF payments appropriately—for allowable general and administrative expenses, health care-related expenses, and to offset legitimate lost revenues attributable to COVID-19. The OIG found that the remaining 14 providers demonstrated various forms of noncompliance totaling $90.3 million, including:

• Excessive Salary Payments. Four providers used PRF payments for salaries that exceeded the federal Executive Level II salary cap. These payments totaled approximately $1.2 million for a combined 72 executives, medical professionals, and other employees whose compensation surpassed the allowable threshold.

• Unsupported & Unallowable Costs. Many providers failed to maintain adequate documentation, used the funds for non-COVID-19 related purposes, or miscalculated their lost revenue. In one instance, a provider could not furnish supporting documentation for $7.1 million in salaries and other expenses that had been reclassified between accounts. Another provider reported using $35.2 million for personnel and general administrative expenses that the provider itself acknowledged were not for COVID-19-related purposes. One provider incorrectly excluded expenses, overstating lost revenues by $8.2 million, while another could not provide documentation after undergoing a “substantial information technology update.”

• Duplicate Funding & Reporting. Six providers used PRF payments for expenses or lost revenues totaling $20.4 million that were already reimbursed or obligated to be reimbursed by other funding sources, such as Medicare, the Federal Emergency Management Agency, or other federal programs. Another four providers used PRF payments to cover duplicate expenses totaling approximately $766,000—including salary costs and equipment purchases that had already been reported in the same or prior reporting periods.

Despite the various errors found, OIG’s Report does not suggest intentional wrongdoing by the facilities. OIG attributed these deficiencies to clerical errors in reporting, failure to correctly interpret HRSA guidance, and inadequate documentation practices. 

What’s Next?

OIG issued three recommendations to HRSA:

• First, OIG recommended that HRSA require the 12 providers that used PRF payments for unallowable expenditures (totaling $70,590,911) to return those amounts to the federal government or, alternatively, to properly replace the unallowable expenditures with allowable unreimbursed lost revenues or eligible expenses.

• Second, OIG recommended that HRSA require the two providers with inaccurately calculated lost revenues (totaling $19,709,036) to identify and return any improperly used PRF payments or replace those amounts with allowable lost revenues or expenses.

• Third, OIG recommended that HRSA work with the two providers that may have used $382,656 in potentially unallowable expenditures to determine which amounts should be returned or replaced.

HRSA concurred with all three recommendations, indicating that it will review the relevant records and seek repayment as appropriate from the non-compliant providers.

OIG’s substantial audit of PRF funds distributed over half a decade ago underscores the importance of compliance with federal funding requirements and highlights that time does not heal all wounds; instead, adherence to program requirements remains the essential safeguard. Moreover, given OIG’s continued auditing of PRF fund recipients, the 14 providers targeted in this last round are surely not to be the last.

Reporter, K. Tyler Dysart, Atlanta, +1 404 572 3532, tdysart@kslaw.com.

Upcoming Events

Understanding Supplemental Medicaid Opportunities via the Medicaid DSH Program 

• March 4, 2026, 1:00 – 2:00 P.M. ET
• Virtual

Supplemental Medicaid programs provide critical funding to hospitals that care for low-income and Medicaid patients. Unfortunately, many hospitals do not receive the full amount they are due, largely because of a lack of legal strategy.

This roundtable uses the Medicaid Disproportionate Share Hospital (DSH) program as an example to explore how supplemental Medicaid programs are structured, tailored state by state, financed and regulated. The discussion will also explore case studies and various ways to assist clients with navigating these programs, which are especially important considering the recent Medicaid financing changes mandated by the One Big Beautiful Bill Act.

You do not have to be a client to attend, and there is no charge. RSVP by March 3. For questions, contact Sydney Forte.

35th Annual King & Spalding Health Law & Policy Forum

• Thursday, March 12, 2026, 8:00 A.M. ET
• Atlanta, GA

Join us for our annual forum focusing on the foremost legal and political developments impacting the healthcare industry. This full-day program will feature thought-provoking sessions and a keynote address from award-winning legal affairs correspondent Nina Totenberg, whose deep knowledge of the inner workings of the Supreme Court will provide attendees with rare insights into today’s judicial headlines.

Highlights include:

• Leading practitioners providing policy and regulatory enforcement updates and other industry developments, including insights from in-house counsel on their priorities for the coming year 
• What’s next in strategic priorities for nonprofit health systems
• Perspectives from a former U.S. attorney on key issues facing the healthcare industry
• Regulatory and legislative impacts of the current administration on the healthcare industry 

Attendees will also enjoy multiple networking opportunities, including a reception following the sessions.

The registration fee for the full program is $95. For questions, or for information about registering, contact the K&S Events Team.

King & Spalding Reception at the AHLA Institute on Medicare and Medicaid Payment Issues

• Thursday, March 19, 6:00 – 8:00 P.M. ET
• Baltimore Marriott Waterfront
  700 Aliceanna Street
  Baltimore
  Laurel Room, 4th Floor

Join us for cocktails and conversation at AHLA’s Institute on Medicare and Medicaid Payment Issues.

For questions and to RSVP by March 12, contact Monique Wharton.

Editors: Chris Kenny and Ahsin Azim

Issue Editors: Doug Comin and David Tassa