Apr 112013

Sixth Circuit Reverses Summary Judgment After Failing to Find Any Violation of a Condition of Payment

Scott D. Stein and Catherine Kim
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Posted by Scott Stein and Catherine Kim

Under a “false certification” theory of FCA liability, a party certifies compliance, expressly or impliedly, with a statute or regulation as a condition of government payment where it has not actually complied. Over the past few years, we have witnessed a split among the circuits in such “false certification” cases over what constitutes a “condition of participation,” as opposed to a “condition of payment,” as only the latter can form the basis of an FCA action. In light of its recent ruling in United States ex rel. Hobbs v. MedQuest Assoc., No. 11-6520 (6th Cir. Apr. 1, 2013), the Sixth Circuit joins the list of circuits imposing stricter standards on plaintiffs seeking to meet the “condition of payment” requirement.

On April 1, 2013, Judge Rogers reversed a district court’s grant of summary judgment against MedQuest in a qui tam case based on false certification. In this case, the Government alleged that MedQuest had filed two types of false claims for reimbursement under Medicare Part B: (1) claims that were false because two of MedQuest’s independent diagnostic testing facilities (“IDTF”) had used physician supervisors who had not been approved by the local Medicare carrier; and (2) claims that were false because they were submitted by an IDTF that was not properly enrolled in Medicare and were filed under a physician’s billing number. Under the Government’s theory, in both scenarios MedQuest failed to comply with Medicare conditions of payment.

Although the district court agreed with the Government, the Sixth Circuit held that MedQuest’s actions merely violated Medicare conditions of participation and were thus “addressable by the administrative sanctions available” rather than through the “extraordinary remedies of the FCA[.]” Specifically, the court found that the Medicare Enrollment Application’s required certification that the IDTFs “abide by the Medicare laws, regulations and program instructions” did not
“condition . . . payment on compliance with any particular law or regulation” (emphasis in original). Moreover, after determining that the Medicare supervising-physician regulations could only constitute a condition of payment under a “cut-and-paste approach” to statutory interpretation, the court concluded that “it is not reasonable to expect Medicare providers to attempt such an approach . . . in their efforts to comply with the FCA.”

The court also held that MedQuest’s submission of claims under a physician’s billing number at most represented a failure to update the facility’s enrollment information in the Medicare program. In the absence of a regulation conditioning Medicare payment on the provision of an accurate enrollment form, MedQuest could not be found liable under the FCA.

“‘[T]he False Claims Act is not a vehicle to police technical compliance with complex federal regulations[,]'” wrote Judge Rogers, quoting from another Sixth Circuit case. “[W]here, as in this case, the violations would not ‘natural[ly] tend[] to influence’ CMS’s decision to pay on the claims, . . . the ‘blunt[ness]’ of the FCA’s hefty fines and penalties makes them an inappropriate tool for ensuring compliance with technical and local program requirements[.]” While this line of Sixth Circuit cases will prove valuable to defendants facing FCA claims based on false certification, it is important to note that other jurisdictions like the First Circuit continue to adhere to a broader interpretation of a condition of payment, as highlighted here. Importantly, it remains to be seen which approach will become the dominant one among the remaining circuits that have yet to address this issue.

Scott D. Stein

Chicago

sstein@sidley.com

Catherine Kim

CatherineKim@sidley.com

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