By Leah S. Poniatowski, J.D.
Relator’s claim that automated screening system’s flags were not heeded lacked proof they amounted to fraud under heightened pleading requirement.
An information specialist at the New York State Department of Health failed to plead specific facts supporting his allegation that the City of New York and the Health and Hospitals Corporation engaged in a fraudulent Medicaid repayment scheme against the United States, the U.S. Court of Appeals for the Second Circuit ruled in an unpublished opinion, affirming the lower court’s determination that the qui tam claim failed to proffer sufficient facts to meet the heightened pleading standard for fraud (U.S. ex rel. Gelbman v. City of New York, October 17, 2019, per curiam).
New York system. Health care providers in New York City seeking Medicaid reimbursement for services must submit their claims to the city’s Human Resources Administration (HRA), which then submits the claims to the New York State Department of Health (NYSDOH), the agency administering Medicaid for the state. According to the relator, he was employed at the NYSDOH as an information specialist for the eMedNY automated computer screening system.
The eMedNY system uses a series of algorithms to determine whether a health care claim is reimbursable under Medicaid. In the event a claim is flagged as being flawed or ineligible, the provider is notified and can resubmit the claim after fixing the error. Alternatively, the provider can challenge the denial by asserting that one of the algorithms was erroneously applied or by requesting an exception. NYSDOH bases its paid claim report to the federal government on the eMedNY system’s determinations.
False claims. The relator alleged that the City of New York, the Health and Hospitals Corporation, and the NYSDOH conspired to commit fraud against the federal government by submitting claims flagged by the eMedNY system. He contended that during his employment with the NYSDOH, unidentified HRA representatives worked with the City and NYSDOH to manipulate the eMedNY algortihms, also referred to as "edits," in order to ensure some ineligible claims would be paid and submitted for reimbursement. The relator also asserted that when he asked why certain ineligible claims were being paid, his supervisors told him it was because to do otherwise would "financial[ly] ruin" city health care providers and create "political problems" for the city.
In addition, the relator provided detailed payment information for over 80 claims as examples of claim submissions that had been flagged as being untimely, without prior authorization, duplicative, submitted without proper enrollment, and had been paid by another insurer or Medicare. He estimated that during 2009 through 2015, these types of claims caused more than $14 billion in reimbursement overpayment. Thus, he asserted, the city, the corporation, and the NYSDOH violated the federal False Claims Act (FCA) by: (1) presenting false claims; (2) making or using a false record or statement material to a false claim; (3) conspiring to violate the FCA; and (4) making or using a false record to avoid an obligation to pay the federal government.
Fraud pleading standard. The relator’s first three claims were subject to the heightened pleading standard for claims based on fraud. The trial court dismissed the relator’s second amended complaint for failure to provide details about the eligibility status of the submitted claims at the time they were submitted. The court remarked that the relator assumed that the flagged submissions were ineligible for reimbursement, which the relator did not dispute. The lower court explained that there could be errors that were later corrected before being submitted, and because the relator did not provide the actual expense reports submitted to the federal government, the relator’s allegation was too speculative (see Relator failed to state factually false, legally false, or reverse false claims, October 4, 2018).
The appellate court acknowledged that the actual submission of a false claim does not always need to be alleged in order for a qui tam case to survive dismissal, but the relator in this case did not "make plausible allegations that the bills or invoices actually submitted to the government were uniquely within [the defendant’s] knowledge and control," and "adduce specific facts supporting a strong inference of fraud," especially given his role on the eMedNY team. Without more detail as to the expense reports or the alleged manipulations of the algorithm, the dismissal of the relator’s three claims was correct.
The relator’s fourth and final claim also merited dismissal for failing to meet the heightened pleading standard, the appellate court determined. Because the amended complaint did not plausibly allege that there was any obligation to repay the federal government vis-a-vis claims the state entities submitted, the relator did not meet the pleading standard. Therefore, the lower court’s dismissal of the claim was affirmed.
The case is No. 18-3162.
Attorneys: Donald D. Barry (Barry Law Offices, LLC) for Andrew Gelbman. Joseph V. Willey (Katten Muchin Rosenman LLP) for City of New York and New York City Health and Hospitals Corp.
Companies: New York City Health and Hospitals Corp.
MainStory: TopStory CaseDecisions CMSNews BillingNews FCANews FraudNews MedicaidNews MedicaidPaymentNews ProgramIntegrityNews QuiTamNews ConnecticutNews NewYorkNews VermontNews
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