Menu

Sixth Circuit Applies Escobar Ruling in Decision to Resuscitate False Claims Act Case

The United States Court of Appeals for the Sixth Circuit recently resuscitated a qui tam action under the False Claims Act (FCA), and, in so doing, held that the relator had properly alleged materiality under the U.S. Supreme Court's decision in Universal Health Services Inc. v. United States ex rel. Escobar, 136 S. Ct. 1989, 2002 (2016). The Sixth Circuit's decision, U.S. ex rel. Prather v. Brookdale Senior Living Communities, Inc., 892 F.3d 22 (6th Cir. June 11, 2018) addressed a relator's claims under the FCA. The FCA imposes civil liability on those who defraud the federal government by levying fines and penalties, including up to three times the government's damages. Private persons called relators file lawsuits or qui tam actions for violations of the FCA on behalf of the government.

In Prather, the relator had been hired to review a home health care provider's backlog of millions of dollars of un-submitted Medicare claims. The relator alleged that, through her work, she found evidence showing the provider had submitted false claims to Medicare using untimely physician certifications, including certifications obtained long after the patient had been treated and discharged. The district court had dismissed the relator's complaint.

Health Care CertificateThe Sixth Circuit reviewed whether the relator had adequately plead materiality in her complaint. In 2016, the U.S. Supreme Court held in Escobar that an action under the FCA must allege misrepresentations that are material to the government's payment decision, and looks to whether the complaint alleged that the government program: (1) had established conditions of payment; (2) consistently refused to pay claims in the mine run of cases based on noncompliance with a particular statutory, regulatory or contractual requirement; or (3) paid claims notwithstanding non-compliance or whether non-compliance went to the very essence of the bargain.

The Sixth Circuit reversed the district court, and reinstated the relator's complaint. The panel held that the relator had identified a regulation requiring that a physician's certification must be obtained at the time the plan of care was established or as soon thereafter as possible. The timing requirement in the regulation was an express condition of payment that supported an inference that the requirement was material to the government's payment decision.

Next, the Sixth Circuit observed that the relator had alleged facts regarding the government's reactions to claims submitted by the provider, but had not alleged anything regarding how the government had previously treated similar claims. The Sixth Circuit noted that a lack of allegations relating to prior government action regarding payment or non-payment was not a dispositive factor. Unless the government had actual knowledge of the provider's alleged noncompliance, the government's response to the claims submitted by the defendants did not affect the materiality analysis. Accordingly, the Sixth Circuit determined that the district court had erred by reading a negative inference into the lack of allegations regarding prior government action.

Finally, the Sixth Circuit held that the requirement that a physician's certification must be obtained at the time the plan of care was established, or as soon thereafter as possible, was material because it went to the very essence of the bargain. The timing requirement was an important anti-fraud requirement because the deadline requirement increased the difficulty of finding a doctor willing to retroactively validate the care provided to a patient. Moreover, the Department of Health and Human Services had issued guidance that highlighting that untimely and/or forged physician certifications on plans of care were an area of special concern. The Centers for Medicare and Medicaid Services had similar stated that it is not acceptable for providers to wait until the end of the 60-day episode of care to obtain a completed certification/recertification.

Summer associate Edet Nsemo assisted in the researching and drafting of this post. Nsemo is not currently licensed to practice law.

Search
Subscribe via Email