The FCA continues to be the federal government’s primary civil enforcement tool for investigating allegations that healthcare providers or government contractors defrauded the federal government. In the coming weeks, we are taking a closer look at recent legal developments involving the FCA. This week, we examine recent court decisions considering the level of specificity required of a relator under Rule 9(b) in pleading the alleged FCA fraud scheme.

During the previous year, courts have continued to scrutinize pleadings to determine whether they sufficiently pleaded the circumstances of a fraudulent scheme – the “who, what, when, where, and how” of the alleged fraud.  While courts consistently dismissed allegations that failed to specify “how” conduct was fraudulent, they varied in their analysis of whether the “who” was pleaded sufficiently. In addition, one court addressed the circumstances in which allegations of a nationwide scheme could be sufficient to support claims based on conduct in multiple states.

Courts recently have dismissed complaints in which the relator did not specify “how” the alleged misconduct amounted to fraud.  For example, in U.S. ex rel. Scharff v. Camelot Counseling, 2016 WL 5416494, at *4-5 (S.D.N.Y. Sept. 28, 2016), the district court held that allegations regarding deficient documentation and signatures failed to satisfy Rule 9(b) because the relator did not allege “the level of detail required of patient notes” and “fail[ed] to allege with particularity why these practices were fraudulent, as opposed to sloppy.”

Similarly, in U.S. ex rel. Kalec v. Nuwave Monitoring, LLC, 2016 WL 750155, at *7 (N.D. Ill. Jan. 26, 2016), another district court reasoned that allegations regarding inflated technician time failed to satisfy Rule 9(b) because the relators did not “specifically plead how Medicare requires technician neuro-monitoring services to be billed, thereby failing to adequately allege that Medicare prohibited [the defendant’s] technician billing practices.” Finally, another district court noted a relator could not satisfy Rule 9(b) by specifying how particular conduct would be fraudulent “if” that conduct occurred without having alleged the conduct, in fact, did occur.  U.S. ex rel. Hockenberry v. OhioHealth Corp., 2016 WL 4480350, at *6 (S.D. Ohio Aug. 25, 2016).

Several decisions have relied upon nuanced distinctions between the ways in which different courts analyzed whether the “who” had been sufficiently pleaded. For example, two district courts appeared to take different approaches with regard to whether a relator must specify the doctors or coders involved in generating allegedly fraudulent documentation. Compare Hockenberry 2016 WL 4480350, at *6 (allegations failed to satisfy Rule 9(b) when relator alleged he “observed first hand Defendants’ employees” engaged in upcoding because he failed to identify physicians involved in upcoding or patients affected) with U.S. ex rel. Ramsey-Ledesma v. Censeo Health, L.L.C., 2016 WL 5661644, at *6 (N.D. Tex. Sept. 30, 2016) (complaint was “not fatally deficient . . . [due to the fact] it does not name a physician who made an allegedly false diagnosis or a coder who entered an allegedly false code” when the relator sufficiently pleaded she “personally observed the conduct” at issue and named an employee who allegedly “acted in furtherance of the scheme”).

In the context of FCA allegations based on purported AKS violations, one district court held the relators failed to satisfy Rule 9(b) because the complaints did not identify who at the defendant company “participated in the agreement to violate the AKS” or any involvement by the defendant-owners.  2016 WL 750155, at *7 (N.D. Ill. Jan. 26, 2016); see also U.S. ex rel. Driscoll v. Todd Spencer M.D. Med. Grp., 2016 WL 7229135, at *5 (E.D. Cal. Dec. 14, 2016) (relator failed to satisfy Rule 9(b) when alleging FCA liability based on a false certification theory because complaint did not identify who provided certification at issue).

The requisite level of particularity required when alleging different types of nationwide schemes was considered in U.S. ex rel. Polansky v. Executive Health Resources, Inc., 2016 WL 4059667, at *12-13 (E.D. Penn. July 26, 2016).  There, the relator alleged Executive Health Resources (EHR), a physician advisory company, caused its hospital clients to falsely bill patient admissions as inpatient when they should have been billed as outpatient. While specific allegations pertained only to conduct in four states, the district court allowed claims to proceed under dozens of state laws based on the alleged nationwide scheme, which centered on the criteria and processes EHR employed for all its case reviews. Analogizing to cases alleging FCA liability based on AKS violations, the district court reasoned the alleged scheme was more like “a uniform nationwide marketing and kickback scheme” than one in which kickbacks “varied by the medical provider” who was “targeted.” The district court concluded that the relator had “alleged the nationwide scope of EHR’s scheme with sufficient particularity.”