19 May 2021

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

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).

Relators alleged that defendant had violated the Anti-Kickback Statute (“AKS”) by paying physicians for referrals to the hospice facility.  In particular, relators asserted that defendant offered physicians below-market investment interests that provided varying returns based on the number of referred patients.  Relators also alleged that, after making an investment, those physicians referred nearly all of their patients to defendant, nearly all of whom were federal healthcare program (“FHCP”) beneficiaries.  As a result, relators alleged, defendant submitted false claims when it billed FHCPs for services provided to improperly-referred patients.

The district court held that relators did not adequately plead that defendant had submitted a false claim to the government.  The district court first noted that relators had not presented an example of a claim that defendant had submitted to an FHCP on behalf of an improperly-referred patient.  Second, the court rejected the argument that relators’ “inside knowledge” of defendant’s referral rates provided sufficient indicia of reliability to meet the standard of Rule 9(b).  Relators had not described defendant’s billing practices in detail, had not alleged that they observed the submission of a false claim, nor did they participate in submitting a false claim.  As the district court explained, under Eleventh Circuit precedent, a court may not conclude that a defendant submitted a false claim based on mathematical probability alone.

In affirming the district court’s conclusion, the Eleventh Circuit highlighted that the submission of a false claim “cannot be inferred from the circumstances.”  Even though relators had alleged familiarity with, and access to, defendant’s billing information, relators had not provided a single example of a false claim that was actually submitted to the government.  And while the Court acknowledged that a sample false claim is not always required to meet Rule 9(b)’s heightened pleading standard, relators had not provided specific facts about a false claim nor explained how their access to information about defendant’s billing process “translated to knowledge of actual tainted claims presented to the government.”  Relators had also emphasized that investor-physicians referred “significant numbers of Medicare recipients to [defendant] and that ‘all or nearly all’ of [defendant’s] patients received coverage from Medicare.”  But, the court explained, a complaint cannot “rely on mathematical probability to conclude that a defendant surely must have submitted a false claim at some point.”

The Eleventh Circuit’s decision reaffirms the high bar that Rule 9(b) sets for FCA relators, as discussed further here and here.  Relators must provide concrete examples and specific detail to support their allegations—it is not enough for relators to base their theory of liability on a mathematical inference that a defendant must have submitted a false claim to the government.

A copy of the decision can be found here.

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