FCA UPDATE
FCA UPDATE
Exploring Recent Developments in False Claims Act Litigation, Enforcement and Compliance
FCA UPDATE
Exploring Recent Developments in False Claims Act Litigation, Enforcement and Compliance
Rule 9(b) Particularity
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Eighth Circuit Rejects FCA Claim for Failure to Allege Actual Claims for Payment

By on Mar 11, 2019
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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. (more…)



Northern District of California Dismisses FCA Claim with Prejudice for Inability to Point to Particular Claims for Payment

By on Oct 15, 2018
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On October 1, 2018, the District Court for the Northern District of California dismissed with prejudice a relator’s qui tam suit against Carelink Hospice Services, Inc. (Carelink) for failure to meet the heightened pleading standards mandated by Federal Rule of Civil Procedure 9(b). The court’s decision largely rested on the relator’s inability to specifically plead the existence of identifiable false claims—a strong affirmation that, in the Ninth Circuit, courts continue to hold relators to their pleading burdens.

The relator worked for Carelink, a hospice provider, for a three-month period in 2015. As a hospice provider, Carelink needed to provide certifications of terminal illness to justify admissions to the facility and, in turn, receive reimbursements from Medicare for services rendered. The relator, without identifying particular claims for reimbursement or patients, alleged that Carelink violated the FCA by seeking reimbursement for patients who Carelink knew were not terminally ill. The court seized upon the relator’s inability to point to specific claims in rendering its dismissal of the case.

Relying on Rule 9(b)’s particularity requirement, the court dismissed the relator’s complaint due to her failure to identify, with the required specificity, actual false claims. The court noted that the relator “relies on general allegations that Carelink presented false claims” but failed to “identify any reimbursements from Medicare[.]” The court came to this conclusion despite the relator’s citation to four patients about whom she alleged to have raised eligibility concerns. The court reasoned that these allegations, without “describ[ing] the nature of [her] concerns or her basis for believing the four individuals” were not eligible for Medicare reimbursements, were not enough to satisfy Rule 9(b).

The court concluded that the relator “fail[ed] to identify with particularity what ‘claims’ Caremark submitted” that were false because the allegations “do not provide a reasonable basis for [the court] to infer that claims had been submitted on behalf of any particular patient.” The court specifically dispelled the relator’s argument that, based on her extremely limited tenure with Carelink, the Rule 9(b) requirement should be relaxed in her case.

This decision confirms that, in the Ninth Circuit, a relator must allege the existence of specific, particularized, identifiable false claims submitted to the government. This confirmation serves as a strong defense against relators who do not sufficiently allege the “who, what, when, where, and how” of their FCA claims.



Sixth Circuit Declines to Revisit Materiality Ruling

By on Aug 29, 2018
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This week, the Sixth Circuit declined the en banc petition of Brookdale Senior Living Communities to revisit a three-judge panel’s two-to-one decision to permit the Relator’s third amended complaint to move forward. We previously analyzed this decision here. The court’s one-page order did not explain the reasoning for declining the petition, although it noted that the dissenting judge voted in favor of re-hearing.

Fortunately, most courts have taken to heart the Supreme Court’s direction that materiality is a “demanding” and “rigorous” test in which “minor or insubstantial” non-compliance would not qualify as material. However, the Sixth Circuit’s decision that noncompliance with a physician signature timing requirement sufficiently alleged materiality under Escobar arguably is inconsistent with Escobar. The better analysis of the Relator’s complaint would conclude that the Relator pled insufficient facts, under the Rule 9(b) particularity standard, to suggest that the untimely physician signature somehow resulted in the government paying for home health services for which it otherwise would not have paid. As the dissenting opinion noted, the Sixth Circuit created the “timing” requirement in a prior opinion in this matter. Given this unusual circumstance, this case may be distinguishable in other cases in which the court is less constrained by their prior ruling.



Timing is Everything: The Sixth Circuit’s Application of the Materiality Test

By on Jul 16, 2018
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The materiality test articulated in Escobar has become one of the most litigated issues in False Claims Act (FCA) practice. Most courts have taken to heart the Supreme Court’s direction that materiality is a “demanding” and “rigorous” test in which “minor or insubstantial” non-compliance would not qualify as material. However, a recent Sixth Circuit two-to-one decision found that noncompliance with a physician signature timing requirement sufficiently alleged materiality under Escobar, reversing the district court’s dismissal of the case. United States ex rel. Prather v. Brookdale Senior Living Communities, Inc., 892 F.3d 822 (6th Cir. 2018). This opinion arguably is inconsistent with Escobar. The better analysis of Relator’s complaint would conclude that the Relator pled insufficient facts, under the Rule 9(b) particularity standard, to suggest that the untimely physician signature somehow resulted in the government paying for home health services for which it otherwise would not have paid.

Case Summary

This decision was Relator’s second time before the Sixth Circuit litigating the complaint she filed in 2012 against Brookdale Senior Living, Inc., and related entities (Brookdale) after the government declined to intervene. The dispute centers around compliance with the regulation, 42 C.F.R. §424.22(a), which pertains to home health services. Section 424.22(a) provides that a “physician must certify the patient’s eligibility for the home health benefit,” including that the individual is home bound and eligible for home care under Medicare’s coverage rules. Subsection (a)(2) has a timing requirement for this certification; “the certification of need for home health services must be obtained at the time the plan of care is established or as soon thereafter as possible and must be signed and dated by the physician who establishes the plan.” Relator alleged that she was engaged to help Brookdale deal with a large backlog of Medicare claims, including obtaining physician certifications months after a patient’s treatment began. She argued that claims with these “late” certifications violated § 424.22(a)(2) and rendered those claims false under an implied certification theory. (more…)



District Court Discards FCA Claim with Prejudice for Inability to Identify Specific False Claims

By on May 10, 2018
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On April 24, 2018, the District Court of Maryland dismissed with prejudice a relator’s qui tam suit against Johns Hopkins Health System Corporation (Johns Hopkins) for failure to state a claim. The court’s decision rested on two rationales, the second of which is generally applicable to FCA claims in the Fourth Circuit and serves as strong deterrent against relator “fishing expeditions.”

The facts of the case revolve around an agreement that Johns Hopkins entered into with Maryland’s Health Services Cost Review Commission (HSCRC), the agency tasked with setting hospital rates for services throughout Maryland. This agreement set a reimbursement “budget cap” that relied on Johns Hopkins’ history of patient volumes, costs and patterns of services in its setting.

The agreement between Johns Hopkins and the HSCRC focused on care provided to Maryland residents. Importantly, the “budget cap” assigned to Johns Hopkins under the agreement applied only to services provided to Maryland residents. Revenue for services provided to out-of-state residents was not counted towards the cap, thereby creating, according to the relator, an incentive for Johns Hopkins to inappropriately recruit and prioritize out-of-state patients in contravention to the focus of the agreement. The relator claimed that senior management sought to increase revenue by treating out-of-state patients at the expense of Maryland patients, leading to false claims each time Johns Hopkins submitted claims and impliedly represented that it was compliant with the agreement’s focus on Maryland patients. Both the United States and the State of Maryland declined to intervene in the relator’s case.

Relying heavily on Rule 9(b)’s particularity requirement, the court dismissed the relator’s complaint due to his failure to identify, with the requisite specificity, claims for payment from Johns Hopkins to the government. The court noted that one of Rule 9(b)’s purposes is “to eliminate fraud actions in which all the facts are learned after discovery,” an especially important purpose in qui tam actions in which a relator has suffered no injury and “may be particularly likely to file suit as a pretext to uncover unknown wrongs.”

The court concluded that the relator alleged a scheme that “need not necessarily have led to the submission of false claims” and failed to identify any particular false claims for payment actually submitted to the government. The court strongly confirmed that Rule 9(b) requires substantial evidence of fraudulent activity before discovery and that courts in the Fourth Circuit will not allow relators to attempt “fishing expeditions” into a defendant’s conduct.

This decision affirms that, in the Fourth Circuit, a relator must provide specific, particularized allegations that point to identifiable claims actually presented to the government for payment.  This affirmation serves as a strong defense against relators who have not conducted sufficient diligence and expect the discovery process to offer the evidence required to satisfy Rule 9(b) after the filing of a complaint.



FCA Whistleblower’s Deficient Anesthesia E-Billing Suit Dismissed with Prejudice by Florida District Court

By on Feb 27, 2018
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On February 6, 2018, the US District Court for the Middle District of Florida granted a motion to dismiss a non-intervened False Claims Act (FCA) suit concerning electronic billing practices for anesthesiology services. As with another recent dismissal, the court found that Relator had failed to present sufficient allegations to meet the particularity requirement of Federal Rule of Civil Procedure 9(b).

The operative complaint alleged that Relator was a compliance review specialist and supervisor of physician coding at a health care provider, and that she utilized the defendant, Epic System’s Corp.’s, medical e-billing software. Relator alleged that she was trained for a week on the software, and then allegedly identified a software issue that resulted in double-billing for the time of anesthesiologists. Specifically, Relator referenced a January 1, 2012, change in Medicare practices which adjusted “units to be billed” for anesthesia services to be measured in actual minutes rather than 15-minute increments. Relator asserted that the e-billing software allowed hospitals to “double-charge” 15-minute increments plus the precise number of minutes of service. Relator alleged that she raised this issue with the defendant repeatedly and that Defendant implemented a very narrow adjustment which would only fix the issue at Relator’s employer’s office, allegedly leaving the “double-charge” error in effect at other users’ offices. (more…)



Dismissed in Florida: Former Compounding Pharmacy Sales Representative’s FCA Whistleblower Suit

By on Dec 1, 2017
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On November 8, 2017, the US District Court for the Middle District of Florida dismissed a relator’s non-intervened claims in United States ex rel. Stepe v. RS Compounding LLC for failure to satisfy the particularity requirement of Federal Rule of Civil Procedure 9(b). Relator originally filed her complaint under seal on December 16, 2013, under the federal False Claims Act (FCA) and Florida’s analogous statute. Over three years after the complaint was filed, the government elected to partially intervene as to fraudulent pricing allegations relating to TRICARE. Relator amended her complaint in July 2017 and added state false claims counts under the laws of 16 additional states. All 17 states declined to intervene in the case in September 2017.

The complaint alleges that Relator, through her work as a sales representative for defendant RS Compounding, became aware of Defendants’ purported schemes to defraud the government on prescription compound and gel products. The relator alleged that prescription pads were prepopulated for physicians, with RS Compounding’s most expensive compounds pre-checked on the pads and six refills listed by default. Relator further alleged that this scheme involved sales representatives “coaching” physicians to number three different products on the pads, with priority given to products containing ketamine because those products had a higher reimbursement rate from the government. (more…)



District Court Tosses Complaint After Finding of Misconduct

By on Jul 11, 2017
Posted In

On April 28, 2017, the United States District Court for the District of Massachusetts dismissed a relator’s qui tam complaint in United States ex rel. Leysock v. Forest Laboratories, Inc. after concluding that the complaint relied on information obtained resulting from deceptive conduct by the relator’s counsel.

In Leysock, the relator alleged that the defendant caused the submission of false claims to Medicare by promoting Forest’s dementia drug, Namenda, for off-label label use. After the United States declined to intervene, Forest filed a motion to dismiss, which the Court denied, largely based upon detailed allegations about eight prescribing physicians who prescribed Namenda for off-label use by Medicare beneficiaries. These allegations, the Court reasoned, were sufficient to satisfy Federal Rule of Civil Procedure 9(b), which in False Claims Act cases typically requires plaintiffs to plead specific allegations regarding the alleged fraud, tying alleged misconduct to the submission of false claims to a government payor.

Through discovery, Forest subsequently learned that relators’ counsel had obtained the information underlying these detailed allegations from a survey conducted by an individual whom relators’ counsel had contracted. This contractor misled the physicians about why he was conducting the survey (not disclosing that he had been retained by the relators in a False Claims Act action) and coaxed the physicians into turning over detailed patient information to the contractor.

In response, the Court concluded that this deception violated Massachusetts Rules of Professional Conduct Rule 4.1(a), which prohibits a lawyer or his agent from knowingly making a false statement of material fact or law to a third person. Consequently, the court concluded, this conduct violated Local Rule 83.6.1 of the United States District Court. As a remedy, the Court struck these allegations, noting that “[the contractor’s] study was conducted solely for the purpose of ensuring that the complaint survived a motion to dismiss,” i.e., to ensure that the complaint satisfied Rule 9(b)’s particularity requirement.

Although the relators’ conduct in this case is unlikely to be repeated in future cases, this case underscores the challenges relators can face in meeting Rule 9(b)’s particularity requirement. These challenges are particularly acute in non-intervened qui tam cases, where the government fails to provide the relator with information about specific false claims that the defendant allegedly submitted or caused to be submitted. Imposing these challenges will continue to chill would-be relators, without firsthand knowledge of wrongdoing, from bringing meritless qui tam cases.



A Hospital’s Deserving Stark and AKS Victory—But At What Cost?

By , and on May 31, 2017
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This April, providers cheered when a federal district court in the Middle District of Florida found insufficient evidence to support a relator’s theory that a hospital had provided free parking to physicians, in violation of the Stark Law and Anti-Kickback Statute (AKS). In the Report and Recommendation for United States ex rel. Bingham v. BayCare Health Systems, 2017 WL 126597, M.D. Fla., No. 8:14-cv-73, Judge Steven D. Merryday of the Middle District of Florida endorsed magistrate judge Julie Sneed’s recommendation that Plaintiff Thomas Bingham’s Motion for Partial Summary Judgment be denied and that Defendant BayCare Health System’s Motion for Summary Judgment be granted. However, as we discussed in a previous FCA blog post regarding these allegations, this type of case encapsulates a worrying and costly trend where courts allow thinly pleaded relator claims in which the government opted not to intervene, to survive past the motion to dismiss stage into the discovery phase of the litigation.

Bingham is a serial relator who practices as a certified real estate appraiser in Tennessee and was unaffiliated with BayCare. In his latest attempt, Bingham alleged that BayCare Health System had violated the Stark Law and the AKS by providing affiliated physicians free parking, valet services and tax benefits to induce physicians to refer patients to the health system. (more…)



Medicare Part B Provider Secures Dismissal of FCA Claims Under First-to-File Bar

By on Mar 15, 2017
Posted In , ,

On February 27, 2017, the US District Court for the Southern District of Mississippi granted a defense motion to dismiss False Claims Act (FCA) claims in United States ex rel. Dale v. Lincare Holdings, Inc., on the grounds that the claims were precluded by the FCA’s first-to-file bar.

The defendant, Lincare Holdings, Inc., is a national respiratory care provider that serves Medicare Part B patients via the sale and rental of medical oxygen supplies. The relator, a former salesperson for a Lincare subsidiary, filed his complaint on February 23, 2015, under seal, alleging that Lincare implemented a scheme to falsify and manipulate medical necessity testing in order to generate false reports that would allow it to sell oxygen and other Medicare-covered services to patients who were not medically qualified for coverage. The relator alleged that an office manager and nurse instructed employees to direct patients to take a variety of steps, such as raising their arms while attached to an oxygen sensor, in order to generate falsely low arterial oxygen saturation levels. The relator further claimed retaliatory discharge under the FCA. The United States declined to intervene on August 17, 2015, and the complaint was unsealed on August 24, 2015.

Granting a nearly year-old motion to dismiss, the court held that the relator’s FCA claims were precluded by the FCA’s first-to-file bar, finding that the “fraudulent scheme depicted in Relator’s complaint is largely based on the same underlying facts as the [United States ex rel. Robins v. Lincare, Inc.] scheme.”  The first-to-file bar prohibits plaintiffs from being a “related action based on the facts underlying [a] pending action.” 31 U.S.C. § 3730(b)(5).  The Robins suit was filed first in the US District Court for the District of Massachusetts and the court found that there was a “substantial overlap in material facts” underlying the schemes alleged in each case such that the complaints are sufficiently related for purposes of the first-to-file bar. (more…)



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