Written by Ellyn L. Sternfield
On April 1st, the Sixth Circuit reversed an $11.1 million dollar summary judgment finding entered against MedQuest Associates, a diagnostic testing company. In its opinion, the Sixth Circuit found that violation of two Medicare enrollment requirements did not warrant liability under the federal False Claims Act (the “FCA”). While the April Fools’ Day issuance may have caused FCA practitioners to do a double-take, the opinion is the latest salvo from the Sixth Circuit on the use of technical regulatory violations to support a FCA case.
The government alleged that MedQuest submitted false claims because (a) it used physician supervisors for the billed procedures who were not named in MedQuest’s Medicare enrollment forms and approved by the local Medicare contractor, and (b) it submitted claims for services performed at a MedQuest facility using the prior owner’s billing number and thus did not submit a new Medicare enrollment form and obtain a new billing number (although the prior owner provided the billed services on behalf of MedQuest). In granting summary judgment under the FCA, the lower court found that the governing Medicare regulations were a condition of Medicare payment under express and implied certification theories.
While finding that MedQuest did skirt Medicare regulations, the Sixth Circuit was persuaded that MedQuest’s actions implicated conditions of Medicare participation, not payment. The only certification on the CMS Form 1500 forms at issue is that the services billed were “medically indicated and necessary,” a standard not breached by MedQuest’s actions. And while adherence to Medicare’s enrollment regulations may be a condition of Medicare participation, the government could not cite to any regulation conditioning Medicare payments on the requirements at issue.
The MedQuest opinion comes five months after the Sixth Circuit reversed another grant of summary judgment under the FCA, holding that Renal Care Group’s diligent attempts to comply with Medicare’s complex regulatory framework defeated the FCA’s “knowledge” requirement.
In Renal Care, the Sixth Circuit was apparently persuaded by the fact that the company clearly made efforts to determine what was necessary to comply with the dense regulatory requirements. But in MedQuest, another undercurrent to the opinion familiar to many FCA defense practitioners seemed to lead to the court’s decision: the concept of unjust enrichment. In MedQuest, there was no allegation that MedQuest did not provide the billed services, or that those services were unnecessary or inadequate for the beneficiaries. Those factors appear to have influenced the Sixth Circuit judges who found that FCA liability, which would trigger the FCA’s mandatory multiple damages and steep penalty provisions, was not warranted.
Health care companies facing FCA allegations based on the violation of Medicare’s enrollment or participation requirements should carefully examine these recent cases. At least in the Sixth Circuit, an asserted regulatory violation will not necessarily translate into the submission of a false claim.