By Nadine E. Roddy, J.D.
Allegations that the provider delivered medical equipment to Medicare patients before obtaining a physician’s order, and then failed to use proper billing code modifiers to alert Medicare to the situation, were sufficient to withstand a motion to dismiss.
A relator in a qui tam action sufficiently alleged a violation of the federal False Claims Act (FCA) by a provider of medical equipment to survive a motion to dismiss, a panel of the Ninth Circuit has held. The complaint alleged with specificity that the provider had knowingly delivered medical equipment to Medicare patients before obtaining a detailed written order from a physician—a requirement for Medicare reimbursement—but had filed claims and obtained reimbursement anyway through misuse of billing code modifiers (Godecke v. Kinetic Concepts, Inc., September 6, 2019, Tashima, A.).
Qui tam action. The relator, the Director of Medicare Cash and Collections for a provider of medical equipment, brought a qui tam suit under the FCA against the provider, alleging that it had submitted false claims to Medicare. Specifically, she alleged that the provider delivered durable medical equipment to Medicare patients before obtaining a detailed written order from a physician, which is a requirement for Medicare reimbursement. She further alleged that if Medicare had known that this delivery requirement was not satisfied prior to delivery, its policy would have been to refuse payment on the provider’s claims. Further, the provider allegedly knew that it should not have been able to receive payment, but it sought reimbursement anyway and chose not to alert Medicare to the issue. The district court dismissed the complaint for failure to state a claim, and the relator appealed.
Elements of FCA claim. The Ninth Circuit first noted that the FCA makes liable anyone who "knowingly presents, or causes to be presented, a false or fraudulent claim for payment or approval," or "knowingly makes, uses, or causes to be made or used, a false record or statement material to a false or fraudulent claim." A claim under the FCA requires a showing of (1) a false statement or fraudulent course of conduct; (2) made with scienter; (3) which was material; causing (4) the government to pay out money or forfeit moneys due. Only the first three elements were at issue on appeal.
Allegations of fraudulent scheme and reliable data. The court held that the relator sufficiently alleged a violation of the FCA. She adequately alleged a fraudulent scheme to submit false claims and reliable indicia leading to a strong inference that false claims were actually submitted. Her complaint asserted that she learned about the provider’s scheme to submit false claims through her role as the provider’s Director of Medicare Cash and Collections. Even though she never personally was directed not to include the proper billing code modifier (EY modifier) or directly observed other employees omitting the EY modifier, her complaint alleged particular details of a management scheme to submit claims omitting the EY modifier when it should have been included. Based on knowledge gained from talking with sales representatives, she learned that the provider often delivered medical devices without receiving a prior written order at the urging of sales executives. She alleged that she "knew from management explanations" that management knew that Medicare would not pay for the devices delivered under the "exceptions" to the rules, and management set up tracking systems to expedite the effort to mask the fact that medical devices were delivered without all of the required elements in place.
Scienter. The court then held that the relator sufficiently alleged that the provider acted with the requisite scienter under the FCA. The statute’s term "knowingly" is defined in the statute itself as having: (1) actual knowledge of the information; (2) deliberate ignorance of the truth or falsity of the information; or (3) reckless disregard of the truth or falsity of the information. It is sufficient to plead that the defendant knowingly filed false claims, or that it submitted false claims with reckless disregard or deliberate ignorance as to the truth or falsity of its representations. In this case, the relator sufficiently alleged that the provider knowingly submitted claims without the requisite EY modifier when it knew that it had not received a written order prior to delivery of equipment.
Materiality. Finally, the court held that the relator sufficiently alleged that the provider’s false claims were material to the government’s payment decision. The FCA defines "material" as "having a natural tendency to influence, or be capable of influencing, the payment or receipt of money or property." Without question, the filing for Medicare reimbursement for a medical device without disclosing that no written order was received prior to delivery is a material false claim.
The case is No. 18-55246.
Attorneys: Michael A. Hirst (Hirst Law Group P.C.) for Geraldine Godecke. Gregory M. Luce (Skadden, Arps, Slate, Meagher & Flom LLP) for Kinetic Concepts, Inc. and KCI-USA, Inc.
Companies: Kinetic Concepts, Inc.; KCI-USA, Inc.
MainStory: TopStory CMSNews BillingNews DMENews FCANews MedicareContractorNews PaymentNews ProgramIntegrityNews QuiTamNews AlaskaNews ArizonaNews CaliforniaNews HawaiiNews IdahoNews MontanaNews NevadaNews OregonNews WashingtonNews
Interested in submitting an article?
Submit your information to us today!Learn More
Health Law Daily: Breaking legal news at your fingertips
Sign up today for your free trial to this daily reporting service created by attorneys, for attorneys. Stay up to date on health legal matters with same-day coverage of breaking news, court decisions, legislation, and regulatory activity with easy access through email or mobile app.