Supreme Court Declines to Address Application of 9(b) to the FCA

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Yesterday the Supreme Court denied cert in a trio of cases seeking clarification as to the pleading standard required in FCA cases under Rule 9(b).  The petitioners urged the Court to remedy what they characterized as a circuit split over how much detail whistleblowers and the government must supply about alleged false claims in order to survive a motion to dismiss.  As discussed further here, the Solicitor General opposed these cert petitions and argued that the circuits have “largely converged” in their application of Rule 9(b) to FCA complaints.

A variety of reasons exist for why a cert petition may fail to garner the requisite number of votes, and in declining to hear these cases, it is not clear whether the Court is convinced that there is uniformity (or at least not significant discord) among the courts of appeal on this issue.

Provider Escapes, Contractor Remains in Qui Tam Alleging Noncompliance With Bad Debt Regs

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Recently, the Seventh Circuit partially reversed a district court’s dismissal of a qui tam complaint alleging that debt collection agencies and their client hospital are liable under the FCA for the agencies’ knowing failing to comply with Medicare’s “bad debt” collection requirements.  See United States ex rel. Sibley v. University of Chicago Medical Center, No. 21-2610 (7th Cir. Aug. 11, 2022).  In reaching this decision, the court concluded that the relators had adequately pled that reasonable collection efforts are material to the government’s decision to reimburse Medicare bad debts.

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DOJ Seeks to Avoid Supreme Court Review of Rule 9(b) Circuit Split; Argues Standard Has Largely “Converged”

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There has been growing variation among courts of appeal over the appropriate pleading standard to apply under Rule 9(b) to the element of presentment, i.e., the requirement that plaintiffs plead with particularity the submission of a false claim to the government for payment. This topic has been the subject of repeated Supreme Court cert petitions (as discussed further here), and the topic has been raised yet again in a cert petition filed late last year in Johnson v. Bethany Hospice and Palliative Care, LLC (No. 21-462) (lower court opinion discussed here). The relator in Bethany Hospice, whose case was dismissed by the Eleventh Circuit for “rely[ing] on mathematical probability to conclude that a defendant surely must have submitted a false claim at some point”, seeks Supreme Court review of this “longstanding circuit split.” (more…)

District Court Again Dismisses Anti-Kickback Statute Claim Related to Medical Devices Used in Bariatric Surgeries

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A court in the District of Maryland again dismissed a declined qui tam action in which the relator, a bariatric surgeon, alleged that two medical device companies violated the AKS by providing surgeons with free advertising in exchange for physicians using the companies’ LAP-BAND medical devices in bariatric surgeries. See United States ex rel. Fitzer v. Allergan, Inc., 17-cv-00668 (D. Md. Mar. 22, 2022).  We reported on the court’s prior dismissal of the relator’s second amended complaint for failure adequately to plead a knowing and willful violation of the AKS here. Relator fared no better on his third attempt; as the court found, he failed to adequately plead presentment and causation. (more…)

Fraud Theories Fail Under Rigorous Standards for “Worthless Services” and Materiality

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Earlier this week, a court in the Eastern District of Pennsylvania dismissed a declined qui tam action in which the relator, a licensed nurse, alleged that an operator of treatment facilities for disabled individuals fraudulently billed Medicare and Medicaid for substandard care and retaliated against her for investigating that fraud.

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D.C. Circuit Applies But-For Causation Standard, Weak Materiality Test to FCA Claims, While Concurrence Questions Viability of Fraudulent Inducement Theory

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On July 6, 2021, the D.C. Circuit Court of Appeals affirmed in part and reversed in part a district court’s dismissal of the qui tam suit against IBM in United States ex rel. Cimino v. Int’l Bus. Machines Corp., No. 19-7139.  The relator alleged that IBM and the Internal Revenue Service (“IRS”) had entered into a software license agreement, but that upon learning that the IRS was uninterested in renewing the agreement, IBM fraudulently induced the IRS to extend the contract.  In particular, IBM allegedly collaborated with the auditor of the agreement, resulting in an audit finding that the IRS owed IBM $292 million for noncompliance with the contract’s terms.  IBM then offered allegedly to waive that fee in exchange for the IRS renewing the agreement.  The relator further alleged that once the new agreement was in place, IBM nonetheless collected $87 million of the noncompliance penalty by disguising that amount as fees for products and services that were never provided.  According to the relator, this scheme yielded FCA liability in two ways: first, IBM fraudulently induced the IRS to renew the agreement; second, IBM submitted false claims by billing $87 million for unprovided products and services.

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Eleventh Circuit Rejects Argument That Mathematical Probability Suffices To Allege The Existence of False Claims, Affirming Dismissal For Failure To Satisfy Rule 9(b)

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On April 26, 2021, the Eleventh Circuit affirmed the dismissal with prejudice of a qui tam action brought by two former employees of a Georgia hospice provider and associated medical providers.  The Court held that the relators did not plead with sufficient particularity under Rule 9(b) that the defendant had submitted a false claim to the government.  Estate of Debbie Helmly, et al. v. Bethany Hospice and Palliative Care of Coastal Georgia, LLC, et al., No. 20-11624 (11th Cir. Apr. 26, 2021).

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Fifth Circuit Affirms Dismissal of FCA Case Based on Inadequate Pleading of Upcoded Claims

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On May 28, 2020, the United States Court of Appeals for the Fifth Circuit affirmed the dismissal with prejudice of a False Claims Act suit brought against Baylor Scott & White Health (“Baylor”), a network of acute care hospitals.  The suit, brought by Integra Med Analytics, alleged that Baylor submitted $61.8 million in fraudulent claims to Medicare by using unsupported “higher-value” diagnosis codes to inflate Medicare reimbursements.  The U.S. government previously declined to intervene in the suit.

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Court Dismisses DOJ Complaint Alleging Improper Auto-Refill and Co-Payment Waiver for Lack of Particularity

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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.

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Eleventh Circuit Holds That It Is Relator’s Burden To Prove Lack of Fair Market Value As An Essential Element of AKS-Based Claims

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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.

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