Ana Sanchez, et al., v. AHS Tulsa Regional Medical Center, L.L.C.

Filing 349

OPINION AND ORDER by Judge Terence Kern AMENDED OPINION AND ORDER (Re: 337 Opinion and Order, Setting/Resetting Scheduling Order Date(s), Ruling on Sealed Motion, Ruling on Motion for Summary Judgment,, Setting/Resetting Scheduling Order Date(s),, ) (vah, Chambers)

IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF OKLAHOMA UNITED STATES OF AMERICA, ex rel. ANA SANCHEZ-SMITH, AMBER HAVERFIELD-CHATWELL, and DANA WHITE, Plaintiffs, v. AHS TULSA REGIONAL MEDICAL CENTER, LLC, d/b/a TULSA REGIONAL MEDICAL CENTER, Defendant. ) ) ) ) ) ) ) ) ) ) ) ) ) )

Case No. 05-CV-442-TCK-PJC

AMENDED OPINION AND ORDER1 Ana Sanchez-Smith ("Smith"), Amber Haverfield-Chatwell ("Chatwell"), and Dana White ("White") (collectively "Relators") filed this qui tam action on behalf of the United States of America pursuant to the False Claims Act ("FCA"), 31 U.S.C. § 3729, et seq.2 Relators assert that Defendant AHS Tulsa Regional Medical Center, LLC d/b/a Tulsa Regional Medical Center ("TRMC") submitted numerous false claims for inpatient psychiatric services provided in its Children and Adolescent Behavioral Health Unit ("Unit") during 2003-2005, in violation of 31 U.S.C. § 3729(a)(1)

This Amended Opinion and Order corrects the professional title of Eric Burch, as requested by an unopposed motion (Doc. 346) filed after entry of the original Opinion and Order (Doc. 337). In addition, the Court has corrected errors in the subheadings of Parts VI.B.1 and VI.B.2 and certain typographical errors. The Amended Opinion and Order is substantively identical to that originally entered on November 5, 2010.
1

The FCA authorizes private citizens to assert FCA claims on behalf of the United States. 31 U.S.C. § 3730(b). These actions are known as qui tam actions, with the private citizen or "relator" acting "for the person and for the U.S. government against the alleged false claimant." United States ex rel. Sikkenga v. Regence Bluecross Blueshield of Utah, 472 F.3d 702, 706 n.3 (10th Cir. 2006) (quotation omitted).
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and (2).3 Before the Court is Defendant's Motion for Summary Judgment (Docs. 230, 244), wherein TRMC contends that it is entitled to judgment as a matter of law based on Relators' failure to demonstrate the submission of any false claims. For reasons explained below, the motion is denied. I. Procedural History Relators, all of whom were TRMC employees in the Unit at relevant times, filed their Complaint on August 3, 2005, alleging six practices by TRMC that resulted in the submission of false claims, including: (1) fraudulently concealing missing signatures from patients' charts and failing to actually obtain patient signatures on individual care plans; (2) placing unlicensed individuals in charge of group therapy sessions; (3) allowing unlicensed individuals to draft individual care plans; (4) failing to meet therapeutic recreation treatment requirements; (5) misrepresenting the length of therapy sessions; and (6) allowing mental health professionals to sign blank individual care plans, to be filled in later by an unlicensed individual. Relators alleged to have either witnessed or directly participated in these practices. Relators alleged that TRMC, by and through managers in the Unit, knew that such conduct violated Medicaid regulations and submitted false claims in order to wrongfully gain profits. On May 14, 2007, the United States notified the Court that it would not intervene in the action, and Relators proceeded to serve their Complaint on TRMC. See 31 U.S.C.

On May 20, 2009, Congress enacted the Fraud Enforcement Recovery Act of 2009 ("FERA"), which amended these sections of the FCA. See 123 Stat. 1617. However, the FERA provides that "the amendment made by this section . . . shall apply to conduct on or after the date of enactment, except that [the amendments to § 3729(a)(2)] shall take effect as if enacted on June 7, 2008, and apply to all claims . . . that are pending on or after that date." 123 Stat. at 1625. In this case, all relevant conduct took place before the amendment, and all claims were submitted and paid well before June 7, 2008. Therefore, the former version governs, see Boone v. Mountainmade Found., 684 F. Supp. 2d 1, 8, n.7 (D.D.C. 2010) (reaching same conclusion), and all citations are to the former version.
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§ 3730(b)(2) (providing that United States must be given opportunity to intervene before relators may serve complaint on defendant). On September 10, 2007, Defendant filed a motion to dismiss. On January 29, 2008, over Relators' objection, the Court stayed discovery pending ruling on the motion to dismiss. On April 8, 2008, the Court denied the motion to dismiss and held that Relators' allegations were sufficient to satisfy Federal Rules of Civil Procedure 9(b) and 12(b)(6). (See Doc. 57.) During the course of discovery, which proceeded over two years, Magistrate Judge Paul Cleary entered an Agreed Protective Order governing confidential information (see Doc. 73) and resolved numerous discovery disputes (see, e.g., Docs. 126, 258, 294, 295, and 296). Most significantly, Judge Cleary denied Relators' motion to compel discovery of patient records where (1) the patient's treatment was covered by the Alcohol, Drug Abuse and Mental Health Act ("ADAMHA"), 42 U.S.C. § 290dd-2, and (2) the patient did not consent to disclosure. (See Doc. 200.) This Court affirmed such ruling (see Doc. 238), resulting in Relators' inability to discover records of certain patients identified in Relators' Amended Complaint. On June 23, 2010, TRMC filed the motion for summary judgment currently pending. II. Summary Judgment Standard Summary judgment is proper only if "there is no genuine issue as to any material fact, and the moving party is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(c). The moving party bears the burden of showing that no genuine issue of material fact exists. See Zamora v. Elite Logistics, Inc., 449 F.3d 1106, 1112 (10th Cir. 2006). The Court resolves all factual disputes and draws all reasonable inferences in favor of the non-moving party. Id. However, the party seeking to overcome a motion for summary judgment may not "rest on mere allegations" in its complaint but

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must "set forth specific facts showing that there is a genuine issue for trial." Fed. R. Civ. P. 56(e). The party seeking to overcome a motion for summary judgment must also make a showing sufficient to establish the existence of those elements essential to that party's case. See Celotex Corp. v. Catrett, 477 U.S. 317, 323-33 (1986). III. Relevant Federal and State Regulations In order to participate in the Medicare/Medicaid programs, a hospital such as TRMC must satisfy certain conditions established by federal regulations. See 42 C.F.R. §§ 482.1, et seq. (entitled "Conditions of Participation for Hospitals"). There are "[s]pecial provisions applying to psychiatric hospitals." See id. § 482.60(a)-(d). It is not disputed that, at all relevant times, TRMC satisfied these federal "conditions of participation" in the Medicare/Medicaid programs and was licensed by the State of Oklahoma to provide psychiatric services in the Unit. In addition to the "conditions of participation," there are other requirements set forth in federal regulations applicable to inpatient psychiatric services for minors. Specifically, federal regulations contain the following "active treatment" requirements: Inpatient psychiatric services must involve "active treatment", which means implementation of a professionally developed and supervised individual plan of care, described in § 441.155 that is-(a) Developed and implemented no later than 14 days after admission; and (b) Designed to achieve the recipient's discharge from inpatient status at the earliest possible time. 42 C.F.R. § 441.154.4 The Oklahoma Health Care Authority ("OHCA") is the state agency that administers the Oklahoma Medicaid program. See Okla. Stat. 63, § 5009(B). OHCA has promulgated additional

In this case, there are no allegations that TRMC failed to comply with 42 C.F.R. § 441.154 or any other federal regulations.
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regulations governing inpatient psychiatric services for minors. During 2003-2005,5 the regulations relevant to this case were set forth at § 317:30-5-95.2 of the Oklahoma Administrative Code (entitled "Coverage for children") and § 317:30-5-96 of the Oklahoma Administrative Code (entitled "Reimbursement for inpatient services").6 Understanding the nature and purpose of these Oklahoma regulations is necessary in this case, and they are explained in detail below. A. Coverage for Children - § 317:30-5-95.2

The "Coverage for children" regulation applies to "coverage for inpatient services for persons under age 21 in acute care hospitals, freestanding psychiatric hospitals and residential psychiatric treatment facilities." It contains six subparts: (1) "Pre-authorization of inpatient psychiatric services," which requires that all inpatient psychiatric services "must be prior authorized by an agent designated by the OHCA," Okla. Admin. Code § 317:30-5-95.2(1); (2) "Inpatient services," which, in relevant part, sets forth the medical necessity criteria for "acute" psychiatric admissions and "residential" psychiatric admissions, see id. § 317:30-5-95.2(2)(B),(F);7 (3) "Pre-authorization and extension procedures," § 317:30-5-95.2(3); (4) "Quality of care requirements," which include

Certain Oklahoma regulations discussed in this Opinion and Order have been amended or revoked. The parties do not dispute that the relevant regulations were those in place between 20032005, attached as Exhibit 6 to Defendant's Motion for Summary Judgment.
5

Title 317 of the Oklahoma Administrative Code is entitled "Oklahoma Health Care Authority"; Chapter 30 is entitled "Medical Providers - Fee for Service"; Subchapter 5 is entitled "Individual Providers and Specialties"; and Part 6 is entitled "Inpatient Psychiatric Hospitals."
6

There are different "medical necessity criteria" for admission as an "acute" psychiatric patient and admission as a "residential" psychiatric patient. Compare id. § 317:30-5-95.2(2)(B) with § 317:30-5-95.2(2)(F). For example, to be admitted as an acute patient, the individual must have "[w]ithin the past 48 hours" presented an "imminent life threatening emergency." See id. § 317:30-5-95.2(2)(B).
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admission requirements, plan of care requirements, active treatment requirements,8 credentialing requirements, treatment team requirements, evaluation requirements, nursing services requirements, reporting requirements, and a requirement to abide by other official standards, see id. § 317:30-595.2(4)(A)-(I) (emphasis added); (5) "Documentation of records," which requires that all services provided under active treatment be documented in a particular manner, see id. § 317:30-5-95.2(5); and (6) "Inspection of care," which sets up a scheme governing "Inspection of Care Reviews" of Oklahoma psychiatric facilities receiving Medicaid payments. Of these six subparts, two are particularly relevant to the issues presented, the "Quality of care" subpart and the "Inspection of care" subpart. 1. Quality of Care - Active Treatment Requirements

Listed as one "quality of care" requirement is that "[i]npatient psychiatric programs must provide "Active Treatment." Relevant to this case, the regulations provide: The following components meet the minimum standards required for "Active Treatment", although an individual child's needs for treatment may exceed this minimum standard: ... (ii) Individual therapy. . . . Individual therapy must be provided two hours per week in acute care and one hour per week in residential treatment by a mental health professional as described in OAC 317:30-5-240(c). One hour of family therapy may be substituted for one hour of individual therapy at the treatment teams [sic] discretion. (iii) Family therapy. . . . Family therapy must be provided one hour per week for acute care and residential treatment. One hour of individual therapy addressing relevant family issues may be substituted for a family session in an instance in which the family is unable to attend a scheduled session . . . (iv) Process group therapy. . . . Group therapy must be provided three hours per week in acute care and two hours per week in residential treatment . . . . In lieu of one hour of process group therapy, one hour of expressive group therapy may be substituted.

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Relators allege TRMC knowingly violated the active treatment requirements.

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(v) Expressive group therapy. . . . Expressive group therapy must be provided four hours per week in acute care and three hours per week in residential treatment. In lieu of one hour of expressive group therapy, one hour of process group therapy may be substituted. (vi) Group rehabilitative treatment. Group rehabilitative treatment services will be provided two hours each day for all inpatient psychiatric care. In lieu of two hours of group rehabilitative services per day, one hour of individual rehabilitative services per day may be substituted. ... Okla. Admin. Code § 317:30-5-95.2(4)(C) (emphasis added) (hereinafter referred to as "active treatment requirements").9 As explained in more detail below, the active treatment regulations result in "minimum" requirements of 21 hours of total weekly therapy for residential patients and 24 hours of total weekly therapy for acute patients. In addition, individual, family, and process group therapy must be provided by a mental health professional. See id.10 2. Inspection of Care

This subpart sets up the regulatory scheme governing inspections of facilities receiving Medicaid funds: (A) There will be an on site inspection of care of each psychiatric facility that provides care to recipients which will be performed by the OHCA or its designated agent. The Oklahoma Health Care Authority will designate the members of the Inspection of Care team. . . . The Inspection of Care Review will consist of recipients present or listed as facility residents at the beginning of the Inspection of Care visit as well as recipients on which claims have been filed with OHCA for acute or [residential] levels of care. The review includes validation of certain factors, all of

These active treatment requirements are in addition to the federal active treatment requirements set forth in 42 C.F.R. § 441.154. When the Court refers generally to active treatment requirements, the Court is referring to those set forth in Oklahoma regulations.
9

The regulations also set forth certain qualitative standards, such as individual therapy being "goal-directed utilizing techniques appropriate to the individual patient's plan of care and developmental and cognitive abilities." Okla. Admin. Code § 317:30-5-95.2(4)(C)(ii). It appears that only the quantitative minimums and mental health professional requirements are at issue in this case.
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which must be met for the Medicaid Services to be compensable. Following the onsite inspection, the Inspection of Care Team will report its findings to the facility. The facility will be provided with written notification if the findings of the inspection of care have resulted in any deficiencies. Deficiencies may result in a monetary penalty, (partial per-diem) or a total (full per-diem) recoupment of the compensation received. If the review findings have resulted in a penalty status, a penalty (partial per-diem) of $50.00 per event and the days of service involved will be reported in the notification. If the review findings have resulted in full (full per-diem) recoupment status, the non-compensable days of services will be reported in the notification. In the case of non-compensable days (full per-diem) or penalties (partial per-diem) the facility will be required to refund the amount. (B) Penalties or non-compensable days which are the result of the facility's failure to appropriately provide and document the services described herein . . . and/or state licensing standards, are not Medicaid compensable or billable to the patient or the patient's family. (C) If a denial decision is made, a reconsideration request may be made directly to the OHCA designated agent within 10 working days of notification of the denial. The agent will return a decision within 10 working days from the time of receiving the reconsideration request. If the denial decision is upheld, the denial can be appealed to the Oklahoma Health Care Authority within 20 working days of notification of the denial by the OHCA designated agent. Okla. Admin. Code § 317:30-5-95.2(6) (emphasis added). In sum, this regulation authorizes OHCA to (1) conduct what is essentially an audit of the facility, (2) determine if there are "deficiencies" in the facility's provision of care to particular Medicaid patients for which claims were submitted, and (3) assess a $50.00 "partial per diem" penalty for certain days of billed service or assess a "full per diem" recoupment for certain days of billed service. Therefore, a facility's failure to comply with the requirements set forth in § 317:30-595.2(1)-(5) ­ including the quality of care requirements ­ may, at the discretion of the Inspection of Care Team, result in the facility being forced to refund Medicaid funds. Because inpatient psychiatric services are reimbursed by Medicaid based on a "per diem" rate, see infra Part II.B, the refunds are also on a per diem basis. In other words, the facility must refund either a flat $50.00 rate (in the case

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of a partial per diem penalty) or must refund the total per diem rate (in the case of a full per diem recoupment). B. Reimbursement for inpatient services- § 317:30-5-96

A separate regulation explains how facilities are reimbursed by Oklahoma Medicaid for inpatient psychiatric services they provide: (a) Reimbursement for inpatient hospital services. Reimbursement for inpatient hospital services is made based on a prospective per diem level of care payment system. The per diem includes all non-physician services furnished either directly or under arrangements. . . . . (1) Components. There are three distinct payment components under this system. Total per diem reimbursement under the new reimbursement system will equal the sum of two rate components: (A) Level of care per diem; plus (B) Fixed capital per diem. (2) Level of care per diem rates. The level of care per diem rate is payment for operating costs and movable capital costs. . . . (A) Level of care. The only level of care is psychiatric care (Level 6). The range of primary diagnosis codes is 290 through 316. ... Id. § 317:30-5-96 (emphasis added). Thus, facilities bill Oklahoma Medicaid on a "prospective per diem level of care payment system." The per diem rate includes "all non-physician services." It is not disputed that costs of therapy performed by mental health professionals is a "non-physician" service that is an operating cost included within the per diem rate. As to the "level of care," the regulation provides that the only "level of care" is "Level 6" for psychiatric care, indicating that only a "6" level of care would appear on a Medicaid bill submitted under this provision. IV. Factual Background The following facts are either undisputed facts or facts construed in a light most favorable to Relators.

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A.

Agreements Between TRMC and OHCA

On March 11, 2004, OHCA entered into an agreement with "Hillcrest Riverside d/b/a Tulsa Regional Medical Center" for the purpose of allowing TRMC to "submit invoices for the services provided under the Medicaid program without the necessity of certifying the contents of a statement before a notary public on each separate invoice." (Ex. 2 to Pls.' Resp. to Def.'s Mot. for Summ. J.) In this agreement, TRMC was issued "provider number" 100700560A. On the same date, OHCA entered into an identical agreement with "Hillcrest Riverside, Inc. d/b/a Children's Medical Center" ("CMC"). In this agreement, CMC was issued "provider number" 100728750B. TRMC utilized provider number 100700560A when it billed for patients classified as "acute," and CMC utilized provider number 100728750B when it billed for patients classified as "residential."11 Oklahoma Medicaid paid different per diem rates depending on the acute or residential classification, with the acute rate being higher. These two contracts, hereinafter referred to as the "Agreements," are indicative of agreements in place at all relevant times from 2003-2005.12

For purposes of this motion, it is not disputed that Defendant TRMC is liable for any false claims submitted by CMC.
11

Despite Relators' classification of these contracts as the "Acute Care Contract" and the "Residential Care Contract," (see Pls.' Resp. to Def.'s Mot. for Summ. J. at Additional Statement of Fact 6), the Court has located no difference between the two contracts that would indicate that one governed "acute" care and the other governed "residential" care. Instead, the difference is apparently indicated by the different parties to the agreements ­ TRMC and CMC. TRMC does not dispute, however, that one contract governed provision of acute care while the other governed provision of residential care.
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B.

Alleged Violations of Active Treatment Regulations

Relators allege knowing violations of the active treatment regulations' "minimum" weekly therapy requirements.13 As one example of knowing non-compliance, White, a therapist within the Unit, testified that she was instructed by Kathryn Rawlings ("Rawlings"), Manager of the Unit, to conduct "drive-by" therapy sessions. White testified: I myself, was directed by [Rawlings] to do what was commonly known on the unit as a drive-by. A drive-by session would ­ would take on a myriad of different looks. It would either be seeing a child for 10 or 15 minutes but documenting you spent an hour with them. It would be a physician pulling a child out of a group session and seeing the child for five minutes and sending them back to group, and pulling out another child and doing the same thing repeatedly. It would be a therapist making some kind of contact with the children on his or her caseload for a very brief period of time, if at all, but for a brief period of time to say, Hey, Johnny, how are you doing today, are you feeling suicidal, yes, no. Are you taking your meds, okay, and document that they saw that child for the full [one hour] session. That was a very common practice during that time. . . . I was directed to do it. I was told to do it. And I asked. [Rawlings] said, Just do a drive-by. And I looked at her with an inquisitive look . . . [a]nd she said, Just see them for 10 or 15 minutes and say you saw them for an hour; you can't keep their attention that long anyway. (White Dep., Ex. 17 to Pls.' Resp. to Def.'s Mot. for Summ. J., at 165-166.) These "drive-by" sessions, according to Relators, resulted in knowingly providing less than the "minimum" weekly active treatment requirements set forth in Oklahoma regulations. White reported drive-by sessions to Rawlings' supervisor, Cynthia Koller ("Koller"), Director of the Unit, around November or December 2004. (Id. at 169.) Relators have also submitted as evidence one of the Unit's written policies, entitled "Therapist Performance Standards," which provides: "Therapists shall spend one hour on each individual and family therapy session. This can be broken down to 45 minutes with the patient/family and 15 minutes to chart and discuss with nursing staff." (Ex. 18 to Pls.' Resp. to Def.'s

Relators have abandoned other theories of regulatory violations advanced in their Amended Complaint.
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Mot. for Summ. J.) According to Relators, this written policy also evidences knowing noncompliance with the active treatment requirements.14 C. Billing Procedures

During relevant times, TRMC billed Oklahoma Medicaid for services provided in the Unit by submitting electronic forms. Prior to 2004, the form was a "UB92." Sometime in 2004, the form changed to a "UB04." Both forms are "Universal Billing" ("UB") forms published by the Centers for Medicare and Medicaid Services. As explained by Deborah Spaeth ("Spaeth"), OHCA

Behavioral Health Director, UB92 and UB04 forms are used for "bundled services," which means that several types of services are put together in one bill. (Spaeth Dep., Ex. 8 to Pls.' Resp. to Def.'s Mot. for Summ. J., at 227-28.) Two examples of such forms are attached as Exhibit 4 to Relators' Response to Defendant's Motion for Summary Judgment. The examples provided by Relators are one-page documents that contain, inter alia, the following: (1) a statement of what dates the bill covers, e.g., 12-26-03 through 12-31-03; (2) the provider number, e.g., 100728750A (acute) or 100728750B (residential); and (3) a description of services, which includes the rate, beginning date of the service, and number of "units" or days.15 Relators' first sample bill contains "Provider No. 100728750A"16 and a description of services as follows:

For purposes of this motion, TRMC does not dispute that technical regulatory violations occurred. These facts are included simply as examples of the types of regulatory violations at issue.
14

The bill contains other codes and descriptions that were not explained in either parties' statement of facts.
15 16

The "Provider No." is field 51 on these sample forms.

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42 REV. CD.

43 DESCRIPTION

44 HCPCS/RATES

45 SERV. DATE

46 SERV. UNITS 5 24 1 4 1 1 1 87

47 TOTAL CHARGES 3260.00 871.20 15.00 359.00 106.00 102.00 28.00 394.00 5135.20

NON-COVERED CHARGES

0124 0259 0300 0301 0305 0306 0307 0250 0001

PSTAY / 2 BED DRUGS / OTHER LAB LAB / CHEMISTRY LAB / HEMOTOLOGY LAB / BACT-MICRO LAB / UROLOGY PHARMACY TOTAL CHARGES

652.00

121803

Relators' second sample contains "Provider No. 100728750B" and a description of services as follows:
42 REV. CD. 43 DESCRIPTION 44 HCPCS/RATES 45 SERV. DATE 0124 0124 0259 0250 0001 PSTAY / 2 BED PSTAY / 2 BED DRUGS / OTHER PHARMACY TOTAL CHARGES 425.00 425.00 122603 122903 46 SERV. UNITS 3 3 16 58 47 TOTAL CHARGES 1275.00 1275.00 580.80 328.00 3458.80 NON-COVERED CHARGES

These bills were both submitted for Patient 19. According to Relators, several other bills were also submitted for Patient 19 that constituted "false claims" because Patient 19 failed to receive the required weekly therapy hours. As to when bills were generated and/or filed as claims with Oklahoma Medicaid, the evidence before the Court is less than clear. (See, e.g., Mapp Dep., Ex. 4 to Def.'s Mot. for Summ. J., at 8085.) There is no dispute, however, that it was not TRMC's practice to file claims every day, although

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billing was on a per diem basis. Instead, Barbara Mapp ("Mapp") testified that a bill was "generated" and a claim was filed for a particular patient upon "discharge." A "discharge" can occur when a patient permanently leaves the facility, or when the patient's status is changed from acute to residential or vice versa. Mapp also testified that she often "split" a bill, upon the patient's actual discharge, between periods authorized as acute care and periods authorized as residential care. (See Mapp Dep., Ex. 4 to Def.'s Mot. for Summ. J., at 80 ("[W]hat we did was have to split the bill after discharge, after the bill is generated to match the authorization period."). Sample claims provided by TRMC as part of its Exhibit 10 are difficult to understand in light of Mapp's testimony. For Patient 48, three separate claims appear to have been generated and/or filed for a period of January 3, 2005 to January 27, 2005. However, the three bills are at the same rate of $440.00/day, appearing to indicate that there was no change in status that would have prompted a "discharge" and resulting generation of new bill. In any event, it is not disputed that some alleged "false claims" are UB forms submitted for time periods of less than one week, although the relevant patients ultimately stayed at the facility more than one week. In her deposition, Rawlings was asked why the Unit billed Oklahoma Medicaid when it was not complying with the therapy requirements. Rawlings testified that she did not believe that the active treatment requirements were relevant to billing Medicaid. Instead, she viewed billing as being based on a "bed count" each night: It was my ­ it was my understanding that the way the . . . unit was billed was per bed day. It was totally based on census. It was totally based on a kid being in a bed at midnight on a particular night and then the Medicaid was billed the "x" amount of money. The active treatment was a part of what we provided as a good quality of care. It also did meet regulations, but I did not ­ those were two kind of separate things. I didn't have anything to do with the billing mainly. I was not responsible for the billing. I didn't have anything to do with that. I had to do with providing active treatment.

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... My understanding was that people were billed for bed days and active treatment was ­ it was our responsibility on the unit to provide active treatment. Those were apples and oranges. ... I've explained to you more than once how the billing was done. It was done per bed date. When the kids was in bed at midnight that night, there was a billing that occurred. (Rawlings Dep., Ex. 12 to Pls.' Resp. to Def.'s Mot. for Summ. J., at 107-08, 123, 149.) Thus, the Unit manager admitted that she did not ensure that the active treatment requirements were satisfied prior to billing Oklahoma Medicaid for any given patient. She did not do so because she did not believe it was necessary. D. OFMQ Audits

During the relevant time period, OHCA contracted with Oklahoma Foundation for Medical Quality ("OFMQ") to conduct the "Inspection of Care Reviews" explained in § 317:30-5-95.2(6). These reviews are known as a "retrospective audit" of the "prospective per diem" bills submitted to Oklahoma Medicaid. In her deposition, Spaeth explained a retrospective audit: Q: What does a retro audit mean? A: This means that I as a clinician have provided a service, billed and been paid for a service. And then after the fact, someone is reviewing those documents to determine did I provide the appropriate treatment, did the patient actually meet the ­ the admissions criteria or medical necessity criteria for the level of care I was providing and being reimbursed for, did the service I get paid for actually get conducted, did I provide the appropriate documentation for the service following the policy in the guidelines. (Spaeth Dep., Ex. 3 to Def.'s Mot. for Summ. J., at 70.) When asked what the Inspection of Care Team is "looking for," Spaeth responded: [T]ypically what you see is a form that is ­ is designed by [OFMQ and OHCA], it's reviewed by the providers at the beginning of every year to determine that this type of document, yes, this format that we're looking at, kind of a checklist, is correctly going to review me as a provider to see that I'm meeting all of these different

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requirements in this set of regulations that I'm responsible to comply with. And we do that every year with a provider because we want to make sure that they're clearly aware of what our contracted vendor is going to be looking at when we do those reviews. (Id. at 123.) On December 8-11, 2003, OFMQ conducted Inspection of Care Reviews of TRMC's acute and residential programs and drafted a "Review Summary Report to the Oklahoma Health Care Authority" ("2003 Audit"). (See Ex. 2 to Def's Mot. for Summ. J, at TRMC 2804-2818.) On January 20, 2004, OFMQ sent a letter to Rawlings enclosing "deficiencies" identified by OFMQ for each type of program (acute or residential) and notifying her of the reconsideration procedure. (Id. at TRMC 2819.) OFMQ issued final deficiency lists for the acute program (see id. at TRMC 2820-2844) and the residential program (see id. at 2845-2871). These deficiencies are summarized in charts entitled "Disallowed Services Summary." (See id. at TRMC 3190-3191 (residential), TRMC 3192-3193 (acute).) Including both programs, TRMC was assessed a total of 448 partial per diem penalties ($50/day) and 2 full per diem recoupments. These partial per diem penalties were assessed for, inter alia, TRMC's failure to provide the required number of required weekly therapy hours for specific patients. The only two full per diem recoupments were assessed because the patient's medical record did not contain an individual treatment plan. On January 1-18, 2005, OFMQ conducted further Inspection of Care Reviews of TRMC's acute and residential programs ("2005 Audit"). (See Ex. 3 to Def.'s Mot. for Summ. J.) Following the reconsideration period, OFMQ issued final deficiency lists in charts entitled "Disallowed Services Summary." (See id. at TRMC 2686-87 (acute), TRMC 2800 (residential).) As a result of the 2005 Audit, OFMQ assessed 183 partial per diem penalties, which were assessed for, inter alia, TRMC's

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failure to provide the required number of individual therapy hours for specific patients. OFMQ did not assess any full per diem recoupments as a result of the 2005 Audit. E. Lundy Report17

Warren Lundy ("Lundy"), a federal auditor, is the Manager of the Oklahoma City Field Office of the United States Department of Health and Human Services. Lundy's role as an auditor is to "gather data and put in a format that [federal agents] can understand it." (Lundy Dep., Ex. 7 to Pls.' Resp. to Def.'s Mot. for Summ. J., at 26.) Lundy has not had training on the FCA and is not an attorney. (Id.) Lundy's audit staff "review[ed] patient files for 25 individuals and the associated Medicaid billings by [TRMC] during the period January 1, 2003 through April 30, 2005 to determine whether TRMC provided the required weekly therapy and treatment hours." (Lundy Report, Ex. 5 to Pls.' Resp. to Def.'s Mot. for Summ. J., at 1.) Lundy concluded that "[o]f the 140 weeks of service we reviewed for the 25 patients, TRMC did not provide the required 21 hours of therapy and treatment for 90 weeks (23 patients). TRMC submitted 97 claims and received $198,355 from the Oklahoma Medicaid program for these weeks." (Id.) These active treatment requirements are set forth in the following chart contained in Lundy's Report:

TRMC moved in limine to exclude opinion testimony by Lundy, including those set forth in the Lundy Report. (See Doc. 267.) Such motion will be denied by separate order, which provides further information and background regarding the Lundy Report.
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Individual Treatment by Physician Acute Care Residential Care 1 Substitutions 3

Individual Therapy

Family Therapy

Process Group Therapy

Expressive Group Therapy

Group Rehabilitative Treatment

Individual Rehabilitative Treatment 7

2

1

3

4

14

1
1 for

1
1

2
1 for

3
1

14
2 for

7 1

(Id. (emphasis added to columns Lundy added to reach total required hours.)18 Lundy explained his general methodology as follows: Since TRMC's billing cycle was not based on a seven-day week, we had to combine multiple claims to determine the length of stay (admission through discharge) for each patient. We used the patient's admit date to determine the first day of a weekly stay. We did not analyze incomplete weeks of service (e.g. if a patient was in the facility for 25 days, we analyzed the first 21 days as three weeks of service and did not analyze the last four days). In addition, we did not analyze weeks where there were not seven Medicaid payments. ... We reviewed the medical record documentation and charted the therapy and treatment sessions by time and date. We used the following methodology to chart the information: 1) charted a full hour session if the documentation had an incomplete or missing start or stop time; 2) charted altered start or stop times; 3) charted sessions when the documentation did not include a provider signature; 4) charted group therapy sessions when either behavioral observations or outcome notes were missing; 5) charted available session time in both categories when the documentation indicated that sessions overlapped, giving precedence to the category that required the fewest hours per week; 6) charted available session time when documentation indicated that the patient was not available for the entire session because the patient was Physician treatment hours are not at issue, and TRMC did not provide individual rehabilitative treatment.
18

18

7)

out on pass, in restraints or seclusion, or visiting a doctor or other medical professional; and disregarded session time when documentation indicated the patient did not attend the session.

We calculated the total number of therapy and treatment session hours for each week a patient was at the facility. Additionally, because patients are sometimes in acute care and residential care status during the same week, we used the lesser residential care standard of 21 hours per week in our analysis. (Id. at 2-3 (emphasis added).) Thus, Lundy erred on the side of caution in determining whether the required number of hours was 21 or 24, gave TRMC the benefit of the doubt where a patient's chart had a missing stop time, and attempted to account for occasions when the patient was not available to receive therapy. Lundy then provided examples of TRMC failing to meet the "minimum" therapy hours for specific patients. For example, as to Patient 19, Lundy concluded that "TRMC did not provide 21 hours of therapy and treatment for 33 of the 40 Medicaid weeks [the] patient was in the facility." (Id. at 4.) Lundy then concluded that "[t]his resulted in 25 false claims" related to that patient, which are identified by claim number. (Id.) The Lundy Report proceeds in this manner for several other patients and therefore concludes that TRMC submitted numerous false claims. V. Overview of FCA As a general matter, "[t]he FCA covers all fraudulent attempts to cause the government to pay out sums of money." United States ex rel. Conner v. Salina Reg'l Health Ctr., 543 F.3d 1211, 1217 (10th Cir. 2008) (internal quotation omitted). At relevant times, the FCA prohibited:

19

(1) knowingly present[ing], or caus[ing] to be presented, to an officer or employee of the United States Government . . . a false or fraudulent claim for payment or approval; [and] (2) knowingly mak[ing], us[ing], or caus[ing] to be made or used, a false record or statement to get a false or fraudulent claim paid or approved by the Government[.] 31 U.S.C. § 3729(a)(1),(2). A. General Elements

At relevant times, § 3729(a)(1) prohibited the presentation of false or fraudulent claims to the government for payment. In order to establish a violation of § 3729(a)(1), "a plaintiff must show by a preponderance of the evidence that: (1) a false or fraudulent claim (2) is presented to the United States for payment or approval (3) with knowledge that the claim is false or fraudulent." United States ex rel. Trim v. McKean, 31 F. Supp. 2d 1308, 1315 (W.D. Okla. 1998). At relevant times, § 3729(a)(2) prohibited the making or using of false records or statements in attempt to get a false claim paid by the government. See Shaw v. AAA Eng'g & Drafting, Inc., 213 F.3d 519, 531 (10th Cir. 2000) ("Under § 3729(a)(2), liability is premised on the presentation of a false record or statement to get a false or fraudulent claim paid or approved.") (internal quotations omitted). A relator may establish a violation of § 3729(a)(2) by showing: "(1) a false record or statement (2) is used to cause the United States to pay or approve a fraudulent claim (3) with the defendant's knowledge of the falsity of the record or statement." Trim, 31 F. Supp. 2d at 1315. B. Types of Falsity

The Tenth Circuit has explained that the FCA "recognizes two types of actionable claims ­ factually false claims and legally false claims." Conner, 543 F.3d at 1217. In a factually false case, "proving falsehood is relatively straightforward: A relator must generally show that the payee has submitted an incorrect description of goods or services provided or a request for reimbursement for

20

goods or services never provided." Id. (internal quotation omitted). In contrast, when the relator's claim is based on an alleged legal falsehood, "the relator must demonstrate that the defendant has certified compliance with a statute or regulation as a condition to government payment, yet knowingly failed to comply with such statute or regulation." Id. (internal quotation and alteration omitted). Legally false certification claims "can rest on one of two theories ­ express false certification, and implied false certification." Id. "An express false certification theory applies when a government payee falsely certifies compliance with a particular statute, regulation or contractual term, where compliance is a prerequisite to payment." Id. (internal quotation omitted). "This promise may be any false statement that relates to a claim, whether made through certifications on invoices or any other express means." Id. (emphasis added). Express false certification claims are actionable under either § 3729(a)(1) or (2). United States ex rel. Lemmon v. Envirocare of Utah, Inc., 614 F.3d 1163, 1168 (10th Cir. 2010). In contrast, under an implied false certification theory, "courts do not look to the contractor's actual statements [in relation to a claim]; rather, the analysis focuses on the underlying contracts, statutes, or regulations themselves to ascertain whether they make compliance a prerequisite to the government's payment." Conner, 543 F.3d at 1217; see also Lemmon, 614 F.3d at 1170 (explaining that "implied-false-certification claims do not involve ­ let alone require ­ an explicit certification of regulatory compliance"). "[T]he key attribute of implied false certification claims ­ and what most clearly differentiates them from express-false-certification claims ­ is that the payee's request for payment lacked an express certification." Lemmon, 614 F.3d at 1169. "[T]he pertinent inquiry for [implied false certification] claims is not whether a payee made an affirmative or express false

21

statement, but whether, through the act of submitting a claim, a payee knowingly and falsely implied that it was entitled to payment." Id. Implied false certification claims are only actionable under § 3729(a)(1), and not § 3729(a)(2), because an implied false certification theory "do[es] not require courts to examine a payee's statements to the government." Id. at 1168. C. Materiality Element

The Tenth Circuit has adopted a materiality requirement in cases involving express or implied false certification theories of FCA liability. See Conner, 543 F.3d at 1219; see also Lemmon, 614 F.3d at 1169 ("Though implied claims differ from express claims, they nonetheless share some common elements, including a materiality requirement."). In Conner, the Tenth Circuit declined to "address whether materiality is an element of the criminal false claims provision or under other theories of FCA liability." Id. at 1220 n.6. Therefore, the Tenth Circuit has not addressed whether materiality is a requirement in cases based on a theory of factual falsity.19 Because the Court rejects Relators' factual falsity theory, it does not reach this question.

The majority position appears to be that materiality is a requirement in every civil FCA case. See United States v. Southland Mgmt. Corp., 326 F.3d 668, 679 (5th Cir. 2003) (en banc) (Jones, J., concurring) ("There should no longer be any doubt that materiality is an element of a civil False Claims Act case. Our past precedent and every circuit that has addressed the issue have so concluded."); Harrison v. Westinghouse Savannah River Co., 176 F.3d 776, 785 (4th Cir. 1999) ("Liability under the False Claims Act is subject to the further, judicially imposed requirement that the false statement or claim be material."); United States ex rel. Oliver v. The Parsons Corp., 498 F. Supp. 2d 1260, 1288-89 (C.D. Cal. 2006) (collecting cases). However, where the allegation is a factually false claim, any "materiality" requirement would seem to be easily met in that the government paid a claim in a factually wrong amount, paid for a service that was not actually provided, or paid an amount greater than it should have based on the service actually provided. See Conner, 543 F.3d at 1223 ("[W]here the validity of actual costs is at issue, there can be little question that had the government known of the alleged fraud, it would not have made the payments.").
19

22

VI.

Analysis In this case, Relators rely upon two alternative theories of falsity: (1) factual falsity on the

face of the UB forms; and (2) legal falsity based on TRMC's implied false certification with Oklahoma Medicaid regulations. A. Factual Falsity Theory

Although they are merged in Relators' brief, Relators are asserting two theories of factual falsity that must be separately analyzed: (1) factual falsity flowing from use of one of the two different provider numbers (acute or residential) on the UB forms; and (2) the theory of factual falsity recognized in United States v. NHC Health Care Corp., 163 F. Supp. 2d 1051 (W.D. Mo. 2001) [hereinafter NHC]. The Court easily rejects any theory of factual falsity premised on the "provider number" field of the UB forms. Relators' theory tied to the provider numbers is simply that, by billing for acute or residential services while failing to comply with Oklahoma Medicaid's active treatment requirements for each type of service, TRMC submitted a "factually" false bill. However, nothing on the claim forms, including the provider number, is "factually" false. Relators do not contend, for example, that TRMC knowingly used the acute provider number for patients preauthorized for residential care in order to receive a higher payment. Nor have Relators presented any other facts indicating that the provider numbers were false on their face. When correctly analyzed, Relators' "provider number" theory of factual falsity devolves to an implied false certification theory ­ namely, TRMC submitted false claims because it knowingly failed to comply with the active treatment regulations for each particular type of patient. Therefore, the Court rejects any theory of factual falsity premised on the provider number field of the UB forms.

23

Relators also urge the Court to allow the case to proceed under a factual falsity theory adopted by the Western District of Missouri in NHC, a case involving (1) Medicaid services billed on a per diem basis, and (2) an alleged violation of a Medicare "quality of care" standard. In NHC, the United States alleged that a nursing home submitted false claims in connection with two residents. One resident suffered dehydration, digitoxicity, pressure sores, and other problems while in NHC's care, and the other suffered pressure sores, weight loss, and ultimately died in NHC's care. It was factually disputed whether these conditions were caused or worsened by NHC. Evidence in the record showed that, during the relevant time period, NHC experienced staffing shortages, NHC requested funding from its home office, several staff members quit due to ethical/workload concerns, and that the relevant state agency received numerous "hotline" calls regarding NHC's deficiencies. Relevant to relators' factual falsity theory, the court reasoned: Defendants are being sued because they allegedly failed to provide the services that they billed for. No certification, implied or otherwise, is necessary when the liability stems from the Defendants' activities of billing for procedures which they did not perform. This would plainly constitute fraud. The difficulty in proving that Defendants committed such a fraud lies in the per diem billing system utilized under Medicare/Medicaid. Obviously, if NHC billed the Government $4 for turning Resident 1 on July 18, 1998, but in fact no one actually performed the task, a clear cut case of fraudulent billing would be presented. However, we are not blessed with such pristine circumstances.20 NHC billed the Medicare/Medicaid programs for the over-all care of each of these residents on a per diem basis. As previously stated by this Court, in so doing NHC agreed to provide "the quality of care which promotes the maintenance and the enhancement of the quality of life." At some very blurry point, a provider of care can cease to maintain this standard by failing to perform the minimum necessary care activities required to promote the patient's quality of life. When the provider reaches that point, and still presents claims for reimbursement to Medicare, the provider has simply committed fraud against the United States.

As in NHC, this case does not present "pristine" circumstances because TRMC did not bill Medicaid separately for therapy sessions but instead "bundled" various services together in one bill.
20

24

Whether the Government has demonstrated that a factual dispute remains as to whether NHC crossed into this admittedly grey area, is the proper focus of this Order. ... While the Court concedes that this is an amorphous standard, it is not a standard without meaning. For instance, if a nursing home accepted a resident, provided absolutely no care to the resident, and then billed the Government for these non-performed services, it is quite clear that the nursing home would have committed fraud. At some point the care rendered to a patient can be so lacking that the provider has simply failed to adhere to the standards it agreed to abide by and has thus committed a fraud. Conversely, if the Government and NHC simply disagreed about what acts of care-giving were necessary to properly maintain a resident's quality of life, there would clearly be no fraud. It is the Court's job in this Order to determine whether the Government has presented sufficient evidence to show that NHC's conduct might have fallen within that amorphous zone between fraud and simple disagreements as to proper care. It would then be the jury's function to determine which side NHC's conduct falls under. NHC, 163 F. Supp. 2d at 1055-56 & n.4 (internal citations and footnotes omitted) (emphasis and footnote added). The court then analyzed the evidence, concluded that the United States had shown sufficient evidence of neglect to present a jury question as to falsity, and further concluded that the United States had created a question of fact as to the knowledge requirement. The court held: [A]n entity who is charging the Government for a minimum amount of care provided to its residents should question whether understaffing might lead to undercare. The knowledge of the answer to that question is charged to the Defendants when they submitted their Medicare and Medicaid claim forms. In other words, a jury could reasonably find that NHC should have known if they were failing to provide all necessary care to Residents 1 and 2 at the time they submitted their claims for reimbursement. Id. at 1058. In this case, Relators argue that TRMC requested reimbursement for services "never provided" because "the government expected the full provision of bundled services [including minimum weekly therapy requirements] as required by the Oklahoma Medicaid Regulations." (Pls.'

25

Resp. to Def.'s Mot. for Summ. J. 18.)21 Relators contend that their position is "stronger than the government's position in NHC because, in this case, [TRMC] was told by the government in clear and unambiguous terms exactly what the minimum requirements were. [TRMC] did not satisfy the minimum requirements for Active Treatment but billed the government anyway. That is fraud." (Pls.' Resp. to Def.'s Mot. for Summ. J. 19.) Relators further contend that this case does not involve any "amorphous" standard because the active treatment regulations, although contained within the "quality of care" regulations, create a bright-line minimum number of weekly therapy hours. TRMC essentially argues that "quality of care" requirements, including the active treatment requirements, can only result in "factual" falsity if the overall bundled service is deemed "worthless." See Mikes v. Straus, 274 F.3d 687, 703 (2d Cir. 2001) (explaining that a "worthless services" FCA theory of liability is "effectively derivative of an allegation that a claim is factually false because it seeks reimbursement for a service not provided" and that, in a worthless services FCA case, a plaintiff argues that "the performance of the service is so deficient that for all practical purposes it is the equivalent of no performance at all") (emphasis added). The Court considered NHC, Mikes, and other commentaries addressing the proper approach to regulatory "quality of care" violations in cases involving bundled, per diem Medicaid bills. The

Relators do not allege that per diem billing occurred for children who were not actually present, which would present a more straight-forward "factual" falsity theory in the context of a per diem bill. See, e.g., U.S. ex rel. Lacy v. New Horizons, Inc., 348 Fed. Appx. 421, 426 (10th Cir. 2009) (plaintiff alleged that defendant "billed the government for reimbursement at the per diem rate for days after patients died; when patients were absent from the facility and visiting with family; when a patient was in a hospital; and when a patient was moved out of state"). In Lacy, the claim was dismissed because the relator failed to provide specific information about dates, amounts, and which programs were overbilled. Id. Nonetheless, the allegations in Lacy exemplify facts that, if specifically alleged and proven, may support a case of "factual" falsity in conjunction with a per diem bill because the per diem services were literally "never provided."
21

26

Court agrees with the NHC court that there is a point between "worthless" and "negligent" at which a Medicaid claim can become factually false. The Court holds that, in order to reach a jury on a factual falsity theory in the context of "bundled" per diem Medicaid billing, a plaintiff must present facts amounting to (1) the provision of entirely "worthless services," see Mikes, 274 F.3d at 703; or (2) at a minimum, the provision of grossly negligent services with regard to a particular standard of care or regulatory requirement, see NHC, 163 F. Supp. 2d at 1055-56 (adopting something akin to a gross negligence requirement in order to reach a jury on factual falsity theory in case involving quality of care); see also James E. Utterback, Substituting an Iron Fist for the Invisible Hand: The False Claims Act and Nursing Home Quality of Care - A Legal and Economic Perspective, 10 Quinnipac Health L. J. 113, 180 (2007) (concluding, in context of factual falsity and per diem Medicaid billing in nursing home context, that courts should "limit the applicability of the FCA to only those cases where the actions of the defendant are truly egregious, rising to the level of gross negligence in the provision of care"). Applying this standard here, Relators have failed to demonstrate the provision of worthless services or anything amounting to gross negligence with respect to the active treatment regulations at issue. Of the examples provided in the Lundy Report, the worst example was Patient 19, who stayed in the facility for forty Medicaid weeks. For this patient, during the most egregious week (week 33), TRMC still provided 9 of the 21 required therapy hours. In total, TRMC provided 677.25 of the 840 required hours for Patient 19. Therefore, even assuming the bundled Medicaid bills were exclusively for the provision of therapy (which they were not), TRMC provided well over fifty percent of the required therapy hours for the patient identified as suffering the most egregious violation. No reasonable jury could conclude that TRMC billed Medicaid for worthless services

27

provided to Patient 19, and no reasonable jury could conclude that TRMC billed Medicaid for even "grossly negligent" services provided to Patient 19. Instead, the evidence shows that Patient 19 received at least some of the care, including therapy hours, for which TRMC billed. In short, no reasonable jury could conclude that TRMC billed Medicaid for a "service not provided" by submitting the claims at issue. Relators argue that gross negligence is also demonstrated by the frequency with which minor violations occurred. Assuming frequent but less egregious violations could somehow support a finding that individual "claims" were false or fraudulent, which seems dubious, Relators have still presented insufficient evidence to support such a theory. See generally Utterback, 10 Quinnipac Health L. J. at 156 (advocating gross negligence theory for widespread substandard quality issues only in cases severe enough to create what is known as an "immediate jeopardy" situation in the nursing home context). Here, there is simply no evidence that the patients' overall "bundled" services were so deficient that a jury could conclude that any of the claims at issue were false on their face based on some type of widespread gross negligence theory. Allowing this case to proceed on a factual falsity theory would stretch FCA "factual" falsity liability too far beyond its intended purpose of preventing misrepresentations of fact on claim forms. In the Court's view, this case must be won or lost on an implied certification theory. B. Implied False Certification Theory

Unlike a factual falsity theory, the implied false certification theory contemplates knowing regulatory violations as a basis for false claims so long as the "underlying contracts, statutes, or regulations themselves . . . make compliance a prerequisite to the government's payment." Conner, 543 F.3d at 1218 (emphasis added). "If a contractor knowingly violates such a condition while

28

attempting to collect renumeration, he may have submitted an impliedly false claim." Id. As explained above, materiality is an essential element of any implied false certification theory. TRMC argues that it is entitled to summary judgment on Relators' implied certification theory because: (1) the Agreements do not condition government payment on compliance with the active treatment requirements, (2) the active treatment regulations themselves do not condition government payment on compliance because they are merely "conditions of participation" in the Oklahoma Medicaid program; (3) Relators have not created a question of fact as to the knowledge element; and (4) Relators have not created a question of fact as to the materiality element. The second and fourth arguments substantially overlap, see Conner, 533 F.3d at 1211 n.6 (explaining that "certification analysis is essentially a way to determine whether compliance was material to the government's decision to pay" and that the implied certification theory "essentially requires a materiality analysis"), but will be treated separately for consistency with the parties' briefs. 1. Agreements

The Agreements do not make compliance with the active treatment requirements a condition of payment. In Article IV, entitled "Scope of Work," they provide that TRMC "agrees to comply" with all applicable Medicaid regulations, including the active treatment regulations. However, in a separate section of Article IV, which is specifically entitled "Payment," the Agreements state that TRMC "certifies that the services for which payment is billed . . . were medically indicated for the health of the patient and were rendered." These provisions, read together, indicate that TRMC generally agreed to comply with Medicaid regulations as a provider of Oklahoma Medicaid services but did not "certify" its compliance with all Medicaid regulations in relation to "services for which payment is billed." Instead, TRMC only "certified" that any particular service billed was medically

29

necessary and was actually rendered.22 Therefore, the Court must proceed to analyze whether the Oklahoma active treatment regulations themselves condition payment on compliance. 2. Allegedly Violated Regulations

In the Medicaid context, an allegedly violated regulation that is merely a "condition of participation" in the overall program cannot support an implied false certification claim. See Conner, 543 F.3d at 1220; see also Mikes, 274 F.3d at 699-700 (explaining that the implied false certification theory "does not fit comfortably into the health care context because the [FCA] was not designed for use as a blunt instrument to enforce compliance with all medical regulations but rather only those regulations that are a precondition to payment"). Conditions of participation are generally "enforced through administrative mechanisms." Conner, 543 F.3d at 1220. Rather than a denial of payment as to any individual bill, the ultimate sanction for violation of conditions of participation is generally "removal from the government program." Id. Therefore, violation of a regulation that is merely a condition of participation would not, as a matter of law, be "material" to the government's decision to pay or not pay any individual claim. See id. at 1219-20. In contrast to a "condition of participation," a regulation that is a "condition of payment" can support an implied false certification claim. The Tenth Circuit has liberally defined "[c]onditions of payment" as "those which, if the government knew they were not being followed, might cause it to actually refuse payment." Id. at 1220 (emphasis added).23

A "certification" to submit claims for only those services actually "rendered" is essentially a certification not to submit factually false claims, and the Court has already rejected this argument.
22

The Tenth Circuit's use of the word "might" indicates that "conditions of payment" are not limited to Medicaid regulations that, if violated, would certainly and in every instance cause the government to refuse payment.
23

30

In determining whether an underlying Medicaid regulation is a condition of participation or payment, the Tenth Circuit has not adopted a bright-line rule requiring that the regulation expressly condition payment on certification of compliance. Instead, the Tenth Circuit stated in Conner that it would not "preclude the possibility that certain Medicare statutes or regulations might expressly or implicitly condition payment on certification of compliance under a false certification theory." Conner, 563 F.3d at 1222 (emphasis added).24 With this framework in mind, the Court turns to TRMC's argument that the active treatment regulations are merely "conditions of participation" in the Oklahoma Medicaid program. The Court begins by explaining the decisions in Conner and Mikes, the two principal decisions relied upon by TRMC. In Conner, the relator contended that a hospital's certification, in an annual cost report, that services identified therein "were provided in compliance" with the "laws and regulations regarding the provision of health care services" constituted an express false certification of compliance with all Medicare and Medicaid regulations. Id. at 1218-19. The court explained the relator's theory: Although this certification represents compliance with underlying laws and regulations, it contains only general sweeping language and does not contain language stating that payment is conditioned on perfect compliance with any particular law or regulation. Nor does any underlying Medicare statute or regulation provide that payment is so conditioned. Thus, by arguing that the certification's language is adequate to create an express false certification claim, Conner fundamentally contends that any failure by [the defendant] to comply with any underlying Medicare statute or regulation during the provision of any Medicare-reimbursable service renders this certification false, and the resulting payments fraudulent. Lest there be any doubt about the potential impact of this

The Second Circuit has adopted a stricter standard, requiring the underlying regulation to contain an express statement that compliance is required in order for that service to be compensable under Medicaid. See Mikes, 274 F.3d at 700 (""[I]mplied false certification is appropriately applied only when the underlying statute or regulation upon which the plaintiff relies expressly states the provider must comply in order to be paid.").
24

31

proposed theory, Conner estimates that the United States has been damaged by [the defendant] in an amount exceeding $100,000,000 per year in reliance on allegedly false certifications. Id. at 1219 (emphasis added). After explaining the difference between conditions of participation and conditions of payment, the court held that "the annual cost report certification does not condition the government's payment on perfect compliance with all underlying statutes and regulations, but rather seeks assurances that the provider continues to comply with the conditions of participation originally agreed upon" to become a participant in the Medicare program. Id. at 1220. Conner is helpful in distinguishing conditions of participation and payment but is otherwise of limited assistance. Conner involved an alleged express false certification in an annual cost report covering an entire year's worth of a hospital's services. This case involves "minimum" standards contained in regulations that are directly applicable to services bundled within the challenged Medicaid bills. Therefore, the Conner decision does not, as TRMC contends, end the Court's analysis. In Mikes, which is more factually helpful, the court held that a Medicare statute stating that "no payment shall be made" for expenses that are "not reasonable and necessary for the diagnosis or treatment of illness