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.
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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.
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On April 2, 2018, the magistrate judge for the US District Court for the Southern District of Indiana issued an order refusing qui tam relators’ request to conduct discovery related to claims submitted to Medicare on a nationwide basis in an ongoing False Claims Act (FCA) case.  Importantly, the judge considered whether statistical sampling could be used to establish liability under the FCA for multiple entities affiliated with the defendant when the alleged false claims in the relators’ complaint originated from a single location. The US Department of Justice (DOJ) subsequently submitted a statement of interest defending relators’ discovery request and the use of statistical sampling to establish liability for false claims, which the court has not yet addressed.

In the underlying qui tam case, the relators alleged that Evansville Hospital, a long-term acute care hospital in Indiana, and a physician violated the FCA by submitting claims to Medicare for medically unnecessary lengths of stay in order to maximize Medicare reimbursement.
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On April 30, 2018, the U.S. District Court for the District of Massachusetts dismissed the last remaining state False Claims Act (FCA) claims against long-term care pharmacy provider PharMerica, Inc. on the grounds that neither relator qualified as an “original source” under the applicable pre-2010 version of the FCA, thereby precluding their claims under the

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

On April 11, 2018, the Eleventh Circuit split from several other circuits on the question whether False Claims Act (FCA) relators can rely on the three-year statute of limitations extension in 31 U.S.C. § 3731(b)(2) in cases where the United States declines to intervene.

Under § 3731(b), an FCA case must be filed within the

On March 13, 2018, the United States District Court for the Eastern District of Oklahoma dismissed U.S. ex rel. Montalvo v. Native American Servs. Corp. In this case, the relators alleged that the defendants performed substandard work at a US Army ammunition plant. Specifically, the relators alleged that the defendant oversaw a construction project in which a subcontractor was ordered to pour concrete into areas that contained tree roots and stems, which allegedly damaged the quality of the concrete.

At summary judgment, the only evidence offered by the relator was an affidavit setting forth the facts above. The only disputed fact was whether the defendant knew about the tree roots and stems when ordering the subcontractor to pour the concrete. Regardless of that factual dispute, the court concluded that the plaintiff had failed to offer sufficient evidence that the defendant had knowingly caused the submission of false claims and granted summary judgment in the defendant’s favor.
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While there are a number of executive policies that will be affected by the presidential election, there are several reasons to expect modest change in the government’s approach to False Claims Act (FCA) actions. The most significant reason for this expectation is that the vast majority of FCA cases are filed by relators on behalf of the government and the Department of Justice (DOJ) has historically viewed itself as obligated to conduct an investigation into those cases. There is little reason to suspect the financial motivations that encourage relators and relators’ counsel to continue to bring cases under the FCA will diminish. That said, the possibility of repeal of the Affordable Care Act (ACA) could remove or change some of the ACA’s FCA amendments that enhanced the ability of certain individuals to qualify as a relator. The composition of the Supreme Court may have the most significant impact on the FCA given the Court’s increasing interest in this area.
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On April 28, 2016, the House Judiciary Committee’s Subcommittee on the Constitution and Civil Justice (Subcommittee) held a hearing on the False Claims Act (FCA). According to a statement of the Subcommittee chair, the hearing was called to examine FCA oversight and “what more can be done to prevent, detect, and eliminate false claims costing taxpayer dollars, while ensuring fair and just results.” The Subcommittee invited two health care lawyers, a professor and a hospital CEO to testify during the hearing. Several other individuals also submitted written statements to the Subcommittee, most notably Senator Chuck Grassley (R-IA), chairman of the Senate Judiciary Committee and long-time FCA proponent.

While the Subcommittee heard a variety of unique perspectives during the hearing, the oral testimonies generally spoke to two primary proposals. The first proposal would require corporate whistleblowers to report frauds internally before filing FCA actions. The second would eliminate or narrow FCA liability for corporations that adopt a so-called “gold standard” corporate compliance program. Both proposals appear to stem from a 2013 US Chamber of Commerce report, which asserted that the FCA as currently written and implemented “incentivize[s] the filing of frivolous lawsuits and impose[s] irrationally excessive penalties for technical violations that occur despite businesses’ good faith efforts to comply . . . .”
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