Duffy v. Lawrence Memorial Hospital
Filing
337
MEMORANDUM AND ORDER denying 318 Motion for Summary Judgment; finding as moot 320 Motion for Summary Judgment; granting 322 Motion for Summary Judgment. See order for details. Signed by U.S. District Senior Judge Sam A. Crow on 10/2/18. (msb)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF KANSAS
UNITED STATES OF AMERICA,
ex rel. Megen Duffy,
Relator-Plaintiff,
vs.
Case No. 14-2256-SAC-TJJ
LAWRENCE MEMORIAL HOSPITAL,
Defendant.
MEMORANDUM AND ORDER
Plaintiff has brought this False Claims Act (“FCA”) lawsuit
against defendant Lawrence Memorial Hospital (“LMH”).
This case
is before the court upon LMH’s motion for summary judgment (Doc.
No. 322) and plaintiff’s motions for partial summary judgment (Doc.
Nos. 318) and for summary judgment against LMH’s counterclaims
(Doc. No. 320).
Plaintiff alleges that LMH made two kinds of false statements
in this case.
First, plaintiff asserts that LMH falsely reported
information involving patients’ arrival time to the Government to
increase Medicare reimbursement.
Plaintiff asserts:
that LMH knowingly manipulated the apparent order of
timed patient events in medical records, so as to
maximize Medicare reimbursement. In carrying out this
scheme, LMH knew that the Specifications Manuals
instructed LMH to abstract the earliest event in the
medical record as “arrival time.”
So LMH made sure
electrocardiogram (“EKG”) times were the earliest times
appearing in the records of chest-pain patients.
Of
course, these patients had necessarily arrived at the
1
hospital well before receiving an EKG. The proof is in
the proverbial pudding.
LMH began reporting “zero”
minute arrival-to-EKG times in 2011.
Doc. No. 333, p. 1. Plaintiff claims this misinformation “directly
impacted LMH’s Medicare reimbursement rate because of [its] impact
on the Outpatient Quality Reporting (‘OQR’), Inpatient Quality
Reporting (‘IQR’), and Hospital Value Based Purchasing (‘HVBP’)
programs.”
Id.
Plaintiff’s second claim is that LMH knowingly, recklessly
and
falsely
certified
compliance
with
employee
anti-fraud
education requirements set out by Section 6032 of the Deficit
Reduction Act of 2005 (“DRA”) as a condition of payment from the
Medicaid program.
Id. at p. 2. Plaintiff seeks partial summary
judgment in her favor on this claim.
Doc. No. 318.
LMH has alleged state law breach of contract and fraudulent
misrepresentation counterclaims against plaintiff.
These claims
arise from a settlement agreement LMH and plaintiff entered which
resolved discrimination claims plaintiff raised in administrative
complaints.
A broadly-stated release was part of the agreement.
The settlement agreement was struck a few months after plaintiff
filed this FCA action under seal.
LMH did not know of the FCA
action at the time of the settlement agreement.
LMH contends that
plaintiff breached the settlement agreement and made fraudulent
misrepresentations which LMH relied upon to enter the settlement
2
agreement.
Plaintiff
counterclaims.
asks
for
summary
judgment
against
the
Doc. No. 320.
As explained below, the court finds that LMH’s motion for
summary
judgment
should
be
granted
because
plaintiff
cannot
demonstrate an essential element of her FCA claims, that is the
materiality of the alleged false statements made by LMH.
For the
same reasons, plaintiff’s motion for partial summary judgment
should be denied.
exercise
With these rulings, the court shall decline to
jurisdiction
over
LMH’s
counterclaims.
Therefore,
plaintiff’s motion for summary judgment against the counterclaims
is moot.
I. SUMMARY JUDGMENT STANDARDS
Summary judgment is appropriate “if the movant shows that
there is no genuine dispute as to any material fact and the movant
is entitled to judgment as a matter of law.” FED.R.CIV.P. 56(a).
A “genuine dispute as to a material fact” is one “such that a
reasonable jury could return a verdict for the nonmoving party.”
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986).
“Only
disputes over facts that might affect the outcome of the suit under
the governing law will properly preclude the entry of summary
judgment.”
Id.
At the summary judgment stage, the court’s job
“is not ... to weigh the evidence and determine the truth of the
matter but to determine whether there is a genuine issue for trial.
. . . If [however] the evidence is merely colorable . . . or is
3
not significantly probative . . . summary judgment may be granted.”
Id. at 249-50.
The moving party bears the initial burden of showing the
absence of any genuine issue of material fact.
Catrett, 477 U.S. 317, 323 (1986).
this
burden,
the
burden
shifts
Celotex Corp. v.
Once the moving party meets
to
the
nonmoving
party
to
demonstrate that genuine issues remain for trial as to those
dispositive matters for which the nonmoving party carries the
burden of proof. Nahno-Lopez v. Houser, 625 F.3d 1279, 1283 (10th
Cir. 2010).
The non-movant may not rely on the party’s own
pleadings; rather, the non-movant must come forward with facts
supported
by
competent
evidence.
Id.
(interior
quotations
omitted).
The essential inquiry is “whether the evidence presents
a sufficient disagreement to require submission to the jury or
whether it is so one-sided that one party must prevail as a matter
of law.”
Liberty Lobby, 477 U.S. 251-52.
II. FACTS
The following facts are uncontroverted or construed in the
light
most
favorable
to
plaintiff.
Some
additional
facts,
particularly as to plaintiff’s DRA contentions, may be included in
the court’s later discussion of LMH’s arguments.
In November 2013, plaintiff called a Centers for Medicare &
Medicaid Services (“CMS”) hotline to report LMH for falsifying
patient charts and charging Medicare for services LMH was not
4
providing
so
that
reimbursement.
LMH
would
receive
increased
Medicare
Her allegations were investigated by NCI Advance
Med, a CMS contractor that investigates fraud allegations.
That
investigation was closed around July 2014.
Plaintiff filed her initial complaint under seal on May 30,
2014.
The
complaint.
U.S.
Department
of
Justice
was
served
with
the
The Health and Human Services Office of Inspector
General was notified and plaintiff was interviewed by the U.S.
Attorney’s Office for the District of Kansas.
The Department of
Justice has declined to intervene in this case.
an amended complaint on June 16, 2015.
Plaintiff filed
DOJ was served with the
complaint and again declined to intervene.
A. Arrival time facts
LMH makes daily claims to the Medicare program for interim
payment to a Medicare Administrative Contractor.
LMH is paid for
services to Medicare patients through interim payments received
most business days.
The charges LMH submits for payment are based upon LMH’s
chargemaster
procedures,
which
is
LMH’s
official
rates
for
individual
services and goods at the hospital. CMS determines
the payment rate for LMH’s charges for Medicare patient services
prior to the services being delivered.
CMS
to
provide
services
to
Medicare
determined by CMS.
5
LMH has a contract with
patients
for
the
rates
The
payment
participation
in
rate
is
reporting
impacted
programs.
positively
The
by
Inpatient
LMH’s
Quality
Reporting Program (“IQR”) is a “pay-for-reporting” program.
Under
this program, hospitals report certain designated quality measures
regarding their inpatient encounters to CMS.
The Outpatient
Quality Reporting Program (“OQR”) is also a “pay-for-reporting”
program.
Under this program, hospitals report certain designated
quality measures regarding their outpatient encounters to CMS.
In
return for submitting data for these reporting programs, hospitals
avoid a reduced payment for the provision of services to Medicare
patients.
LMH’s Quality Services Department abstracts data from patient
charts and submits that data to CMS for IQR and OQR reports.
The
data abstraction is done using Specifications Manuals promulgated
by CMS.
Because abstractors do not and cannot alter patient
records or even investigate the accuracy of the patient records,
inaccuracies in patient records are simply carried over to the
abstracted data reported to CMS on IQR and OQR measures.
Each fiscal year from 2011 to 2018, LMH completed Data
Accuracy and Completeness Acknowledgements (“DACA” forms) and
submitted those certifications to CMS.
The DACA forms acknowledge
that the information reported for the IQR program is accurate and
complete and that the acknowledgement is required for the IQR
program.
6
Each year CMS randomly selects 450 hospitals for each of the
IQR and OQR programs to verify the accuracy of the abstraction of
data from medical records.
hospitals.
In addition, there are 50 targeted
LMH has been randomly selected three times since 2011.
LMH satisfied the 75 percent accuracy threshold in these audits.
The audits, however, do not assess the accuracy of the medical
records themselves.
The HVBP program is a budget-neutral program. Under the HVBP,
CMS withholds a percentage from the total annual Medicare payments
to all hospitals nationally, and places it in a separate fund used
to increase or decrease the reimbursement rate upon claims for
payment in following years, depending upon performance on certain
measures calculated with IQR data.
All amounts in the HVBP fund are paid out to hospitals each
year.
CMS does not retain any of the money.
“Arrival time” is a component of certain measures in the IQR
and OQR programs.
There are numerous other measures which do not
use “arrival time” as a component.
Performing an ECG prior to registering a patient results in
the “arrival time” reported to CMS being the same as the ECG time
in the patient record, where the ECG is the earliest documented
event in the medical record.
An expert witness for plaintiff has testified that, based
upon his review of documents, LMH failed to properly record the
7
actual
arrival
times
of
ER
chest
pain
patients
registration until after an ECG was obtained.
3.
by
delaying
Doc. No. 333-14, p.
There is other evidence discussed in the orders denying LMH’s
first
motion
for
summary
judgment
and
LMH’s
motion
for
reconsideration (Doc. No. 204, pp.8-9, 16-19; Doc. No. 234, p. 4
n.2), that LMH knowingly falsified patient records with the intent
of causing abstracted “arrival times” to be later than they would
have
been
absent
the
falsification,
thereby
improving
LMH’s
reported performance on time measures for the IQR, OQR, and HVBP
programs.
See also, Doc. No. 333, Statement of Fact # 89 and
record citations in support.
From 2010 through 2017 for LMH, the records in which the
abstracted “arrival time” of a patient was either the same as or
after a recorded EKG time represents 15.89% of the inpatient
records submitted to CMS for measures for which “arrival time” was
a data point.
From 2010 through 2017 for LMH, the records in which the
abstracted “arrival time” was either the same as or after a
recorded ECG time represents 4.09% of the outpatient records
submitted to CMS for measures for which “arrival time” was a data
point.
LMH reported “arrival times” that were used to calculate CMS
measure AMI-8A - - “primary percutaneous coronary intervention
received within 90 minutes of hospital arrival.”
8
“Arrival time”
was either the same or after a recorded EKG time in 72.22 percent
of the records LMH submitted to CMS for HVBP measure AMI-8a for FY
2015.
The goal set out in AMI-8a was to administer a PCI (heart
catheterization) within 90 minutes of arrival.
No evidence has
been presented to show that the LMH’s allegedly false “arrival
times” had a material impact upon whether the goal was met.
In fiscal years 2014, 2015, 2016 and 2017, LMH was not
penalized for reporting inaccurate data to CMS and LMH received
positive Value Based Purchasing adjustments based upon the data it
provided.
B. DRA facts1
LMH
has
submitted
attestation
of
compliance
forms
for
multiple fiscal years. The forms attest to compliance with Section
6032 of the DRA.
The forms state “as a condition for receiving
payments exceeding $5 million per federal fiscal year,” that the
signees have read Section 6032 of the DRA and examined LMH’s
policies and procedures.
The forms further state that LMH will
comply with the provisions to remain eligible for payment under
the Kansas Medicaid program and that LMH has complied with the
requirements of the DRA to educate employees and contractors
concerning, among other matters, the False Claims Act, state law
pertaining to Medicaid fraud and abuse, administrative remedies
1
In this opinion, the court has considered the statement of facts contained in
the parties’ memoranda in support of and opposition to both LMH’s motion for
summary judgment and plaintiff’s motion for partial summary judgment.
9
for false claims and statements, civil or criminal penalties for
false claims and statements, and whistleblower protections under
such laws. Copies of attestations for the fiscal years 2014, 2015,
2016 and 2017 have been submitted as exhibits.
Plaintiff has presented evidence that persons signed the
attestations
procedures.
employee
without
first
examining
LMH’s
policies
and
Plaintiff has also presented evidence that LMH issued
handbooks
over
several
years
which
information required by DRA Section 6032.
did
not
contain
LMH has presented
evidence of its Codes of Conduct, Compliance Plans, Compliance
Handbooks, and on-line policy manuals over the years.
There is a
fact issue as to whether these sources satisfy the Section 6032
requirements for all the years in dispute in this case.
These
sources, however, provide some evidence that LMH publicized its
commitment to deterring fraud and abuse, and provided education
(sometimes quite general) regarding anti-fraud goals, remedies,
and legislation.
III. FCA STANDARDS
“The
FCA
“covers
all
fraudulent
government to pay out sums of money.’”
attempts
to
cause
the
U.S. ex rel. Polukoff v.
St. Mark’s Hosp., 895 F.3d 730, 734 (10th Cir. 2018)(quoting U.S.
ex rel. Conner v. Salina Regional Health Ctr., Inc., 543 F.3d 1211,
1217 (10th Cir. 2008)(interior quotation omitted)).
is to be read broadly.
Id. at 742.
10
The statute
Plaintiff brings this action under the FCA, specifically,
subsections (A),(B) and (G) of 31 U.S.C. § 3729(a)(1).
subsections state that it violates the law to:
These
(A) – knowingly
present or cause to be presented, a false or fraudulent claim for
payment or approval; (B) - knowingly make, use or cause to be made
or used, a false record or statement material to a false or
fraudulent claim; and (G) – knowingly make, use, or cause to be
made or used, a false record or statement material to an obligation
to
pay
or
transmit
money
or
property
to
the
Government,
or
knowingly conceal or knowingly and improperly avoid or decrease an
obligation to pay or transmit money or property to the Government.
To prove a false claim under subsections (A) or (B), a
plaintiff must show that defendant:
(1) made a claim; (2) to the
government; (3) that is materially false or fraudulent; (4) knowing
of
its
falsity;
government.
and
(5)
seeking
payment
from
the
federal
See U.S. v. The Boeing Company, 825 F.3d 1138, 1148
(10th Cir. 2016).
To
prove
3729(a)(1)(G)
a
a
“reverse
relator
false
must
show
claim”
under
that:
(1)
FCA
the
section
defendant
knowingly made a materially false record or statement; (2) to
improperly avoid or decrease an obligation to pay or transmit money
or property to the government.
See U.S. ex rel. Matheny v. Medco
Health Solutions, Inc., 671 F.3d 1217, 1222 (11th Cir. 2012).
A “claim” is:
11
(A) any request or demand . . . for money or property
. . . that (i) is presented to an officer, employee,
or agent of the United States; or (ii) is made to a
contractor, grantee or other recipient, if the money
or property is to be spent or used on the Government’s
behalf or to advance a Government program or interest,
and if the United States Government - - (I) provides
or has provided any portion of the money or property
requested or demanded; or (II) will reimburse such
contractor, grantee, or other recipient for any
portion of the money or property which is requested or
demanded . . .”
31 U.S.C. § 3729(b)(2).
False claims under the FCA may be either factually false or
legally false. Boeing, 825 F.3d at 1148; U.S. ex rel. Lemmon v.
Envirocare of Utah, Inc., 614 F.3d 1163, 1168 (10th Cir. 2010).
A
factually false claim involves the submission of an incorrect
description
of
goods
or
services
provided
or
a
reimbursement for goods or services never provided.
request
for
Polukoff, 895
F.3d at 741; Boeing, 825 F.3d at 1148; Lemmon, 614 F.3d at 1168
(interior quotation omitted).
A legally false claim is one which
falsely certifies compliance with a regulation or contractual
provision as a condition of payment.
Polukoff, supra; Boeing, 825
F.3d at 1148; Lemmon, 614 F.3d at 1168.
be express or implied.
A legally false claim may
Boeing, 825 F.3d at 1148.
An express claim
occurs upon a false certification of compliance with a term where
compliance is a prerequisite to payment.
Id.
An implied claim
occurs when the request for payment lacks an express certification,
12
but contains a knowing and false implication of entitlement to
payment.
Id.
“To give rise to liability under the FCA, the submitted claim
must be both knowingly and materially false.”
1148.
Boeing, 825 F.3d at
“’Liability [under the FCA] does not arise merely because
a false statement is included within a claim’; rather, ‘the false
statement must be material to the government’s decision to pay out
moneys to the claimant.’”
U.S. ex rel. Thomas v. Black & Veatch
Special, 820 F.3d 1162, 1169 (10th Cir. 2016)(quoting Conner, 543
F.3d at 1219 & n.6).
Plaintiff mainly states that LMH made either express legally
false claims or factually false claims.2
Doc. No. 333, p. 46.
LMH
argues that plaintiff’s claims are largely implied certification
claims.
Doc. No. 334, p. 56.
The court does not believe the
categorization of plaintiff’s claims is important to defendant’s
materiality argument.
IV. PLAINTIFF’S CLAIMS
According to the pretrial order, plaintiff is making the
following
claims:
1)
that,
in
violation
of
31
U.S.C.
§
3729(a)(1)(A), LMH submitted false claims to Medicare; 2) that, in
violation of 31 U.S.C. § 3729(a)(1)(A), LMH submitted false claims
to Medicaid; 3) that, in violation of 31 U.S.C. § 3729(a)(1)(B),
22
Plaintiff states in a footnote, however, that the individual DRA claims might
be seen as implied false certifications. Doc. No. 333, p. 42 n.9.
13
LMH
submitted
false
records
or
statements
to
Medicare
which
constituted “false claims” and that these records or statements
included but were not limited to “harvested patient records”,
Inpatient Quality Reports, Outpatient Quality Reports, and Data
Accuracy and Completeness Acknowledgement certifications; 4) that,
in violation of 31 U.S.C. § 3729(a)(1)(B), LMH submitted false
records
or
statements
to
Medicaid
which
constituted
“false
claims”, specifically attestations of compliance with Section 6032
of the DRA; 5) that, in violation of 31 U.S.C. § 3729(a)(1)(G),
LMH concealed or improperly avoided an obligation to repay money
received
from
Medicare
through
Outpatient Quality Reporting.
the
Market
Basket
Update
of
Doc. No. 317, pp. 14-15.
These claims, as discussed in plaintiff’s response to the
summary
judgment
falsehoods:
motion,
concern
two
alleged
underlying
1) that LMH submitted false information concerning
patients’ arrival times; and 2) that LMH falsely certified that it
complied with the provisions of Section 6032 of the DRA. Any claim
relating to the general warranties of truth contained on individual
claim forms3 or on the DACA forms cannot describe a material
falsehood if the underlying alleged falsehoods are immaterial.
3
There is evidence that individual claim forms submitted by LMH contained
language stating:
Submission of this claim constitutes certification that the
billing information as shown on the face hereof is true, accurate
and complete. That the submitter did not knowingly or recklessly
disregard or misrepresent or conceal material facts.
14
V. DEFENDANT’S ARGUMENTS FOR SUMMARY JUDGMENT
Defendant’s
main
argument
for
summary
judgment
is
that
plaintiff cannot prove a materially false claim for payment or a
materially false statement or record in support of such a claim.4
Doc. No. 323, p. 12.
The same argument would apply to dispute
whether defendant had an obligation to repay money it received
from Medicare.
A. Materiality standards
“Material” means “having a natural tendency to influence, or
be capable of influencing, the payment or receipt of money or
property.”
31
U.S.C.
§
3729(b)(4).
The
Supreme
Court
has
counseled that the term must be given a rigorous and demanding
construction in the context of the FCA.
Universal Health Servs.,
Inc. v. United States ex rel. Escobar, 136 S. Ct. 1989, 2002-03
(2016)(“Escobar”).
“[M]ateriality ‘look[s] to the effect on the likely or
actual
behavior
misrepresentation.’”
of
the
recipient
of
the
alleged
Id., 136 S.Ct. at 2002 (quoting Williston on
Contracts § 69:12, p. 549 (4th ed. 2003)). The Court further stated
in Escobar:
The False Claims Act is not “an all-purpose antifraud
statute,” Allison Engine, 553 U.S., at 672, 128 S.Ct.
2123 or a vehicle for punishing garden-variety breaches
of
contract
or
regulatory
violations.
A
4
LMH also argues that plaintiff has not proven that false arrival times were
reported. The court finds that plaintiff has presented sufficient evidence to
create a jury issue on this point.
15
misrepresentation cannot be deemed material merely
because the Government designates compliance with a
particular
statutory,
regulatory,
or
contractual
requirement as a condition of payment. Nor is it
sufficient for a finding of materiality that the
Government would have the option to decline to pay if it
knew of the defendant's noncompliance. Materiality, in
addition, cannot be found where noncompliance is minor
or insubstantial. See United States ex rel. Marcus v.
Hess, 317 U.S. 537, 543, 63 S.Ct. 379, 87 L.Ed. 443
(1943)
(contractors'
misrepresentation
that
they
satisfied a non-collusive bidding requirement for
federal program contracts violated the False Claims Act
because “[t]he government's money would never have been
placed in the joint fund for payment to respondents had
its agents known the bids were collusive”); see also
Junius Constr., 257 N.Y., at 400, 178 N.E., at 674 (an
undisclosed fact was material because “[n]o one can say
with reason that the plaintiff would have signed this
contract if informed of the likelihood” of the
undisclosed fact).
In sum, when evaluating materiality under the False
Claims Act, the Government's decision to expressly
identify a provision as a condition of payment is
relevant, but not automatically dispositive. Likewise,
proof of materiality can include, but is not necessarily
limited to, evidence that the defendant knows that the
Government consistently refuses to pay claims in the
mine run of cases based on noncompliance with the
particular
statutory,
regulatory,
or
contractual
requirement. Conversely, if the Government pays a
particular claim in full despite its actual knowledge
that certain requirements were violated, that is very
strong evidence that those requirements are not
material. Or, if the Government regularly pays a
particular type of claim in full despite actual
knowledge that certain requirements were violated, and
has signaled no change in position, that is strong
evidence that the requirements are not material.
Id. at 2003-04.
information
is
“The fundamental inquiry is ‘whether a piece of
sufficiently
[government’s] behavior . . .”
important
to
influence
the
U.S. v. Coloplast Corp., 2018 WL
16
4029549 *6 (D.Mass. 8/17/2018)(quoting U.S. ex rel. Winkelman et
al. v. CVS Caremark Corp., 827 F.3d 201, 211 (1st Cir. 2016)).
Courts
should
conduct
a
holistic
approach
to
determining
materiality, but “[m]ateriality is ‘more likely to be found where
the
information
bargain.”’”
Universal
at
issue
goes
“to
the
very
essence
of
the
Id., (quoting United States ex rel. Escobar v.
Health
Servs.,
Inc.,
842
F.3d
103,
109
(1st
Cir.
2016)(citing Escobar, 136 S.Ct. at 2003 n.5)).
B. Arrival times
It is undisputed that “arrival time” is a component of certain
measures used in the IQR and OQR programs and that there are
numerous other measures for which arrival time is not a factor.
The court has reviewed the record citations presented by
plaintiff.
There is clear and substantial support for the general
proposition that LMH’s reimbursement is affected positively by
submitting
IQR
and
OQR
reports.
There
is
also
clear
and
substantial support for the proposition that LMH’s reimbursement
from the Government can be positively or negatively affected under
the HVBP program from statistical measurements using information
supplied by LMH.5
There is evidence that “arrival time” is a data
5
The court relied upon these general propositions in part to deny LMH’s
materiality argument in LMH’s first motion for summary judgment. Doc. No. 204,
pp. 19-20. Also, at the time the court decided the first motion for summary
judgment, discovery was not complete and plaintiff’s claims were not as clear.
A final pretrial order has been entered which helps clarify plaintiff’s claims.
Discovery is complete. Under these circumstances, the court has confidence in
finding that plaintiff is unable to show evidence of materiality upon which a
reasonable jury could find in plaintiff’s favor.
17
point which can affect some of the measures used by the Government
in the HVBP program.
One such measure is labelled AMI-8a.
This
involves the time from arrival to heart catheterization.
But,
plaintiff has not presented evidence showing that LMH’s alleged
arrival
time
manipulations
actually
affected
a
reimbursement
decision or reimbursement rate, or would likely have had an
effect.6
Such evidence or allegations are critical.
In U.S. ex rel.
McBride v. Halliburton Co., 848 F.3d 1027, 1033 (D.C. Cir. 2017),
the court held that speculative statements that a false headcount
“might” have led to an investigation or might have resulted in
some charged costs being disallowed, was far too attenuated to
satisfy the FCA’s materiality standard.
Also, in U.S. ex rel.
Nargol v. DePuy Orthopaedics, Inc., 865 F.3d 29, 36 (1st Cir. 2017)
cert. denied, 138 S.Ct. 1551 (2018), the court affirmed the
dismissal of a FCA claim involving the use and FDA approval of a
medical device where the defendant allegedly told doctors that the
device had a failure rate of 0.1% at five years, as opposed to a
more modest 4% to 4.5% claimed in FDA filings.
6
This claim that a
Plaintiff’s statement of fact # 92 (Doc. No. 333, p. 28) states that the
amount of reimbursement upon every inpatient claim was increased because of the
reported arrival times’ impact upon the AMI-8A measure.
But, the record
citations do not adequately support plaintiff’s claim. The witnesses either
speak in generalities or do not specifically address reimbursement. Similarly,
plaintiff’s statement of fact # 95 (Doc. No. 333, p. 29) states that LMH received
additional reimbursement of each Medicare claim because of its performance in
the HVBP program. Plaintiff’s citations, however, do not show that the alleged
inaccurate arrival times had a material impact upon plaintiff’s performance
score.
18
design defect was misrepresented was dismissed because there was
no allegation that the difference between 0.1% and 4%-4.5% was
significant
to
doctors
or
the
difference
between
being
reimbursable by the government and not being reimbursable.7
The court does not question that the Government expects to
receive accurate information from LMH.
through
the
DACA
forms
and
LMH expressly represents
warranties
made
with
claims
for
payments, that the information submitted is accurate and complete.
LMH also impliedly represents that the information it submits for
the Government is accurate.
to this understanding.
Several witnesses have testified as
But, for plaintiff to establish a jury
issue as to materiality, there must be some showing that the
inaccuracy alleged as to arrival time is sufficiently critical
that the Government modified or would likely have modified its
reimbursement behavior on the basis of that information. Plaintiff
has failed to present evidence that LMH’s alleged submission of
inaccurate arrival time data was material to a reimbursement
decision, in other words, that it would not be considered by the
Government as a minor or insubstantial matter as opposed to a
material violation of LMH’s duty to provide accurate and complete
information.
7
The court also reversed the dismissal of a FCA claim that defendant sold a
defectively manufactured product to a provider that sought government
reimbursement. 865 F.3d at 41.
19
The statutes and regulations cited by plaintiff are quite
general in nature.
Plaintiff cites 42 C.F.R. § 482.24 which
requires LMH, as a condition of participation in Medicare, to
maintain accurate medical records.
This regulation, however, does
not make perfect compliance a condition to receive payment and it
does
not
directly
concern
the
participation
in
or
payment
conditioned on the IQR, OQR or HVBP programs. A mandatory broadlystated certification of compliance with laws and regulations was
rejected as proof of materiality in Conner, 543 F.3d at 1218-22.
The court believes the requirements of § 482.24 also fail to
demonstrate the materiality of the alleged misrepresentations in
this case.
Plaintiff also cites 42 U.S.C. §§ 1395ww(b), 1395l(t)(17) and
1395ww(o).
programs.
These
statutes
authorize
the
IQR,
OQR
and
HVBP
But, the general language set forth does not support a
claim of materiality in the context of this case.
There is no indication in plaintiff’s materials that the
Government has refused to pay a claim or reduced compensation to
a Medicare participant because of a similar inaccuracy.
Moreover,
LMH’s reimbursements in past years from the Government appear not
have been affected by the Government’s knowledge of plaintiff’s
allegations.
This is some evidence against plaintiff’s claim of
materiality.
See McBride, 848 F.3d at 1034; D’Agostino v. EV3,
Inc., 845 F.3d 1, 7 (1st Cir. 2016).
20
In
sum,
while
the
provision
of
accurate
and
complete
information from LMH is a real and logical expectation by the
Government, the record indicates that plaintiff cannot prove that
LMH’s alleged misrepresentations as to measures involving arrival
times are so important that they have affected or likely would
affect the Government’s reimbursement decisions.8
C. DRA claims
The DRA went into effect on January 1, 2007. The Act requires
employee
anti-fraud
education
methods
as
a
condition
of
participation for entities that receive annual Medicaid payments
of at least $5 million.
LMH has received more than $5 million in
Medicaid payments each year since 2007.
Section 6032 of the DRA, at 42 U.S.C. § 1396a(68), requires
that a state Medicaid plan:
8
In reaching this decision, the court does not rely upon LMH’s arguments
regarding the validation of LMH’s abstracting process, the administrative
remedies available to LMH if it wishes to challenge a reimbursement adjustment,
or LMH’s claim that the HVBP program does not impact the federal treasury.
These arguments are not pertinent to the materiality analysis required in this
case because they do not reach the question of whether the provision of
inaccurate or incomplete information from LMH’s medical records affected or
likely would affect the Government’s reimbursement actions. The court is not
convinced that an audit of the abstracting process addressed the source of
inaccuracy alleged by plaintiff. If LMH’s argument is that the leeway granted
in the auditing process (a 75% threshold) suggests that far less than perfect
accuracy is required, the court is still unconvinced that LMH is not comparing
apples and oranges.
The court agrees with plaintiff that the possible
administrative remedy for LMH if it wishes to contest a reimbursement adjustment
is not germane to whether the alleged misrepresentations in this case were
material to the Government. Finally, whether the U.S. Treasury is ultimately
impacted is not relevant to the question of whether an alleged misrepresentation
affected or would likely affect a reimbursement decision.
21
provide that any entity that receives or makes annual
payments under the State plan of at least $5,000,000, as
a condition of receiving such payments, shall-(A) establish written policies for all employees of the
entity (including management), and of any contractor or
agent of the entity, that provide detailed information
about the False Claims Act established under sections
3729 through 3733 of Title 31, administrative remedies
for false claims and statements established under
chapter 38 of Title 31, any State laws pertaining to
civil or criminal penalties for false claims and
statements, and whistleblower protections under such
laws, with respect to the role of such laws in preventing
and detecting fraud, waste, and abuse in Federal health
care programs (as defined in section 1320a-7b(f) of this
title);
(B) include as part of such written policies, detailed
provisions
regarding
the
entity's
policies
and
procedures for detecting and preventing fraud, waste,
and abuse; and
(C) include in any employee handbook for the entity, a
specific
discussion
of
the
laws
described
in
subparagraph (A), the rights of employees to be
protected as whistleblowers, and the entity's policies
and procedures for detecting and preventing fraud,
waste, and abuse;
The
Kansas
Medicaid
plan
incorporates
these
requirements
for
service providers to Medicaid patients.
There is evidence in the summary judgment record which creates
a jury issue as to whether LMH complied with the requirements that
it inform its employees of the provisions of the FCA and the Kansas
false claims statutes in the detail and manner mandated in Section
6032.
The court finds, however, that plaintiff cannot show that
LMH’s
compliance
statements
were
decision by the Government.
22
material
to
a
reimbursement
Plaintiff relies upon: the statutory language of Section
6032; the language of the Kansas Medicaid plan which incorporates
Section 6032’s requirements; Answers to Frequently Asked Question
sent by CMS to State Medicaid Directors; the Kansas Medical
Assistance Program Fee-for-Service Manual (Doc. No. 323-19, p.
20); and the language of the attestations of compliance.
All of
these sources indicate that compliance with Section 6032 is a
mandatory condition of receiving payments.
these
sources,
by
and
large,
simply
The court concludes
repeat
the
statutory
commandment of Section 6032 and that this does not suffice to
establish a jury issue as to materiality.
As previously quoted,
in Escobar the Court said clearly that “[a] misrepresentation
cannot be deemed material merely because the Government designates
compliance with a particular statutory, regulatory, or contractual
requirement as a condition of payment.”
136 S.Ct. at 2003.
The
Court expressly disagreed with the position that “any statutory,
regulatory, or contractual violation is material so long as the
defendant knows that the Government would be entitled to refuse
payment were it aware of the violation.”
Id. at 2004.
Contrary
to plaintiff’s claim, a misrepresentation regarding the anti-fraud
education given to LMH employees does not go to the essence of the
bargain between LMH and the state and federal government for the
23
provision of medical services.9
Nor has plaintiff shown that the
Government’s knowledge of plaintiff’s claims, or of similar claims
from other persons, has led to a change in the Government’s
reimbursement decisions.
Upon the record presented, the court
finds that plaintiff could not persuade a reasonable jury that LMH
made a misrepresentation relating to Section 6032 of the DRA which
was material to the Government’s reimbursement actions.
VI. LMH’S COUNTERCLAIMS SHALL BE DISMISSED WITHOUT PREJUDICE.
The
question
dismissal
of
of
whether
plaintiff’s
to
dismiss
federal
LMH’s
claims
opens
counterclaims
prejudice pursuant to 28 U.S.C. § 1367(c).
the
without
The court finds that
it is unlikely that litigation in state court would cause a
substantial increase in cost or inconvenience for the parties.
There
is
also
a
strong
argument
that
the
counterclaims
permissive and lack an independent jurisdictional basis.
are
See U.S.
ex rel. O’Donnell v. America at Home Healthcare, 2018 WL 319319 *8
(N.D.Ill. 1/8/2018); Wilhelm v. TLC Lawn Care, 2008 WL 640733 *3
(D.Kan. 3/6/2008); Allen v. Leal, 27 F.Supp.2d 945, 949 (S.D.Tex.
1998); Chemtech Industries, Inc. v. Goldman Financial Group, Inc.,
156 F.R.D. 181, 185 (E.D.Mo. 1994).
9
Under these circumstances,
In her reply brief, plaintiff cites U.S. v. Quicken Loans, Inc., 239 F.Supp.3d
1014 (E.D.Mich. 2017) in support of her materiality argument. The court finds
that the alleged false statements about compliance with FHA requirements for
mortgage insurance in Quicken Loans are considerably closer to the essence of
the bargain between the defendant and the Government in that case, than the
evidence presented by plaintiff for the summary judgment record in the case at
bar.
24
the court shall dismiss LMH’s counterclaims without prejudice
pursuant to 28 U.S.C. § 1367(c)(3).
County
Hosp.,
58
F.3d
533,
541
See Anglemyer v. Hamilton
(10th
Cir.
1995)(sustaining
dismissal of supplemental state claims where pretrial proceedings
had been completed); see also Ball v. Renner, 54 F.3d 664, 669
(10th Cir. 1995)(describing dismissal of supplemental claims after
pretrial
dismissal
of
federal
claims
as
the
“most
common
response”).
VII. CONCLUSION
For the above-stated reasons, LMH is entitled to summary
judgment against plaintiff’s claims under the FCA.
Doc.
No.
322
is
therefore
granted.
For
the
The motion at
same
reasons,
plaintiff’s motion for partial summary judgment (Doc. No. 318)
must be denied.
without
The court shall dismiss LMH’s counterclaims
prejudice.
Finally,
the
court
shall
declare
that
plaintiff’s motion for summary judgment at Doc. No. 320 is moot.
IT IS SO ORDERED.
Dated this 2nd day of October 2018, at Topeka, Kansas.
s/Sam A. Crow
Sam A. Crow, U.S. District Senior Judge
25
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