In U.S. ex rel. Poehling v. UnitedHealth Group, Inc., the U.S. District Court for the Central District of California partially granted UnitedHealth’s motion to dismiss the government’s FCA claims, which were based on the allegation that UnitedHealth’s attestations as to the truth and accuracy of the risk adjustment data submitted were false because the district court found that the government had failed to plead the attestations were material to the payment decision, as required by the Supreme Court’s decision in  Escobar.  The district court declined to dismiss the remaining claims, including an FCA claim added by the government after its complaint in the similar Swoben case was dismissed (which we discussed here), which alleged a violation of the reverse false claims provisions due to failure to delete invalid diagnosis codes without reference to the attestation.  The district court did grant the government leave to amend, with the second amended complaint to be filed by February 26, 2018.

Government Accurately Pleaded Materiality But Did Not Prove that Attestation Had Direct Impact on Payments

The district court’s opinion in Poehling focused on whether the government had adequately pleaded materiality as to the attestations and as to the invalid diagnosis codes that UnitedHealth failed to delete.  The district court found that the government had sufficiently alleged that the failure to delete invalid diagnosis codes was material to the payment decision because its amended complaint specifically alleged that deletions submitted would have prompted the Centers for Medicare & Medicaid Services (CMS) to recalculate the risk adjustment payment and alter the reconciliation payment due to UnitedHealth or to work with UnitedHealth to achieve repayment.  The district court noted “not only do various contractual and regulatory materials require Defendants to submit accurate diagnostic data, but that data is central to the calculation of the amount of money CMS pays to Defendants.”

Conversely, the district court found that the government had not alleged that the attestations have a direct impact on the risk adjustment payments made to UnitedHealth even though the amended complaint had made the relationship between the attestations and the risk adjustment data clear.  The district court said that in light of Escobar, the “Government must do more than alleged that the Attestations and the diagnosis codes are intertwined.” The government must show the attestation itself is material to the payment decision.

Swoben and Escobar Decisions Informed Government’s Strategy in Poehling Case

The government appears to have attempted to significantly strengthen its complaint in Poehling following its defeat in Swoben, and while it appears to have avoided deficiencies in pleading knowledge and with specificity, its failure to sufficiently plead materiality highlights the high barrier imposed under Escobar.  The government added information regarding the roles and knowledge of specific individuals in the scheme, likely to ensure the court would not find the complaint deficient in its pleading of knowledge or in its pleading with particularity, two of the reasons the court cited in its dismissal of the government’s complaint in Swoben. This included additional information about the knowledge of individuals who signed attestations and the internal approval processes that preceded the signing of the attestations.

The government also added language attempting to explain why the attestations were material, citing their importance as a reminder to Medicare Advantage Organizations (MAOs) that they cannot ignore invalid diagnosis codes and indications that UnitedHealth employees knew they were important due to the caveats they added and meetings with CMS.  The fact that the district court in Poehling found these additions insufficient to sufficiently plead the materiality of the attestations gives rise to the question of whether this is a threshold that the government will be able to meet.

The amended complaint also added the claim based on the reverse false claims provision along with substantial factual detail in support of this claim, including regarding the process by which risk adjustment data can be deleted and the impact of such deletions. The district court in Swoben had declined to consider a similar claim in that case because it had been dismissed at an earlier point and had not been revived by the Ninth Circuit’s opinion, having not been appealed by the relator.

Poehling Decision Demonstrates Sufficient and Insufficient Allegations of Materiality

The opinion in Poehling, which serves to identify both sufficient allegations of materiality—with respect to the unmade deletions—and insufficient allegations of materiality—with respect to the attestations—further underscores the language from Swoben suggesting that materiality means the government would have refused to make payment if they had known of the falsity.  Additionally, whether or not the government is able to meet the materiality burden with respect to the attestations could also impact the resources at its disposal to influence compliance programs and diligence conducted on risk adjustment data by MAOs.

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