Health Law Daily Criminal conviction for defrauding Medicare can be used to prove elements of FCA claim
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Friday, March 15, 2019

Criminal conviction for defrauding Medicare can be used to prove elements of FCA claim

By Rebecca Mayo, J.D.

Statements made in a plea colloquy in a criminal conviction for defrauding Medicare may be used to prove the elements of a False Claims Act action.

A circuit court upheld a lower court decision granting summary judgment in a False Claims Act (FCA) case where the elements of the FCA claims were proven by the defendant’s plea colloquy in a criminal conviction for defrauding Medicare. The court did reverse summary judgments against the mobile diagnostic company involved in the FCA claims because it was not a party to the criminal case. The court also reversed summary judgments as to common law claims that required a showing of elements that were not established in the plea colloquy (U.S. ex rel. Doe v. Heart Solution, PC, March 14, 2019, Roth, J.).

Criminal proceedings. A husband and wife owned and operated mobile diagnostic companies. The husband owned Biosound Medical Services and the wife owned Heart Solution PC. In November, 2015, the couple pled guilty to separate but nearly identical criminal charges for defrauding Medicare. The couple allegedly submitted diagnostic reports to Medicare that should have been written by a specialist physician, but instead contained forged physician signatures. Additionally, the couple allegedly falsely represented to Medicare that neurological testing was being supervised by a licensed neurologist as required by the Medicare regulations when in fact the couple had not employed a supervising neurologist for those tests.

FCA. In June 2014 a relator brought a qui tam suit under the FCA against the couple and both mobile diagnostic companies and the government intervened in November 2015. The claim alleged that the couple and their respective companies knowingly presented or caused to be presented a false or fraudulent claim and knowingly made, used, or caused to be made or used a false record or statement material to a false or fraudulent claim. They also brought common law claims that included fraud, unjust enrichment, disgorgement of profits, and payment by mistake of fact.

Summary judgment. The government moved for partial summary judgment on the two FCA counts based on the wife’s admissions during her plea colloquy. The government claimed the plea colloquy established all of the elements of the FCA claims and therefore Heart Solution and the wife were collaterally estopped from contesting FCA liability. The district court granted summary judgments to the government on all claims.

The couple appealed, arguing that the wife cannot be liable for unsupervised neurological testing at Biosound because she did not own or operate Biosound. The couple also argued that there was a genuine issue of material fact as to the time frame during which they had employed a supervising neurologist, based on a certification statement submitted by the husband.

Fraud and false claims. According to the court, whether or not the wife had an ownership interest in her husband’s diagnostic company was immaterial to whether she knowingly submitted, or caused to be submitted, false claims to Medicare. The court also found that the husband’s certified statement was both unsworn and not given under the penalty of perjury and therefore was insufficient to create an issue of fact on summary judgment. The FCA violations and common law fraud claims require a showing of materiality, which the government was able to show through evidence that Medicare would not have paid the claims if not for the misrepresentation. This same evidence also proves causation. Therefore, the judgment on the issue of the wife’s liability under the FCA for false claims submitted to Medicare for unsupervised neurological tests and on the issue of the wife’s common law fraud were upheld.

Collateral estoppel. The court did find that Heart Solution was not collaterally estopped from contesting liability or damages for the claims against it. Because the summary judgment was based entirely on the plea colloquy of the wife in the criminal conviction of the husband and wife, Heart Solution had no opportunity, much less a full and fair opportunity, to litigate any issue involved in this appeal.

Finally, the court found that the common law claims for unjust enrichment, disgorgement of profits, and payment by mistake of fact all have a common essential element, which is that the defendant must have retained the funds. The plea colloquy does not establish that the wife or Heart Solution received or retained the funds or whether the funds went to the husband or Biosound. Because there is reasonable doubt as to which issues were decided by a prior judgment, the court could not conclude that collateral estoppel applied. Therefore, the summary judgment was reversed.

The case No. 17-2019.

Attorneys: Mark E. Coyne, Office of U.S. Attorney, for the United States. Mark E. Cedrone (Cedrone & Mancano LLC) for Heart Solution PC.

Companies: Heart Solution PC

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