The Fourth Circuit has agreed to consider on interlocutory appeal whether statistical sampling can be used to establish FCA liability, as we previously reported here. See United States ex rel. Michaels v. Agape Senior Cmty., Inc., No. 15-2145 (4th Cir.). Because no circuit court has yet ruled on the issue, the Fourth Circuit’s decision could significantly impact the development of this hotly-debated issue in FCA litigation.
A district court recently denied a relator’s efforts to translate alleged manipulation of skilled nursing facility (“SNF”) CMS Star Ratings into a claim under the FCA, while allowing the relator to proceed with allegations that the CEO of a SNF chain oversaw a kickback scheme designed to churn business. See U.S. ex rel. Orten v. North Amer. Health Care, Inc., No. 14-cv-02401 (N.D. Cal. Nov. 9, 2015). The case reinforces well-established precedent that FCA suits alleging regulatory violations cannot proceed where the government does not condition payment on complete regulatory compliance. The government’s Statement of Interest arguing that the public disclosure bar was triggered as to certain claims demonstrates the DOJ’s growing wariness of opportunistic behavior by relators seeking to capitalize on pre-existing government investigations to which they did not contribute.
A court in the Central District of California recently granted in part and denied in part the motions to dismiss of defendants—multiple Medicare Advantage (“MA”) plans and a home health assessment company—in a suit alleging that the sickness of patients had been inflated through illegitimate in-home assessments. See United States ex rel. Silingo v. Mobile Med. Examination Servs., No. 13-cv-01348 (C.D. Cal. Sept. 29, 2015). The case is one further development in the broader ongoing enforcement effort against private Medicare insurers (as reported here), and highlights the scrutiny by CMS of the role in-home assessments play in the MA program.
As we previously reported here, a district court in South Carolina recently certified to the Fourth Circuit two questions for interlocutory appeal: 1) whether courts can review and reconsider the government’s rejection of a settlement in a non-intervened qui tam suit, and 2) whether and when statistical sampling can be used to prove liability and damages in FCA actions. Both the government (which did not intervene in this case, but which has opposed settlement) and the defendant hospice chain, Agape, recently filed briefs urging the Fourth Circuit to pass on the statistical sampling question. The government also argued that the Fourth Circuit should adopt the majority rule recognizing the government as having unfettered veto authority.
Posted by Scott Stein and Brenna Jenny
A district court in the Southern District of Florida recently denied motions to dismiss filed by a Medicare Advantage (“MA”) plan and MA providers in a case alleging upcoding through fraudulent diagnosing. See United States ex rel. Graves v. Plaza Med. Ctrs. Corp., No. 10-cv-23382 (S.D. Fla. July 6, 2015). The case is one of a growing number of qui tam cases in the Medicare Advantage sphere, mirroring heightened congressional pressure on CMS and DOJ to take steps to combat Medicare Advantage fraud (as previously reported here).
A judge in the District of South Carolina has invited the Fourth Circuit to become the first appellate court to rule on when statistical sampling can appropriately be used to establish FCA liability. The district court also certified for interlocutory appeal the question of whether the Attorney General’s decision in a non-intervened qui tam suit to reject a proposed settlement is subject to judicial review, an issue on which the circuit courts are split. See United States ex rel. Michaels v. Agape Senior Cmty., Inc., No. 12-3466 (D.S.C. June 25, 2015). Both issues became intertwined in this case when the government rejected a $2.5 million settlement agreed to by the defendants and the relator, citing its own extrapolated calculations (based on an undisclosed statistical sampling) as the basis for concluding that damages to the government were $25 million, and that the settlement was therefore inadequate. The resolution of these questions has the potential to significantly impact bargaining dynamics when investigating and negotiating resolutions to qui tam suits.
Posted by Scott Stein and Brenna Jenny
A court in the Middle District of Florida is the latest of a growing number of courts (as reported here and here) that has allowed relators to rely on statistical sampling in order to establish liability in FCA cases involving large numbers of claims. See United States ex rel. Ruckh v. Genoa Healthcare, LLC, No. 11-cv-01303 (M.D. Fla. Apr. 28, 2015).
The relator, a former employee of the defendant operators of a chain of nursing and rehabilitation centers, initially filed a qui tam suit alleging upcoding at two facilities where she had worked. After the court dismissed the initial complaint for failing to include sufficient details about the alleged fraudulent scheme, the relator filed an amended complaint citing upcoding at fifty-three facilities.
Following denial of the motion to dismiss the amended complaint, and “[c]iting the voluminous discovery in this action and arguing that producing and processing the relevant medical records at the ‘fifty-three . . . [medical] facilities and some fifty-three . . . off-site storage locations’ within a reasonable time is impossible,” the relator filed a motion in limine for permission to submit an export report that would use statistical sampling and extrapolation in order to estimate the volume of overpayments allegedly retained by the defendants.
The United States filed a Statement of Interest in support of the relator’s motion (accessible here). The government opposed the defendants’ argument that the FCA necessarily requires proof of individual false claims, particularly in cases, such as this one, involving allegations of medically unnecessary care. While medical necessity decisions would be based on unique determinations for the population of patients in the sample, the government argued that so long as the sample was representative, the extrapolated result would be valid, and the defendants should be relegated to attacking the weight of the inferences through competing testimony.
The court relied heavily on the District of Tennessee’s decision in U.S. ex rel. Martin v. Life Care Centers of America, Inc. (discussed here) in ruling that the relator could use statistical sampling to estimate the claimed overpayments. In concluding that there is “no universal ban” on sampling in qui tam suits, court emphasized in particular the Martin court’s observation that proceeding without extrapolation “would consume an unacceptable portion of the Court’s limited resources.”
A copy of the court’s opinion can be found here.
Posted by Jaime L.M. Jones and Brenna Jenny
On March 4, 2015, the Central District of Illinois granted a defendant hospital’s motion to dismiss FCA claims based on “upcoding” allegations, holding the relator was not an original source of certain allegations and finding his remaining allegations insufficient to satisfy the requirements of Rule 9(b). U.S. ex rel. Gravett v. The Methodist Med. Ctr of Ill., No. 12-1008 (C.D. Ill. Mar. 4, 2015). In reaching its decision the court rejected relator’s argument that he could be the original source of allegations based on conduct that occurred after he left defendant’s employ, breaking with recent precedent out of the Eastern District of Pennsylvania. See U.S. ex rel Galmines v. Novartis Pharma. Corp., No. 06-cv-03213 (Feb. 27, 2015).
The relator in U.S. ex rel Gravett worked as an emergency room physician at Methodist Medical Center until January 1, 2007. According to his allegations, Methodist Medical Center employed coding software that it knew had a tendency to inflate the otherwise applicable CPT codes for physician and hospital services to codes associated with higher reimbursement. As a result, the relator alleged the submission of false claims for patients treated during the period 2006-2011. The defendant moved to dismiss relator’s claims under the public disclosure bar, arguing that it had disclosed the essential elements of the alleged fraud to the U.S. Attorney’s Office in the course of a government investigation beginning in 2010. Following Seventh Circuit precedent, the court held that relator’s allegations were publicly disclosed before proceeding to assess whether the relator qualified as an original source of those allegations. The court held that relator could not have direct knowledge of any alleged upcoding that occurred after his employment ended. As such, he could not be an original source of those allegations, which were barred.
The Central District of Illinois’ refusal to consider allegations of misconduct occurring after the relator’s employment was terminated stands in contrast to a recent order by the Eastern District of Pennsylvania in U.S. ex rel Galmines v. Novartis Pharma. Corp. Under an earlier ruling, the relator’s allegations—that during the time of his employment at Novartis, the company engaged in off-label marketing and entered into kickback arrangements with respect to the drug Elidel—had been deemed publicly disclosed. Nonetheless, the court concluded that the relator was an original source of those allegations. The relator subsequently moved to amend his complaint to extend the time period of the alleged misconduct past the termination of his employment. The court granted the motion, ruling that relators may “pursue the entire fraudulent scheme for which they have direct and independent knowledge of the operative substantive facts,” without limitation to the “specific time periods for which they have direct and independent knowledge.” The court viewed this conclusion as mandated by how the public disclosure and first-to-file rules have been interpreted. In particular, the court was concerned that constraining a relator to the time period of his direct involvement could create situations in which no relator could bring a lawsuit for a particular time period of a fraud. For example, this could arise where an original source who was the first to file lacked direct knowledge of a later portion of the scheme, but would-be relators with direct knowledge as to this later period would be barred from filing a suit under the first-to-file rule. The Galmines court further ruled that because the relator had sufficiently alleged a course of conduct continuing past his misconduct, he could amend his complaint and obtain discovery for conduct occurring after he filed earlier iterations of his complaint.
In contrast to the claims arising from conduct after his termination, the Gravett court held the relator was the original source of allegations related to upcoding he observed during his employment. As to that alleged upcoding, the court ruled that despite his direct knowledge relator failed to include any particulars regarding the false claims, such as invoices or requests for payment to a federal healthcare program that resulted from the alleged upcoding. Under well-established precedent, relators advancing upcoding allegations are only entitled to a relaxation of Rule 9(b)’s requirement to plead specific information of at least one submitted false claim if they are “in a special position of personal knowledge or involvement in the billing practices of the defendant that affords some indicia of reliability to the allegations.” The Gravett court determined that as a former emergency room physician, the relator was only involved in the delivery of care, and he lacked “first hand knowledge of Defendants’ actual billing practices, submission of claims for payment, or receipt of payments from the Government payors.” Absent actual involvement in claims or billing practices, the relator was effectively relying on “rumor or innuendo.” Thus, the court dismissed relator’s remaining claims pursuant to Rule 9(b).
A copy of the opinion in U.S. ex rel. Gravett v. The Methodist Med. Ctr of Ill., No. 12-1008 (C.D. Ill. Mar. 4, 2015) can be found here.
A copy of the opinion in U.S. ex rel Galmines v. Novartis Pharma. Corp., No. 06-cv-03213 (Feb. 27, 2015) can be found here.