6th Circuit Rules on Materiality in False Claims Act Case

The Sixth Circuit recently overturned a district court’s dismissal with prejudice of a False Claims Act (FCA) case against the owner of a national senior living community.  The Sixth Circuit held that the claim adequately alleged an FCA claim.

The FCA prohibits one from knowingly presenting, or causing to be presented, false or fraudulent claims for payment or approval to the government.  The relator, who filed the qui tam action, alleges that the defendant violated the FCA by submitting claims for home health services in which required documents “were not signed until long after the episode of care had ended.”

In each claim, a physician’s signature certifying the patient’s eligibility for and entitlement to those services was filed late.  Medicare covers certain home health services “only if a physician certifies and recertifies the patient’s eligibility for and entitlement to those services.”  This certification “must be obtained at the time the plan of care is established or as soon thereafter as possible.”  The relator alleges that this timing requirement was violated and gives rise to an FCA claim.

The district court dismissed the case for failure to plead materiality of the timing requirement.  The district court found this requirement to be both an express condition of payment as well as an “essential and material component of the bargain between home health providers and Medicare”; however, the district court held that the timing requirement is not material because the relator failed to direct the court to “facts in the record . . ., legal precedent, or relevant Medicare guidance supporting a conclusion that the timing requirement is material.”

Conversely, the Sixth Circuit found the timing requirement to be material because the requirement is an express condition of payment and goes to the very essence of the bargain, functioning to prevent fraud.  Additionally, the Court accepted the relator’s “numerous guidance documents issued by the Department of Health and Human Services” in support of materiality, despite the fact that some of the guidance was over ten years old at the time of the alleged false claims.

The Sixth Circuit additionally rejected the defendant’s argument that the claim failed the scienter requirement for FCA claims.  The Court, in reversing the district court, concluded that the relator’s claim “sufficiently pleaded that the defendants misrepresented their compliance with the material timing requirement . . . and that they acted with ‘reckless disregard’ as to whether they had complied with this requirement and whether this requirement was material.”

The opinion, United States ex rel. Prather v. Brookdale Senior Living Communities, is accessible here.