Eighth Circuit Rejects FCA Claim for Failure to Allege Actual Claims for Payment

By on March 11, 2019

On February 11, 2019, the Eighth Circuit affirmed the dismissal of a group of relators’ qui tam suit against Crawford County Memorial Hospital for failure to meet the pleading standards required by Federal Rule of Civil Procedure 9(b). The court’s decision focused on the relators’ failure to allege the specifics of any actual claim for payment by Crawford County – a solid confirmation that the Eighth Circuit continues to require the pleading of identifiable false claims for payment, even in instances in which a relator is not in a position to have that information.

The three relators were a former EMT and two former paramedics at Crawford County. The relators alleged that Crawford County violated the FCA by submitting, among other things, claims for breathing treatments administered to patients by paramedics, claims for lab services performed by paramedics and EMTs, and claims with false credentials of service providers. The relators further stated that Crawford County used false statements to get these claims paid, including records documenting breathing treatments as taking 30 minutes when they did not, records referring to paramedics as “specialized ancillary staff” for breathing treatments, and documents containing false credentials for emergency staff. The complaint was fairly detailed – it included allegations that Crawford County required paramedics to perform breathing treatments previously provided by nurses, that hospital management told staff the change was explicitly for billing purposes, and that management required the paramedics to document each breathing treatment at 30 minutes, regardless of its actual length.

Despite this litany of alleged abuses of the Medicare claim system, the relators did not provide any allegations demonstrating actual claims for payment. This was despite the fact that the complaint alleged one of the relators “began reviewing hospital financial documents” and “spoke to all Board members about the financial situation” prior to filing suit. The court rested its dismissal heavily on the relators’ failure to allege with specificity any claims for payment.

Noting that liability under the FCA attaches only to the false claim for payment, and not to any underlying fraudulent activity, the court reasoned that Rule 9(b) does not permit relators to satisfy their pleading burdens through “conclusory and generalized allegations” regarding claims for payment. The court found the relators’ complaint failed because they did not plead any representative samples of false claims. The court noted that the relators included one example of a patient receiving an unnecessary breathing treatment, but failed to provide the date, provider of the treatment, any specific information about the patient, the money obtained, and “most importantly, whether a claim was actually submitted for that particular patient.”

The court further reasoned that a relator’s alternative avenue to surviving Rule 9(b)’s particularity requirement – pleading allegations “on information and belief” if the facts constituting the fraud are uniquely in the possession of the opposing party – provided no help to the relators here.  Recognizing that the relators may not have had access to hospital billing records, the court nevertheless found that the complaint “lacks the sufficient indicia of reliability leading to a strong inference that claims were actually submitted.” The court concluded that the facts as alleged showed the “possibility” that Crawford County submitted claims, but did not lead to a “strong inference” that Crawford County actually submitted those claims.

This decision confirms that the Eighth Circuit holds relators to their pleading burdens with respect to allegations concerning the actual submission of claims for payment. Qui tam defendants situated in the Eighth Circuit should prioritize scrutinizing a complaint for allegations related to actual claims, as this is an area in which relators may stumble with little recourse. If a relator is unaware of the specifics of any claims for payment at the outset of litigation, the relator will very likely be unable to cure that deficiency.

Sean Hennessy
Sean Hennessy focuses his practice on white-collar and securities defense matters, including the defense of criminal and civil investigations brought by the Department of Justice (DOJ), the Securities and Exchange Commission (SEC), and State Attorneys General. Sean defends individuals and public and private companies against governmental investigations involving allegations of antitrust violations, securities and investment adviser fraud, insider trading, financial market manipulation, tax crimes and violations of the False Claim Act. Read Sean Hennessy's full bio.