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 will take a closer look at recent legal developments involving the FCA. This week, we examine recent court decisions requiring relators to plead actual claims to satisfy the requirements of Rule 9(b) in order to avoid dismissal.
In the past, the First Circuit has shifted between requiring the identification of a specific false claim and applying a more flexible standard. Compare U.S. ex rel. Karvelas v. Melrose-Wakefield Hosp., 360 F.3d 220, 232 (1st Cir. 2004) (applying strict standard) abrogated on other grounds, Allison Engine Co. v. U.S. ex rel. Sanders, 553 U.S. 662 (2008), with U.S. ex rel. Duxbury v. Ortho Biotech Prods., L.P., 579 F.3d 13, 29 (1st Cir. 2009) (applying flexible standard). Last year, the First Circuit explained its approach as requiring “relators to connect allegations of fraud to particular false claims for payment, rather than a fraudulent scheme in the abstract.”
In U.S. ex rel. Escobar v. Universal Health Services, Inc., the First Circuit held the relators had “succeeded in linking their allegations of fraud to specific claims for payment” by alleging “twenty-seven separate dates on which claims were submitted in connection with [a specific patient’s] care, each time including the relevant billing codes, amount invoiced, and the name of the [defendant’s] staff member who provided the treatment for which reimbursement was sought.” Furthermore, the First Circuit determined the allegations with regard to one patient were sufficiently particular to allow other allegations to proceed that pertained to claims for services rendered to other patients by the relevant staff members. It appears that the First Circuit now will require relators to identify specific claims to satisfy Rule 9(b), but these representative claims will enable allegations regarding other claims to proceed, if they are rendered fraudulent by the same alleged scheme.
A number of district courts have dismissed cases this year for failure to plead a specific false claim. For example, in U.S. ex rel. Prather v. Brookdale Senior Living Communities., Inc., 2015 WL 6812581 (M.D. Tenn. Nov. 5, 2015), the district court dismissed the relator’s amended complaint, which included only “generally delineated circumstances” of individual patients’ receipt of home health services. The district court explained the complaint lacked details about the basis of the claim for payment, the form or method used to submit the claim, any corporate authorization for the claim and any amount paid to the defendants by the government in response to the claims.
Some of the courts that dismissed cases due to the relators’ failure to plead specific details of false claims acknowledged that certain circumstances may call for a relaxed pleading standard, such as “when relevant facts are not accessible to the pleader.” U.S. ex rel. Chorches v. Amer. Med. Response, Inc., 2015 WL 6870025 (D. Conn. Nov. 6, 2015); see also U.S. ex rel. Hagerty v. Cyberonics, 95 F. Supp. 3d 240 (D. Mass. Mar. 31, 2015) (when defendant allegedly caused third parties to file false claims, factual and statistical evidence may be used to strengthen inference of fraud beyond a possibility). Nevertheless, highlighting the narrow circumstances in which relaxing the standard would be appropriate, these courts all refused to apply a more lenient standard in the particular cases. See, e.g., U.S. ex rel. McFeeters v. N.W. Hosp., 2015 WL 328212 (Jan. 23, 2015 M.D. Tenn.) (refusing to apply relaxed standard when patient pleaded first-hand knowledge of the allegedly fraudulent conduct, but did not show “any involvement with Defendants’ billing or claims submission processes.”).