Ninth Circuit Holds That the FCA Does Not Require Objective Falsehoods and That False Certification of Medical Necessity May Give Rise to FCA Liability
On March 23, 2020, the Ninth Circuit revived a whistleblower suit in which Jane Winter, a registered nurse, alleged that Defendants Gardens Regional Hospital (“Gardens Regional”), S&W Health Management Services (“S&W Health”), RollinsNelson, and various physicians orchestrated medically unnecessary inpatient admissions resulting in the submission of more than $1.2 million in false claims to Medicare. The District Court held that Winter’s allegations failed to state a claim under the FCA because “subjective medical opinions . . . cannot be proved objectively false.” Winter appealed and the Ninth Circuit reversed, finding that the FCA did not does not require plaintiffs to plead objective falsehoods and that false certification of medical necessity may give rise to FCA liability.
Court Orders DOJ to Articulate Factual Basis for Allegation that AKS Violations Caused the Submission of False Claims
Earlier this month, a federal judge in Minnesota held that DOJ was required to articulate the factual basis for its allegation that Defendants’ claims for payment resulted from kickbacks, rejecting the argument that such information was irrelevant based on a legal presumption of causation. The Government alleges that defendants Precision Lens and Paul Ehlen provided kickbacks to physicians, including “lavish hunting, fishing and golf trips, private plane flights, frequent-flyer miles and other items of value,” to induce them to use products that Defendants supplied. The Government further alleges that these kickbacks violated the Anti-Kickback Statute (AKS), causing the submission of false claims to the Government.
Court Dismisses DOJ Complaint Alleging Improper Auto-Refill and Co-Payment Waiver for Lack of Particularity
On September 30, 2019, a judge in the United States District Court for the Northern District of Illinois granted a motion to dismiss in an intervened FCA qui tam suit, finding that the relators, the United States, and the state of Illinois failed to satisfy Federal Rule of Civil Procedure 9(b)’s heightened pleading requirements for fraud claims. The suit targeted an entity referred to as C&M Specialty Pharmacy (“C&M”), which provides specialized medication for complex medical conditions.
Ninth Circuit Invited To Weigh In On Public Disclosure Bar, Falsity
On October 8, 2019, a judge in the United States District Court for the Central District of California granted a stay and certified two questions for interlocutory appeal in relator Integra Med Analytics’ FCA suit against Providence Health & Services (“Providence”), its affiliates, and J.A. Thomas and Associates, Inc. (“JATA”), a clinical documentation consultant. The case, on which we have previously reported here, involves allegations that Providence perpetrated an upcoding scheme whereby it trained its doctors to describe medical conditions with language that would support increasing the severity levels of the DRGs that Providence reported to Medicare, leading to inflated Medicare reimbursements.
Third Circuit Holds That A Live Hearing Is Not Required When Government Seeks To Dismiss FCA Complaint Over Relator’s Objection
The Third Circuit recently held that relators are not automatically entitled to an in-person hearing when the government moves to dismiss a qui tam suit over the relator’s objection. U.S. ex rel Chang v. Children’s Advocacy Center of Delaware, No. 18-2311 (3d Cir. Sept. 12, 2019). Weih Chang filed qui tam lawsuit in 2015 alleging the Children’s Advocacy Center of Delaware had misrepresented material information when applying for governmental funding. After a lengthy investigation, the United States declined intervention and moved to dismiss under the statutory provision that allows dismissal, “notwithstanding the objections of the person initiating the action if the person has been notified by the Government of the filing of the motion and the court has provided the person with an opportunity for a hearing on the motion.” 31 U.S.C. § 3730(c)(2)(A). The district court granted the motion to dismiss, holding that the government had shown a legitimate interest in dismissing the suit and Chang had not met the burden of showing that the move to dismiss was arbitrary or capricious. Chang appealed, arguing that he had a statutory right to an in-person hearing prior to dismissal and that at the hearing he could have introduced evidence to show that the dismissal was arbitrary and capricious. Id. at *5-6. The Third Circuit affirmed the district court opinion, holding the court had not erred in granting dismissal without conducting an in-person hearing. Id. at 8.
DOJ Defends Medicare Advantage Upcoding Claims Against Sutter
On August 28, 2019, the United States filed a brief in opposition to Sutter’s June 14, 2019 motion to dismiss the Department of Justice’s Complaint-in-Intervention in a False Claims Act suit alleging Sutter knowingly submitted and caused the submission of unsupported diagnosis codes for Medicare Advantage Organization (MAO) patients in order to inflate Medicare reimbursements. On the same day, the Relator, Kathy Ormsby, also filed a similar brief in opposition to Sutter’s motion to dismiss. We previously discussed Sutter’s motion to dismiss here and the Department of Justice’s Complaint-in-Intervention here.
District Court Dismisses FCA Suit in Medicare Advantage Upcoding Case
On August 6, 2019, the United States District Court for the Western District of Texas granted a motion to dismiss filed by Baylor Scott & White Health (“Baylor”), a network of inpatient short-term acute care hospitals, in a False Claims Act suit alleging that Baylor submitted “more than $61.8 million in false claims” by upcoding certain diagnosis codes. The Court dismissed all claims with prejudice, finding that the Relator, Integra Med Analytics LLC, alleged only “naked assertions devoid of further factual enhancement” that were “insufficient under Rule 8’s pleading standards.” The Department of Justice declined to intervene in the suit.
Eleventh Circuit Holds That It Is Relator’s Burden To Prove Lack of Fair Market Value As An Essential Element of AKS-Based Claims
Last week, the Eleventh Circuit issued an opinion holding that a Relator bringing an FCA claim premised on an AKS violation – at least when relating to lease arrangements – must show that the financial arrangements were not at fair market value. See Bingham v. HCA, Inc., Case No. 1:13-cv-23671 (11th Cir. 2019). Significantly, this ruling provides that proving fair market value (or lack thereof) is not a burden imposed solely on defendants as part of a safe harbor defense, but is instead an essential element to establishing the existence of remuneration in the first instance. In the same opinion, the court also held that a Relator cannot rely upon information gleaned in discovery to satisfy Rule 9(b)’s pleading requirements.
Supreme Court Unanimously Extends FCA Statute of Limitations to 10 Years for Non-Intervened Cases
On May 13, 2019, the United States Supreme Court unanimously held that the False Claims Act’s (“FCA”) alternative 10-year statute of limitations applies to non-intervened actions. As previously reported here, Cochise Consultancy, Inc. v. United States ex rel. Hunt, presented two main issues: whether relators are entitled to invoke the FCA’s 10-year statute of limitations set forth in 31 U.S.C. § 3731(b)(2), and whether relators are considered “official[s] of the United States” whose knowledge is relevant for determining when the 10-year limitations period applies. Writing for the unanimous Court, Justice Thomas ruled favorably for relators on both questions.
District Court Held that Government Must Produce Factual Basis For Allegations of Below-Fair-Market-Value Transfers
Earlier this month, in a FCA case in which the Government intervened, the United States District Court for the District of Minnesota held that the Government was obligated to produce evidence that supported its allegation that amounts that physicians paid for social trips and other benefits provided by Defendants were below fair market value. In United States v. Cameron-Ehlen Grp., Inc., No. 13-CV-3003 (WMW/DTS), 2019 WL 1453063, at *1 (D. Minn. Apr. 2, 2019), the Government’s Complaint-In-Intervention alleged that Defendants, Precision Lens and Paul Ehlen, schemed to pay kickbacks—in the form of “lavish hunting, fishing and golf trips, private plane flights, frequent-flyer miles and other items of value”—to physicians to induce them to use products supplied by Defendants. The Complaint-In-Intervention includes several specific examples where physicians “were remunerated by not paying the full fair market value for trips and other benefits provided by Defendants.” (more…)