9th Circuit Reinstates FCA Lawsuit Involving Medicare Claims
The Ninth Circuit Court of Appeals recently ruled that a former employee of a medical device company who filed a qui tam case in 2008 may proceed with litigation against her former employer, reversing the district court’s dismissal of the case. A three-judge panel of the court found the relator sufficiently alleged her former employer knowingly engaged in a fraudulent scheme to submit false Medicare claims, and that those claims were material to the government’s Medicare payment decisions.
The defendant-appellee delivered durable medical equipment to Medicare patients. Medicare claims for those devices required a written order from a physician prior to device delivery and Medicare claim submission. The relator alleged the company submitted claims without the physician orders in place and deliberately used improper billing codes to cover up the fact that physician orders were not obtained within the required timeframe.
First, as to whether relator’s FCA claims were sufficiently pled, the court found the relator’s complaint alleged reliable details about the scheme to submit false claims and included reliable indications that the claims were actually submitted. The relator’s detailed allegations suggested claims were submitted with management approval and with a particular billing code that falsely indicated physicians’ orders for the devices were in place prior to device delivery and claims submission. If the proper billing code had been included, it would have indicated physician approval was not obtained before device delivery and such claims would not have been submitted to avoid denial.
Second, as to the defendant-appellee’s required scienter, the relator alleged the company knowingly authorized an internal procedure to permit exceptions to the requirement that physician orders be in place prior to device delivery and claims submission. The relator supported this allegation with information from a former co-worker who confirmed the company procedure was not to appeal the denial of some claims out of concern that Medicare would discover the lack of timely physician orders. The court also viewed the relator’s firing along with the terminations of other supervisors with whom she discussed the alleged fraudulent scheme as an “extraordinarily aggressive reaction” to relator’s concerns that suggested the company wished to “remain willfully ignorant” of the alleged false claims submissions.
Finally, as to materiality, the court noted that applicable Medicare rules explicitly state claim payments would not be authorized if the device delivery occurred without a physician order in place. According to allegations in the complaint, defendant-appellee was well-aware of those rules, and that physician approval was a necessary pre-condition to Medicare claims submission. The court found that claims for the devices would not have been paid by Medicare but for the allegedly false claims information about the physician orders, thus establishing that the information was material to the governments’ payment decisions on those claims.
