False Statements Regarding The Length Of Time A Patient Needs A Purchased Medical Device Are Not Material To The Government’s Payment Decision And Not Actionable Under The FCA

If Medicare pays a flat rate for a patient to purchase a medical device regardless of how long the patient uses the item, any false statement to Medicare regarding the length of time the patient needs that device is not an FCA violation because it is not material to Medicare’s payment decision.  That was the holding recently by a federal district court in Massachusetts, granting summary judgment to device manufacturer DJO, Inc. and ending its role in a decade-long qui tam litigation against numerous manufacturers of bone-growth stimulators.  United States ex rel. Bierman v. Orthofix Int’l, N.V. 05-10557-RWZ (D. Mass. Apr. 11, 2016).

Relator Jeffrey Bierman alleged that DJO violated the FCA by coaching physicians who prescribed DJO’s bone-growth stimulators to overstate the anticipated treatment length on Certificates of Medical Necessity (CMNs) they submitted to Medicare.  Bone growth stimulators typically have a useful life of nine months, and the “vast majority” of physicians’ CMNs for DJO products “listed a nine-month recommendation.”  Id. at 3.  Bierman alleged that “DJO ha[d] coached physicians to unreflectively estimate a nine-month length of need in lieu of exercising their medical judgment.”  Id.

The Court held that this allegation is not actionable under the FCA because the length of need is “immaterial to Medicare’s decision to pay.”  Id. DJO sells these devices “with no option for rental,” and Medicare pays a “flat rate” for each purchase.  Id. at 3-4.  Thus, “the length of time the patient needs the device” is “incapable of influencing Medicare’s decision to pay for those devices.”  Id. at 4.  Moreover, the Court noted that Medicare had made “no mention of estimated length of need” in the section of its National Coverage Determinations Manual addressing bone-growth simulators.  Id. 

In so holding, the Court rejected the contrary position DOJ had taken on this point in a criminal information against another manufacturer of bone-growth stimulators, alleging fraud.  DOJ argued in that criminal information that “coaching . . . physicians to list a nine-month estimated length of need was material to Medicare’s decision to pay for those devices.”  Id. at 6 (emphasis added).   But, according to the Court, “[t]he Department of Justice’s position in a criminal information carries no weight when interpreting the meaning of the False Claims Act, of Medicare regulations, or of Medicare guidance.”  Id. at 6 (emphasis added).  The Court cited United States v. Mead Corp., 533 U.S. 218 (2001), apparently as a reminder that the Government’s litigating positions do not carry the force of law.

The decision underscores the importance of the FCA’s materiality requirement.  The Act does not prohibit all false statements to the Government, only those knowingly false statements that materially influence a Government payment decision.